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HP hopes for the best; Google picks Pixel's production place

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HP hopes for the best; Google picks Pixel's production place

The Supply Chain Daily provides a curated overview of Panjiva's research and insights covering global trade policy, the logistics sector and industrial supply chains and draws from global shipping and freight data.

HP hopes for the best from List 4 as tech sector tariff worries rise
Panjiva's analysis of over 6,000 company transcripts from the second quarter reporting season shows 23.5% have mentioned Brexit or tariffs, the highest since the third quarter of 2018. That may perhaps be not a surprise given the escalating U.S.-China trade war and increasing political uncertainty surrounding Brexit.

The machinery sector remained the most focused on trade policy with 51.0% of companies mentioning the topics. Yet, that was lower than the prior quarter suggesting tariffs are a known fact of life. The technology sector saw an increase to 25.9% from 22.6% in the prior quarter, perhaps reflecting the forthcoming U.S. tariffs on Chinese exports of end-products, including laptop computers.

Not all companies are concerned though. HP Inc. CFO Steven Fieler has indicated the firm is "assuming that the incremental China tariffs on notebooks do not happen in [the fourth quarter]" while it has increased prices on printers where tariffs already apply.

The firm may also have been cutting its exposure to China. The country likely accounted for 59.6% of HP Inc.'s imports by sea in the three months to July 31 compared to 63.2% in the first quarter of 2018. For laptops, specifically, the ratio fell to 88.0% from 91.1% over the same time periods.

(Panjiva Research - Tech. Hardware)

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Google to pick Pixel's new production center to mitigate labor, tariff costs
Alphabet Inc.'s Google may move production of its Pixel smartphone to Vietnam from China in response to rising labor costs and the likely persistence of U.S. tariffs on exports from China. The latter will likely begin from Dec. 15 at a rate of 15% and come as Google looks to double its sales of the Pixel.

The sales growth may require an increased market share – U.S. imports of mobile phones fell 1.2% year over year in the 12 months to June 30 to reach 219 million handsets, according to Panjiva data. Google is not the first to move to Vietnam though, with Samsung Electronics Co. Ltd. moving there previously. Exports of phones to the U.S. from Vietnam reached 14.8% of the total in the past 12 months compared to 1.6% in 2014, though China still represents 78.0% of the total.

(Panjiva Research - Comms. Equipment)

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Mexico peak season catches U.S.-China trade war cold
Freight forwarder Eternity Mexico has that stated imports to Mexico from Asia are suffering "one of the worst peak seasons in the past four years," according to company President Nicolas Portenza. Panjiva data shows Mexican imports of seaborne, containerized freight from China are already down 12.4% year over year in July, reversing an 8.9% increase in the second quarter and a 15.6% rise in the first quarter.

That has only been partly offset by a 2.6% increase in shipments from the rest of Asia in July. The U.S.-China trade war may be complicating trade patterns within sectors – for example, shipments to Mexico from China associated with Samsung Electronics fell 33.9% year over year in July while those linked to Sony Corp. rose by 15.9% in the same period.

(Panjiva Research - Logistics)

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Flextronics hoovers up Dyson's business after Huawei hits U.S. blacklist
Flex Ltd., operating as Flextronics, closed a manufacturing facility that previously serviced Huawei after U.S. sanctions on the company were enacted. More broadly, Flextronics' Chinese operations have likely seen a decline in activity due to U.S. tariffs on Chinese exports.

U.S. seaborne imports associated with Flextronics fell 9.5% year over year in the three months to July 31, Panjiva data shows. Imports from Hong Kong and Malaysia meanwhile have partly compensated with increases of 43.5% and 56.1%, respectively.

While shipments to BISSELL Homecare Inc. and HP from China may have fallen, the increase in shipments from Malaysia has partly been down to new supplies by Flextronics for premium consumer electronics firm Dyson Technology Ltd.

(Panjiva Research - Tech. Hardware)

Hyundai, Daewoo Shipbuilding face falling orders, Japan policy risk
China's shipyards saw a recovery in deliveries in July with a 1.1% rise in the tonnage of vessels exports shipped, according to Panjiva's analysis of official data. Yet, remaining orders of 74.5 million dryweight tons are only a little above June's two-year low. Additionally, the value of vessels exported declined by 25.7% year over year in July after a 30.0% slide in the second quarter.

Exports from South Korea also fell by a more modest 6.1% in July and by 13.2% in the past 12 months. That decline supports consolidation in the South Korean shipbuilding industry, a key part of which is the merger of South Korea’s Hyundai Heavy Industries Co. Ltd. and Daewoo Shipbuilding and Marine.

The deal may be held up by Japanese antitrust authorities and as such is exposed to the worsening trade spat between the two countries. Exports from Japan's shipyards meanwhile surged 18.2% higher year over year in the past 12 months.

(Panjiva Research - Logistics)

Christopher Rogers is a senior researcher at Panjiva, which is a business line of S&P Global Market Intelligence, a division of S&P Global Inc. This content does not constitute investment advice, and the views and opinions expressed in this piece are those of the author and do not necessarily represent the views of S&P Global Market Intelligence.

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