China Acquired Banned U.S. Chips: Report | Business Matters Full Broadcast (Apr. 23)

The TikTok ban legislation advancing in the Senate. We're going to tell you what you need to know on that coming up on business matters. And thank you very much for being here with me. I appreciate it very much. I'm your host, Don Ma. To start off today's episode, I want to go to stocks first. It looks like a U.S. stocks closed higher today, and this is following positive earnings, as you can see here from top tier companies. So what investors were actually focused on today was with quarterly results. And of course, those from the Magnificent Seven and other mega cap growth stocks as well. Markets also today buoyed by upbeat earnings from companies that's like General Motors, for example, which, by the way, closed up higher after the automakers better than expected quarterly results. And just a brief mention here of Donald Trump. The former president is going to secure a stock. In fact, a stock bonus worth one point three billion dollars. And if you remember, this is part of the merger deal to take Trump's media company public. He is entitled to the stock bonus as long as the shares stay above 17 dollars and 50 cents for 20 trading days since the company's listing. And of course, as you can see here, it closed well above 30 dollars today, despite actually falling eight percent. OK, quickly moving on here, a lot to go through. Let's go to Apple now. It had its worst performance since 2020, and the data is showing that this tech giant, its smartphone shipments in China tumbled to 19 percent in the first quarter of this year. And the iPhone has taken a hit from China's Huawei and its new products. And research is actually showing that Huawei sales jumped 70 percent. And China is Apple's third biggest market. So that's very important here. Meanwhile, separate data showing Apple is struggling in the rest of the world as well. It suffered a nearly 10 percent dip in global smartphone shipments in the first quarter competition intensifying with Android phones led by Samsung. So, you know, it looks like Apple here could be trying to win back customers. And with its event scheduled for May 7th, we'll see there is speculation that this is when Apple is going to revamp its iPads. Let's all wait for that reveal. Moving on, UPS, a lot of earnings today reported better than expected profit for the first quarter, but its revenue missing targets. The company reported a 3 percent decline in daily volumes. It's been cutting costs to offset soft demand for deliveries. But, you know, the company also paying higher labor costs. And this is tied to its new Teamsters contract. And to offset reduced shipping volumes, UPS plans to focus on higher margin deliveries for small businesses and health care companies. All right, on to GM now, back to back 43 billion dollar quarters for General Motors and the car company kept its earnings momentum cruising into the new year. No pun intended here. GM has reported top line revenue of 43 billion dollars for the first quarter, and that's matching last quarter's sales. Very impressive here. This strong performance revving up the company's outlook, now seeing a higher earnings before interest and taxes and a positive variable profit in its electric vehicles unit by the end of the year. Now, according to GM, it delivered more vehicles in the U.S. during the first quarter than any other automaker. OK, stepping back a little bit and taking a look at the broader economy right now, U.S. business activity seems like cool that in the April quarter to a four month low due to weaker demand, S&P Global said that today its index, which tracks both the manufacturing and services sectors, fell to near contraction territory and the slowdown reflected weaker rates of growth in both sectors. The survey suggested that the economy lost momentum after the beginning of the second quarter compared to the January, March quarter. Meanwhile, just a little bit more here, according to S&P Global, the manufacturing sector on its own entered contraction territory. And I wanted to know more on this topic. So I spoke to the chief strategist at Mill Street Research, Sam Burns. Here's what he told me. Sam Burns, thank you very much for your time today, this afternoon. So what I wanted to talk to you about today is the S&P Global PMI index. So it looks like it cooled a bit in terms of U.S. activity in in April. What are your thoughts on this? Any insight that you have? Yeah, that's right. It has pulled back a little bit on that data. And it's another sign that the economy is doing relatively well, but not going, you know, it's kind of explosive growth or too too hot. I think nothing in this data suggests that the economy is overheating. It's kind of the indexes are hovering around 50, which is kind of the balance, you know, middle level. And I think that'll, you know, if anything, you know, give the Fed a little more comfort that they don't need to try too hard to slow things down. And it looks like, you know, the bond market at least reacted positively. Bond prices rose, yields came down in response to that news. So so I think signs of the economy is doing OK, but not too strong. It's kind of what the markets are looking for. And they got some of that today. All right, so softer than expected number, it seems like was taken well by markets in your view. Yeah, I think so. I think I could say the bond market rallied and the stocks stock markets up today, partly potentially because of that, partly because we're in earning season here. And I think there's after the pullback in stocks we've had, I think there's some expectations that earnings will still be pretty good. So I think overall, it's generally a market positive news day to day. So in terms of the overall economy, what can we say anything from seeing the number now? It looks like manufacturing, the index itself is actually in contraction territory. Yeah, manufacturing has been sort of mixed in the U.S. for a little while now. So, yeah, that index is right around kind of 50 percent, suggesting that there's about as many firms seeing improvement as seeing, you know, weakness or potentially no change. I think the general trend has been pretty stable overall, that growth in the U.S., particularly in services, but in manufacturing as well, has been, you know, again, sort of decent, not not extraordinary, but relatively good. But I think there's probably more to go on the services side than on the manufacturing side for the U.S. right now, just given the way the economy has kind of shifted over the last year or so. What is your overall outlook for the U.S. economy in the near term? Just curious. I think overall, we've still got a pretty decent amount of economic momentum. I think that, you know, the employment situation, jobs and wages are pretty good. I think, you know, the household and corporate balance sheets are in pretty good shape. I think the Fed, you know, is running tight monetary policy, but it's not really slowing the economy too much right now, in part because fiscal policy is still fairly supportive. So I don't see unless we have another big shock somewhere coming from outside, I don't think that we're going to have a big shift in the near term. I think we'll probably still get two to three percent growth in the U.S. over the next quarter or two. And speaking of the Fed, just one last thing, it seems like it's a topic of discussion for for everything nowadays. So then let me ask you, Sam, how many rate cuts are we going to get this this year? Yeah, that's been in the betting all back and forth this year. The bond market can't make up its mind. My guess is that we'd probably get two between now and the end of the year, at least maybe three. But but I wouldn't expect a huge number of cuts. I think they'll probably wait until the fall to do it. So maybe we get one in the fall, one in the winter. I don't think we need a lot of rate cuts, but I think, you know, a couple would probably be appropriate given what the Fed has said so far. I think the Fed officials would like to cut once or twice, at least this year. All right, Sam. Great insight. Chief Strategist, Military Research. Thank you. Pleasure. All right. We have more earnings for you in the defense sector. But before we get to that, let me just give you a quick update on what happened with TikTok today. So earlier, the Senate voted to advance the ninety five billion dollar foreign aid package for Ukraine, Israel and Taiwan. The bills also include a measure to force TikTok to divest from its Chinese parent company or face a ban. The vote of 80 to 19, this indicates the legislation has enough support to clear the Senate in a final vote, which in fact could come as soon as this evening and earlier this month. Just a quick refresher for you guys. The Senate passed a similar foreign aid package, but without the measure on TikTok, the ninety five billion dollar package includes sixty one billion dollars in aid for Ukraine, more than twenty six billion for Israel and more than eight billion for the Indo-Pacific region. A fourth bill increases sanctions on Russian assets and contains language that could lead to a ban on the popular video sharing app in the United States. All right, simmering geopolitical tensions here, bringing strong first quarter profits to U.S. weapons maker Lockheed Martin, countries have been boosting their defense spending, which is driven by demand for new weapons. So, of course, as a result, Lockheed Martin reporting revenue of more than 19 billion dollars, its missile sales and fire control units jumping as well as its aeronautics business. This is its biggest unit, which makes F-35 fighter jets and sales in this unit alone rose to nearly seven billion dollars. Aerospace and defense and major RTX also reported earnings today, beating estimates. It's helped by demand for missile defense systems and strength in the commercial aftermarket business. All right, moving on, the Supreme Court showing sympathy for Starbucks as it hears oral arguments today on whether it should be forced to rehire union organizers. Let's now go to entities Virginia Gibson for a brief recap. The Supreme Court seemed to side with Starbucks during oral arguments Tuesday at issue, whether a lower court made a mistake in forcing Starbucks to rehire union organizing employees. Starbucks had fired the Memphis Seven, who invited a TV crew into a store to promote their unionization efforts. The National Labor Relations Board, or NLRB, then successfully convinced the lower court to force Starbucks to rehire them. Why would the board get deference when the board doesn't deserve any deference and has no expertise on how equity should be should be weighed? Attorney Lisa Blatt, arguing on behalf of Starbucks, says forcing Starbucks to do something is extraordinary and drastic. She believes the NLRB made an inappropriate request in this instance. If the NLRB wins, it'll be easier for them to intervene in similar cases. It may have more power over other companies. Justice Neil Gorsuch says that NLRB is not following the same standard other organizations follow in all sorts of alphabet soup agencies. We don't do this. The district courts apply the likelihood of success test as we normally conceive it. So why is this particular statutory regime different than so many others? He suggests the NLRB shouldn't be an exception. If Starbucks wins the case, it'll be harder for the NLRB to help employees who want to unionize. After the arguments, the justices will deliberate and issue a final decision in the coming months. Virginia Gibson, NTD News. Thanks very much for that, Virginia. Uh, our next story is on Elon Musk and he is pushing back against a federal court order in Australia. It directed X to temporarily hide posts is displaying footage of an alleged terror incident. Let's go to Gabe Singer now for the report. Elon Musk lashed out at Australia's prime minister on Tuesday. That's after a court ordered his social media company X to take down footage of an alleged terrorist attack in Sydney. The ruling Musk set on X meant that any country could control quote the entire internet. The post came after an overnight hearing in which Australia's federal court ordered X to temporarily hide videos of the incident a week earlier. In which a teenager was charged with terrorism for knifing an Assyrian priest and others. X said it had already blocked the post from Australian users, but Australia's e-safety commissioner had said the content should be taken down since it showed explicit violence. Although Musk wrote in another post that X had made the attack footage quote inaccessible to Australian IP addresses, a Reuters reporter in Australia was able to view the video. Australian prime minister, Anthony Albanese hit back at Musk hours later. Well, this guy is showing his arrogance. He's a billionaire over there in the United States who thinks he's above Australian law. This isn't about censorship. It's about common sense and common decency. And Elon Musk should show some. The standoff is the most recent front in the battle between the world's largest internet platforms and countries and nonprofits seeking more oversight of the content posted on them. Last month, a U.S. judge threw out a lawsuit by X against a hate speech watchdog. In Australia, the e-safety commissioner fined X last year for failing to cooperate with a probe on anti-child abuse practices, which X is currently fighting in court. Taking a quick break now. But don't go away. Still ahead, the U.S. cracking down on China, obtaining advanced chips, a Reuters review showing that it has discovered several Chinese entities getting a hold of banned chips. We're going to explain exactly how ahead. And are you willing to pay more for products in America made here? Well, one company got fined for making false claims about that for certain products they're selling. Stay tuned with us to find out more. And welcome back. Some rapid fire headlines for you to keep you up to date today as much as possible. JetBlue lowering its annual revenue forecast and now expects 2024 revenue to decline in a low single digit percentage range. The airline says there was an oversupply in the Latin America market and it has outlined plans to cut some of its routes and markets in the region. Meanwhile, Buy Now Pay Later is now an option outside of online shopping. Fintech lender Affirm says it has started offering loans for elective medical procedures. The company is hoping to tap growing consumer demand for financing for cosmetic treatments, dental services, as well as medical devices. And a full AI image generation tool is coming to Adobe's Photoshop software this year. And the image generation AI system is called Firefly. Adobe is facing rising competition from startups such as OpenAI, Midjourney and Stability AI, which can generate images from texts. Spotify's quarterly gross profit topped one point one billion dollars for the first time. This comes after it slashed its marketing budget. The tradeoff was the music streaming service missed its forecast for monthly active users. And now. OK, some China related stories. Now, despite extensive export bans, China appears to have gotten its hands on banned chips. So what's happening here is Reuters reviewed hundreds of tender documents which are used to get bids from potential suppliers. It found that 10 Chinese universities and research institutes acquired advanced Nvidia chips and they were embedded in server products. This was after the U.S. expanded its embargo on chips and licensing rules. Nvidia saying the tender documents specify products that were available before the restrictions added that its partners did not violate export control rules. As well, tensions between Beijing and Washington, the top concern here for U.S. companies operating in China. And this is according to a report by the American Chamber of Commerce in China. American businesses are frustrated by China claiming it welcomes foreign investment, but at the same time still hitting hurdles for free competition. Plus, they reported high heightened export controls by the U.S. have raised the cost of doing business. The chamber sees high level communications between the U.S. and China as a top priority. And the report found that American companies generally not planning to move supply chains out of China, but willingness to increase investment has diminished. Home goods retailer Williams Sonoma will pay a three million dollar fine. And this is to settle charges by the FTC, which says the company falsely claimed some of its products were made in the USA, but actually they were made in China for the most part. One product in question here is is is Pottery Barn teen mattress pads. Williams Sonoma admitted that the latest FTC allegations are indeed true. In 2023, the FTC settled a similar case that's about Pyrex kitchenware. The company advertised them as made in USA, though they often came from China as well. Shocking discovery here made by a cyber sleuth while he was examining the North Korean Internet. So what happened was here he found a trove of animation sketches that may be meant for U.S. based studios. Now, there is no evidence that the American studios knew the work could have been outsourced to North Korea. The U.S. government does, in fact, have strict rules against doing business with the nuclear armed regime. And in our next story, an expert gives analysis on the files. Invincible is a popular animated show streaming on Amazon Prime with a third season on the way. Your power's got to be due any day now. It's based on a comic book about a superhero teen. I wasn't ready before. While its main character is all American, some animation in the new season may come from one of America's biggest foes, North Korea. Martin Williams is a North Korea analyst at the Stimson Center. I'll show you what we found. He shows us what was inside a recently discovered North Korean Internet server. There's a bunch of working files in here. Files including sketches and video from North Korea, which resemble the animation from two shows produced and streamed by American companies. Amazon's Invincible and another coming soon called Ayanu, Child of Wonder, set to stream on Macs. There's no evidence that the studios knew that any proprietary work was on a North Korean server. At some stage in this production process, these files appear to be being worked on by the North Koreans. There's a clip of Ayanu which hasn't been released yet. Now me spare your life. Williams says a lot of American production work is outsourced, particularly to China, where it could then be subcontracted to North Koreans without the American company's awareness. It's very common. Numerous Chinese companies have been sanctioned by the US for working with North Korea, not just in animation, but in other areas as well. A draft of one animation has Chinese instructions translated into Korean. There's also this production sheet in English for Invincible. We didn't find any evidence that they had any direct knowledge of any of this. We found names of some animations, we found the names of some US companies, but nothing that concretely tied that back to the US companies. Using North Korean labor would be a violation of US sanctions. Max and the producer of Ayanu, Lion Forge Entertainment, declined to comment. Unique Studios, which co-created the graphic novel series, did not respond. It's just something that's very difficult to kind of figure out who you are working with, because once stuff starts getting outsourced, once stuff starts moving through the system, actually finding out who the person is at the other side of the keyboard is very, very difficult. And let me just mention that Skybound Entertainment, which produces Invincible, is never approved outsourcing and would investigate what's happening here. So moving on here to Amazon, it's launching a new grocery delivery subscription today in the United States, and it's for members of its Amazon Prime and customers who receive government food stamps. So what this is is that the plan would allow Amazon Prime members to get unlimited grocery delivery at $9.99 per month on orders over $35. And the service will be available in over 3,500 cities and towns across the country. Low-income citizens who rely on the government SNAP program will pay a reduced fee, which is $4.99 per month, and they don't require a Prime membership. All right, thank you very much for watching today. That's all the stories we have for you. And if you have any feedback for the episode, please feel free to let me know. I do read the comments. And one last thing, as I always say, business matters. See you tomorrow.