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Semiconductors are the new oil

March 25, 2021, 10:01 AM UTC

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Good morning.

New Intel CEO Pat Gelsinger created a brief bump in his company’s stock yesterday, after laying out his plan for reviving the struggling chip firm. It didn’t last long. After opening up 5%, the stock promptly fell back and closed 2% below the previous day’s close.

But if the markets were cool, the reception in Washington was considerably warmer. Gelsinger committed to a major expansion in what he called “geographically balanced” manufacturing capacity—meaning “not in Asia.” The commitment starts with a $20 billion investment to build chip plants in Arizona in partnership “with the state of Arizona and the Biden administration.” The company is also competing for a major award from the Defense Department.

The point here is clear. Semiconductors have emerged as the new oil, and Intel is making a bid to become America’s national champion. Taiwan-based chip maker TSMC is also building a new fab in Arizona and making a play for U.S. government support. But that’s complicated, in the eyes of Washington policy makers, by the fact that China claims Taiwan as its territory. The language of Chinese leaders on Taiwan allows “no room for compromise,” former World Bank President Robert Zoellick told members of Fortune’s CEO Initiative this week. Taiwan “is a special point of danger in the months ahead.”

Former Intel CEO Andy Grove is famed for making the decision in 1985 to take his company out of the memory chip business in order to focus on higher value chips. That was an iconic example of a company “disrupting itself”—and also a major step in the globalization of the semiconductor business. Gelsinger’s announcement is a signal that a new age has begun, with U.S. government and business teaming up to bolster U.S. competitiveness in a key industry to counter the Chinese threat.

More news below.

Alan Murray
@alansmurray

alan.murray@fortune.com

TOP NEWS

Chinese tech

Dual-listed Chinese tech stocks trading in Hong Kong, such as Alibaba and Baidu, took a beating today over fears that some companies could be de-listed in the U.S. The SEC just adopted the Holding Foreign Companies Accountable Act that was passed by the Trump administration, introducing hefty new auditing requirements that could—if not followed—lead to de-listing from U.S. exchanges. CNBC

Indian vaccines

The EU's tough new vaccine export rules don't constitute an export ban…This is an export ban: India has temporarily stopped all major exports of AstraZeneca's COVID vaccine, as produced by the Serum Institute of India, because the jabs are urgently needed domestically. The ban even affects doses that were destined for distribution to low- and mid-income countries via the global COVAX facility (again, the EU's potential restrictions exempt COVAX exports). Reuters

AstraZeneca data

Following U.S. criticism of the data it provided from its local trials, AstraZeneca has revised the efficacy rate of its vaccine down from 79% to 76% (which is still really good as vaccines go, but not the 90+% being touted by BioNTech/Pfizer, Moderna and Sputnik V.) For people over 65, the efficacy rate actually increased from 80% to 85%. Fortune

Greensill latest

Citigroup reportedly ignored internal warnings and helped Greensill Capital expand before the supply-chain finance firm's collapse. Morgan Stanley apparently also quietly lent Greensill a hand. Meanwhile, former U.K. Prime Minister David Cameron is now formally being investigated over his lobbying of the current British government on behalf of Greensill. Wall Street Journal

AROUND THE WATER COOLER

Buckle up

The U.S. needs to move past trying to bad-mouth China's One Belt One Road initiative because that doesn't work, argues author and investment strategist Eyck Freymann in a piece for Fortune: "To respond effectively to OBOR, the U.S. must start by looking beyond its own divided politics to articulate an open and inclusive national brand: a packaged vision that the world will want to buy." Fortune

Russian vaccines

As Germany asks the European Commission to move forward with bulk buys of Russia's Sputnik V vaccine, check out Adrian Croft's excellent Fortune piece on Sputnik V's unusually active social media operations, which produce both boosterism for the Russian jab and harsh words for its competitors. Fortune

Merkel culpa

German Chancellor Angela Merkel yesterday cancelled the Easter lockdown that her government announced last week to the horror of businesses and epidemiologists alike, following very-late-night deliberations. The plan was for a five-day total shutdown, except for one day in the middle when everyone could crowd into grocery stores (spot the problem!) "I deeply regret it, and for that, I ask all citizens' forgiveness," said Merkel, who is retiring after Germany's looming elections. Politico

Rocking rolls

The global shipping-container crunch could lead to shortages of "residential" toilet paper, due to disruptions to the pulp trade. Fortune

This edition of CEO Daily was edited by David Meyer.