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| Here's your daily business briefing. - 👨💼 U.S. grants GlobalFoundries $1.5B for chip production
- 🔍 Deep Dive: Retailers revert to "just-in-time" inventory
- 🤖 OpenAI: Text to realistic video software
Thanks for reading! Shriram
p/Shriram | |
| 1 | | The U.S. government is allocating $1.5B to GlobalFoundries ($GFS) as part of a $39B fund for semiconductor production. The world's third-largest contract chipmaker plans to construct a new facility in Malta, New York, and expand existing operations in New York and Vermont, with an accompanying $1.6B in loans, expecting to spur $12.5B in potential investment across the two states. More: - Gina Raimondo, the secretary of commerce, emphasized the significance of the chips that GlobalFoundries would manufacture at the new facilities for national security.
- The American multinational semiconductor firm's chips are utilized in satellite and space communications, defense applications, vehicle safety systems, and various connectivity technologies such as Wi-Fi and cellular networks.
- General Motors is one of the companies that will benefit from the investment, which intends to provide a steady supply of chips for various industries, including automotive.
- The upcoming Malta facility will manufacture high-value chips that are currently not produced in the U.S., reinforcing the country's leadership in semiconductor innovation.
Zoom Out: - GlobalFoundries inaugurated a $4B semiconductor fabrication plant in Singapore as part of its extensive global manufacturing expansion.
- In January, the department disclosed a planned $162M award to Microchip Technology and had previously allocated $35M to a BAE Systems facility in New Hampshire in December.
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What the numbers say: General merchandise retailers' inventory-to-sales ratio dropped to 1.36 in November 2023, nearing pre-pandemic levels of 1.33 in November 2019, while the Logistics Managers' Index indicated a seventh decrease in inventory levels in December over eight months. Walmart achieved a 4.8% reduction in U.S. inventory for the quarter ended Oct. 27, coupled with a 4.9% growth in comparable-store sales YoY. Relevance: Retailers are reverting to a "just-in-time" inventory strategy, signaling improved confidence in predicting demand and supply chain efficiency. This shift, driven by technology adoption and enhanced forecasting tools, enables retailers to maintain leaner inventories and reduce the risks associated with excess stock. More data: Despite "just-in-time" inventory strategies, external factors like container ship attacks and Panama Canal challenges may prompt retailers to adjust. With a 5.6% growth in U.S. retail sales in December 2023, signaling consumer spending moderation, IKEA and Walmart adopted lean inventory approaches. | | | |
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| 3 | | OpenAI introduced Sora, its latest AI model designed for video generation, marking a move beyond text and images. Users can input a descriptive sentence, and Sora produces a high-definition realistic video clip with additional capabilities such as generating videos based on still images, extending existing videos, or filling in missing frames. More: - Sora enters the competitive landscape of video-generation AI tools, unveiled in January, challenging offerings from companies like Meta and Google, such as Lumiere.
- Businesses like Stability AI and Amazon provide similar AI solutions for creating videos.
- Sora is confined to generating videos with a maximum duration of one minute, aligning with OpenAI's objective of multimodal AI models.
- To recognize Sora-generated material and reduce the possibility of misrepresentation, OpenAI is putting safety measures in place, including a "detection classifier" and metadata.
- According to data from Clarity, the number of AI-generated deep fakes has surged by 900% annually, raising concerns about disinformation.
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| 4 | | China witnessed a record surge in travel and consumption during the Lunar New Year holiday, with 474 million trips within mainland China, marking a 34% increase from 2023 and a 19% rise compared to 2019. While total spending by domestic tourists reached $87.9B, average tourism-related spending per trip remained below pre-pandemic levels. More: - Over the holiday season, 59.25 million domestic travels were undertaken on average per day, a slight decrease from 2019.
- The average daily trip expenditure was $23.2, a 6% decrease from 2019.
- A record $1.11B worth of movie tickets were sold over the holiday, with 163 million people attending theatres, setting another record.
- China's Hainan province set a record by spending $346.2M on duty-free goods, marking a 60% year-on-year increase, with over 297,000 shoppers spending an average of $1162.12 each on duty-free items.
- Deflationary pressure, poor consumer confidence, and a record-breaking real estate market slump are among the issues facing China's economy.
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| 5 | | JD Sports is set to penetrate the challenged U.S. sportswear market with its fashion-focused strategy, which is distinct from rivals like Nike and Adidas. Targeting Gen Z consumers and prioritizing fashion over performance sportswear, the company envisions expanding its U.S. presence to more than 1,300 stores by 2028, an increase from around 900 at present. More: - The British sports-fashion retail store offers a modern, streetwise ambiance with youthful staff, music, and imagery reminiscent of fashion labels rather than traditional sports shops.
- The "Undisputed King of Trainers," JD Sports, saw a notable five-year surge in annual sales, surpassing $12.8B in 2022.
- Conversely, rival retailers such as Foot Locker and Dick's Sporting Goods have encountered a decrease in sales or a slight increase.
- Major manufacturers such as Nike have taken notice of JD Sports' distinct fashion character and have given the company exclusive products or early releases.
- The company plans to open about 100 stores annually in the U.S. through 2028 as part of its expansion strategy, using alliances with Nike and Adidas to spur growth.
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| 6 | | Tupperware ($TUP) has entered into a forbearance agreement with lenders, enabling it to pursue strategic alternatives while continuing its turnaround plan. During this period, the company's weekly U.S. liquidity agreement will decrease from $15M to $10M, with the forbearance set to conclude by June 30. More: - Tupperware will pay $10.9M to the lender to secure access to the revolving credit facility, resulting in an available capital of around $36.4M.
- The company has seen a fall in sales and plans to increase cash and investigate strategic alternatives.
- Sales of Tupperware decreased by 18% in 2022 to approximately $1.3B in 2021.
- The company's shares have fallen by over 30% year-to-date, dropping from $2.04 on Jan. 2 to $1.43 today.
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 | Freelance Writer | | Shriram is pursuing Master’s in Business with Marketing at Warwick Business School. He worked as a Senior Consultant in Tech and Political Consultancies before his Masters. He is passionate about Tech, Marketing, Strategy, Anthropology and Politics. He is also the Postgraduate Ambassador for Warwick Business School. | | This newsletter was edited by Aaron Crutchfield | |
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