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Tech shock

Balance of Power
Bloomberg

Given the pandemic's mounting toll and dramatic events in Washington, it's easy to overlook a kink in the global supply chain that has surfaced with potentially profound political consequences.

Automakers including Toyota of Japan, Germany's Volkswagen and Ford of America are struggling to secure computer chips needed for everything from entertainment systems to opening a car door. Production is being cut back and plants idled, with company earnings predicted to take a hit.

The cause is a global shortage of semiconductors as chipmakers allocated capacity to meet a Covid-induced surge in demand from consumer electronics producers like Apple. That shock to the supply chain exposes vulnerabilities in the global chip industry, notably the concentration of high-end production in Taiwan, the democratically run island claimed by China.

President Donald Trump's tech war with Beijing famously hit Huawei and chipmaker SMIC with sanctions aimed at hobbling China's advance. But it also included a component of reshoring chip production to the U.S., a push that President-elect Joe Biden must decide whether to pursue. He's just been given a strong reason to continue Trump's approach.

Europe too has big plans to bolster chip output that suddenly seem more urgent.

For now, Taiwan is reaping the benefits of its dominance: Chip giant TSMC today announced record sales. It expects to boost capital spending to as much as $28 billion this year to preserve its technological lead.

That's something governments from Berlin to Washington, Tokyo and Beijing cannot afford to ignore. — Alan Crawford

Shipping containers at the Yangshan Deepwater Port in Shanghai on Jan. 11.

Photographer: Qilai Shen/Bloomberg

Tell us how we're doing or what we're missing at balancepower@bloomberg.net.

Global Headlines

McConnell's move | Trump's unprecedented second impeachment heads to the Senate, where his fate rests with Mitch McConnell, the chamber's Republican leader. McConnell has told party colleagues he won't allow an impeachment trial to start before Biden takes office Jan. 20 (after which control of the Senate will shift to Democrats). But he also said he hasn't made up his mind whether to vote to convict Trump of inciting the riot that left five dead and damaged the Capitol.

  • Trump's trial will be the first to extend beyond a president's time in office, creating a novel legal question that ultimately could require Supreme Court resolution.
  • Read how yesterday's House vote shows Trump's iron grip on the Republican Party has slipped.

Job one | Biden today will unveil a Covid-19 relief package rivaled in size only by last year's $2 trillion Cares Act, a move that sets up his first legislative test in the face of a split Senate and deteriorating economy. The incoming president is seeking significant bipartisan backing for his aid plan. Success would distinguish him from his two immediate Democratic predecessors.

  • Biden's hope of turning the page on a chaotic chapter in American history has been complicated by the impeachment efforts.

Rocky start | The World Health Organization's mission to China to investigate the origins of Covid-19 ran into immediate problems when two of the 15-member delegation were denied entry for failing to clear health-screening procedures, while the rest were put into 14-day quarantine in Wuhan. Beijing's slow response and changing narrative of the pandemic's origins have made it harder for the world to know how it began.

New divide | Two weeks after the U.K. left the European Union, tensions over the economic border erected between mainland Britain and Northern Ireland are heating up. While grocery stores are filling their shelves again, the customs frontier is underscoring the difficulties of treating Northern Ireland differently from the rest of the U.K. and cementing divisions as calls for a referendum on reunifying the north and south of Ireland grow.

Youthful challenge | Uganda's government shut down the Internet and stepped up security patrols as voting started in a presidential election pitting pop star-turned-politician Bobi Wine, 38, against veteran leader Yoweri Museveni. While Museveni is expected to win after a campaign marred by violence, arrests and restrictions on social media platforms, Wine has shaken up the nation's politics by appealing to tech-savvy youth in a country where 80% of the population is under the age of 40.

A police officer walks past a line of voters in Kampala today.

Photographer: Luke Dray/Getty Images Europe

What to Watch

  • Italian Prime Minister Giuseppe Conte is struggling to hold onto power after losing his parliamentary majority when a junior partner quit his coalition.
  • U.S. officials deliberated but ultimately decided against banning American investment in Alibaba Group and Tencent, removing some uncertainty over Asia's two biggest corporations.
  • Turkey hopes it can end its standoff with the U.S. over Ankara's purchase of a Russian missile-defense system, even if talks are underway for a second S-400 missile battery.
  • The Centers for Disease Control and Prevention is weighing measures that could lift travel restrictions on places like Brazil and EU nations, given the imposition of Covid-19 testing requirements for people flying into the U.S.

And finally ... Among the thousands of trucks backed up in Dover last month trying to get across the Channel, one was carrying a painting by Henri Matisse, with tens of millions of dollars of other artworks also in the queue. The owners wanted to get their art back to the continent before the U.K. left the EU's single market. The risk for dealers is they could be hit by import duties when bringing works of art into the bloc in the future.

Deliverymen move a flat crate containing artworks in London.

Photographer: Richard Baker/In Pictures

 

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