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Monday, September 2, 2024

China Warns Japan of Retaliation for Possible New Chip Curbs

 

China has threatened severe economic retaliation against Japan if Tokyo further restricts sales and servicing of chipmaking equipment to Chinese firms, complicating US-led efforts to cut the world’s second-largest economy off from advanced technology

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Senior Chinese officials have repeatedly outlined that position in recent meetings with their Japanese counterparts, according to people familiar with the matter. One specific fear in Japan, Toyota Motor Corp. privately told officials in Tokyo, is that Beijing could react to new semiconductor controls by cutting Japan’s access to critical minerals that are essential for automotive production, the people said, declining to be named discussing private affairs. 

Toyota is among the most important companies in Japan and is deeply involved in the country’s chip policy, partly reflected by the fact that it has invested in a new chip campus being built by Taiwan Semiconductor Manufacturing Co. in Kumamoto, according to one of the people.

 That makes its concerns a major consideration for Japanese officials, in addition to those of Tokyo Electron Ltd., the semiconductor gear-maker that would be principally affected by any new Japanese export controls. 

The US has been pressuring Japan to impose additional restrictions on the ability of firms including Tokyo Electron to sell advanced chipmaking tools to China, part of a long-running campaign to curtail China’s semiconductor progress. 

With those talks, senior US officials have been working with their Japanese counterparts on a strategy to ensure adequate supplies of critical minerals, some of the people said, especially since China imposed restrictions on the exports of gallium, germanium and graphite last year


Why World Powers Are Sparring Over Computer Chips: QuickTake

The concern about Toyota has some historical precedent.

 In 2010, China temporarily suspended exports of rare earths to Japan after a clash in waters of the East China Sea claimed by both sides. 

The move shook Japan’s electronics sector and threatened to choke off global supplies of high-power magnets produced in Japan employing rare earths from China. 

Tokyo has since worked with mixed success to reduce its reliance on Chinese rare earth imports.

Shares of Japan’s chip-related companies fell after Bloomberg’s report of the China-Japan clash. 

Tokyo Electron shares fell as much as 1.9%, while Lasertec Corp. and Disco Corp. dropped as much as 2.8% and 3.3% respectively.

Some in Japan pushed back on the idea that the Tokyo government should fall into line with Washington’s latest geopolitical strategy.

“Japan shouldn’t tighten its export control just because the US is making such a request,” said Akira Minamikawa, an analyst with the research firm Omdia.

 “Japan should have its own philosophy, decide what’s best for the country and stand firm.”

The Biden administration is confident that they can assuage Tokyo’s concerns and reach an agreement with Japan by the end of this year, some of the people said. 

But there are more aggressive options: Behind the scenes, the US has been wielding a power known as the foreign direct product rule, or FDPR. 

The rule allows Washington to control sales of products made anywhere in the world, provided they use even the smallest amount of American technology. 

In the current talks, American officials so far have refrained from invoking that authority against Japan and other key allies, which see the rule as a draconian step.

 A senior administration official said the US would prefer to reach a diplomatic solution but would not rule out the use of FDPR.

The timing of any deal is complicated by the US presidential election in November and the planned resignation of Japanese Prime Minister Fumio Kishida this month.

 But Kishida stepping down should not impact the negotiations for further curbs, the senior administration official said, because Tokyo has built consensus for the policy across its government.

Japan’s Ministry of Economy, Trade and Industry didn’t have immediate comment when contacted by Bloomberg News.

 Tokyo Electron declined to comment. A Toyota spokesperson said the automaker is constantly considering optimal procurement strategies, not limited to mineral resources, to meet the needs of its customers. 

The US Commerce Department’s Bureau of Industry and Security, which is in charge of export controls, declined to comment. 

The Chinese Foreign Ministry said in a statement that it opposes efforts by any individual nation to politicize normal trade and lure other countries to join any technology blockade against China. 

The US first unveiled sweeping chip export controls in October 2022 — focused on both equipment and cutting-edge processors — and Japan and the Netherlands later followed suit with their own, less restrictive measures.

 Washington has since then been trying to convince allies to fully align with the original US controls, particularly by limiting Dutch supplier ASML Holding NV and Tokyo Electron’s ability to repair restricted machines that are already in China — something US firms are barred from doing.

 The Hague is planning to impose some servicing restrictions, Bloomberg News has reported.

Now, the US is eyeing more American curbs on high-bandwidth memory chips — an essential AI component — and additional chipmaking tools, as well as measures targeting specific Chinese companies. 

That’s triggered a second, parallel set of negotiations with officials in Japan and the Netherlands, as Washington pressures both governments to match the potential new US measures, which currently have a carveout for allies.

 The Biden administration is under pressure from US industry — and some lawmakers in its own party — to secure an agreement with key allies before moving ahead with its own measures.

 

“We are deeply concerned about the harm being done to US companies and US leadership in semiconductor innovation by unilateral export controls with questionable national security benefits,” wrote Representative Zoe Lofgren and Senator Alex Padilla, both California Democrats, in an August 13 letter to senior Commerce Department officials.

 They are “even more troubled” by the possibility of another round of unilateral controls in the near term, they wrote. 

ASML and Tokyo Electron have both posted large sales increases in China since the US imposed its rules. US firms including Applied Materials Inc., Lam Research Corp., and KLA Corp. have also continued to sell large amounts of gear to China, as businesses there stockpile less-advanced equipment in an effort to get ahead of potential new US restrictions. 

A senior Biden administration official downplayed the impact of stockpiling, saying it only pertains to less advanced machinery and that Beijing’s ability to innovate has been severely hampered by a lack of access to cutting-edge tools

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“I think this points to new restrictions from the US shortly,” said Andrew Jackson, head of Japan equity strategy at Ortus Advisors Pte., referring to the Japan-China standoff.

 “I am telling my clients to keep shorting names with high China sales weightings.”

US lawmakers urged the administration to use “all forms of leverage available” to secure allies’s cooperation.

 If necessary, they said, they would support tariffs on chipmaking tools from allied countries that directly compete with US firms for market share. US firms, similarly frustrated, had earlier suggested signaling to allies that their companies could face additional export licensing requirements if they continue to service customers in China that American firms are barred from working with. 

South Korea’s trade minister, Cheong Inkyo, said the US should offer incentives and more flexibility to encourage allies to collaborate on China chip controls.

“For countries or companies trying to comply with the US in good faith, there should be some kind of carrots,” Cheong said in his first interview with media since he took office in January. “That would help US policy be embraced more easily.”

Sanofi Phase 3 MS trial misses primary endpoint

 Sanofi has announced the outcomes of Phase III clinical trials of its investigational oral brain-penetrant BTK inhibitor, tolebrutinib, aimed at treating multiple sclerosis (MS).

These studies, namely HERCULES, GEMINI 1, and GEMINI 2, have provided mixed results, with the HERCULES trial meeting its primary endpoint while the GEMINI trials did not.

The HERCULES study focused on the efficacy and safety of tolebrutinib in individuals with non-relapsing secondary progressive MS (nrSPMS) compared to a placebo.

The primary measure of success was the six-month confirmed disability progression (CDP), which tolebrutinib successfully delayed in comparison to the placebo.

GEMINI 1 and GEMINI 2 were both designed to assess the therapy’s performance against teriflunomide in patients with relapsing forms of MS.

Despite not meeting the primary goal of reducing the annualised relapse rate (ARR), pooled data from secondary endpoints suggested a significant delay in the onset of confirmed disability worsening (CDW), aligning with the positive CDP findings from HERCULES.

The GEMINI studies had a 1:1 randomisation of participants to either receive tolebrutinib and a placebo or 14mg of teriflunomide and a placebo daily.

The primary endpoint was the ARR over approximately 36 months, with secondary endpoints including time to onset of CDW confirmed over at least six months, as well as the total number of new or enlarging T2 hyperintense lesions and Gd-enhancing T1 hyperintense lesions as detected by MRI.

While the GEMINI trials did not demonstrate a reduction in ARR when compared to teriflunomide, the analysis of the key secondary endpoint of pooled six-month CDW data revealed a notable delay in time to onset.

This finding is consistent with the CDP data observed in the HERCULES trial, providing a measure of support for tolebrutinib's potential efficacy.

Sanofi research and development head Houman Ashrafian said: “Tolebrutinib represents an unprecedented breakthrough as a potential first-in-disease treatment option with clinically meaningful benefit in disability accumulation.

“Addressing disability accumulation, thought to be driven by smoldering neuroinflammation, remains the greatest unmet medical need in people with non-relapsing secondary progressive MS today.”

https://finance.yahoo.com/news/sanofi-reports-data-phase-iii-105303910.html

Bezos Fund Eyed For Potential Sway On Carbon Credit Market with Growing Climate Moves

 

Concerns are mounting over the impact of Amazon.com, Inc. AMZN and Jeff Bezos‘s $10 billion charitable organization on the carbon credit market.

What Happened: The Bezos Earth Fund is a significant supporter of the Science Based Targets initiative (SBTi), which sets voluntary climate standards for corporations such as Apple Inc. and H&M. Simultaneously, Amazon is broadening its climate pledge initiative, which has been endorsed by over 500 companies, including Uber Technologies Inc.IBM, and Microsoft Corp.reported Financial Times on Sunday.

There are concerns about Amazon and the Bezos fund’s potential influence on SBTi, especially as SBTi reconsiders its approach to carbon offsets. A former SBTi staff member filed a complaint in July to the UK charity commission, citing perceived conflicts of interest.

The UK charity commission plans to advise SBTi on governance improvements, including conflict of interest management.

The Bezos Earth Fund stated it looks forward to reviewing the commission’s findings, while SBTi emphasized its existing governance processes, according to the report.

Amazon has also faced criticism for not reporting its emissions from grid use for four consecutive years, a requirement since 2015, according to the report. The company promotes alternatives to SBTi’s standards, allowing more flexibility in achieving “net zero” goals.

Observers like Holger Hoffman-Riem from SBTi’s technical advisory group have voiced concerns that Amazon and the Bezos fund might influence climate standards to favor cheaper carbon offsets over actual emission reductions.

“If big polluters like Amazon want to reach net zero as cheaply as possible, they may well have an incentive to engineer a situation where offsets are seen as credible,” he said.

Why It Matters: This issue is not new for Amazon. In July, Amazon chose to bypass the global standard for verifying carbon offsets, instead supporting the development of a new standard called Abacus, developed in collaboration with carbon registry Verra. This move was seen as a significant step towards achieving its goal of zero net greenhouse gas emissions by 2040.

Bezos has been a prominent figure in climate initiatives. In February 2020, he committed $10 billion to the Bezos Earth Fund to support scientists, activists, and NGOs in combating climate change.

Also, Bill Gates, another major player in climate initiatives, has expressed his desire for influential figures like Elon Musk to talk more about climate change. Gates, along with Bezos and Jack Ma, has been actively involved in climate-focused investments through Breakthrough Energy Ventures, which recently raised $839 million for its third flagship fund.

https://www.benzinga.com/markets/equities/24/09/40670507/jeff-bezoss-earth-fund-under-scrutiny-for-potential-influence-on-carbon-credit-market-amid-amazo

Credit Markets Go Dark

Jared A. Ellias

Harvard Law School

Elisabeth de Fontenay

Duke University School of Law

Abstract

Over the past generation, conflicting trends have reshaped the ownership of corporate equity on the one hand and corporate debt on the other. In equity, the two great trends have been the shift from public markets to private ownership and the consolidation of American companies' stock in the hands of powerful investment funds. In debt, by contrast, the great trends have been a shift from private loans to quasi-public markets, democratization and dispersed ownership. In this Article, we chronicle the recent and dramatic reversal of these trends in the debt markets. Private investment funds executing a "private credit" strategy have become increasingly important corporate lenders, bringing into corporate debt the same forces of de-democratization and consolidation that have been reshaping the equity markets. We offer new data that illustrates the meteoric rise of the now $1.5 trillion private credit industry and explore the allure and implications of private credit. The transition from bank-intermediated finance to private credit will transform not only corporate finance, but also firm behavior and economic activity more generally. First, as the corporate debt markets go dark, we move to a world in which information about many firms and even entire industries will be lost to the investing public. For better or worse, these firms will act with unprecedented discretion-having been shielded from the discipline and scrutiny of regulators, the trading markets, and the general public. Second, corporate debt-like corporate equity-is poised to become the dominion of investment funds, some of which are almost unimaginably large. These funds will influence everything from firm operations and strategy to corporate distress, with uncertain consequences for social welfare.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4879742

Fentanyl Responsible For 81% Of Overdose Deaths Under-24: UN

 In 2022, an estimated 292 million people worldwide were using illegal drugs, with 60 million consuming opioids such as morphine, codeine, or heroin, according to the latest United Nations World Drug ReportThis makes opioids the second most widely used class of illicit drugstrailing behind cannabis, which has approximately 228 million users.

While cannabis use is more widespread and carries a relatively low risk of addiction, it does not result in overdose deaths. The same cannot be said for the far more potent and dangerous class of opioids. As highlighted in the latest data from the Centers for Disease Control and Prevention (CDC), synthetic opioids like fentanyl have become the leading cause of the rising number of drug overdose deaths.

Of the nearly 108,000 recorded overdose deaths in 2022, almost 74,000 were directly linked to synthetic opioids, with fentanyl being the most prevalent. Fentanyl is said to be 50 times more potent than heroin and has become a preferred choice for illegal drug manufacturers due to its ease of production and low cost, unlike traditional opioids that rely on crop cultivation. The impact is even more severe among younger populations. In the 15 to 24 age group, 81 percent of the 6,696 overdose deaths in 2022 were attributed to synthetic opioids, with related fatalities increasing fivefold from 2015 to 2022.

On a global scale, opioid use has remained relatively stable since 2019, with reported users even decreasing slightly from 62 million in the year before the coronavirus pandemic. According to data from the United Nations Office on Drugs and Crime (UNODC), the global prevalence rate of opioid use was 1.2% in 2022. However, certain regions reported significantly higher rates: 3.2% in the Near and Middle East/South-West Asia, 2.7% in North America, and 2.0% in Australia and New Zealand.

While cannabis use continues to dominate in terms of sheer numbers, the stark difference in overdose risks highlights the urgency in addressing the ongoing opioid crisis, particularly the lethal threat posed by synthetic variants like fentanyl.

As visualized by Statista: