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US-China trade war tech sector impact

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China could potentially end up losing more than the U.S. from the ongoing trade tensions that are now spilling over into the technology sector, according to a Hong Kong-based investment services firm.

That is because major U.S. tech firms operating in China are already under pressure from President Donald Trump to shift their manufacturing businesses back to the United States, and create more jobs for the domestic economy, Gavin Parry, managing director of investment services firm Parry Global Group, told CNBC. He said that if such a shift happens, there would likely be job losses in China.

Earlier this week, Trump unveiled a list of Chinese imports his administration aims to target as part of a crackdown on what the president deems unfair trade practices. Sectors covered by the proposed tariffs include products used for robotics, information technology, communication technology and aerospace — which some economists note are areas that would benefit from China’s industrial upgrading plans.

“China’s actually got a fair amount to lose from an economic point of view, whereas most people are talking about the U.S. as the biggest loser coming out of the trade war,” Parry said.

One example Parry pointed to was Apple. The tech giant sources parts for its iPhone devices from various companies like South Korea’s Samsung Electronics and SK Hynix. Those components are then assembled together by firms like Taiwan’s Foxconn.

Much of that iPhone assembly happens in China. According to a report from state-owned newspaper China Daily last year, data indicated that nearly half of the iPhones were manufactured at Foxconn’s Zhengzhou plant in Central China. The report said that there were 94 iPhone production lines operated by 350,000 workers at the plant. So, if Apple and Foxconn were to potentially shift some of those production lines to the U.S., it could result in job losses in Zhengzhou.

In January, Apple announced investments to support the American economy — that included predictions that the company would contribute about $350 billion to the domestic economy and create around 20,000 jobs over the next five years, as well as to support innovation among domestic manufacturers.

Beyond Apple, Parry said the Trump administration could offer tax concessions and other incentives to push more U.S. tech firms to bring their operations back stateside. That would, theoretically, boost the domestic economy while the import tariffs could continue to put pressure on China. Parry added that Beijing still needs value-added jobs that many U.S. firms in the country offer, to increase the purchasing power and grow the middle class in China.

“It would cause ripples in China,” he said. “Not huge ones but enough for Trump to turn around and say let’s talk broadly. It gives him some kind of (room for) negotiations.”

The office of the U.S. Trade Representative said this week that the tariff targets were developed using a computer algorithm designed to choose products that would inflict maximum pain on Chinese exporters but limit the damage to U.S. consumers, according to a Reuters report.

The tariff list proposed by the U.S. focuses on technology parts and components — such as printed circuit assemblies, transistors and semiconductor devices — instead of finished goods like mobile phones or computers, according to Ma Tieying, an economist at Singapore’s DBS Bank.

“China’s (information and communication technology) exports to the U.S. largely consist of finished goods, especially relatively low value-added computers and consumer electronics,” Ma said in a recent note. “Most of these products are not directly targeted by the U.S. in the tariff list.”

That means U.S. consumers may not experience a significant rise in the price of imported electronics goods from China.

Parry said that ultimately, both Washington and Beijing will sit down to work out existing trade disputes — and the recent moves announcing tit-for-tat measures were just to strengthen their respective hands. On Wednesday, China announced additional tariffs on 106 U.S. products, including soybeans, cars, aerospace and defense. One commentator told CNBC that Beijing’s decision to target soybeans is a political maneuver designed to hit Trump’s support base.

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Toshiba business unit says it has been hacked by DarkSide: Reuters

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Toru Yamanaka | AFP | Getty Images

 A division of Toshiba said on Friday that its European business has been hit by a cyberattack, according to a Reuters report.

Toshiba Tec France said in a statement seen by Reuters that it was hacked on the evening of May 4. by Darkside, the same group the U.S. FBI blamed for the Colonial Pipeline attack.

The Toshiba unit, which sells self-checkout technology and point-of -sale systems to retailers, did not immediately respond to CNBC’s request for comment.

Toshiba Tec reportedly said that a “minimal” amount of work data was stolen in a ransomware attack. No leaks of the data have been detected so far and protective measures were put in place after the cyber-attack, the company said.

Ransomware is a type of malicious software that’s designed to block access to a computer system the victims pay the hackers a sum of money. It is not known if Toshiba Tec France has paid a ransom to the hackers.

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Chip shortage will last another quarter

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Xpeng Motors launches the P5 sedan at an event in Guangzhou, China on April 14, 2021. The P5 is Xpeng’s third production model and features so-called Lidar technology.

Arjun Kharpal | CNBC

BEIJING — Chinese electric car start-up Xpeng expects the global chip shortage will persist for at least another three months.

Automakers around the world have had to cut production due to a shortfall in semiconductors, or chips. High demand for electronics, U.S.-China trade tensions and a major factory fire have affected the highly specialized industry’s ability to manufacture enough chips.

“What we’ve seen is that this tight situation will continue for the next quarter or so,” Brian Gu, vice chairman and president of Xpeng, said Friday on CNBC’s “Squawk Box Asia.”

The challenge is “the visibility of chip supplies is by the minute,” Gu said. “We are paying very, very close attention to the situation. Right now, the impact is limited and it’s reflected in our guidance.”

Xpeng’s U.S.-listed shares fell nearly 4.9% in Thursday’s trading session despite the start-up reporting greater-than-expected revenue of 2.95 billion yuan ($456.7 million) for the first quarter.

The stock is now down nearly 45% for the year so far, but still holds gains of more than 50% from its IPO in August.

Xpeng expects to deliver between 15,500 and 16,000 vehicles in the second quarter. The company said it delivered 13,340 cars in the first three months of the year, topping its forecast for 12,500 cars.

Growing revenue from software

While car sales account for the majority of Xpeng’s revenue, the company noted first-quarter results were helped by customer demand for its assisted driving software. The start-up said it recorded revenue from the software for the first time after a rollout of an upgrade to paying customers in the first quarter.

Gu said on CNBC that more than 25% of customers have paid for the assisted driving software in the last month, up from 20% last quarter. He expects greater use of Xpeng’s software and lower vehicle production costs will increase the company’s margin in the near future.

Later this year, Xpeng plans to launch a second electric sedan, the P5, which includes support for the latest version of the start-up’s assisted driving software.

Vehicle margin, a measure of profitability, rose to 10.1% in the first quarter, up from 6.8% in the prior quarter. The company did report a year-on-year increase in net losses, of 786.6 million yuan in the first quarter, versus 649.8 million yuan during the same period last year. Research and development expenses rose 72.2% from a year ago to 535.1 million yuan.

Moving ahead into Europe

Xpeng pressed ahead with its European expansion plans in the first quarter by delivering more than 300 units of its G3 SUV to Norway, according to the company. The start-up had sent 100 of the cars to the market in December. Xpeng expects to begin delivering its P7 sedan to Norway in the second half of the year.

Competition in that overseas market is set to pick up with rival Chinese electric car maker Nio’s plans to open a showroom and begin deliveries in Norway later this year. Nio’s shares fell 7.3% Thursday and are down nearly 36% for the year so far.

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Dogecoin rallies on Elon Musk tweet, anticipated Coinbase listing

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Yuriko Nakao | Getty Images News | Getty Images

Dogecoin soared more than 40% early Friday after a tweet from supporter Elon Musk and as Coinbase said it would list the meme-inspired cryptocurrency.

The price of dogecoin rose to an intraday high of around 55 cents at 2:30 a.m. ET, according to data from Coin Metrics. It’s still down about 18% from a record high of nearly 67 cents only a week ago.

Musk tweeted Thursday that he was working with dogecoin developers to improve the efficiency of transactions.

On Wednesday, the Tesla CEO made a surprise announcement that his electric car firm would stop accepting bitcoin as payment due to concerns over its environmental impact.

That led to a brutal sell-off in cryptocurrencies, including dogecoin. Dogecoin had already fallen significantly after Musk’s appearance on Saturday Night Live, in which he called the digital coin a “hustle.”

Meanwhile, crypto exchange platform Coinbase said Thursday it would offer dogecoin support in the next six to eight weeks. Many crypto traders have flocked to the zero-fee investing app Robinhood to trade the meme token; now Coinbase’s move could lead to more trading activity.

Dogecoin isn’t taken very seriously by loyal bitcoin supporters. It started in 2013 as a joke, inspired by the “Doge” meme, but has since found a growing community online. Dogecoin is now the fourth-largest crypto by market value on CoinMarketCap, worth over $69 billion.

Financial experts warn that dogecoin is a highly speculative asset. It has stoked worries over a potential bubble in crypto markets — though some economists would say all cryptocurrencies are in a bubble.

Last week, Bank of England Governor Andrew Bailey warned crypto investors should be “prepared to lose all your money,” echoing a similar warning from the U.K.’s Financial Conduct Authority.

Bitcoin was marginally higher Friday, with the world’s biggest digital asset up about 0.3% at a price of $49,052. Ether, the second-biggest cryptocurrency, rose 3.6%, to $3,805.

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