Category: personal_noteS

Notes on CATL 2023

`1/ shareholder return is real

annual dividend of 22bn rmb, out of net income of ~44bn net income -> ~50% payout ratio.

this is also due to scaling back of capex (down 30% yoy in FY23)

 

2/ growth has slowed to almost zero

q4 gross profit is up only +2% yoy

q4 net income is -1% yoy

however, with utilization up, 2024H2 and beyond should return to growth

 

3/ barrier in internationalization

both EU and US want to localize the whole value chain, which seems to be a big investment, and involves upstream & downstream companies.

CATL doesn’t see good return and hasn’t done massive capital-heavy investments.

Licensing model is what clients are happy about, which is capital-light for CATL, but growth in net income would be less.

 

Future of tech – how AI and blockchain might intersect

AI will be so good at mimicking human.

Blockchain will be the tool to verify origin.

What news, photos, videos should I trust?

I am more likely to believe in those send from my friends whom I trust.

Fake account won’t work if I am already connected with the real account.

The reason I can recognize the “real” account from the “fake” one, even if they look exactly the same, is due to the history (conversations etc.) that happened before, which is what blockchain is about.

First High-NA for Intel

Intel received the world’s first high NA EUV (TWINSCAN EXE:5200) from ASML recently.

The purchase order was made in Jan 2022 – so it took some 2 years.

The machine is said to be 2x as expensive, or $350mn (or more). ASML says it has taken between 10 and 20 orders to date.

If TSMC was to take 10 machines, it will cost $3.5-4bn, or some 13% of its $28-32bn capex target for 2024.

If Intel to budget 35% of its revenue as capex, (say $60bn), it would be ~$21bn, 10 high-NA machines would be 17-19% of that capex budget.

To justify the cost of machine, high-NA “enables building transistors that are about 1.7 times smaller than today, resulting in almost triple the transistor density“. So if density is almost 3x, and assume price per wafer is up by ~45%, then cost per transistor could be halved.

Meanwhile, ASML said 2024 revenue guidance is similar to 2023, which was EUR27.56 billion.

How China exported deflation & what data to watch

1/ China PPI

China’ PPI (12-month) started to decline from Nov 2021 (Dec 2020 – Nov 2021 when global demand running high and supply running low), and entered the negative territory in Oct 2022 (global demand shock after Fed hiked rates & war in Ukraine)

China’ PPI (12-month) has remained in negative territory for 16 month as of Jan 2024 data. Looks to remain negative for next 6 month at least.

 

2/ RMB depreciation

Average exchange rate for RMB has depreciated ~9% in 2 years against USD, which caused additional price deflation.

Average exchange rate in 2023: 0.1415 USD.

Average exchange rate in 2021: 0.155 USD.

 

3/ Domestic demand

Hard to quantify, but weak China domestic demand is partially causing weakness in global demand in commodities etc., especially from the real estate sector., thus reducing inflation pressure.

The sharp dropped happened in August 2021, when Evergrande’s debt problem was catching world’s attention.

Personal computers 2024

Intel (2023q4 earnings call): “Customer inventory levels have normalized, and 2023 PC consumption was in line with our 270 million-unit forecast. We expect the PC TAM up low single digits year on year in 2024, in line with third-party estimates. We expect to ship approximately 40 million AIPCs in 2024 alone.”

IDC: The total PC market of 2024 should see growth of 3.4% compared to 2023.

Logitech (FY24q3 earnings call): implied low single digit rev growth – “Looking ahead to FY25, we do not anticipate an inflection point in the slope of this curve. While the rate of our net sales declines has improved, there are a number of headwinds and uncertainties that may impact our net sales throughout FY25.”

 

Bridgewater’s alpha return after 2018

2019: flat

The firm’s flagship Pure Alpha strategy was essentially flat in 2019, with Pure Alpha 18 Percent, the more leveraged version, falling 0.5 percent for the year, according to an investor in the funds. The less leveraged version, Pure Alpha 12 percent, gained 0.5 percent for the year.

2020: -7.6%

Bridgewater Associates’ flagship Pure Alpha fund lost 7.6% in 2020, while the firm’s All Weather fund was up over 10%.

Pure Alpha 12% Strategy fund, which went from posting a 0.29% return in 2019 to suffering a loss of -10.63% in 2020. Furthermore 2020 also wiped out two years of returns on their Pure Alpha 18% Volatility Strategy.

2021: 8%

Performance of Bridgewater’s flagship global macro fund Pure Alpha 18% Vol fund was up 7.95% in 2021 compared with a loss of 12.6% in 2020. The firm’s All-Weather 10% Vol risk-parity strategy returned 11.57% in 2021 and 9.5% in 2020.

2022: 9.4% (6% through Nov)

The Pure Alpha fund tumbled about 13% in the fourth quarter through November, cutting its year-to-date gain to 6%.

Pure Alpha II tumbled in October and November 2022 after having been up 22%. It ended that year up 9.4%.

2023: -7.6%

Bridgewater Associates’s flagship hedge fund lost 7.6% last year, with all of the drop coming in the last two months of 2023, according to people familiar with its performance. The losses for the world’s biggest hedge fund corresponded to the biggest two-month gain in global bonds since at least 1990 and a roughly 14% gain in US shares. The Pure Alpha II fund was up 7.5% through October before dropping about 14% in the following two months.

The firm’s long-only All Weather fund returned 10.6% last year, one of the people said.

 

What did Japan’s housing price look like during 1990s housing bubble?

Price-to-income ratio

The average price of a new 70 sqm apartment in 1990 in Tokyo was 107,660,000 Yen, or 1,538,000 Yen/sqm, while the average annual income was 5,940,000 Yen. Before the bubble, the average price-to-income ratio in 1985 was 8.08.

Financial Times article (https://www.ft.com/content/2ba1cb74-f598-3a4e-9edd-4e55a48d3480)

So in 1990, new home price is ~18x annual income and before bubble is ~8x.

Relative performance

Price rose ~4x in 15 years

Peak to bottom took 5 years; declined ~40% (1990-1995)

From 1975 – 1995, price still rose ~2.5x in 20 years.

Source: Home Ownership and Economic Change in Japan

Relative to global (before bubble)

Price-to-income ratio is actually more than doubling US-level and is the highest among developed countries.

Source: Introduction to “Housing Markets in the U.S. and Japan”

However, Japan’s women work participation rate is lower than the US back then, which can impact household income.

Source: Lessons from the rise of women’s labor force participation in Japan

Income level

Peak income is actually lower for later generations.

Source: The Impact of the Rise and Collapse of Japan’s Housing Price Bubble on Households’ Lifetime Utility

Due to other reasons, e.g. Asia Financial Crisis, the property market didn’t seem to recover until later years.

Source: New apartment prices in Japan since 1956,
Tokyo Kantei via JAPAN PROPERTY CENTRAL

TSMC in EU

Capital structure. The setup seems simple. Total cost is 10 billion euros. German gov shall give 5 billion euros in subsidies. TSMC will put down 3.5 billion euros, for a 70% stake. Bosch, Infineon Technologies and NXP Semiconductors will each put down 500 million for a 10% stake – 30% total.

Timing. TSMC’s fab in Japan announced in Oct 2021, started construction in Apr 2022 and is finishing in Q1 2024 (2 years of construction), and began mass production in H2 2024. The Kumamoto plant will start with 28-nm and 22-nm chips.

TSMC’s German fab hasn’t started yet. Should it began construction in H1 2024, it should finish in 2026 and start mass production in 2027. which sounds a bit far away. And this fab is for mature node (28/22nm planar CMOS and 16nm/12nm FinFET nodes).

Cost. Back in 2016, TSMC’s Nanjing plant (Fab 16) is said to cost $3bn for 20,000 12-inch wafers per month, plus the construction of a design service center. The German plant is designed to have 40,000 wafers a month, but still, the cost has inflated to almost 2x after 8 years, or ~8% annually.