What Nancy Pelosi’s Taiwan Trip Means for Business

Pelosi means business.

Speaker Nancy Pelosi left Taiwan today after a brief visit that could have far-reaching consequences. It met with unusual support from Republicans, condemnation from Beijing and quiet reluctance from its hosts in the face of Chinese threats. But China experts predict further fallout for businesses and investors if the trip tests China’s appetite for conflict.

“The world faces a choice between democracy and autocracy,” Pelosi said today. During his meeting with Taiwan President Tsai Ing-wen. “America’s commitment to democracy in Taiwan and around the world is iron-clad.” Economic growth and trade were among her agenda – along with the pandemic, climate change, human rights and democratic governance – but these were overshadowed by geopolitics and anger when she visited China’s self-governing island.

Among many things, the trip was about chips. Pelosi spoke today with Mark Liu, chairman of Taiwan Semiconductor Manufacturing Co., the world’s largest chip maker. TSMC is building a factory in Arizona, and Pelosi and Liu reportedly discussed the recently passed CHIPS and Science Act.

Chinese business responded to Pelosi’s visit It includes a ban on certain fish and fruit products from Taiwan, but the broader impact could reach US shores. Bloomberg reports that China’s CATL, the world’s largest maker of electric car batteries, has delayed a decision on a North American plant because of “tensions” over the move. Semiconductor company shares slipped yesterday on fears of a conflict – particularly as China plans to hold live-fire military exercises in areas around Taiwan from Thursday. In an interview with CNN this week, TSMC’s Liu warned that a war on Taiwan could disrupt the geopolitical landscape and global economy, citing the fallout from Russia’s invasion of Ukraine.

Here’s what’s happening

Robinhood will lay off nearly a quarter of its staff. The company’s brokerage app was wildly popular when the pandemic began, but is now losing customers, including 1.9 million active monthly users, in the second quarter. Separately, New York state regulators announced a $30 million fine for Robinhood’s crypto division for violating anti-money laundering and cybersecurity regulations.

Senators Propose New Regulator for Bitcoin and Ether The legislation, sponsored by Agriculture Committee leaders, would make the Commodity Futures Trading Commission the primary regulator of the two largest cryptocurrencies. The SEC recently stepped up its crypto enforcement, stating that many digital assets like stocks and other investments should be regulated.

Forbes is up for the polls. The company said it was exploring a sale after agreeing to go public in a merger with special purpose entities in May. Forbes is looking for a buyer as digital media companies fall out of favor with investors and the value of SPAC transactions has fallen 90 percent.

Blake Masters, a Senate candidate supported by Peter Thiel, won the Arizona Republican primary. Masters, who has been endorsed by Donald Trump and has complained about “vigilance,” will face Democratic incumbent Mark Kelly, who won a special election in 2020. Other election results include a victory for abortion rights in Kansas yesterday. A generally poor showing for candidates following the Trump playbook.

Warner Bros. “Batgirl” axes. The studio, which has spent $90 million on the near-completed Heroine , says it will never look at theatrical darkness or offer it to any streaming service. Warner said the decision was not based on the quality of the film, but was part of a new strategy to be more selective in the films it releases.

The CHIPS Act has strings attached

Lawmakers used Intel’s SHIELD plan to take over an abandoned factory in Chengdu, China, to expand its chip manufacturing capacity as an argument for passing the CHIPS and SCIENCE Act, the Times’ Anna Swanson reports. The bill, which includes $52 billion in subsidies and tax credits for those who set up or expand jobs in the United States, hands the Commerce Department significant powers over the private sector.

“This is not a blank check for these companies.” Commerce Secretary Gina Raimondo said. There are many strings attached and many taxpayer protections. Her department has the authority to review future company investments in China and claw back money from any firm it deems to have violated the rules, as well as the ability to make some changes to foreign investment rules over time.

China’s growing dominance of key global supply chains has created new support among Republicans and Democrats. To take care of strategic industries for the government. South Korea, Japan, the European Union and other governments have outlined aggressive plans to pacify semiconductor factories. And the production of many advanced semiconductors in Taiwan has become an unbearable security risk for many. “The question is, why do we have to go in the same direction as how we advance industrial strategy,” said Brian Dease, director of the National Economic Council.

The bill still has many critics. By focusing the regulations on the new generation of semiconductors, the law could leave the door open for China to manufacture older chips used in cars and other consumer products. Some Republicans, such as Sen. Marco Rubio of Florida, say safeguards are insufficient to prevent American technology exposure to China. Some Democrats and their allies, like Sen. Bernie Sanders of Vermont, describe the bill as a corporate giveaway.

How effectively is the money used? The prospect of tens of billions of dollars being committed in the coming years may raise many questions about how those investments will be allocated. And in the first half of this year alone, it could affect even more crowding among semiconductor companies, which spent more than $20 million on lobbying, according to a statement. A 10-year ban on investment in China’s best-in-class facilities has been particularly controversial, saying it would make the companies less competitive globally and ultimately put the U.S. in competition with Chinese competitors. But there are signs that the ban is already having an impact: Two South Korean chipmakers are reportedly rethinking their investments in China.

“I tried three courses and an expert on the side, and the only thing I got out of it was an empty wallet.”

– Scott Mitchell, 33, is one of many people trying to make money with the so-called approach YouTube Automate.

Antitrust horror story

There’s a hidden spirit behind Penguin Random House’s proposed $2.2 billion deal to buy rival Simon & Schuster, says Shira Ovide, co-author of The Times’s subscription-only newsletter On Tech. (Spoiler alert: it’s Amazon.)

Yesterday, Stephen King, best known for his horror books, testified in support of the Justice Department’s lawsuit to block the merger. It’s one of several efforts by the Biden administration to curb overcrowding in the U.S. economy.

The administration said the merger would hurt authors. The deal reduces the number of major American mass-market book publishers from five to four. Since King began selling books in the mid-1970s, he has witnessed a decline in publishing options for authors. With fewer imprints competing, King said, advances tend to slow down, especially for writers who don’t have a track record of sales. The merger of the country’s two biggest publishers will make life difficult for writers, he said.

But Ovid argues, the trial is haunted by Amazon audiences. “Book publishers want to get bigger and stronger in part to gain more leverage on Amazon, the largest book seller in the United States,” she wrote. “One of Penguin’s Random House strategies has evolved into this: our book monopoly is the best defense against Amazon’s book-selling monopoly.”

Companies have long justified acquisitions by saying they are trying to level the playing field.

However, according to Ovid, another mega-combination cannot solve the problem of the book’s commercial focus. Competition experts say the best way to counter Amazon’s dominance of books is not to allow publishers to become monopolists themselves, but to address Amazon’s power through laws, regulations and enforcement. Bipartisan support for such a move is growing, but don’t hold your breath.

“This legal issue of book publishing is a window into deep-rooted problems in the American economy,” Ovid wrote. Those problems “have taken decades to change and will take a long time to change.”

The speed is read

Discounts

• The film distributor behind the hit “Parasite” is exploring sales of Neon. (NYT)

• GrubHub’s owner wrote down the valuation at $3 billion, nearly half of what it was bought for last year. (FT)

• Investments in African startups more than doubled in half a year, destabilizing the global economy. (Bloomberg)

Policy

The best of the rest

David F. Gallagher Contributed to today’s DealBook.

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