Arvind's Newsletter

1.Apple is investing billions in US-made 5G components as it looks to move manufacturing out of China.The tech giant announced a deal with Broadcom for US made chips , part of its plan to invest $430 billion in the US.

The announcement comes as Apple—the world’s largest consumer electronics company—looks to spend more than $400 billion on domestic manufacturing.

We’re thrilled to make commitments that harness the ingenuity, creativity, and innovative spirit of American manufacturing,” Apple CEO Tim Cook said. “All of Apple’s products depend on technology engineered and built here in the United States, and we’ll continue to deepen our investments in the U.S. economy because we have an unshakable belief in America’s future.”

2.FTX and Tesla, once seen as shining examples of innovation and opportunity, took two of the biggest reputational hits in this year's Axios Harris Poll 100 brand reputation survey.
Amid a crypto collapse and Musk madness, Americans have grown wary and weary of big ideas and powerful moguls who they feel have overpromised and underdelivered.Tesla saw one of the biggest reputation drops of the past year, from 11th in 2022 to 62nd place this year, with a 74.3 RQ (79.5 in 2022).

Top-ranked Patagonia has long put its commitment to conservation at the forefront of its business objectives. The company took its commitment to another level last year by transferring its ownership to two nonprofits structured to put all of the company's profits into conservation.

3.Some patients taking semaglutide, the weight-loss drug, report that they also struggle less with compulsions such as alcohol, drugs, and even nail-biting. The drug, brand named Ozempic, works partly by blocking reward pathways in the brain, and obese people who take it lose on average 15% of their bodyweight: They still find food pleasurable but are less compelled by it. Users report that they also feel other urges less strongly. There is evidence from animal trials that similar drugs reduce compulsive behaviour, such as making cocaine-addicted rats take less cocaine, The Atlantic reported. So far the evidence in humans is largely anecdotal.

4.Concerns are growing over the debt amassed by China’s local governments. Estimated liabilities total nearly $10 trillion, according to Caixin, a business-focused Chinese magazine. That’s about twice as much as the entire annual GDP of Japan. Local governments took on huge amounts of debt to build infrastructure, but also to pay for sprawling surveillance systems and COVID-19 controls imposed by Beijing. Investors fear the loans will be a drag on economic growth, and could even trigger a banking crisis. Officials are cutting spending in response, leading residents in one city near the Russian border to complain of a lack of indoor heating during the winter, while a southwestern province warned recently of a risk of default.

5.Mukesh Ambani returns to the spotlight, reports the Economist. India’s richest man and his business empire are again the talk of India Inc.

It had all the hallmarks of a coming-out party—or, more accurately, a coming-out-again one. After being uncharacteristically absent from public view for a few years, Mukesh Ambani re-emerged at the end of March for the opening of the Nita Mukesh Ambani Cultural Centre in Mumbai’s new business district. It houses three theatres, a conference hall for trade shows, as well as a small museum. Plans are afoot to build an adjoining apartment complex and shopping mall. The precise cost of the project is veiled in secrecy, though the figure of $1bn has been rumoured. A single lift, said to be the world’s largest, with a capacity of 100 people, is thought to have set the tycoon back $45m.

The sprawling and opaque endeavour is an apt metaphor for Reliance Group, the business empire that has made Mr Ambani Asia’s richest man. The conglomerate reported record profits in the fiscal year to March, stealing the limelight from a rival tycoon, Gautam Adani, whose businesses are on the defensive after an attack in January by a short-seller. Last year its listed flagship, Reliance Industries, accounted for 21% of the collective revenue of the 30 Indian blue-chip firms in Mumbai’s Sensex index, and 13% of their net profits. With the beleaguered Mr Adani reining in investments, Mr Ambani remains a rare Indian industrialist who is keen to build. Reliance Industries’ capital spending grew from $10bn in fiscal 2021 to $14bn a year later. Last year it spent $18bn, equivalent to 45% of the Sensex total.

In the sectors where Reliance operates, it is dominant. Its Jio telephony unit went from nothing to 439m mobile customers, or 37% of India’s total, in seven years. It gained 1m users in February even as Vodafone, the erstwhile market leader, lost double that number. Reliance’s retailing arm has 18,000 stores, up from 12,000 two years ago, a digital marketplace and a logistics network. It sells everything from gadgets and groceries to garments (many coming straight from numerous fashion brands that Reliance has been acquiring). Its renewable-energy arm has grand ambitions in solar power, green hydrogen and other climate-friendly businesses. On May 2nd the group spun out Jio Financial Services, which could fast become a force in payments and consumer lending thanks to troves of data on Jio’s mobile customers.

Then there is Reliance’s core business: petrochemicals. It is less sexy than the much-trumpeted new-economy ventures, but more lucrative. Last year the group’s refining operations produced 56% of its total revenues and 59% of earnings before interest and taxes. Reliance is believed to be the single biggest beneficiary from India’s abrupt transformation into a huge importer of sanction-hit Russian oil and a leading exporter of refined products. Mr Ambani’s business benefits from both ends of this equation, buying cut-price Russian crude and selling the refined stuff into global markets, where prices remain elevated. According to Jefferies, an investment bank, this adds up to $5 of gross margin to every barrel of Reliance’s refined oil. The company says that “As part of overall crude sourcing strategy, Reliance is always in the market to source arbitrage barrels.”

Yet Reliance’s ambitions have a flipside. It makes relatively little money from its operations. Though its return on capital is higher than for the Sensex as a whole, it has not exceeded 10% since 2007 (see chart 1 above). Last year it was 5%. Year-on-year revenue growth slowed in each of the past three quarters. Debts are up (see chart 2), having dropped in 2021 after capital injections from foreign tech giants such as Alphabet and Meta, and sovereign-wealth funds, which all saw teaming up with a local titan as a way to partake in India’s rise. Net debt trebled in the last financial year, relative to the one before.

In the 12 months to March Reliance Industries’ market value fell by 18% in dollar terms, or $43bn. Among big Indian firms, only Mr Adani’s battered businesses and two it giants caught up in the global tech crunch, Infosys and TCS, did worse. Reliance has since clawed back some of that. But it will take more than a snazzy cultural centre to impress investors.