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Daily Archives: September 7, 2022

Chart: Bank of Canada Hikes 75bps As Expected, Warns Rates Will Need to Rise Further

Source : Bloomberg

Charts: Yuan Depreciates Against US$ but Appreciates Against EURO and Yen

Source : Trading Economics

Chart: What U.S. Industries Have the Highest Levels of Working from Home

Source : WFH Research

Humour: News in Cartoons

The Long Road Ahead for American-made Electric Vehicles

Rebecca Heilweil wrote . . . . . . . . .

Much hay has been made about how the Inflation Reduction Act represents America’s biggest climate investment ever. But reading between the lines of the legislation, which tackles everything from taxes to health care, shows that the nearly $740 billion law has some caveats, including new provisions to a more than decade-old EV tax credit.

For years, prospective electric vehicle buyers could count on a federal vehicle tax credit, which amounts to a $7,500 discount on a wide range of EV models. The incentive was originally authorized in 2008 and played a critical part in promoting early EV startups and encouraging price-conscious consumers to take the plunge and go electric. The IRA extends the tax credit until 2032 and establishes an additional $4,000 credit for used EVs.

But there are new rules, too, for a vehicle to qualify for that credit. The final assembly of any qualified vehicles must take place in North America, and the credit will also hinge on the vehicle’s size, its total cost, and potential buyers’ income. Starting before 2024, at least 40 percent of the critical minerals and at least half of the battery components used to build new eligible EVs will need to come from the US or one of its free trade partners to access the full credit.

But for most consumers, the new tax credit could prove elusive. Around 70 percent of the electric, hydrogen, and hybrid cars currently sold in the US won’t be eligible for the credit, according to the Alliance of Automotive Innovation, a trade group that represents the car industry. An August analysis of the IRA proposal from the Congressional Budget Office estimates that only about 11,000 vehicles could receive the credit in 2023, and around 60,000 vehicles in 2024, according to an August analysis of the IRA proposal. While the Internal Revenue Service is charged with determining which vehicles are eligible, experts told Recode that they expect very few cars to receive the credit over the next several years, especially since the law’s sourcing requirements are designed to become more stringent.

But that may not be the case forever. The tax credit is only one part of the Biden administration’s plan for a new era of American auto manufacturing, which includes everything from a new push to rethink mining regulations to the Bipartisan Infrastructure Act’s $3 billion investment in the domestic battery supply chain. Together, these efforts, and a surge in new EV factories based in the US, could make American-made electric vehicles much more common in the latter part of the decade. At the same time, this credit won’t necessarily disincentivize people from buying EVs that are made abroad, especially as electric vehicle prices decline and as geopolitics continue to complicate the world’s access to fossil fuels.

“People will still go ahead and purchase EVs that do not qualify for the tax credit,” explains Jane Nakano, a senior fellow at the Center for Strategic and International Studies’ energy security and climate change program. “EVs do have some real consumer benefits. It’s not just for decarbonization. It’s household economic benefits, and then to some extent, energy security benefits.”

Right now, China is the undisputed world leader in EVs. Though the critical minerals used in electric vehicle batteries are currently sourced from all over the world –– the lion’s share of cobalt comes from the Democratic Republic of the Congo, while lithium tends to come from South America and Australia — much of the processing of those materials takes place in China. China is also responsible for more than 70 percent of global battery cell production. The country not only makes much of the world’s battery components, like cathode materials, but is also home to the largest battery manufacturer, Contemporary Amperex Technology Co.

The overhauled vehicle tax credit aims to catch up and compete by putting increasing pressure on automakers, though they do get one major piece of help. The earlier version of the credit included a provision that after an automaker made 200,000 eligible vehicles, people could no longer claim the $7,500 credit. That means companies like Tesla and GM haven’t been able to offer the credit for some time. The latest version of the law eliminates that limitation, so car models built by larger EV manufacturers could become eligible for the credit once again.

Car manufacturers will face an uphill battle in meeting those requirements, especially since the percentage of components and materials that must come from the US or its partners is designed to increase in the coming years. US reserves of minerals like cobalt, lithium, and nickel are just a small fraction of the world’s current supply. Even stricter rules will eventually kick in: By 2024, eligible vehicles can’t incorporate any battery components from China or other “foreign entities of concern,” and in 2025, they can’t include any critical minerals from these countries, either.

“This is the very moment for those automakers to decide the next pathway of their business model and where they’re going to invest and shore up their production,” explains Katherine Stainken, the vice president of policy at the Electrification Coalition, an organization that promotes EV adoption.

The US was making progress on this front even before Biden signed the IRA earlier this month. Automakers and electronics manufacturers have been slowly adding to the number of battery production facilities in the US over the past several years. Earlier this week, Honda and LG Energy Solution announced that they would build a $4 billion battery plant in the US, with mass production expected in 2025. Panasonic, which said it would open a battery factory in Kansas last month, now says it may build a second facility in Oklahoma. The Department of Energy estimated at the end of last year that at least 13 new gigafactories may be coming to the US, joining the several plants that companies like Tesla and GM have already opened.

These efforts are buoyed by the Biden administration’s other investments in the tech supply chain. The White House has already appropriated funding from last year’s Bipartisan Infrastructure Act to support new projects focused on lithium production and critical mineral recycling, and the Department of Energy is loaning out billions to support the construction of new GM and LG Chem battery factories. The White House is also supporting an effort in Congress to overhaul the Mining Law of 1872, which still governs much of the mining within the US today. Biden declared the key metals used in EVs critical to national security when he invoked the Defense Production Act in April, setting the groundwork for the Department of Defense to boost the domestic mining industry.

The CHIPS and Science Act could give American-made EVs a lift, too. The $52 billion package subsidy, which Biden formally approved earlier this summer, will subsidize the construction of several new semiconductor factories in the US, including plants focused on making automotive chips. This is especially important for EVs, which can easily require double the number of computer chips that comparable internal combustion vehicles do.

“What the United States is doing right now is securing its own supply over the next 10 years,” explains Nathan Iyer, a senior associate at RMI, “and making sure that what currently is 0.7 percent of the global market goes up to a more reasonable amount, closer to 5, 6, 10, 13 percent of the global market, to really ensure that our own demand is being covered by supply chains.”

Biden’s plan does have some real flaws, however. Federal mining applications and approvals have decreased over the past several years, and environmental regulations may stall the opening of new mining projects Critically, the prospect of building or expanding new mines introduced the risk of pollution, potential damage to agriculture and wildlife, and disproportionate impacts on local communities. In Minnesota, members of tribes who live nearby are already raising concerns about a mine from which Talon Metals, a company that has won a contract with Tesla and praise from the Biden administration, is planning to extract nickel for EVs.

There are logistical hurdles as well. The IRS needs to figure out how to accurately determine which EV models meet the new credit’s tough sourcing requirements, a task the tax agency is not currently equipped for. Other countries, including the European Union and South Korea, have suggested that the clean vehicle tax credit may be unfair to foreign carmakers and could violate international trade rules. It’s also possible that automakers will accept a $7,500 markup to avoid the government’s new requirements entirely.

These efforts are a reminder that even though the US has a long history of building cars, the country is mostly starting from scratch when it comes to electric vehicles. The investments the Biden administration is making in EV manufacturing capabilities largely won’t produce components or vehicles for at least several years, which means consumers may have to wait to reap the full benefits of the extended credit. Only time will tell whether Biden’s dreams for an EV renaissance for the American auto industry ultimately pan out.

Source : Vox

Chart: Only 12% Of Brits Have Trust in Truss

Source : Statista

Music: Bridging Memories for People With Alzheimer’s

Dennis Thompson wrote . . . . . . . . .

Wes Mika started out on drums, but in his heart he was a tambourine man.

“He got fascinated by the little silver discs on the tambourine,” said his wife, Susan Mika. “Sometimes he would hit the tambourine with the little mallets of the drum. He just he loved that tambourine.”

Wes, 77, has dementia and lives in a memory care facility in Arlington Heights, Ill., a northwest suburb of Chicago. He and Susan, 76, participated in a music program designed to help dementia patients connect with their loved ones.

The program, Musical Bridges to Memory, has been shown to enhance patients’ ability to non-verbally interact with their caregivers, according to a study published recently in the journal Alzheimer Disease and Associated Disorders.

The music therapy also reduces troubling dementia symptoms like agitation, anxiety and depression.

“He’s in a wheelchair, and it was just a nice, close connection for both of us,” Susan said. “We both enjoyed it. I would sing the lyrics I knew, and at times I would see him moving his lips. He doesn’t speak loudly but he would move his lips, so I think he knew the words and was connected with the music.”

The music program was developed by the non-profit Institute for Therapy through the Arts, and is designed to help dementia patients who are losing their ability to communicate verbally with loved ones.

In the program, a live ensemble plays music from a patient’s youth. The patient and their caregiver are encouraged to interact with the music together by singing, dancing or playing simple instruments like shakers, drums or tambourines.

It’s well-established that even as dementia wreaks havoc on the mind and memories, the degenerative brain disorder doesn’t appear to affect a person’s ability to enjoy music until much later in the disease course, said senior researcher Dr. Borna Bonakdarpour. He is an associate professor of neurology at Northwestern University Feinberg School of Medicine, in Chicago.

Because of this, patients can retain their ability to dance and sing long after their ability to talk has diminished.

“They can process music, they can get it, they receive it, they respond to it, they can dance with it, they can play with it, they can sing along with it,” Bonakdarpour said. “These are components that are pretty much intact, which is amazing.”

The Alzheimer’s Association recognizes music therapy as an important non-drug therapy for dementia, said Sam Fazio, senior director for psychosocial research and quality care.

“You’re accessing different parts of the brain that may not be affected by the disease’s symptoms,” Fazio said. “Sometimes when people can no longer express themselves in words, they can still express themselves with lyrics of a song or feel the melody.”

Helping patients and caregivers

For this study, Bonakdarpour’s team asked 21 patients and their caregivers to take part in the Musical Bridges to Memory program once a week. The study was unusual because earlier music therapy efforts have tended to focus solely on the patient, while this involved both patients and caregivers.

The program included 45 minutes of music, as well as a 15-minute talk beforehand so the music therapist could discuss specific communication skills to be addressed during the time together. Overall, patients took part in 12 sessions over three months.

The patient/caregiver pairs also were videotaped for 10 minutes before and 10 minutes after each session, so research assistants could analyze the effect music therapy had on their interactions, Bonakdarpour said.

While the program is designed to help access the musical part of a patient’s brain, these sessions also counsel caregivers on ways to patiently engage with their loved one, Bonakdarpour said.

“Things can get escalated between the patient and caregiver because the care partner doesn’t know what to do with abnormal behaviors,” he said. “A patient with a memory problem may ask the same question 10 times, and the partner can get exasperated.”

Wes and Susan took part in the program virtually because of the COVID-19 pandemic.

The music included old standards like “You Are My Sunshine,” “Take Me Out to the Ballgame,” and “You’re a Grand Old Flag,” but the musicians took requests, Susan said. She and Wes love Josh Groban, so the ensemble added some of his tunes to their repertoire.

“She would play videos and she’d do an opening and an ending song,” Susan recalled. “She asked what we wanted to hear, and she would play it for us, and then we would sing along. I was right next to him, so I would often look into his face, and we’d connect that way.”

The researchers found that non-verbal social interactions significantly increased between the patients and caregivers who took part in the program, while communication declined among eight patient/caregiver pairs who did not participate and served as a control group.

In group conversations after the music, patients were more socially engaged, the researchers said. They maintained eye contact more often, were less distracted and agitated, and were in an upbeat mood.

Bonakdarpour remembered one particular patient “who was very hyperactive and during the sessions would get up and wanted to dance with everybody. The wife was kind of embarrassed, and she would get mad at him.”

“But then as the sessions moved forward, and by the middle to end, this guy was sitting down during all the sessions with his wife,” Bonakdarpour said. “They’re communicating. They’re using percussion instruments to participate. They dance together. So it really changed their relationship.”

‘It just makes him happy’

Based on these results, Bonakdarpour’s team has received a three-year grant from the National Endowment for the Arts to expand the program and perform another clinical trial involving more patients.

Fazio praised the study because it was done with professional music therapists and with the right protocols so it could have the best possible outcomes.

“Sometimes people think they’re doing music therapy by just playing a record in the background, when that’s not really true,” Fazio said. “To have the outcomes we want, like increased engagement and less anxiety or agitation, the correct protocols need to be in place by trained music therapy professionals who understand how to use music to accomplish non-musical goals.”

Bonakdarpour is convinced that music therapy should be an important part of helping manage the symptoms of dementia patients whose capabilities are declining.

“For some of these psychiatric issues of people with dementia, we don’t have great drugs,” he said. “When we’re really desperate, we have to use some drugs that have side effects. Some of them can really affect the heart. It can even shorten people’s lives. And if you can avoid using these toxic medications, wouldn’t that be great?”

Wes enjoyed the program so much that Susan now incorporates music into their regular visits, she said. She asks an Amazon device to play a list of songs.

“Alexa plays those songs and then we just play along with the instruments. I try to find songs that he’ll remember. It just makes him happy,” Susan said.

Source: HealthDay

Tech Companies Slowly Shift Production Away from China

Daisuke Wakabayashi and Tripp Mickle wrote . . . . . . . . .

Worried about geopolitical tensions and stung by pandemic shutdowns, Google, Apple and others are moving some work to nearby countries.

In the coming weeks, Apple and Google will unveil their latest generation of smartphones, jockeying to distinguish the new devices from previous models. But one of the most significant changes will go largely unnoticed by consumers: Some of these phones will not be made in China.

A very small portion of Apple’s latest iPhones will be made in India, and part of Google’s newest Pixel phone production will be done in Vietnam, people familiar with their plans said.

The shift is a response to growing concerns about the geopolitical tensions and pandemic-induced supply chain disruptions that have involved China in the last few years. China has long been the world’s factory floor for high-tech electronics, unrivaled in its ability to secure legions of high-skilled workers and the production capacity to handle demand for the next hot device.

But U.S. companies are seeing more risk there — a perspective forged during the Trump-era trade war, with its tit-for-tat tariffs, and cemented by China’s saber-rattling after Speaker Nancy Pelosi’s visit to Taiwan last month. They fear that basing a supply chain largely in China may thrust them into the middle of its escalating conflict with the United States over Taiwan.

China is still, by far, the most dominant consumer electronics manufacturer. But it’s not just smartphone production that is moving out the country. Apple is producing iPads in northern Vietnam. Microsoft has shipped Xbox game consoles this year from Ho Chi Minh City, Vietnam. Amazon has been making Fire TV devices in Chennai, India. Several years ago, all of these products were made in China.

On Wednesday, China announced that factory activity contracted for a second straight month in August, according to the country’s closely watched survey of purchasing managers.

“The empire of manufacturing in China is being shaken,” said Lior Susan, founder of Eclipse Venture Capital, which invests in hardware and manufacturing startups. “More and more capital is going to pull manufacturing out of China and find an alternative.”

The fracturing supply chain is rippling across Asia, causing a spike in industrial land prices in Vietnam, a revival of manufacturing in Malaysia and a surge in demand for low-wage workers in India. For China, it is siphoning away manufacturing activity when the country is reeling from its slowest economic growth in decades.

“Everyone is thinking about moving, even if they’re not acting yet,” said Anna-Katrina Shedletsky, founder of Instrumental, a Bay Area company that remotely monitors assembly lines for electronics companies.

When the first outbreak of COVID-19 shut down factories in China in early 2020, the closures roiled sales plans for many companies, including Apple, which had to cut its quarterly sales forecast because it couldn’t make iPhones.

The company’s operations team started to look at alternative manufacturing locations to hedge against future shutdowns in China, said three former employees, who asked not to be identified because they are not permitted to speak about their work at the company.

Vietnam, which Apple had already earmarked for AirPods production in 2020, became a much-discussed option, one of the people said. Since then, Apple has started producing its watch in the country and moved some iPad manufacturing there. In Apple’s most recent list of its top 200 suppliers, 20 use factories in Vietnam. By comparison, 155 of the companies operate factories in China.

Apple plans to assemble and package a small fraction of this year’s iPhone 14, the company’s flagship device, in India for the first time. While most of the initial and most critical production for that device is happening in China, Apple will move some of its overall iPhone production to India later — mainly as a way to assess the ability for future manufacturing there, two people familiar with the plans said.

Even as Apple pushed ahead with plans, the company was careful not to antagonize China’s ruling Communist Party since the vast majority of its products are still made there. As China carried out military drills around Taiwan during Pelosi’s visit, Apple reminded its Taiwanese suppliers to label components destined for China as made in “Chinese Taipei” or “Taiwan, China,” according to a report in Japan’s Nikkei newspaper.

Apple, Microsoft and Amazon declined to comment.

So far, the biggest beneficiary of wariness over China has been Vietnam.

Foxconn, Apple’s largest contract manufacturer, recently signed a $300 million deal to expand in northern Vietnam with a new factory that will generate 30,000 jobs, according to state media. The latest spending was in addition to $1.5 billion that the Vietnamese government had said Foxconn had already invested in the country.

In Bac Giang and Bac Ninh provinces in northeastern Vietnam, Foxconn and other contract manufacturers operate massive factories in scenic countryside that was once rice fields and farmland, surrounded by temples, banyan trees and ponds. Now workers from around the country descend to these facilities in search of jobs.

A billboard outside a Foxconn factory in Bac Ninh advertised that the company is looking to hire 5,000 workers “urgently” with an offer of roughly $300 in monthly pay for an entry-level position. It is less than half the monthly pay — 4,500 yuan, or about $650 — that Foxconn is offering new hires at its assembly lines in Shenzhen in southeastern China.

The pay disparity underscores another reason that companies are looking for new manufacturing options. Over the past decade, manufacturing workers in China have tripled their annual income to more than $9,300, according to the country’s Bureau of Statistics.

Foxconn declined to comment for this article.

Tariffs also added to manufacturing costs in China. In 2019, former President Donald Trump levied a 15% tariff on tech products such as smart speakers, smartwatches and wireless headphones.

As the tariff battle intensified, Google looked at alternatives to China. This year, Google plans to move manufacturing from Foxconn facilities in southern China to Vietnam, where it will begin assembling its latest model, the Pixel 7, two people with knowledge of the plans said.

The company expects Vietnam to provide as much as half of next year’s high-end Pixel phones, the people said.

But Google’s planning for next year’s phones demonstrates how hard it will be for companies to move from China completely. Google is exploring a foldable phone for 2023, but making a device like that, using newer screen and hinge technology, would probably require production to be close to key suppliers in China, these people said.

Google declined to comment.

Over two decades, the tech industry has established an expansive collection of suppliers that make the cords, buttons and machines critical to assembling smartphones and computers. The concentration of suppliers reduces shipment costs and makes it easier to fix faulty parts.

“We have a long way to go to have the whole supply chain diversified outside of China,” said Mehdi Hosseini, a financial analyst at Susquehanna International Group who focuses on the tech supply chain.

So for alternatives to China, proximity matters. Interest from Foxconn and others has caused industrial real estate prices in Vietnam to spike by nearly one-third since 2019 to $105 per square meter (about $9.75 per square foot), while the cost of warehouses has risen 20%, according to Cushman & Wakefield, a global commercial real estate firm.

Five years ago, said Trang Bui, Cushman’s general manager for Vietnam, she showed industrial land to clients once every other month. Now she travels daily with clients from the United States, Taiwan, South Korea, Japan, Europe and China to see real estate for factories.

“If you come to Vietnam, all you see is energy,” Bui said. “For an outsider who hasn’t visited the country, they might be a little shocked.”

Source : New York Times