Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg Daybreak Weekend, our global look at the top stories in the coming week from our Daybreak anchors all around the world, and straight ahead on the program, a look at the struggling US housing market. I'm Tom Busby in New York.
I'm Stephen carlon London, where we're looking ahead to how issues around trade and the war in Ukraine will feature at the upcoming meeting of G seven finance ministers and central bankers in Italy.
I'm Brian Curtis in Hong Kong. We look ahead to the inauguration of Taiwan President elect Lyiching Da and what it means for Taiwan, US and China relations.
That's all straight ahead on Bloomberg day Break Weekend on Bloomberg Ey Look the Free Own New York, Bloomberg ninety nine to one, Washington, d C, Bloomberg one O six one, Boston, Bloomberg nine sixty, San Francisco, DAB, Digital Radio, London, Sirius XM one nineteen and around the world on Bloomberg Radio dot com and via the Bloomberg Business App.
Good day to you.
I'm Tom Busby, and we begin today's program with home sales for the month of April, the heart of the spring home buying season. We get existing home sales on Wednesday, new home sales on Thursday. What will these reports tell us about the health of the US housing market, about housing affordability and the overall economy? For more, we're joined by Drew Redding, Bloomberg Intelligence US home Building Analysts. Drew, thanks for being here.
Travl me.
All right, so what do you expect to see this week?
Well, I think some context is important here. We've been describing the housing market as a tail to markets. Existing home sales finally broke back about four million annalyzed run rate two months ago, and we think we'll probably remain above those levels. But what you have to keep in mind is the data that we're seeing now still reflects a period where rates were in that high six percent range. Subsequently rates rose to over you know, seven and a half percent, So we think that date is going to
trickle in into the next couple of months. We expect some volatility on the existing home front side, you know, over the next couple of months and through the summer. But big picture, you know, it's It's difficult to get too excited about a significant rebound in existing home sales when you have mortgage rates that are still hovering around seven percent. We just actually fell below that for the first time since April. We're at about six point nine right now, so you know that will add a little
momentum to the market. But big picture, we're not expecting any type of significant, you know, rebound maybe until we get to twenty twenty five and even into twenty twenty six. Now you can trust that what we're seeing in the new home market. Demand in the new home sign has been a lot stronger, and that's because builders have been successful in pulling the levers in terms of financing incentives,
closing costs, assistance, and things like that. So you know, they've been able to make the monthly payment a little more palatable than what you see on the resale side.
Well, that's the problem, isn't it. Home affordability. You've got rates near seven percent, You've got record high prices for new and used homes. Plus you know there's just a lack of homes on the market. I mean, how are people affording this?
It's one hundred percent all about afford affordability is, you know, hovering near the worst levels on record. We were looking at some data from redfind It actually shows the medium monthly payment is about twenty nine hundred dollars, which is fourteen percent above last month, and that's more than double
where we were prior to the pandemic. You've had prices which increased more than fifty percent since the beginning of twenty twenty, and you know, depending on the index that you look at, we're either pretty close to those levels now, if not higher. And there's been certainly been some momentum of late with pricing, and part of that has to
do with what you mentioned. Inventory in the resale market, we're still at about three months of supply, which is historically low, and that's putting a floor on the prices. There's there's demand out there and there's not a whole lot of inventory that's pushing prices up.
Now.
We have seen inventory in some markets start to rise, which is something we where to keep our eye on. You look at markets in Florida, a couple of markets in Texas like Austin, so that could have implications for prices should inventories continue to rise. But but you're right at this point, it's just difficult for the consumer to afford a house, and that's really what's held the market back.
Now, this has also impacted the troubles in housing the broader economy not always bad or not all bad, but like home builders, home renovation still going pretty strong, but people aren't buying big ticket appliances. Home Depot confirming that high margin items grills, power washers, refrigerators. You know, it's really impacting a lot of other businesses.
It's certainly been a challenging backdrop for the consumer. You have to remember, you know, they're battling the cumulative impact of inflation. So you know, even when you see inflation coming down to three percent, it's still inflation and it's been going on for years. So it's really the cumulative
impact that we're seeing. You're seeing credit card balances rise, and you know, when you talk about some of the names that we cover, like A Home Depot and A Lows, they're really seeing it on the discretionary side and on the big ticket products in particular. You know, they've got a little bit of a unique situation in that, you know, some of the products they sell are what they call
one time purchases. So if you think about, you know, the early days of the pandemic, people loaded up on you know, grill's patio furniture, lawn mowers and things like that, and that's just something that you don't need to replace
as frequently. So they've been contending with that. But at the same time, something they mentioned this quarter that was pretty interesting is that they're seeing weakness in projects that are typically debt financed, which goes back to that mortgage rate or the interest rate dynamic, and that it's just a lot more expensive to get these projects done. So we're seeing you know, kitchens and bath projects being deferred, or we're seeing projects, you know, kind of being toned
down in size. We've heard that from home DEEPO, We've heard that some from a handful of the building product manufacturers as well.
Yeah you need a new roof, you've got to get a new roof, but maybe not a new kitchen. Looking ahead, do you see or can you see any green shoots later in the year or into twenty twenty five or does it all depend on maybe what the FED does with interest rates.
Yeah, well, look, I think that I think Holsing Broadley is going to continue to EBB and flow with what happens with interest rates. That being said, I mean, if you could call this a bright picture, I mean, existing home sales are the lowest level they's been in you know, two decades, so we think we've probably reached are very
close to trough levels. So we do think that if rates start to pull back a little bit and you get to that mid six percent range, you know, you could start to see some growth towards the back end of this year and as we get into twenty twenty five. So the way we look at it now is there's not a whole lot of downside risk with where the
economy stands now, with where employment stands now. You know, obviously if those things deteriorate further, that's a concern, you know, But looking ahead, we think you could start to build a little bit momentum looking into next year. And on the remodeling side, we think that a lot of these projects, as we mentioned, are being deferred, So we think there's a lot of pent up demand that starts to get
unleashed in twenty twenty five and twenty twenty six. As rates pull back, people are able to tap that record amount of home equity they have, and we think that that'll ultimately support a rebound in big ticket spending.
So if you're a painter or a drywall guide, just told on tight Well our thanks to Drew Redding, Bloomberg Intelligence US home building analyst. We move now to big tech and chip maker and Video, which has been on a roll, seeing its market value balloon thanks to demand for its artificial intelligence chips, also its data center and gaming offerings. What does it all mean for the company's
earnings out this Wednesday. Well for more, we're joined by Kunjan Sobanni, Bloomberg Intelligence Senior semiconductor analyst, Konjohn Thanks for joining us. Why don't you start right away? What do you expect to see in vidious first quarter earnings?
Well, just similar to what we have been seeing for the past almost six plus quarters, We again expect a solid beaten race coming into this earnings. Throughout the quarter, we have seen multiple strong demand signals, namely its largest cloud and hyperscaled customers all upsiding their hapexpend guidance for
AI for twenty twenty four and twenty five. Second, we have seen strong demand from outside of the cloud players, namely Sogn, Wild Government, entities, other enterprises, large enterprises like the deal we saw about Elon purchasing about ten billion dollars of AI capacity from Oracle, etc.
So and all the same.
Time, we have seen the h one hundred lean times continue to shrink. What that means is supply continue to keeps up for that product family. So the combination of all of this gives us confidence again they will be coming out with US Beta.
DACE now in video appears to be far ahead of a lot of US competitors on AI. And how important is that for this earnings and for the company?
I mean, it is important, and that's why you see this level of positive sentiment around the stock and what you've seen in the return. I mean, it still continues to be the market leader and has a market share in the mid nineties, which we expected to continue at least for the foreseeable future. So that is definitely a big part of the story right now.
And to keep up with that demand, How is it growing? Where is Nvidia expanding here in the US and worldwide?
I mean it is global at this point if you think about it. Look, it's the only sort of almost the only game in the town, and the town being globally, if you want to set up a high end AI server to train model, there's only really one go to full tax solution right now.
We just in media.
We do have AMD, which has entered the game, but again the scale is significantly different.
Here in Media's making is going to.
Be generating about in the sort of between fifty to eighty billion dollars from its data center it's here, and on the contrast, AMD is projected to generate about four billion from its cview business. So, I mean, look, the demand is globally now when it comes to allocation. When it comes to where its customers are residing, a big portion majority is in US in the West, but it is also trying to allocate as much as it can to most of its consider outside of US.
Well, that brings me to the next point, the growing trade war between the US and China. There was a ban on advanced chips selling them another technology to China, implemented last year. We know that President Biden just last week up the nite with a whole bunch of tariffs on all kinds of Chinese products. How has that impacted in video and the wider chip you know, semiconductor market here in the US.
Yeah, it has impacted Nvidia, I would say the most. If you actually go back almost two years back, the very first ban in this data center space came on in media specific chips. So from that time when China represented about mid twenties percentage of revenue of its data center segment, all the way to now this year, we expected to be somewhere between mid single digit to high
single digits. So that gives you a magnitude that it has lost the potential that it could have been shipped in absence of these bands and billions of dollars to China. So that's the company that has most been impacted. And I think a lot of restrictions and bands have heavily
focused on in media chips initially. What you're seeing now is sort of those bands get ex span, their range getting expand As again, regulation always runs behind technology, So what you're seeing is now out those impacting in other players like Intel, like Caulcom and AMD, etc.
And Vidia's the big name, and in Vidia's first quarter earnings out this Wednesday. Our thanks to Kunjan Sobanni, Bloomberg Intelligence Senior semiconductor analyst, coming up on Bloomberg Day Break weekend to look ahead to the upcoming meeting of G seven finance ministers and central bankers in Italy. I'm Tom Busby and this is Bloomberg. This is Bloomberg day Break weekend, our global look ahead at the top stories for investors in the coming week. I'm Tom Busby in New York.
Up later on our program, we look ahead to the inauguration of Taiwan President elect Ley ching Da and what it means for Taiwan, the US and China relations. But first, G seven finance ministers meeting this week in the northern Italian town of Stressa as representatives to reflect on the fragmentation of global trade. For more, Let's go to London and bring in Bloomberg Daybreak. Europe Banker Stephen Carroll.
Tom, Italy's Finance Minister and Central Bank governor, will be hosting this G seven meeting on the banks of Lake Majore. It's a majestic setting to discuss some weighty topics, not least the latest ratcheting up of trade tensions between the United States and China, as well as Russia's war in Ukraine and the Ukrainian Finance Minister will be attending with issues around the use of frozen Russian assets on the agenda.
Both the United States and the European Union have struggled to mobilize the help that Kiev needs to defend itself, as AID has been caught up in other political debates in the EU. There's also a discussion about how best to bolster the European defense industry. Here's what European Investment Bank President Nadia Calvino told Bloomberg that her institution is doing about this.
I think it's quite clear that we need to step up our support to Europe's security and defense industry. We need to reinforce our capacity in this area, and the European Investment Bank is ready to play its role in supporting Europe's defense industry.
From this point of view.
What we have done is put forward an action plan which has been endorsed by our board last week and this up and running since first of May, and which will indeed allow us to finance dual use technologies and infrastructures, removing a constraint that existed which required that more than fifty percent of future revenues should come from the civil use side for it to be.
Financed right, and so now it's zero percent, but there still is this mandate of dual use. So just for to understand better how this actually works, because this doesn't mean that you can, for example, invest in something that produces a ammunition, which isn't what is in high sort of need right now for Ukraine and in Europe.
Correct.
Well, we are an investment bank and the mandate from European leaders was cleared that we should step up our support to europe security and defense industry while safeguarding our financing capacity.
And this is what we have been doing. This is what we are doing.
The reaction of financial markets is confirming that we're on the right track, and our Board of Directors endorsed our strategy as recently as last week. And so now we have this action plan which should allow us to speed up with the investment of the six billion euros which are already earmarked for this industry.
Yeah, and so those also, I mean six billion is also quite a small proportion of the entire fund. Are you looking at potentially boosting that over the years, just given the scale of the need that there is in European defense.
We have six billion euros.
Actually the program was had eight billion euros ear marked, we have only invested two billion euros. We're focusing right now in speeding up the investment of these six billion euros and also getting up and running a capital investment of one hundred and seventy five million euros in startups, innovative startups also in this area.
And for those two billion, was it just because there wasn't demand for the loans or is it because there were all these rules around and you hope that that capital can get to work well.
Obviously, we are now expanding, enlarging the scope of projects that we can finance. We are also speeding up these divestments with a single stop shop with a dedicated team, and we're going to be proactively reaching out.
Actually, we have launched a call for.
Projects, and so our expectation is that in the second part of the year there will be more projects, more demand as you named it, and that we will be able to step up our support to europe security and defense industry while safeguarding our financing capacity, which is the mandate from MARS.
When you say safeguarding your financing capacity is to do with the credit rating, you think that could be jeopardized by investing in these sorts of companies, what exactly is the relationship there?
Well, obviously rating agencies, but also investors are looking carefully at many areas that have to do with our financing capacity. So far, as I was saying, financial markets are responding as we had anticipated, and our Board of Directors indoors last week our action plan which will allow us to step up our support.
And in terms of the eb's rule and rebuilding Ukraine and funding that, how do you imagine the ib's role in that.
Well, we're playing a very important role already.
We're probably the key financing investor partner to the Ukrainian government.
We're very close contact.
Only some weeks ago I signed a memorandrov of understanding with Prime Minister Smichael, and I hope that in June we will be able to already sign some specific projects and speed up our investments on the ground in large infrastructures energy transport, also in municipal and local projects having to do with restoring and renovating, rebuilding schools, hospital houses,
and also supporting the private sector. Many of these projects are already ongoing and as of the signature of the memorandum of understanding, I think we will be able to do more while the war is unfortunately going on. I hope we will be able to step up our support with the rebuilding of the country once the war is over.
That's the European Investment Bank President Nadia Calvino there speaking to Bloomberg's Oliver Crook in recent days. Now, Oliver will also be attending the G seven meeting in Straisa along with finance ministers and central bankers. I've been speaking to him about it and started by asking him how much the latest announcement of increased US tariffs on Chinese goods will be weighing on ministers' minds.
I think it'll be weighing on their minds very very much, in part because it's so fresh and it just sort of dropped just you know, just before the meeting. And then on the other side of the meeting, of course, you're going to get the initial report from the EU in terms of the ev probe that they're going into China. So trade is really going to be front and center for both the finance ministers and the central bankers, who
are both present there. For the central bankers, obviously this is also a big question in terms of inflation because if we're dealing with just one off things, that's one thing. If we're talking about basically the beginning of another kind of trade war and tit for tat, this could have huge implications for inflation to what degrees. So they'll be exchanging notes, you know, it's the ec be the FED
will be there much. The FED is setting the tone for global interest rates, and of course the question will be will China retaliate. Biden has been quite targeted in terms of this. These sounds like a lot of import tariffs on the evs, you know, quadrupling, but really it's only touching about eighteen billion dollars a trade because obviously he's very conscious of not wanting to get those prices going up, particularly in an election year.
Yeah, indeed, that's a big concern for them too. Around the G seven table though, Ali, how much divergence is there on the approach, the approach to China and trades.
So I think it's interesting if you look at just the United States and Europe, you know what I mean. I mean, you have them sort of singing a bit from the same hymn sheet in terms of the sort of general message, which is that China has engaged in unfair trade practices. But ma Cole, for example, has really kept the door open saying that he's not going to be dragged in around the world by US foreign policy, which is sort of an allusion to Taiwan and the
evidence of that. That's a message that's kind of resounded with Hashijiping because he came to France. You know, he came to Europe for the first time in five years. He came to France, but he also came to Hungary, which is another country that kind of takes us to the within Europe question of China. You know, China has had huge manufacturing production in Hungary. The you know, c atl the battery manufacturer, has opened up a factory. Now we understand byd is there the Europeans are looking at
this because Hungary is often a political outlier. Could this drive a further wedge within Europe and could it get really China a seat at the table politically within there? And there's also a disagreement even between Schultz and macohone right, Schultz was even saying that listen, we want to put these ev tariffs up. Okay, but let's think about the consequences here. Half of the EV's coming into Europe from China are not Chinese, they are Europeans.
Yeah.
Indeed, I mean the Ukraine's finance minister is going to be attending this meeting as well. What will he be looking to hear from his counterparts?
Well, I think a lot of it is going to be a message of reassurance, right, and we saw that with Blincoln when he was in Kiev saying that you know, we're still here, We're still supporting Ukraine. And the reason that there is you know, potentially some desire to doubt that is because of how long that aid package took to get to Ukraine. Remember that was stalled in the
House for six months. That sixty billion dollar package eventually got there and that will mean you know, some military relief and some financial relief for Ukraine, but it's cost them very dearly on the battlefield. We've seen infrastructure behead there, swatting very a lot fewer of the missiles out of the skies. And the question for the G seven going forward is how do you get the financing for Ukraine on sustainable footing? And that will be one of the direct and central conversations there.
Yeah, because the U ass is proposed seizing the Russian assets that were frozen by the G seven after the invasion of Ukraine. Is that a proposal that has much support.
So it doesn't have that much support in Europe solicited. To be clear about what we're talking about here, What the Europeans favor is they want to take the proceeds from the Russian assets being sold that are kind of accruing interests and making profits. They want to take those and give that to Ukraine. But that's only about three billion dollars a year. The United States is very keen
on taking the underlying assets. We're talking about three hundred billion dollars of Russian central bank assets that are scattered across the world that are currently being held. They want to bring that directly to Ukraine. The Europeans have resistant to that. What has been interesting is some of the debates on how to maybe do it to make everyone happy.
The United States, for example, has suggested these so called freedom bonds, you know, and putting American branding on it, which basically is issuing bonds and using the underlying assets as collateral, so you don't touch the underlying asset, but you can still monetize it and get more of that money to Ukraine.
Now, central bankers, as you mentioned Oli, will be attending this meeting as well. Of course, inflations still a big question for these major global economies. Should we expect to hear much about the broader issues around the path I had for interest rights?
I would think so. I mean, wherever there are central bankers there is a rate debate, and if Bloomberg is there will certainly be chasing it and we may be speaking to a few of them. I can't tell you who exactly because we haven't confirmed it, but there will be certainly a conversation about what the stance is on rate policy going forward. And of course, how does this trade question now front and center? How does that read through?
I mean, the debate forming at the ECB is not whether or not the going to be a cut, it's what happens after the cut. What is the default sort of stance for the ECB? Does it have a neutral bias or an easing bias? And you have people on either side of that. You have Panetta from Italy who's saying that really we should have an easing bias, maybe pushing that for it. In the Nogle from the Bundesbag saying no, we need to stay neutral until we see what happens.
Yes, that's another debate that's going to be happening at the G seven two. I mean more broadly, Oliver, is the G seven a forum that's fit for purpose. We're talking about some of very diverse issues being discussed at this forum as well, but does it actually produce concrete decision?
Well, let's think about what this forum is, right, the G seven. For a very long time, this was the G eight, right, and now it is the G seven, And that happened ten years ago. And I was actually just looking at a picture of the last G eight, you know, meeting. It's sort of astounding. You see fonswau Land, Obama, David Cameron smiling, Merkle is there and Putin is there.
Right.
And in the last sort of ten years, ever since the sort of invasion of Crimea, we've seen a real bifurcation, of fragmentation of global order. So there's the question of the broader G twenty in the sort of breakoff of the bricks, as you mentioned, you know, there's this you know, G came to Europe and then Putin went to Beijing saying that they're going to have a very good relationship for generations to come. So there's a question of how
much influence the G seven has over others. But even within the G seven there is all this talk about sort of protectionistic policies of China, the G seven itself within there is being protectionist itself. I mean the Inflation Reduction Act. There's not a lot of talk going on around it. But this hits Europe very very hard. And you're not hearing so much about the American European relationship. You know, post pandemic, it was all about friend shoring
and securing supply chains that way. But really even under Biden, you're hearing a slightly more America first kind of policy and Europe alone, and that is really hanging over this G seven meeting.
Thanks to our correspondent Oliver Crook, who will be bringing us coverage on Bloomberg Radio and television of the G seven finance ministers meeting in Italy in the coming days, I'm Stephen Carol in London. You can count us every weekday morning here for Bloomberg Daybreak Europe, beginning out six am in London and what am on Wall Streets.
Tom, thank you Steven, and coming up on Bloomberg day Break weekend, we look ahead to the inauguration of Taiwan's president elect. I'm Tom Busby and this is Bloomberg. I'm Tom Busby in New York with your global look ahead at the top stories for investors in the coming week. Taiwan's president elect Lee Ching Da will be inaugurated in the coming week. Let's go to Bloomberg Daybreak Asia host Brian Curtis and Doug Krisner for more.
Tom William Lai takes office at a critical time, with tensions running high. In recent days, China said live faces a choice between peace and confrontation. On Wednesday, Beijing said that it would sanction five taiwan political commentators and roll out a new law to punish separatists.
In addition, Taiwan finds itself in the middle of worsening relations between the US and China. Now on the economic side, President Biden just slapped new tariffs on Chinese imports and accused China of cheating on trade. Then there's the political front. China's Foreign Ministry bristled it reports on the US and Taiwan conducting naval drills last month.
Additionally, the US will send a delegation of former officials to the inauguration. The fact that their former officials may placate China to a certain degree, but Beijing still won't be happy as such, Doug and I thought it would be a good time to take a closer look at the trilateral relationship and see how it might change under the presidency of Lei ching Dug. We asked John Liu, Bloomberg Executive editor in Beijing, if Taiwan is at a crossroads.
Taiwan is definitely the most dangerous flashpoint in this relationship between the United States and China. Whether William Lae's ascendence to the presidential office will be the spark that sets off some sort of conflict, I think that looks relatively unlikely at the moment. We are expecting him to stick to the line from the previous administration of Tiing I. He has said that publicly he plans to be a
continuity president of anything. I think the speech that he will be giving at his inauguration will be tuned to try and both show him and his party is defending Taiwan, but also not to cause any upsetness in Beijing or Washington.
Bloomberg Executive editor in Beijing, John Liu, Now for discussion on this. We're joined by Bloomberg's Type A bureau chief Samson Ellis and deputy Bureau chief Cindy Wong. So, Sam, let me go to you first. Is John Wright there that Lai is likely to be pragmatic and push for continuity.
Those are certainly the indications we have right now. Obviously we're speaking before he has taken power, But over the past year he has strenuously emphasized that he will to size previous line of being willing to talk to China, but only on the basis of equality, that the two sides sit down and speak to each other as equals. That's obviously a condition that China is very unlikely to
be able to accept. Plus he's also said that there will be no formal action for him to in some way formalize Taiwan's independent So I think that's his way of signaling to the United States and to Beijing and to the time Inese public and the world at large that there isn't going to be some kind of declaration of independence during his presidency to try and put people at ease that he's not going to be a troublemaker throughout his term.
Cindy, from what I understand, William Lai took about forty percent of the popular vote. When you look at a number like that, you may conclude that the mandate that William Lai has is not that strong. Am I right about that?
Yeah?
Exactly. He only got forty percent of the vote in the general election, and that made him the first Taiwan president since year two thousand that didn't win an outright majority vote, So that's relatively weak man day. And also the Taiwanese voters just gave the majority of the legislature to the opposition KMT, hoping that there would be some check and balance in the government. So I think with that challenges that that means lies any policies or reforms
is going to face the legislative hurdles. So going forward the next four years is going to be a very daunting tax ahead for him, Cindy.
One would think that lie, given his past and sort of leaning toward Taiwan independence, that he would be even less popular with China than signing one was.
Yeah, definitely. So just to give you a little bit of contest. The ruling Democratic Progressive Party or the DPP champion that strong sense of Taiwan identity distinct from China, and Lai used to being for his pro independent stance. He used to describe himself as a pragmatic worker of Taiwan independence. Although during the presidential campaign he has been very measured. He didn't talked about independence at all. Instead, he said Taiwan is already a de facto state and
there's no need to declare independence. Still, the past comments and past records made him very unpopular with China. China revealed lie with deep suspicion and deep distrust, and China has already labeled him as an instigator of war or
a separatist. So it is believed that going forward for the next four years, since China has already cut off all the communication with Taiwan since President's Hi took office in twenty sixteen, and for the next four years, it's unlikely that it would possibly resume any communication with Taiwan
given their dis deep distrust of life. So one important thing to watch from lives inaugurate speed each would be if he has any comments or new narrative about the cross relations going forward, or if he is able to propose any kind of framework that could break the deadlock between China and Taiwan and resume the communication between the two sides.
Again, Sam, the current President Sin Wing has been in office for eight years now, two terms term limited. During a big chunk of that period, since about twenty nineteen, I think that we have seen a much harder line from Beijing when it comes to Hong Kong, and I'm curious about possible ripple effects. Has a harder line on Hong Kong impacted the politics of Taiwan in any way.
Well, it certainly did in twenty nineteen and twenty twenty, the last election, when Taiwan a resounding re election. You know, at that point we were at the height of the authorities cracked down against protesters in Hong Kong, and that definitely engendered a sense of sympathy from voters in Taiwan and a you know, no desire to move towards a friendlier stance with Beijing. But then there's the long term
repercussions of that. Certainly that you know, China's offer for Taiwan essentially as you know, the same as to Hong Kong one country, two systems, except that you're part of China and will let you keep your democratic system and your way of life largely untouched. But the big lesson from Hong Kong obviously is that they promised to keep
that for fifty years and then they didn't. They just swooped in and they have radically changed how things are run in Hong Kong, and that really has served as a lesson for Taiwan as a whole.
And Taiwan people have spoken very clearly that that is not something that they can accept. But on the other hand, Samson, and this is something we've talked about before. We often hear that, you know, despite what you hear from pundits about all of this geopolitical fear and threats, Taiwan people are actually pretty relaxed. They've they've been dealing with this for more than seventy years. Is that likely to continue to think over the next four years underline?
For sure. I mean, one of the remarkable things about being in Taiwan, living in Taiwan is seeing how much more nervous people outside of Taiwan are than people inside Taiwan. Will often, you know, get very worried phone calls from Hong Kong or Singapore or London on New York people worried of you know, is the invasion about to happen? How worried are you? And in Taiwan life goes on as normal, you know, people, as you say, they're very
used to these threats or these tensions with China. As for how things will play out over the coming four years, that that's going to be very interesting to see. Sources do indicate to us that there's a good chance that China slowly starts to ratchet up the tension. As you pointed out at the beginning of this conversation, they appear to already be doing that with new sanctions against certain
individuals in Taiwan. So these are the so called gray zone tactics that China deploys, like a range of measures that fall below the threshold of outright warfare that are designed to influence and coerce Taiwan to do Beijing's bidding. The thinking is that we're likely to see a big increase in these kinds of tactics over the coming four years in an effort to stop Taiwan and voted in particular from wanting to give the DPP another four year term.
Cindy, It's remarkable when you look at the degree of concentration of semiconductor manufacturing in Taiwan. This is obviously a TSMC story, but we know one of the things that the US has been doing, to a lesser extent Europe addressing this perhaps over concentration and trying to diversify away from Taiwan. Is there concern about that when you look at the economics of the island.
Yeah, there is certainly some concerns and bait within Taiwan about whether we should let TSMC to continue to broad
its ship plants overseas. And that's also a question that we asked the incoming President Lighting the last August when we had a chance to sit down with him, and then Light said at that time that he won't stop TSMC from building more chip plants in the US or in other countries because he thinks Taiwan has a responsibility to the world and the fact that TSMC is diversifying its ship plans and building chip plants overseas, it's to show that Taiwan's economic advantage and the power of Taiwan.
That said Cindy. We spoke with Sean Darby from the Zuho Securities and he said that the global trend of on shoring will actually mean that semiconductor output in Taiwan will slow. Now it'll still be TSMC to a certain degree and other companies, but jobs in Taiwan may suffer.
The irony is that the competitive part of Taiwan's semiconductors is to some extent being hollowed out through this, you know, sort of on shoring in the developed world, and in that respect, you're not going to get the same level of output growth that you would have had in pre
proceeding cycles. You know, sometime in two or three years from now, in fairness that time, one is going to sort of see below trend growth from twenty twenty five twenty six purely because they don't have that same facilities in situ.
And Cindy, will that be a problem for a Taiwan that some of these jobs will move offshore.
I think that's definitely something people will keep and close eye on from incoming present. Lyes in inaugura speech, it is believed that he will certainly talk about his plans to boost Taiwan's economy, and also he has already previously avowed to continue strengthening Taiwan's chip sectors. We know that before his inauguration, he's already set up meeting with representatives from the chip industry is trying to understand what would be the best policies for the industry and for the
country as well. So we're sure that from his inaugural speech next Monday, we're going to hear more details about his plan to beef up Taiwan's economy and how to strengthen the chip industry going forward.
Sam and Cindy, thank you so much for joining us and helping us set up the inauguration of Taiwan's new president, Light ching Da that will be happening in the week ahead. Samson Ellis is Bloomberg's Taipei bureau chief and Cindy Wong is deputy bureau chief. In our Taipay newsroom, I'm Dereg Krisner along with Brian Curtis in Hong Kong. You can catch us weekdays here for Bloomberg Day Break Asia beginning at eight am in Hong Kong eight pm on Wall Street. Tom.
Thank you, Doug, and thank you Brian. And that does it for this edition of Bloomberg day Break Weekend. Join us again Monday morning at five am Wall Street Time for the latest on markets overseas and the news you need to start your day. I'm Tom Buzzby. Stay with us. Top stories and global business headlines are coming up right now.