Can’t find chips? Make your own.
Ford is taking a do-it-yourself approach to addressing the severe shortage in chips that has slowed its production lines and snarled supply chains around the world.
The carmaker announced a partnership yesterday with the semiconductor manufacturer GlobalFoundries to develop its own chips. Initially these will be designed for Ford vehicles, but the companies said a larger goal is to expand U.S. chip production. Jim Farley, Ford’s C.E.O., said that the auto industry, and the U.S. in general, needs “greater independence” to develop new technologies, and that requires control over chip production.
It’s a message that resonates in Washington — and beyond. Pandemic disruptions have highlighted that years of consolidation led to a shift of chipmaking capacity out of the U.S. In 1990, more than a third of all semiconductors were made in the U.S., but that share fell to 12 percent last year, according to the Semiconductor Industry Association. In June, the Senate overwhelmingly approved a $52 billion package of subsidies aimed at encouraging the construction of more chip factories in the U.S., though that funding has been caught up in partisan battles in the House. In Brussels, the E.U. may ease its state-aid rules, officials said yesterday, to fund more local chip factories.
Ford isn’t the only company taking matters into its own hands. General Motors announced a plan yesterday to sharply reduce the variety of chips it uses, which it believes will help ease supply issues. The company also signed an agreement with the chip company Wolfspeed, which is building a factory in New York State.
Experts are skeptical that a D.I.Y. approach is the answer to stopping chip shortages in the future. Willy Shih, a Harvard Business School professor steeped in the semiconductor industry and supply chains, told DealBook that expanding manufacturing capacity is the biggest risk for players in the chip-making business. Right now, after getting burned by shortages, companies are willing to take on some of that risk that they traditionally pushed onto chip makers.
Shih said the cost of the chip shortage to companies, in lost sales and profits, will determine how long that shift may last: “I think it’s inevitable we’ll get to a surplus in many chips at some point, and that will be the true test of how strategic these deals actually are.”
HERE’S WHAT’S HAPPENING
The House is set to approve President Biden’s social spending plan. Despite a long speech by Representative Kevin McCarthy that delayed proceedings, Democrats plan to vote on the $1.8 trillion bill today. Helping solidify centrist Democrats’ support was a report by the Congressional Budget Office that the legislation would only slightly add to the federal deficit.
Biden weighs a “diplomatic boycott” of the Beijing Olympics. The move, to protest alleged human rights abuses, would mean that no U.S. officials would attend the games, though American athletes could still compete. Separately, the Women’s Tennis Association said it is willing to withdraw from China if the whereabouts of Peng Shuai, a player who accused a former government official of sexual assault and hasn’t been heard from since, aren’t explained.
State attorneys general open a new inquiry into Meta. At least 11 states are examining whether Facebook’s parent company promoted Instagram despite knowing how much emotional harm the service could cause, especially for teens. It’s the latest headache for the company to emerge from leaked documents known as the Facebook Papers.
Apple’s shares jump on hopes for its electric car plans. The tech giant’s stock rose nearly 3 percent yesterday after Bloomberg reported that the company is aiming to unveil a fully autonomous vehicle by 2025. It’s yet another sign of investor enthusiasm for next-generation vehicles, no matter how tenuous companies’ plans for them are.
A crypto collective loses its bid for a copy of the U.S. Constitution. The leaderless group known as ConstitutionDAO fell short in its quest to buy a rare first printing of the Constitution at a Sotheby’s auction. But ConstitutionDAO, which raised more than $40 million in the effort, is emboldened: “What are we going to bid on now?” one member asked in the group’s chat room.
Wait, what is Crypto.com?
For years, the home of the L.A. Lakers has been known as the Staples Center. But soon, one of America’s best-known sporting venues will be renamed the Crypto.com Arena, a development that has left many wondering … who?
Crypto.com claims to be one of the world’s fastest-growing crypto platforms. Founded in 2016 as a seller of Visa cards that could be topped up with cryptocurrency, the company is now a digital currency exchange that also offers digital wallets. (It bought its domain name from a University of Pennsylvania computer science professor for what was likely a lot of money.) It raised hundreds of millions by selling its own digital token in 2017.
The deal will elevate Crypto.com’s cultural relevance, Kris Marszalek, the company’s C.E.O., told The Times’s Ryan Mac. (Marszalek, who Ryan reports paid $700 million for the 20-year naming rights deal, admitted he has never visited the Staples Center.) The deal follows the purchase of naming rights for the Miami Heat’s arena by FTX, another crypto exchange. Skeptics note that history is rife with stadium naming deals gone bad, from Enron to the failed dot-com businesses CMGI and PSINet.
“Holmes just becomes this fable of, ‘You can’t just buy what they’re selling. This was not what it purported to be and we fell for it.’”
— Margaret O’Mara, a professor at the University of Washington and tech historian, on how the collapse of Elizabeth Holmes’s Theranos helped sour the media on Silicon Valley.
One meme stock case is dismissed, more to come
A Florida federal court this week dismissed one part of a proposed three-part class action lawsuit against Robinhood and others over their roles in January’s GameStop trading frenzy. Investors alleged that brokerages like Robinhood conspired with clearinghouses and the market maker Citadel Securities to restrict trading of meme stocks as they shot up in price. The judge found otherwise.
“A bare assertion of conspiracy will not suffice,” Chief Judge Cecilia Altonaga wrote in the order dismissing the antitrust-based claim. Executives at Robinhood and Citadel Securities “exchanged various vague and ambiguous emails” around the time of meme-stock trading halts, the judge noted, which looked “somewhat suspicious given the participants and their timing.” But claims of conspiracy were not “plausible,” she wrote: The firms had a “lawful, ongoing business relationship,” in which Robinhood routes customer trades to Citadel Securities to execute and gets paid for the order flow, a common but sometimes contentious arrangement.
The case isn’t closed. There are two more tranches in this litigation, which combined claims from across the country. Retail traders are also claiming Robinhood was negligent in its duty to customers and violated securities laws. Maurice Pessah, the lead attorney on the negligence tranche, told DealBook that his case is based on “totally separate and distinct legal theories.” Robinhood has moved to dismiss the claims; there could be a decision by the end of the year.
In the papers
Some of the academic research that caught our eye this week, summarized in one sentence:
Corporate executives predicted large, negative shocks to growth early in the pandemic but have recently shifted to preparing for large, positive shocks. (Philip Bunn et al.)
Married people tend to earn more than single people because the security of their spouse’s income allows them to hold out for higher paying jobs when searching. (Laura Pilossoph and Shu Lin Wee)
C.E.O.s who come from “frontier” cities with individualistic cultures tend to run more innovative companies, as measured by patent activity. (Lei Gao et al.)
The Universal Proxy Rule is not universally loved
The S.E.C. has adopted a new rule that shareholders who vote by proxy, as most do, can mix and match directors from competing slates of nominees through “universal proxy cards.” This would allow investors to elect board members based on who is best, not on who has nominated them, the agency said. In the previous setup, shareholders who voted electronically in a proxy contest could only vote for a slate of nominees and not individual directors. The rule was originally proposed during the Obama administration.
It’s part of a push by the S.E.C. to give shareholders more say. For example, the agency issued guidance this month that appeared to make it easier for environmental and social proposals to be put to a shareholder vote, relaxing rules on “economic relevance” and “ordinary business” that management could cite to nix these ballot measures.
The new proxy rule has riled corporate defense advisers. One concern, they say, is that activists could put forward a large number of nominees in hopes that a few would attract enough votes to get elected. It would also be easier for smaller funds, or those focused on narrow issues, to run campaigns to elect corporate directors. That’s because a universal proxy card listing all of the nominees, not just those proposed by management or activists, could replace the costly process of mailing out multiple cards to shareholders during proxy battles. The S.E.C. raised the bar for activists, requiring them to send materials to investors with at least 67 percent of voting power, but agency commissioner Hester Peirce argued in a dissent that this is already often met in proxy campaigns.
“The increase in the number of contests, and the potential for people to get on the board for these issues that have nothing to do with what the big shareholders actually care about from a director perspective, is going to be exponential,” said Shaun Mathew, who leads the defense practice at law firm Kirkland & Ellis.
THE SPEED READ
Macy’s has hired the consulting firm AlixPartners to examine a potential spinoff of its e-commerce business, amid pressure from the activist investor Jana Partners. (WSJ)
Unilever will sell its tea brands, including Lipton and P.G. Tips, to CVC Capital for $5 billion. (Bloomberg)
NBC agreed to buy the U.S. broadcast rights for English Premier League soccer matches for $2.7 billion, triple the value of the previous deal. (FT)
The nomination of Saule Omarova to lead the Office of the Comptroller of Currency is in doubt after moderate Democrats appeared wary. (NYT)
The I.R.S. said it had seized $3.5 billion worth of crypto linked to tax fraud this fiscal year and expects to claim even more in 2022. (CoinDesk)
The likely next leader of the Teamsters union, Sean O’Brien, suggested he would be more aggressive in taking on Amazon. (NYT)
Best of the rest
Internal documents reportedly show how Amazon didn’t protect its trove of customer data. (Wired)
C.E.O.s are joining the Great Resignation, too. (Insider)
Investment bankers are back at the office, but their suits mostly aren’t. (Bloomberg)
“Can a Machine Learn Morality?” (NYT)
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