Apple supplier Foxconn says it is seeking Indian partners to cooperate in areas such as chips and electric vehicles, as its chief executive wrapped up a visit to the country.
“India is a country with a large population,” Young Liu, the company’s chairman and CEO, said in a Saturday statement. “My trip this week supported Foxconn’s efforts to deepen partnerships … and seek cooperation in new areas such as semiconductor development and electric vehicles.”
“Foxconn will continue to communicate with local governments to seek the most beneficial development opportunities for the company and all stakeholders,” he added.
The company, best known for making Apple
(AAPL)’s iPhones, is one of the world’s biggest contract makers of electronics. It’s now expanding into other areas including electric vehicles.
Liu did not specify any investment spending in India during his trip, which included a meeting with Prime Minister Narendra Modi.
The company already has factories in the states of Andhra Pradesh and Tamil Nadu.
On Friday, the investment promotion office of the southern Indian state of Karnataka said Foxconn had announced a major deal there and that 300 acres of land had been allocated for a facility. The investment will generate 100,000 jobs over 10 years in the state, it said.
According to a report from Bloomberg citing unnamed sources, the company plans to invest about $700 million on a new plant in Bengaluru, the capital of Karnataka, to make iPhone parts.
India has emerged as an attractive potential alternative to China for the likes of Apple. One of India’s top ministers, Piyush Goyal, said in January that Apple wants to ramp up its production in the South Asian country to a quarter of its overall total from between 5% and 7% now.
For years, Apple had relied on a vast manufacturing network in China to mass produce iPhones, iPads and other popular products. But its dependence on the country was tested last year by Beijing’s strict zero-Covid strategy, which was rapidly dismantled last December.
Apple devices are currently manufactured in India by Foxconn, Wistron and Pegatron, which are all Taiwanese companies.
LONDON — Britain was rebuffed by the Biden administration after multiple requests to develop an advanced trade and technology dialogue similar to structures the U.S. set up with the European Union.
On visits to Washington as a Cabinet minister over the past two years, Liz Truss urged U.S. Commerce Secretary Gina Raimondo and senior Biden administration officials to intensify talks with the U.K. to build clean technology supply chains and boost collaboration on artificial intelligence (AI) and semiconductors.
After Truss became prime minister in fall 2022, the idea was floated again when Raimondo visited London last October, people familiar with the conversations told POLITICO. But fear of angering the U.S.’s European partners and the U.K.’s diminished status outside the EU post-Brexit have posed barriers to influencing Washington.
Businesses, lawmakers and experts worry the U.K. is being left on the sidelines.
“We tried many times,” said a former senior Downing Street official, of the British government’s efforts to set up a U.K. equivalent to the U.S.-E.U. Trade and Technology Council (TTC), noting Truss’ overtures began as trade chief in July 2021. They requested anonymity to speak on sensitive issues.
“We did speak to Gina Raimondo about that, saying ‘we think it would be a good opportunity,’” said the former official — not necessarily to join the EU-U.S. talks directly, “but to increase trilateral cooperation.”
Set up in June 2021, the TTC forum co-chaired by Raimondo, Secretary of State Antony Blinken and U.S. trade chief Katherine Tai gives their EU counterparts, Margrethe Vestager and Valdis Dombrovskis, a direct line to shape tech and trade policy.
The U.S. is pushing forward with export controls on advanced semiconductors to China; forging new secure tech supply chains away from Beijing; and spurring innovation through subsidies for cutting-edge green technology and microprocessors.
The TTC’s 10 working groups with the EU, Raimondo said in an interview late last year, “set the standards,” though Brussels has rebuffed Washington’s efforts to use the transatlantic body to go directly after Beijing.
But the U.K. “is missing the boat on not being completely engaged in that dialogue,” said a U.S.-based representative of a major business group. “There has been some discussion about the U.K. perhaps joining the TTC,” they confirmed, and “it was kind of mooted, at least in private” with Raimondo by the Truss administration on her visit to London last October.
The response from the U.S. had been ‘’let’s work with what we’ve got at the moment,’” said the former Downing Street official.
Even if the U.S. does want to talk, “they don’t want to irritate the Europeans,” the same former official added. Right now the U.K.’s conversations with the U.S. on these issues are “ad hoc” under the new Atlantic Charter Boris Johnson and Joe Biden signed around the G7 summit in 2021, they said, and “nothing institutional.”
Last October, Washington and London held the first meeting of the data and tech forum Johnson and Biden set up | Pool photo by Olivier Matthys/AFP via Getty Images
Securing British access to the U.S.-EU tech forum or an equivalent was also discussed when CBI chief Tony Danker was in Washington last July, said people familiar with conversations during his visit.
The U.K.’s science and tech secretary, Michelle Donelan, confirmed the British government had discussed establishing a more regular channel for tech and trade discussions with the U.S., both last October and more recently. “My officials have just been out [to the U.S.],” she told POLITICO. “They’ve had very productive conversations.”
A U.K. government spokesperson said: “The U.K. remains committed to working closely with the U.S. and EU to further our shared trade and technology objectives, through the EU-UK Trade and Cooperation Agreement, the U.S.-U.K. Future of Atlantic Trade dialogues, and the U.K.-U.S. technology partnership.
“We will continue to advance U.K. interests in trade and technology and explore further areas of cooperation with partners where it is mutually beneficial.”
Britain the rule-taker?
Last October, Washington and London held the first meeting of the data and tech forum Johnson and Biden set up. Senior officials hoped to get a deal securing the free flow of data between the U.S. and U.K. across the line and addressed similar issues as the TTC.
They couldn’t secure the data deal. The U.K. is expected to join a U.S.-led effort to expand data transfer rules baked into the Asia-Pacific Economic Cooperation trading agreement as soon as this year, according to a former and a current British official, who spoke on the condition of anonymity to discuss internal deliberations. The next formal meeting between the U.K. and U.S. is penciled in for January 2024.
Ongoing dialogue “is vital to secure an overarching agreement on U.K.-U.S. data flows, without which modern day business cannot function,” said William Bain, head of trade policy at the British Chambers of Commerce (BCC). “It would also provide an opportunity to set the ground rules around a host of other technological developments.”
In contrast, the U.S. and EU are always at work, with TTC officials in constant contact with the operation — though questions have been raised about how long-term the transatlantic cooperation is likely to prove, ahead of next year’s U.S. presidential election.
“Unless you have a structured system or set up, often overseen by ministers, you don’t really get the drive to actually get things done,” said the former Downing Street official.
Right now cooperation with the U.S. on tech issues is not as intense or structured as desired, the same former official said, and is “not really brought together” in one central forum.
Britain has yet to publish a formal semiconductor strategy | Thomas Coex/AFP via Getty Images
“This initiative [the TTC] between the world’s two regulatory powerhouses risks sidelining the U.K.,” warned lawmakers on the UK Parliament’s Foreign Affairs Committee in a report last October. Britain may become “a rule-taker rather than a rule-maker,” MPs noted, citing the government’s “ambiguous” position on technology standards. Britain has yet to publish a formal semiconductor strategy, and others on critical minerals — like those used in EV batteries — or AI are also missing.
Over the last two years, U.S. trade chief Tai has “spoken regularly to her three successive U.K. counterparts to identify and tackle shared economic and trade priorities,” said a spokesperson for the U.S. Trade Representative, adding “we intend to continue strengthening this partnership in the years to come.”
All eyes on Europe
For its part, the EU has to date shown little interest in closer cooperation with the U.K.
Three European Commission officials disregarded the likelihood of Britain joining the club, though one of those officials said that London may be asked to join — alongside other like-minded countries — for specific discussions related to ongoing export bans against Russia.
Even with last week’s breakthrough over the Northern Ireland protocol calming friction between London and Brussels, the U.K. was not a priority country for involvement in the TTC, added another of the EU officials.
“The U.K. was extremely keen to be part of a dialogue of some sort of equivalent of TTC,” said a senior business representative in London, who requested anonymity to speak about sensitive issues.
U.K. firms see “the Holy Grail” as Britain, the U.S. and EU working together on this, they said. “We’re very keen to see a triangular dialogue at some point.”
The U.K.’s haggling with the EU over the details of the Northern Ireland protocol governing trade in the region has posed “a political obstacle” to realizing that vision, they suggested.
Yet with a solution to the dispute announced in late February, the same business figure said, “there will be a more prominent push to work together with the U.K.”
TTC+
Some trade experts think the UK would increase its chances of accession to the TTC if it submitted a joint request with other nations.
But prior to that happening, “I think the EU-U.S. TTC will need to first deliver bilaterally,” said Sabina Ciofu, an international tech policy expert at the trade body techUK.
Representatives speak to the media following the Trade and Technology Council Meeting in Maryland | Saul Loeb/AFP via Getty Images
When there is momentum, Ciofu said, the U.K. should join forces with Japan, South Korea and other advanced economies to ask for a TTC+ that could include the G7 or other partners. At the last TTC meeting in December, U.S. and EU officials said they were open to such an expansion around specific topics that had global significance.
But not all trade experts think this is essential. Andy Burwell, director of international trade at the CBI, said he doesn’t “think it necessarily matters” whether the U.K. has a structured conversation with the U.S. like the TTC forum.
Off the back of a soon-to-be-published refresh of the Integrated Review — the U.K.’s national security and foreign policy strategy — Prime Minister Rishi Sunak should instead seize the opportunity, Burwell said, to pinpoint where Britain is “going to own, collaborate and have access to various aspects of the supply chains.”
The G7, Burwell said, “could be the right platform for having some of those conversations.”
Yet the “danger with the ad hoc approach with lots of different people is incoherence,” said the former Downing Street official quoted above.
Too many countries involved in setting the standards can, the former official said, “create difficulty in leveraging what you want — which is all of the countries agreeing together on a certain way forward … especially when you’re dealing with issues that relate to, for example, China.”
Additional reporting by Mark Scott, Annabelle Dickson and Tom Bristow
The US government is reviewing a policy that permits certain US exports to continue to Huawei, despite an overall push by the Trump and Biden administrations to block the Chinese telecommunications giant from receiving American technology.
Alan Estevez, a Commerce Department official, told lawmakers Tuesday that the policy is “under assessment” as the agency conducts a “top-to-bottom review of our export control policies related to the [People’s Republic of China].”
Estevez testified before the House Foreign Affairs Committee, which was holding a hearing to scrutinize China’s impact on US national security.
In 2019, Huawei was one of a number of Chinese companies placed on the Commerce Department’s Entity List, which prohibits US companies from trading specified items with entities named on the list unless they obtain a license to do so.
US officials have expressed concerns that Huawei’s 5G wireless networking gear could allow the Chinese government to spy on American communications. Huawei has denied that it poses a security risk, and its founder has said the company would resist any Chinese government effort to obtain its data.
According to Foreign Affairs Committee chairman Michael McCaul, between January and March of 2022 the Commerce Department approved more than $23 billion in license applications to trade with Chinese-affiliated companies on the Entity List. Confronting Estevez at Tuesday’s hearing, McCaul asked the Commerce Department to square the license approvals with the US government’s wider effort to sideline Huawei and similar companies.
“A licensing rule of the previous administration that still stands for Huawei allows things below 5G, below cloud-level to go,” Estevez said, “and I will say that all those things are under assessment.”
Entity List restrictions do not provide for a “blanket embargo” on exports generally, Estevez added, but rather reflect specific rules about particular exports.
Separately, in 2020 the Commerce Department moved to prevent Huawei’s suppliers from selling the company semiconductor chips made by US-built software and equipment, unless those suppliers also obtained a license.
Other parts of the US government have also moved against Huawei. The Federal Communications Commission has prohibited US wireless carriers from using federal funding to purchase Huawei networking gear, and last year also banned future approvals of Huawei equipment for sale in the United States, in the first use of the FCC’s equipment authorization authority for a national security purpose.
And amid tensions with China marked by the dramatic downing of a spy balloon and new warnings that Beijing is considering providing lethal aid to Russia, Raimondo’s sales pitch these days is simple: Making chips is core to US national security.
“It’s no secret that we are in a global – very heated global competition with China. And technology is at the crux of that competition,” Raimondo told CNN in an interview. “Right now, we are much too reliant upon Taiwan for leading edge chips. So, a big part of our strategy around being a global leader is investing in America: In our people, in our capacity to out innovate China and the rest of the world.”
As the Commerce Department on Tuesday launches its application for billions of dollars in semiconductor subsidies, Raimondo said she wants to be “crystal clear” that the program is “a national security initiative.” But reaching those national security goals, she said, will require developing a US workforce that can meet the moment.
“We simply will not be successful in achieving the national security goals of the CHIPS initiative unless we invest in our workforce, period. Full stop,” Raimondo said. “For decades, we’ve taken our eye off the ball with manufacturing, which means the worker supply of people with the skills to do super technical manufacturing has withered. And so, we need to be honest about that, but also embrace it as an opportunity to come up with creative solutions.”
To that end, the Commerce Department is asking every company vying for a share of the $39 billion in direct funding for semiconductor manufacturing to develop and outline plans for how they plan to build a skilled and diverse workforce, including by working with high schools and community colleges.
Companies applying for the funding will need to lay out strategies and commitments for training workers and coordinating with educational and other community institutions to meet their workforce goals.
As part of Raimondo’s initiative to bring one million women into the construction industry over the next decade, applicants will also need to detail steps they will take to recruit and train a diverse construction workforce, including efforts to recruit women to the field. Raimondo said she expects building new chips manufacturing hubs will require 120,000 to 140,000 construction workers.
Applicants seeking over $150 million in funding will also need to lay out how they will provide its workforce with access to childcare, including through on-site childcare or by subsidizing the cost of childcare.
Some of these initiatives – recruiting more women and people of color into specialized fields or ensuring that high school and community college graduates can receive technical training – are ideas that the Biden administration has touted in other contexts throughout the president’s first two years in office. But one senior administration official insisted that the applications would be “seriously vetted and pressure-tested,” saying that if their workforce plans do not clear the bar, “we will not sign off on the funding.”
Raimondo, for her part, acknowledged that senior executives at chips manufacturing companies have questioned whether the US workforce is up to the task.
“They say, ‘America doesn’t manufacture anymore. America hasn’t manufactured chips in a really long time at scale, you don’t have the talent supply. How are we going to be successful?’” Raimondo said.
She also suggested to CNN that there is a unique opportunity to make real headway on these goals in the context of semiconductors – precisely because there are such serious national security imperatives at stake.
“If we don’t recruit more people, including women, into the construction trades, these projects won’t be built on time and on budget. And then we won’t as a nation hit our national security goal,” Raimondo said. “Same thing for engineers. Same thing for technicians.”
(AMD) and has struggled to meet Wall Street’s earnings targets. Weighing on earnings is weak PC demand, with year-over-year declines in sales. A dividend cut this large may partly reflect the economic environment, but also the company’s own problems.
Shares in Taiwan Semiconductor Manufacturing Company fell as much as 4% on Wednesday, after Warren Buffett’s Berkshire Hathaway disclosed that it had sold most of its holdings in the chip giant.
In a Tuesday filing with the United States’ Securities and Exchange Commission, Berkshire Hathaway
(BRKA) said it had about 8.3 million American depository shares of TSMC worth $618 million, having sold 86% of its shares. Just months before, in November, the company held about 60 million American depository shares of TSMC worth $4.1 billion, according to an SEC filing.
Berkshire Hathaway did not provide a reason for the sale and did not immediately respond to a CNN request for comment. TSMC had no comment on the share sale.
Shares in TSMC, which accounts for an estimated 90% of the world’s super-advanced computer chips, ended Wednesday more than 3% lower.
Last month, the chipmaker posted strong quarterly and annual earnings, but gave a muted forecast on prospects for 2023 given the global slump in electronics demand because of rising inflation.
Due to TSMC’s record earnings in 2022, its board approved on Tuesday the distribution of $121 billion New Taiwan Dollars ($4 billion) in performance-related bonuses and profit sharing to employees based in Taiwan.
With nearly 65,000 employees on the island as of the end of last year, that would work out as an average of $62,000 per employee – if distributed equally.
The board also approved a plan to inject up to $3.5 billion into the company’s subsidiary in Arizona, which will be part of a previously announced investment of $40 billion in the United States. TSMC announced last year that it’s building a second semiconductor factory in Phoenix and increasing its investment there.
The world’s most important chipmaker, highly sought after by governments globally, is considering opening its first plant in Europe and a second one in Japan. TSMC’s global expansion comes as political tension has heightened between Washington and Beijing.
Earlier this month, US Secretary of State Antony Blinken postponed a planned trip to China in response to the flying of a suspected Chinese spy balloon over the United States.
In October, President Joe Biden’s administration imposed sweeping new curbs designed to curtail China’s access to technology critical to its growing military power.
Last month, a Dutch maker of semiconductor equipment, ASML, told CNN that “rules are being finalized” on export controls to China, amid reports that the Netherlands and Japan have joined the United States in restricting sales of some computer chip machinery to the country.
A few days later, multiple media outlets reported that Washington was moving to further restrict sales of American technology to Chinese tech giant Huawei.
– CNN’s Chris Isidore and Michelle Toh contributed to this report
should be insulated from any slowdown in the broader economy by increased spending on artificial intelligence, say analysts at Oppenheimer, who lifted their price target for the semiconductor company.
The heightened interest around artificial-intelligence should set investors’ minds at ease ahead of
Nvidia
‘s earnings next week, say the analysts, with the semiconductor maker’s commentary on data-center spending in focus.
Investors are in a feeding frenzy over artificial-intelligence software plays, and you have to think this isn’t going to end well.
You can date the start of the AI stock craze to the Nov. 30 launch of ChatGPT, the generative AI chatbot created by the start up OpenAI. Recent data show that ChatGPT reached more than 100 million users in January, reaching that market faster than other buzzy apps like TikTok.
Infineon Technologies AG on Thursday posted higher revenue and profit for its fiscal first quarter as strong chips sales in the automotive and industrial segments offset weaker demand for smartphones, computers and data centers.
The German chip maker IFX, +7.46%
said revenue for the three months ended Dec. 31 climbed to 3.95 billion euros ($4.34 billion) from EUR3.16 billion the prior-year quarter. Infineon’s automotive segment contributed EUR1.87 billion to the total.
“The energy transition and expansion of electromobility are causing a continuously high need for our solutions in industrial and automotive applications. In contrast, we are seeing significantly weaker demand in areas such as smartphones, PCs and data centers,” Chief Executive Jochen Hanebeck said.
Last week, Intel Corp. reported a fourth-quarter loss and a decrease in sales, reflecting, in part, the sharp downturn the personal-computer market has been experiencing over recent months. Infineon also saw lower demand for chips in laptops, TVs and games consoles.
Net profit jumped to EUR728 million from EUR457 million. Infineon’s segment result, a key profitability metric, surged to EUR1.11 billion from EUR717 million, generating a margin of 28%.
Analysts polled by FactSet had forecast revenue of EUR4 billion, a net profit of EUR675 million and a segment result of EUR1 billion.
Infineon had guided for revenue of around EUR4 billion and a segment result margin of about 25%.
For the fiscal second quarter, Infineon is targeting revenue of around EUR3.9 billion and a segment result margin of around 25%.
“We are continuing to navigate carefully in these challenging times and remain flexible in our approach to market dynamics. All in all, we are increasing our guidance slightly for the fiscal year, adjusting for currency effects,” Mr. Hanebeck said.
For the fiscal year, Infineon continues to expect revenue of around EUR15.5 billion, plus or minus EUR500 million, but raised its segment result margin forecast to around 25% from about 24% previously. The company based its guidance on an exchange rate of $1.05 to the euro, up from $1 previously.
Write to Mauro Orru at mauro.orru@wsj.com; @MauroOrru94
Intel Corp. continues to cut costs for everything except payments to investors.
Intel INTC, +3.03%,
which is already in the process of cutting what is believed to be thousands of jobs amid steep declines in profit and revenue, is reducing Chief Executive Pat Gelsinger’s base salary by 25% and trimming other salaries at a descending rate based on seniority, down to 5% cuts for midlevel positions, a person familiar with the matter told MarketWatch. While nonexempt workers and junior positions face no pay cuts, Intel is trimming its 401(k) contributions to 2.5% from 5% and will suspend merit raises and quarterly performance bonuses, the person said. Annual performance bonuses and stock grants will remain.
In an emailed statement, an Intel spokesperson confirmed “several adjustments to our 2023 employee compensation and rewards programs.”
“As we continue to navigate macroeconomic headwinds and work to reduce costs across the company, we’ve made several adjustments to our 2023 employee compensation and rewards programs,” the statement said. “These changes are designed to impact our executive population more significantly and will help support the investments and overall workforce needed to accelerate our transformation and achieve our long-term strategy. We are grateful to our employees for their commitment to Intel and patience during this time as we know these changes are not easy.”
Intel has not touched its dividend, though, even as its free cash flow fell into the red during 2022 and is expected to be negative again this year. The chip maker paid out roughly $1.5 billion in dividends in the fourth quarter, completing $6 billion in annual payments, and maintained the same level of payments for the first quarter despite analysts questioning whether the company can afford it.
“The board [and] management, we take a very disciplined approach to the capital allocation strategy and we’re going to remain committed to being very prudent around how we allocate capital for the owners, and we are committed to maintaining a competitive dividend,” Chief Financial Officer David Zinsner said when asked directly about the dividend during Intel’s earnings call last week.
Intel shares have declined 42.1% in the past 12 months, as the S&P 500 SPX, +1.30%
has dropped 10.3% and the Dow Jones Industrial Average DJIA, +0.36%
— which counts Intel as one of its 30 components — has fallen 3.7%.
Advanced Micro Devices Inc. shares rose in the extended session Tuesday after the chip maker’s data-center sales gained and executives forecast sales of more than $5 billion to start 2023, even as cloud-customer demand begins the year light.
AMD shares AMD rose 3% after hours, following a 3.7% gain in the regular session to close at $75.15.
The initial version of this story had incorrect price changes for 2023. It is now updated with information as of the market close on Jan. 31.
Investors staged a January rally, with solid gains for the S&P 500 and an even better showing for technology stocks that led the dismal downward action in 2022.
ASML, a Dutch maker of semiconductor equipment, says “rules are being finalized” on export controls, amid reports that the Netherlands and Japan have joined the United States in restricting sales of some computer chip machinery to China.
“It is our understanding that steps have been made towards an agreement between governments which, to our understanding, will be focused on advanced chip manufacturing technology, including but not limited to advanced lithography tools,” the company told CNN late Friday in response to questions about export controls to China.
“Before it will come into effect it has to be detailed out and implemented into legislation which will take time.”
ASML is known for its prowess in making lithography machines, which uses light to print patterns on silicon. The firm says that step is crucial in the mass production of microchips.
The company’s response came as Bloomberg, the Wall Street Journal and the Financial Times reported over the weekend that the United States had persuaded the Netherlands and Japan to agree to curb exports of certain chipmaking equipment to China, citing anonymous sources.
A deal was reached at the White House on Friday, though it was not officially announced, partly due to “concerns by Japan and Netherlands about potential retaliation by China,” according to the Journal, which cited a person familiar with the matter.
Bloomberg reported that the deal “would extend some export controls the US adopted in October” to Dutch and Japanese companies, including ASML
(ASML), Nikon
(NINOY) and Tokyo Electron.
The Biden administration had banned Chinese companies from buying advanced chips and chipmaking equipment without a license. It also restricted the ability of American citizens to provide support for the development or production of chips at certain manufacturing facilities in China.
The White House did not immediately respond to a request for comment outside US business hours. Nikon and Tokyo Electron declined to comment.
On Saturday, Japan’s Economy and Trade Minister Yasutoshi Nishimura told reporters that he would “refrain from commenting on diplomatic negotiations.”
Asked about the three-way talks in Washington, Nishimura said “we would like to respond appropriately while taking into consideration the regulatory trends in each country.”
Because of its dominance in the market, ASML has been cited by experts as a bellwether of the growing rift between China and the West over access to advanced technology.
In recent months, the Dutch government has faced pressure from the United States to limit chip-related exports to China, particularly from ASML, according to Xiaomeng Lu, director of geo-technology at the Eurasia Group.
In its Friday statement, the company said that based on what has been said by government officials and current market conditions, it did not expect any material impact on its financial projections for 2023.
But ASML said its knowledge of the new rules was still limited, making it difficult to map out “the medium and long-term financial, organizational and global industry-wide impact of new export control rules.”
“While these rules are being finalized, ASML will continue to engage with the authorities to inform them about the potential impact of any proposed rule in order to assess the impact on the global semiconductor supply chain,” it said.
It noted that it mainly sold “mature” products to China, and its most advanced lithography technology had already been restricted since 2019.
Those machines had been prohibited from being sent to China because the Dutch government had “refused to grant it a license under US pressure,” Lu previously told CNN.
In the biggest week of the holiday-earnings season, Big Tech results will receive the spotlight amid thousands of layoffs that could only be the beginning.
After tech stocks were decimated in 2022, investors will be looking for signs of a turnaround in holiday reports and potential forecasts for the year ahead from three of 2022’s top five market-value losers: Amazon.com Inc. AMZN, -0.66%,
Apple Inc. AAPL, -0.63%
and Meta Platforms Inc. META, -0.60%.
The other two stocks on that list — Microsoft Corp. MSFT, -1.38%
and Tesla Inc. TSLA, -0.15%
— reported last week, and Microsoft’s results in the wake of a mass-layoffs announcement did not bode well for its Big Tech brethren.
Those companies — along with Google parent Alphabet Inc. GOOGL, -1.32% GOOG, -1.49%
— will deliver results after finding themselves in unfamiliar territory: A backdrop of layoffs amid slowing demand for core products like digital ads, electronics and e-commerce, after a two-year pandemic surge and a two-decade-plus honeymoon with investors. Some analysts say the bottom hasn’t arrived, for either their finances or their workforces.
The one Big Tech company that hasn’t taken a sword to its payroll is Apple, which also increased its staff the least among the group during the COVID-19 pandemic. Apple shed $846 billion from its market cap last year, and now reports after its core product was part of the smartphone industry’s worst year since 2013 and worst holiday-season decline on record. The iPhone maker could also face questions from Wall Street about changing up its product sourcing, which has relied heavily on China, a nation whose COVID-19 restrictions have constrained production of some phones.
“Similar to other big technology companies, we expect Apple to adjust its head count to reflect an increasingly challenging global macroeconomic environment,” D.A. Davidson analyst Tom Forte said in a research note Tuesday.
Rivals that have already cut could face more if profit continues to fall along with revenue growth. Alphabet, for instance, is cutting 12,000 employees, but an activist investor has already said that is not enough considering how much the company grew during the pandemic, and the difficulties it now faces in the online-ad sector.
Analysts have said Meta’s “darkest days” are still ahead, as it navigates a round of more than 11,000 layoffs, competition from TikTok and its early stumbles in the metaverse. While cutting, Chief Executive Mark Zuckerberg has promised to keep spending on metaverse development, even as the efforts slash the Facebook parent company’s previously healthy bottom line.
“In 2023, we expect Meta to remain engulfed in arduous battles inside the Octagon,” Monness Crespi Hardt analyst Brian White said in a research note on Thursday. “In the long run, we believe Meta will benefit from the secular digital ad trend and innovate in the metaverse; however, regulatory scrutiny persists, internal headwinds remain, and we believe the darkest days of this downturn are ahead of us.”
Online retailer Amazon AMZN, -0.66%
was the first Big Tech company to publicly declare cost-cutting was in order a year ago, and still coughed up $834 billion in market value in 2022. It kicked off 2023 with plans to lay off more than 18,000 workers as struggles continued throughout last year, when inflation siphoned away more consumer dollars toward essentials.
Amazon’s own AWS cloud-infrastructure unit has helped to drive sales in years past, as businesses built out their tech infrastructures. But remarks and the outlook from Microsoft executives — the third-biggest market-cap loser of 2022, and a big barometer for tech spending overall — weren’t exactly encouraging for cloud growth: Executives there last week warned of “moderating consumption growth” for its own cloud business.
“Sentiment was already bearish on AWS, with investors looking for slowing revenue over the next three quarters, largely confirmed after Microsoft earnings and conversations with industry checks,” Oppenheimer analyst Jason Helfstein said in a note on Wednesday. “Positively, we believe e-commerce revenue has stabilized, and margins should improve from organic scale and announced head-count reductions.”
One sector to watch is semiconductors, where a chip shortage has turned into a glut: Chip-equipment maker Lam Research Corp. LRCX, +0.04% announced layoffs in the past week as Silicon Valley semiconductor giant Intel Corp. INTC, +0.27% displayed “astonishingly bad” results while laying off workers. When Intel rival Advanced Micro Devices Inc. AMD, -1.64%
reports this week, it could determine whether there is any silver lining in the semiconductor storm.
Wedbush analyst Daniel Ives said in a Sunday note that a common theme of this week’s Big Tech earnings will be that “tech layoffs will accelerate with more pain ahead to curb expenses,” though he added that “Apple will likely cut some costs around the edges, but we do not expect mass layoffs from Cupertino this week.”
Big Tech earnings were a salve to other problems in the market for the past decade-plus, but with layoffs already under way and doubts about the path forward, don’t expect salvation from their results this week.
This week in earnings
For the week ahead, 107 S&P 500 SPX, -0.19%
companies, including six members of the Dow Jones Industrial Average DJIA, +0.18%,
will report results, according to FactSet. While more Dow components reported last week, this will be the busiest week for S&P 500 holiday earnings of the season, FactSet senior earnings analyst John Butters confirmed to MarketWatch.
On Tuesday, package-deliverer United Parcel Service Inc. UPS, -0.26%
reports, amid questions about holiday-season demand. So does streaming service Spotify Technology, SPOT, -0.02%
following its own layoffs and suggestions of possible price hikes, as well as McDonald’s Corp. MCD, -0.30%,
amid concerns that rising prices are keeping people from dining out. Exxon Mobil Corp. XOM, -0.99%,
Caterpillar Inc. CAT, -0.12%,
Snap Inc. SNAP, +0.64%
and Pfizer Inc. PFE, +0.72%
also report Tuesday.
For the Big Tech companies, Thursday is also the big day: Apple, Amazon and Alphabet will report that afternoon, after Meta reports the prior day.
The calls to put on your calendar
WWE upheaval: World Wrestling Entertainment Inc. WWE, +0.91%
reports earnings on Thursday, as Vince McMahon — who returned to the professional-wrestling organization this month following allegations of sexual misconduct — seeks a buyer or some other so-called “strategic alternative” for the company.
The Wall Street Journal this month reported that McMahon would pay a multimillion-dollar settlement to a former referee who accused him of raping her. Among the changes since McMahon returned was the departure of his daughter, who had been promoted to co-CEO after he stepped down from the role last year.
There isn’t much clarity on whether Vince McMahon will be on Thursday’s earnings call, which was moved from the morning to the afternoon due to a scheduling conflict. But it should offer drama no matter who attends.
The numbers to watch
GM and Ford auto sales: Auto makers General Motors Co. GM, -2.00%
and Ford Motor Co. F, -0.94%
will issue results on Tuesday and Thursday respectively, amid signs of waning demand and rising interest rates that have made car loans more expensive. Despite falling new-vehicle sales in the third quarter, GM managed to keep its own sales higher, the AP noted.
Mary Barry, GM’s chief executive, called out the popularity of vehicles like the Escalade, the Chevrolet Bolt EV and some pickups and SUVs during the auto maker’s third-quarter earnings call in October. During that quarter, GM said it completed and shipped nearly 75% of the unfinished vehicles held in its inventory in June. She said supply-chains were opening up again, but added that “short-term disruptions will continue to happen.”
The auto makers report as they try to put a chip shortage and other production constraints behind them. But some forecasts call for 2022 auto sales, or sales volumes, to be the weakest in roughly a decade. Electric vehicle maker Tesla’s recent price cuts could also cut into GM’s and Ford’s own EV sales.
Intel Corp. shares dropped more than 9% in the extended session Thursday after the chip maker reported a big miss for the fourth quarter, forecast a loss for the first quarter, said the data-center market was contracting and that inventory digestion will gnaw at margins.
Intel INTC, +1.31%
executives forecast an adjusted loss of 15 cents a share on revenue of about $10.5 billion to $11.5 billion and adjusted gross margins of about 39% for the current quarter. Analysts surveyed by FactSet had estimated adjusted first-quarter earnings of 25 cents a share on revenue of $13.93 billion.
Chief Executive Pat Gelsinger told analysts on a conference call he would not provide a 2023 forecast. Gelsinger restricted the outlook to the current quarter, citing macro uncertainties, a digestion of PC inventory that was “difficult” to forecast and a contracting data-center market. In the fourth quarter, AI group sales dropped 33% to $4.3 billion, while the Street expected revenue of $4.08 billion.
“We expect Q1 server consumption [total addressable market] to decline both sequentially and year-over-year at an accelerated rate, with first-half 2023 server consumption TAM down year-on-year before returning to growth in the second half,” Gelsinger said.
Chief Financial Officer David Zinsner told analysts that the company will institute an accounting change in the first quarter, where Intel will extend the useful life of their machinery to eight years from a current five years. Gelsinger said that Intel was going to “squeeze” its effective capacity.
While Zinsner would not give a full-year outlook, he did say that continued inventory digestion should be weighted to the first half of the year.
Pressed on how Intel could get back to the 51% to 53% margins range he promised a year ago, Zinsner said a “significant inventory burn” on PC inventory would hit gross margins by 400 basis points in the first quarter. Gross margins for the fourth quarter dropped to 43.8% from 55.8% a year ago, and from 45.9% in the third quarter.
Intel reported a fourth-quarter loss of $664 million, or 16 cents a share, versus net income of $4.62 billion, or $1.13 a share, in the year-ago period. After adjusting for restructuring charges and other items, Intel reported earnings of 10 cents a share, compared with $1.13 a share from a year ago.
Revenue declined to $14.04 billion from $20.52 billion in the year-ago quarter, for a 10th straight quarter of year-over-year declines.
Analysts surveyed by FactSet estimated earnings of 21 cents a share on revenue of $14.49 billion, based on Intel’s forecast of 20 cents a share on about $14 billion to $15 billion.
Intel shares fell 9% in after-hours trading, after closing the regular session up 1.3% at $30.09. Other chip stocks also declined, including top rival Advanced Micro Devices Inc. AMD, +0.33%,
which saw shares drop more than 3% in after-hours trading, and Nvidia Corp. NVDA, +2.48%,
which declined 2%.
Breaking down divisions: Client-computing sales fell 36% to $6.6 billion from a year ago; “network and edge” sales slipped 1% to $2.1 billion; and foundry services revenue rose 30% to $319 million.
Analysts surveyed by FactSet expected revenue from client computing to come in at $7.36 billion; “network and edge” revenue of $2.23 billion; and foundry services revenue of $199.1 million.
Over the past 12 months, Intel stock has fallen 43%. Over the same period, the Dow Jones Industrial Average DJIA, +0.61%
— which counts Intel as a component — has slipped 1%, the PHLX Semiconductor Index SOX, +1.63%
has dropped 13%, the S&P 500 index SPX, +1.10%
has declined 7%, and the tech-heavy Nasdaq Composite Index COMP, +6.59%
has dropped 15%.
Intel Corp. shares dropped in the extended session Thursday after the chip maker reported a big miss for the fourth quarter and forecast a loss for the first quarter.
Intel INTC, +1.31%
shares fell 6% in after-hours trading, after closing the regular session up 1.3% at $30.09.
For the first quarter, Intel forecast an adjusted loss of 15 cents a share on revenue of about $10.5 billion to $11.5 billion and adjusted gross margins of about 39%. Analysts surveyed by FactSet had estimated adjusted first-quarter earnings of 25 cents a share on revenue of $13.93 billion.
“In 2023, we will continue to navigate the short-term challenges while striving to meet our long-term commitments, including delivering leadership products anchored on open and secure platforms, powered by at-scale manufacturing and supercharged by our incredible team,” said Pat Gelsinger, Intel’s chief executive, in a statement.
Intel reported a fourth-quarter loss of $664 million, or 16 cents a share, versus net income of $4.62 billion, or $1.13 a share, in the year-ago period. After adjusting for restructuring charges and other items, Intel reported earnings of 10 cents a share, compared with $1.09 a share from a year ago.
Revenue declined to $14.04 billion from $20.52 billion in the year-ago quarter, for a 10th straight quarter of year-over-year declines. Gross margins dropped to 43.8% from 55.8% a year ago, and 45.9% in the third quarter.
Analysts surveyed by FactSet estimated earnings of 21 cents a share on revenue of $14.49 billion, based on Intel’s forecast of 20 cents a share on about $14 billion to $15 billion.
Over the past 12 months, Intel stock has fallen 43%. Over the same period, the Dow Jones Industrial Average DJIA, +0.61%
— which counts Intel as a component — has slipped 1%, the PHLX Semiconductor Index SOX, +1.63%
has dropped 13%, the S&P 500 index SPX, +1.10%
has declined 7%, and the tech-heavy Nasdaq Composite Index COMP, +1.76%
has dropped 15%.
STMicroelectronics NV on Thursday posted a surge in revenue and profit for the fourth quarter led by growth at its automotive and microcontrollers divisions.
The European chip maker STM IT:STM said net revenue climbed to $4.42 billion compared with $3.56 billion in the 2021 fourth quarter, with the company’s automotive business contributing $1.70 billion.
ASML Holding NV said Wednesday that for the fourth quarter it beat net profit consensus and net sales rose, and that it expects continued strong sales growth in 2023 despite a challenging environment.
The Dutch semiconductor-equipment maker NL:ASML ASMLsaid net profit for the period was 1.8 billion euros ($1.96 billion) compared with EUR1.77 billion for the fourth quarter of 2021, and consensus of EUR1.71 billion, taken from FactSet and based on 17 analysts’ estimates.
After one of the worst years in Wall Street’s history, investors have some serious questions for companies. As holiday returns roll in — and with them, forecasts for the months or year ahead — many have the chance to answer those questions, or avoid them.
In the busiest week of the holiday-earnings season so far, three big names will take the stage on back-to-back-to-back afternoons. Here is what to expect:
Microsoft Corp.
Microsoft MSFT, +3.57%
shed $737 billion in market value last year, the third-most of any S&P 500 company, then announced plans to lay off some 10,000 workers this month. Previously a Wall Street darling thanks to the phenomenal growth of its Azure cloud-computing offering, Microsoft now faces a cutback in enterprise spending on cloud and other products, as companies seek to cut their bills after spending wantonly during the early years of the COVID-19 pandemic.
When the company announced layoffs, Chief Executive Satya Nadella admitted customers were cutting, saying “as we saw customers accelerate their digital spend during the pandemic, we’re now seeing them optimize their digital spend to do more with less.” Analysts believe Azure may be holding up better than rivals, however, and will expect to hear about it when Microsoft results hit Tuesday afternoon.
“Our Azure checks were mixed, but generally better than public cloud sentiment that has turned highly negative over the past few months,” Mizuho analysts wrote. “More specifically, we have heard of increasing levels of optimization, but it is being partially offset by many organizations prioritizing digital transformation.”
As cloud growth slows down, expect Microsoft to point to the next big buzzword in tech: Artificial intelligence, specifically ChatGPT, the chatbot product developed by OpenAI, which Microsoft has invested heavily in and expects to incorporate into its products. D.A. Davidson analyst Gil Luria this month wrote that Microsoft’s investments in OpenAI would help it build out more AI technology, including in its search engine Bing.
Tesla Inc.
Tesla TSLA, +4.91%
stock suffered a much larger percentage decline than Microsoft in 2022,as the electric-vehicle maker’s shares closed out their worst year on record with their worst quarter and month ever. After the year ended, Tesla began slashing prices in China and the U.S. in hopes of qualifying for more consumer tax incentives and reinvigorating demand, which could lead to questions about previously fat margins.
For Tesla, which reports fourth-quarter results Wednesday, the results will offer more context on production of the Cybertruck — currently set to start in the middle of the year — demand in China, competition and the impact of price cuts. Auto-information website Edmunds on Thursday said that Tesla’s decision to slash prices by as much as 20% in the U.S. and Europe led to a jump in interest in the vehicles.
While those cuts seem likely to hurt profit, Deutsche Bank analyst Emmanuel Rosner called it “a bold offensive move, which secures Tesla’s volume growth, puts its traditional and EV competitors in great difficulty, and showcases Tesla’s considerable pricing power and cost superiority.” And a survey from Wedbush analysts found that “76% of EV Chinese consumers are considering buying a Tesla in 2023.” But Toni Sacconaghi, an analyst at Bernstein, said Tesla needed more low-cost electric-vehicle offerings, which might not ship until 2025.
With Tesla’s stock in the gutter, some analysts have raised the possibility of a share buyback to spur investor interest, and Chief Executive Elon Musk said such a plan was being discussed in the previous earnings call. Musk is not in great favor with many investors right now, however, following some heavy selling of Tesla shares in the wake of his purchase last year of Twitter, which some on Wall Street have said has distracted him from the needs of the auto maker. Musk’s tweets have landed him in trouble elsewhere: Opening arguments began last week for a trial centered on allegations that Musk put investors at risk when he tweeted in 2018 that he was “considering” taking Tesla private and had secured the money to do so.
Intel’s INTC, +2.81%
questions were not fresh in 2022, as the chip maker for years has seen rivals like Advanced Micro Devices Inc. AMD, +3.49%
and Nvidia Corp. NVDA, +6.41%
challenge it in ways that would have been unthinkable in previous generations. Shares still dove more than 43% last year, as declining sales led to plans for $3 billion in cost cuts.
Intel CEO Pat Gelsinger, though, has a chance to lay out his vision for a long-term Intel rebound, as he attempts to make Intel a chip-manufacturing powerhouse again after years of struggles. He was forced to trim his annual outlook multiple times last year, so it will be important for him to provide attainable numbers this time, but without reducing hopes in the path forward.
This week in earnings
Expectations remain low for fourth-quarter earnings season overall, with consumers squeezed by higher prices and interest rates, and hopes fading for any relief from the holiday shopping season. But even with a low bar, the fourth-quarter results from companies so far have been worse than the historical norm, with FactSet senior earnings analyst John Butters writing Friday that “the fourth-quarter earnings season for the S&P 500 is not off to a strong start.”
So far, 11% of S&P 500 companies have reported fourth-quarter results, with roughly one-third reporting earnings better than estimates, Butters reported. That’s lower than the 10-year average of 73%.
Still, Wall Street generally expects strong profit margins for companies in the S&P 500, as earlier price increases — which help businesses offset their own costs and test the limits of consumer demand — mix with more recent cost cuts.
For the week ahead, 93 companies in the S&P 500 index SPX, +1.89%,
and 12 of the 30 Dow Jones Industrial Average DJIA, +1.00%
components, are set to report quarterly results.
And as demand for goods eases amid worries about a downturn, a number of railroad operators that ship those goods report during the week. Union Pacific Corp. UNP, +1.54%,
whose lines ship across the Western half of the U.S., reports on Tuesday, while CSX Corp. CSX, +1.46%,
which covers much of the East, reports Wednesday. Norfolk Southern Corp. NSC, +1.51%
also reports Wednesday.
Telecom giants Verizon Communications Inc. VZ, -0.15%,
AT&T Inc. T, +1.53%
and Comcast Corp. CMCSA, +3.22%
report Tuesday, Wednesday and Thursday, respectively. Results there will offer a clearer sense of the state of demand for Apple Inc.’s AAPL, +1.92%
iPhones, as premium models suffer from production snags, and for broadband, which saw heightened demand when more people were staying home due to the pandemic.
The call to put on your calendar
Southwest, post-meltdown: Southwest Airlines Co. LUV, +1.67%,
which reports on Thursday, will offer executives with plenty to answer for, after bad weather and an overloaded, aging scheduling system caused thousands of flight cancellations over the holidays.
The implosion has raised questions about the air carrier’s investments in its own technology — after restarting dividend payments shortly before the disruptions — and airlines’ ability to handle the post-lockdown travel rebound. The breakdown has underscored the airline industry’s bigger issues with understaffing, after 2020’s wave of departures, as carriers try to reload flight schedules to meet pent-up travel demand.
Scott Kirby, chief executive at United Airlines Holdings Inc. UAL, +2.25%, said during his company’s earnings call last week that he felt the industry’s goals to expand their flight coverage this year and beyond were “simply unachievable.” And he said that airlines that tried to follow prepandemic patterns were destined to face trouble. He said manufacturers were suffering from delays in building jets, engines and other parts, and that airlines had outgrown their technology infrastructure.
“All of us, airlines and the FAA, lost experienced employees and most didn’t invest in the future,” he said. “That means the system simply can’t handle the volume today, much less the anticipated growth.”
American Airlines Group Inc. AAL, +0.37%,
Alaska Air Group Inc. ALK, +0.85%
and JetBlue Airways Corp. JBLU, +0.94%
are also expected to report results Thursday morning, along with Southwest.
The numbers to watch
Visa, Mastercard and consumer spending: The return of travel and entertainment, along with rising prices, have helped prop up consumer spending. But as Visa Inc. V, +1.77%,
Mastercard Inc. MA, +2.27%,
American Express Co. AXP, +3.23%
and Capital One Financial Corp. COF, +6.40%
prepare to report, their finance-industry counterparts are getting nervous — and taking more steps to pad themselves against the fallout from consumers struggling to pay their bills.
Credit-card issuer Capital One reports results on Tuesday, while card payments-network providers Visa and Mastercard report on Thursday, with Amex on Friday morning. They’ll report after shares of Discover Financial Services DFS, +4.16% got hit last week after the company, which also offers credit cards and loans, set aside more money to cover souring credit, and reported a bump in its net charge-off rate — a measure of debt a company thinks is unlikely to be recovered.
Larger banks, like JPMorgan Chase & Co. JPM, +0.24%,
have also set aside more money to guard against credit losses.
