Business

One Reason the U.S. Can’t Quit China? Chips.

Published

2 years ago

July 8, 2023

One Reason the U.S. Can’t Quit China? Chips.

In May, Micron Technologies, the Idaho chipmaker, suffered a serious blow as part of the U.S.-China technology war. The Chinese government barred companies that handle crucial information from buying Micron’s chips, saying the company had failed a cybersecurity review.

Micron said the change could destroy roughly an eighth of its global revenue. Yet in June, the chipmaker announced that it would increase its investments in China — adding $600 million to expand a chip packaging facility in the Chinese city of Xian.

“This investment project demonstrates Micron’s unwavering commitment to its China business and team,” an announcement posted on the company’s Chinese social media account said.

Global semiconductor companies are finding themselves in an extremely tricky position as they try to straddle a growing rift between the United States and China. The semiconductor industry has become ground zero for the technology rivalry between Washington and Beijing, with new restrictions and punitive measures imposed by both sides.

U.S. officials say American products have fed into Chinese military and surveillance programs that run counter to the national security interest of the United States. They have imposed increasingly tough restrictions on the kind of chips and chip-making equipment that can be sent to China, and are offering new incentives, including grants and tax credits, for chipmakers who choose to build new operations in the United States.

But factories can take years to construct, and corporate ties between the countries remain strong. China is a major market for chips, since it is home to many factories that make chip-rich products, including smartphones, dishwashers, cars and computers, that are both exported around the world and purchased by consumers in China.

Overall, China accounts for roughly a third of global semiconductor sales. But for some chipmakers, the country accounts for 60 percent or 70 percent of their revenue. Even when chips are manufactured in the United States, they are often sent to China for assembly and testing.

“We can’t just flip a switch and say all of sudden you have to take everything out of China,” said Emily S. Weinstein, a research fellow at Georgetown’s Center for Security and Emerging Technology.

The industry’s reliance on China highlights how a close — but extremely contentious — economic relationship between Washington and Beijing is posing challenges for both sides.

Those tensions were reflected during Treasury Secretary Janet L. Yellen’s visit to Beijing this week, where she tried to walk a fine line by faulting some of China’s practices while insisting the United States was not looking to sever ties with the country.

Ms. Yellen criticized punitive measures China has recently taken against foreign firms, including limiting the export of some minerals used in chip making, and suggested that such actions were why the Biden administration was trying to make U.S. manufacturers less reliant on China. But she also affirmed the U.S.-China relationship as strategic and important.

“I have made clear that the United States does not seek a wholesale separation of our economies,” Ms. Yellen said during a roundtable with U.S. companies operating in China. “We seek to diversify, not to decouple. A decoupling of the world’s two largest economies would be destabilizing for the global economy, and it would be virtually impossible to undertake.”

The Biden administration is poised to begin investing heavily in American semiconductor manufacturing to lure factories out of China. Later this year, the Commerce Department is expected to begin handing out funds to help companies build U.S. chip facilities. That money will come with strings: Firms that take funding must refrain from expanding high-tech manufacturing facilities in China.

The administration is also weighing further curbs on the chips that can be sent to China, as part of a push to expand and finalize sweeping restrictions it issued last October.

These measures could include potential limits on sales to China of advanced chips used for artificial intelligence, new restrictions for Chinese companies’ access to U.S. cloud computing services, and restrictions on U.S. venture capital investments in the Chinese chip sector, according to people familiar with the plans.

The administration has also been considering halting the licenses it has extended to some U.S. chipmakers that have allowed them to continue selling products to Huawei, the Chinese telecom firm.

Japan and the Netherlands, which are home to companies that make advanced chip manufacturing equipment, have also put new restrictions on their sales to China, in part because of urging from the United States.

China has issued restrictions of its own, including new export controls on minerals used in chip manufacturing.

Amid tighter regulations and new incentive programs from the United States and Europe, global chip companies are increasingly looking outside China as they choose the locations for their next major investments. But these facilities will likely take years to construct, meaning any changes to the global semiconductor market will unfold gradually.

John Neuffer, the president of the Semiconductor Industry Association, which represents the chip industry, said in a statement that the ongoing escalation of controls posed a significant risk to the global competitiveness of the U.S. industry.

“China is the world’s largest market for semiconductors, and our companies simply need to do business there to continue to grow, innovate and stay ahead of global competitors,” he said. “We urge solutions that protect national security, avoid inadvertent and lasting damage to the chip industry, and avert future escalations.”

Business

Albania Gives Jared Kushner Hotel Project a Nod as Trump Returns

Published

3 hours ago

January 16, 2025

Press Room

Albania Gives Jared Kushner Hotel Project a Nod as Trump Returns

The government of Albania has given preliminary approval to a plan proposed by Jared Kushner, Donald J. Trump’s son-in-law, to build a $1.4 billion luxury hotel complex on a small abandoned military base off the coast of Albania.

The project is one of several involving Mr. Trump and his extended family that directly involve foreign government entities that will be moving ahead even while Mr. Trump will be in charge of foreign policy related to these same nations.

The approval by Albania’s Strategic Investment Committee — which is led by Prime Minister Edi Rama — gives Mr. Kushner and his business partners the right to move ahead with accelerated negotiations to build the luxury resort on a 111-acre section of the 2.2-square-mile island of Sazan that will be connected by ferry to the mainland.

Mr. Kushner and the Albanian government did not respond Wednesday to requests for comment. But when previously asked about this project, both have said that the evaluation is not being influenced by Mr. Kushner’s ties to Mr. Trump or any effort to try to seek favors from the U.S. government.

“The fact that such a renowned American entrepreneur shows his interest on investing in Albania makes us very proud and happy,” a spokesman for Mr. Rama said last year in a statement to The New York Times when asked about the projects.

Mr. Kushner’s Affinity Partners, a private equity company backed with about $4.6 billion in money mostly from Saudi Arabia and other Middle East sovereign wealth funds, is pursuing the Albania project along with Asher Abehsera, a real-estate executive that Mr. Kushner has previously teamed up with to build projects in Brooklyn, N.Y.

The Albanian government, according to an official document recently posted online, will now work with their American partners to clear the proposed hotel site of any potential buried munitions and to examine any other environmental or legal concerns that need to be resolved before the project can move ahead.

The document, dated Dec. 30, notes that the government “has the right to revoke the decision,” depending on the final project negotiations.

Mr. Kushner’s firm has said the plan is to build a five-star “eco-resort community” on the island by turning a “former military base into a vibrant international destination for hospitality and wellness.”

Ivanka Trump, Mr. Trump’s daughter, has said she is helping with the project as well. “We will execute on it,” she said about the project, during a podcast last year.

This project is just one of two major real-estate deals that Mr. Kushner is pursuing along with Mr. Abehsera that involve foreign governments.

Separately, the partnership received preliminary approval last year to build a luxury hotel complex in Belgrade, Serbia, in the former ministry of defense building, which has sat empty for decades after it was bombed by NATO in 1999 during a war there.

Serbia and Albania have foreign policy matters pending with the United States, as both countries seek continued U.S. support for their long-stalled efforts to join the European Union, and officials in Washington are trying to convince Serbia to tighten ties with the United States, instead of Russia.

Virginia Canter, who served as White House ethics lawyer during the Obama and Clinton administrations and also an ethics adviser to the International Monetary Fund, said even if there was no attempt to gain influence with Mr. Trump, any government deal involving his family creates that impression.

“It all looks like favoritism, like they are providing access to Kushner because they want to be on the good side of Trump,” Ms. Canter said, now with State Democracy Defenders Fund, a group that tracks federal government corruption and ethics issues.

Business

Craft supplies retailer Joann declares bankruptcy for the second time in a year

Published

4 hours ago

January 16, 2025

Press Room

Craft supplies retailer Joann declares bankruptcy for the second time in a year

The craft supplies and fabric retailer Joann filed for bankruptcy for the second time in less than a year, as the chain wrestles with declining sales and inventory shortages, the company said Wednesday.

The retailer emerged from a previous Chapter 11 bankruptcy process last April after eliminating $505 million in debt. Now, with $615 million in liabilities, the company will begin a court-supervised sale of its assets to repay creditors. The company owes an additional $133 million to its suppliers.

“We hope that this process enables us to find a path that would allow Joann to continue operating,” said interim Chief Executive Michael Prendergast in a statement. “The last several years have presented significant and lasting challenges in the retail environment, which, coupled with our current financial position and constrained inventory levels, forced us to take this step.”

Joann’s more than 800 stores and websites will remain open throughout the bankruptcy process, the company said, and employees will continue to receive pay and benefits. The Hudson, Ohio-based company was founded in 1943 and has stores in 49 states, including several in Southern California.

According to court documents, Joann began receiving unpredictable and inconsistent deliveries of yarn and sewing items from its suppliers, making it difficult to keep its shelves stocked. Joann’s suppliers also discontinued certain items the retailer relied on.

Along with the “unanticipated inventory challenges,” Joann and other retailers face pressure from inflation-wary consumers and interest rates that were for a time the highest in decades. The crafts supplier has also been hindered by competition from others in the space, including Michael’s, Etsy and Hobby Lobby, said Retail Wire Chief Executive Dominick Miserandino.

“It did not necessarily learn to evolve like its nearby competitors,” Miserandino said of Joann. “Not many people have heard of Joann in the way they’ve heard of Michael’s.”

Joann is not the first retailer to continue to struggle after going through bankruptcy. The party supply chain Party City announced last month it would be shutting down operations, after filing for and emerging from Chapter 11 bankruptcy in 2023.

Over the last two years, more than 60 companies have filed for bankruptcy for a second or third time, Bloomberg reported, based on information from BankruptcyData. That’s the most over a comparable period since 2020, when the COVID-19 pandemic kept shoppers home.

Discount chain Big Lots filed for bankruptcy last September, and the Container Store, a retailer offering storage and organization products, declared bankruptcy last month. Companies that rely heavily on brick-and-mortar locations are scrambling to keep up with online retailers and big-box chains. Fast-casual restaurants such as Red Lobster and Rubio’s Coastal Grill have also struggled.

High prices have prompted consumers to pull back on discretionary spending, while rising operating and labor costs put additional pressure on businesses, experts said. The U.S. annual inflation rate for 2024 was 2.9%, down from 3.4% in 2023. But inflation has been on the rise since September and remains above the Federal Reserve’s goal of 2%.

If a sale process for Joann is approved, Gordon Brothers Retail Partners would serve as the stalking-horse bidder and set the floor for the auction.

Business

U.S. Sues Southwest Airlines Over Chronic Delays

Published

11 hours ago

January 15, 2025

Press Room

U.S. Sues Southwest Airlines Over Chronic Delays

The federal government sued Southwest Airlines on Wednesday, accusing the airline of harming passengers who flew on two routes that were plagued by consistent delays in 2022.

In a lawsuit, the Transportation Department said it was seeking more than $2.1 million in civil penalties over the flights between airports in Chicago and Oakland, Calif., as well as Baltimore and Cleveland, that were chronically delayed over five months that year.

“Airlines have a legal obligation to ensure that their flight schedules provide travelers with realistic departure and arrival times,” the transportation secretary, Pete Buttigieg, said in a statement. “Today’s action sends a message to all airlines that the department is prepared to go to court in order to enforce passenger protections.”

Carriers are barred from operating unrealistic flight schedules, which the Transportation Department considers an unfair, deceptive and anticompetitive practice. A “chronically delayed” flight is defined as one that operates at least 10 times a month and is late by at least 30 minutes more than half the time.

In a statement, Southwest said it was “disappointed” that the department chose to sue over the flights that took place more than two years ago. The airline said it had operated 20 million flights since the Transportation Department enacted its policy against chronically delayed flights more than a decade ago, with no other violations.

“Any claim that these two flights represent an unrealistic schedule is simply not credible when compared with our performance over the past 15 years,” Southwest said.

Last year, Southwest canceled fewer than 1 percent of its flights, but more than 22 percent arrived at least 15 minutes later than scheduled, according to Cirium, an aviation data provider. Delta Air Lines, United Airlines, Alaska Airlines and American Airlines all had fewer such delays.

The lawsuit was filed in the United States District Court for the Northern District of California. In it, the government said that a Southwest flight from Chicago to Oakland arrived late 19 out of 25 trips in April 2022, with delays averaging more than an hour. The consistent delays continued through August of that year, averaging an hour or more. On another flight, between Baltimore and Cleveland, average delay times reached as high as 96 minutes per month during the same period. In a statement, the department said that Southwest, rather than poor weather or air traffic control, was responsible for more than 90 percent of the delays.

“Holding out these chronically delayed flights disregarded consumers’ need to have reliable information about the real arrival time of a flight and harmed thousands of passengers traveling on these Southwest flights by causing disruptions to travel plans or other plans,” the department said in the lawsuit.

The government said Southwest had violated federal rules 58 times in August 2022 after four months of consistent delays. Each violation faces a civil penalty of up to $37,377, or more than $2.1 million in total, according to the lawsuit.

The Transportation Department on Wednesday also said that it had penalized Frontier Airlines for chronically delayed flights, fining the airline $650,000. Half that amount was paid to the Treasury and the rest is slated to be forgiven if the airline has no more chronically delayed flights over the next three years.

This month, the department ordered JetBlue Airways to pay a $2 million fine for failing to address similarly delayed flights over a span of more than a year ending in November 2023, with half the money going to passengers affected by the delays.