Global Supply Chains in Flux: IP Disputes, Geopolitics, and Labor Strikes

Can intellectual property disputes reshape global supply chains? Join us on the Chain Reaction Podcast this week as we unpack this and other pressing issues affecting global commerce. From the Federal Reserve's decision to lower interest rates to the geopolitical tensions in the Middle East, we provide sharp insights into how these developments influence transportation, logistics, and corporate strategies. We'll also cover the high-stakes legal feud between Nokia and Amazon over patented video technologies and the ripple effects such disputes can have on supply chain dynamics. Moreover, we explore the intriguing speculation about a Qualcomm-Intel merger and its potential antitrust challenges, along with the ambitious plan by Constellation and Microsoft to rejuvenate the Three Mile Island nuclear plant to power data centers with clean energy. 

In another segment, we turn our focus to labor disputes and shifting trade dynamics. Hear the latest on the massive strike shaking Boeing plants in Washington State and Oregon, involving over 32,000 workers and halting jet production. As we dissect Tupperware's bankruptcy and General Motors' recall of 450,000 SUVs, we also delve into rumors of Volkswagen possibly shutting down its Beijing plant to adjust global capacity. Shifting trade dynamics are also in the spotlight, with rising Chinese exports to Mexico contrasted against declining China-US trade. We discuss how these shifts impact investment strategies and future US-Mexico trade relations, underscoring Mexico's strategic importance in the global market. Tune in for a comprehensive analysis filled with key updates and critical insights.

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Chapters

• 0:06 Global Supply Chain News Update
• 10:27 Labor Disputes and Trade Dynamics

Transcript

Tony Hines: 0:06

Hello, tony Hines. Here you're listening to the Chain Reaction Podcast, all about supply chain advantage and this is the News Roundup all things impacting global supply chains this week. Stick around, stay tuned and find out more. Interest rates came down in the United States by half a per cent this week after better economic data improved the situation and the Fed made the judgment to lower the rate. In the United Kingdom interest rates held steady but they are expected to fall in the next quarter. The Bank of Japan also held interest rates at 0.25% this week and they say the trend is for a moderate increase in consumption.

Tony Hines: 0:59

We don't very often think about supply chains when we consider intellectual property, but of course it's very important that organisations defend their intellectual property and of course it can be a supply chain issue when it comes to meeting demand, because if you can't use particular technologies that you're used to putting into the product, then you have to find something else, and that isn't always easy. But this week it was quite interesting. There was a court case in Germany which ruled in favour of Nokia against Amazon using patented video technologies without a licence. That was reported by the Finnish network equipment maker on Friday. The chief licensing officer, Arvind Patel, said the Munich regional court ruled that Amazon had used Nokia's patented video technologies in its end-user streaming device illegally. Amazon, of course, disagreed with the court's decision and is expected to resolve the issue without being specific. So does that mean an appeal or does it mean a payment? The ruling, of course, will not affect any existing customers with a wide range of Fire TV devices, which will continue to be on sale on Amazon. Back in July, amazon sued Nokia in a Delaware federal court, accusing the Finnish group of infringing a dozen Amazon patents related to cloud computing technology. So there's going to be some kind of tit-for-tat arrangement here. I'm guessing they're going to come to an agreement and that should resolve matters. So perhaps that's what Amazon mean. Nokia initiated the litigation against Amazon over the use of patented multimedia inventions in 2023 in Germany, india and the United Kingdom and the United States, as well as the European Unified Patent Court, and Nokia representatives said we hope Amazon accepts its obligations and agrees a license on fair terms.

Tony Hines: 2:59

Now the biggest game changer of the week is probably all the attacks by Israel on Hezbollah We've got exploding devices, which has killed quite a number of people, and they've been triggered remotely and, of course, attacks on Hezbollah's leadership in Lebanon. Now we don't normally report the wars as such on the Chain Reaction podcast because we're interested in supply chains. But with this sort of development it's going to mean some delays to goods and shipments from specific parts of the world, and it does make the place much more risky. Transportation is obviously a more risky undertaking when there are wars and we already have Russia's invasion in Ukraine and other wars in other parts of the world and it makes transportation difficult. It makes production of goods, the sourcing of goods more difficult and everything else. So it would be nice to get back to some peaceful times, but doesn't look likely on the horizon at the moment.

Tony Hines: 4:06

It's rumoured that Qualcomm has approached Intel over a takeover in the past few days, and that's all we really know so far. But there'd be some antitrust legislation to get through here as to whether this is in the public interest, so we'll have to wait and see how this one will actually play out. Both of these companies, of course, are amongst the biggest microchip companies in the world, are amongst the biggest microchip companies in the world. Tsmc, the Taiwan-based chip manufacturer, is the largest company making chips in the world. Antitrust legislation wouldn't just take place against this takeover in the United States, but China and Europe would also have a part to play as to whether it goes ahead and what divestments might be expected of Qualcomm to actually get the takeover through would be subject for negotiation. Qualcomm's valued at about US$183 billion and Intel about US$122 billion.

Tony Hines: 5:07

Intel, of course, was the largest provider of chips in the past, but since the start of the year it's lost about 60% of its value because of difficulties. Intel CEO Pat Gelsinger has previously stated that Intel is trying to refocus its business as a contract manufacturer and that's what people call a foundry as a contract manufacturer and that's what people call a foundry. And so they've moved away from the original approach to chip making to being contractors. And recently they've announced plans to pull back from building plant in Poland and Germany and they want to reduce the real estate investment. So I'm guessing that would pull back cash for the company against any debts that they might have. They have a contract to supply Amazon Web Services, ors, with chips to run that service, and that's worth quite a lot of money. Intel, of course, is still a big player in this market. It's in the top three.

Tony Hines: 6:10

Now you will know that over the past few years, one of the big growth industries has been data centres, and data centres consume lots of energy and could be big contributors to CO2 emissions. Well, this week, on Friday, it was announced that Constellation have reached agreement with Microsoft to revive part of Three Mile Island where there's a nuclear plant. And that's because nuclear is seen as clean, because it has low carbon emissions, and so they want to revive the plant and ensure that that can supply clean energy and consistent energy to serve the data centres and the tech companies that use them. Now, if you think about this, it's seen as cleaner than solar and wind in the sense that it's more reliable. So I think there'll be some green energy groups that may not see it this way and that could give rise to some opposition to nuclear energy. But we'll have to wait and see. Shares at Constellation rose by 20% on the news and they're up to $251.42 as a result of this deal.

Tony Hines: 7:24

Now you may recall that the Three Mile Island plant in Pennsylvania is one of the worst nuclear accidents in US history. The tech giant Microsoft has said it signed a 20-year deal to purchase power from the Pennsylvania plant, which would reopen in 2028 after improvements, and it would be a clean source of energy for power-hungry data centers for artificial intelligence. It will have to go to regulators for approval. The current owner of the plant, constellation Energy, said it's fully independent of the unit that had been involved in the 1979 accident. It pushed back, of course, the development of nuclear energy in the United States and in other countries because of fears from accidents occurring at nuclear plants, but there's currently renewed interest in reviving nuclear power. The chief executive of Constellation, joe Dominguez, spoke to analysts on Friday and he said that the plant had been prematurely shut due to poor economics, but it was among the safest and most reliable nuclear plants on the grid and we look forward to bringing it back. He went on to say that the only energy sources that could consistently deliver an abundance of carbon-free energy were nuclear sources. Reopening the plant would create about 3,400 jobs, both directly and indirectly, and it would add 800 megawatts of carbon-free electricity to the grid, generating billions of dollars in taxes, according to Constellation.

Tony Hines: 8:54

On a related note with regard to energy in the United Kingdom this week there's been talk about drawing energy from the east coast of England, from wind power mainly, but also from other sources solar, so clean energy sources. But the big problem is connecting the energy source to the grid, and one of the decisions that's being made currently is how to get the grid plugged in and that will require large investment and the talk currently is of pylons, going back to pylons in fields and having wires above ground and that apparently is the most reliable and the best option according to people at the grid. But there is resistance from groups that say the grid should go underground, it would be much safer, but of course they say it won't cost more. But the people at the grid say it would cost a lot more to dig and put the cables underground and I guess that's going to be something that's going to rumble on for some time. So you can see energy is going to be one of the big investment decisions by governments around the world in the next few years as the transition away from fossil fuel sources of energy intensify to meet the carbon targets that have been set by governments for 2050.

Tony Hines: 10:27

Strikes at Boeing plants in the United States took place in Washington State, oregon, this week. More than 32,000 workers went on strike, halting production of the US Plane Maker's 737 MAX and other jets. The striking workers, with the International Association of Machinists and Aerospace Workers, received their last paycheck this week. Talks between Boeing and the largest union have stalled. There are no signs that negotiators for Boeing or the union are going to return to the table immediately. Boeing CEO Kelly Ortberg told employees on Friday that while the company is disappointed that the discussions haven't led to more progress, the planemaker is very committed to reaching an agreement as soon as possible. Production of Boeing 777 and 767 jets is a top priority for Ortberg. As orders are behind schedule, boeing's planned for workers to take one week of furlough every four weeks on a rolling basis for the duration of the strike. So this looks like it's signaling that they think they're in for a strike for the long haul here. Claims by workers want 40% higher pay and a performance bonus restored, and Brian Bryant, the IAM international president, said in an interview last week they're ready to fight for this as long as they have to to get to the contract that they deserve.

Tony Hines: 11:53

So difficulties rumble on at Boeing, that famous company that made all those plastic containers in the 1950s and 1960s onwards and created a revolution for people taking their sandwiches to work. Well, tupperware this week filed for bankruptcy and it has debts of 812 million dollars. Of course, a lot more competition these days for those plastic boxes and people might be turning away from plastic of course as well. So Tupperware's lost its once very dominant position in the marketplace and that famous brand probably won't be around in future. So maybe time to scour the cupboards and see if you've still got any of that Tupperware left. And, who knows, would a plastic box be a valuable commodity on an antiques TV programme in years to come?

Tony Hines: 12:44

Well, general Motors announced this week it's recording 450,000 SUVs over a warning light problem. So recalls continue in the auto industry. The NHTSA said it would be recalling the trucks. They're apparently signalling low brake fluid on the warning light signal, but it seems to be a false warning and the trucks are being recalled under the safety regulator Needs to be put right. The recall includes 2023 model year Chevrolet Silverado 1500, gmc Sierra 1500, and the 2023-4 Chevrolet Tahoe Suburban, gmc Yukon, yukon XL, cadillac Escalade and Escalade ESV models.

Tony Hines: 13:31

Rumours emerge this week that VW is reorganising its capacity, and what that means is plant closure. It's rumoured that the Beijing plant will likely close as it's struggling to rebalance its capacity around global demand. It's likely that other German automakers may well follow suit. The changing economics in the car industry are, of course, far more rapid in today's market and there's all kinds of tariffs to negotiate, with the imposition of tariffs in the United States, in Europe and, of course, retaliation from China, and that's changing the global picture, and it will likely change and shift over the next 6 to 12 months as those tariffs and other economic factors come into play. No doubt we'll be hearing about them on the Chain Reaction podcast.

Tony Hines: 14:34

Trade exports from China to Mexico have increased by 20% annually since 2020. During that period, china-us trade has decreased by 17.7% to 13.5%. So what's going on? Has Mexico become the Trojan horse? Well, those of you who are Greek classical scholars will know what the Trojan horse is, where they put the wooden horse of Troy, filled with troops, to be taken inside a city fortress. Is that what's happening here? Have Chinese manufacturers worked out that they can move product to the doorstep and slip it in through that back door into the United States, using the many free trade agreements and low-cost options that Mexico have negotiated over time with the US? And Mexico, of course, has free trade agreements with Europe and other countries around the globe, so it could always be a way to avoid any imposition of tariffs by the US on particular sectors, such as EVs, by the US on particular sectors, such as EVs.

Tony Hines: 15:41

It's not just the Chinese, of course, who are investing in Mexico because Mexico is seen as a way to get goods into the United States, to avoid bureaucracy and make things smoother and lower the tariffs, and so lots of EV makers and battery gigafactories are investing in facilities in Mexico to get goods into the US, and warehouse facilities and shippers are also investing. Maersk have recently invested in a facility in Mexico, and it may all be part of a grand plan by many building their strategies to move goods into the US. Of course, these plans have to be made well in advance of the time period at which they're going to be used, and the problem for investment decisions, as always, is if you invest, will that investment pay back? And that's a question that many of these strategists will be considering. And one of the issues that's unknown, of course, is who's going to be the next president of the US and what that administration will decide to do when it comes to securing the border with Mexico and erecting trade barriers. Maybe the big advantage for Mexico, of course, is its close proximity to the United States, and that can't be changed, and it's likely that the investments by carriers, warehouse facilities and production facilities will likely pay back, regardless of whoever's in the administration, because goods will be required and demanded in the US. It's just a question of what kind of bureaucracy and what kind of importation duties they'll face so difficult decisions, but we'll keep watching the space.

Tony Hines: 17:32

Well, that's it for this week. I hope you've enjoyed the news roundup and I hope you've learned something you didn't know before you started listening, because that creates the value, and that's what we're about. We're all about creating value. Don't forget to subscribe if you haven't already. You'll be the first to know when new podcasts are headed up your way and you can listen before anyone else does. So join us on the Chain Reaction Podcast and stay informed. I'm Tony Hines, I'm signing off and I'll see you next time on the Chain Reaction Podcast. Have a great week. Bye for now, thank you.