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China’s Faltering Economy Claims Samsung as a Victim

Just week after Apple, Inc blamed China’s weakening economy for a huge drop in sales and revenues, Samsung Electronics Co, Ltd yesterday followed suit by echoing a similar plaint.

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Arthur J. Villasanta – Fourth Estate Contributor

Seoul, South Korea (4E) – Just week after Apple, Inc blamed China’s weakening economy for a huge drop in sales and revenues, Samsung Electronics Co, Ltd yesterday followed suit by echoing a similar plaint.

In a regulatory filing, Samsung estimated its profit at $9.67 billion for its fourth quarter (October to December) 2018, 29 percent lower year-on-year. The South Korean firm also estimated revenues might drop 11 percent on-year to $52.4 billion.

Samsung blamed “lackluster demand in the memory business and intensifying competition in the smartphone business” for the dismal Q4 outlook.

“Memory earnings fell significantly … due to weaker-than-expected demand amid inventory adjustments at data-centre customers,” which led to a “greater-than-expected” drop in chip prices, said Samsung in a statement.

“We expect earnings to remain subdued in the first quarter of 2019 due to difficult conditions for the memory business but strengthen in the second half.”

On the upside, Samsung’s has a rosier outlook for the full year of 2018. It expects operating profit to hit $52.4 billion, up nearly 10 percent from 2017. Sales are forecast to improve slightly by 1.6 percent to $217 billion.

Analysts, however, expect Samsung’s profit to decline through 2019 as China’s economy continues to slow down. They also note the worsening supply and demand conditions for semiconductors and the structural challenges facing Samsung’s smartphone business will drag down the firm’s profits throughout 2019.

“If Apple’s not selling, then is it Samsung that’s selling well? It is not. The smartphone market is already saturated,” said Greg Roh, senior analyst at Hyundai Motor Securities.

Samsung is the world’s leading smartphone brand, and is also the world’s largest maker of memory chips.

Demand for DRAM memory chips will hit a low in the fourth quarter of 2019, according to some analysts. Prices for DRAM chips dropped 10 percent in the fourth quarter. Prices of NAND flash memory chips fell 15 percent.

Analysts expect memory chip prices to fall 10 percent on average in the first quarter of 2019, adding to Samsung’s woes.

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Politics

U.S. Auto Industry Bosses Want Trump to End Trade War; Re-open Government

Leaders of the U.S. motor vehicle industry are urging the Trump administration and Congress to resolve Trump’s trade war against the world and end the government shutdown.

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Arthur J. Villasanta – Fourth Estate Contributor

Washington, DC, United States (4E) – Leaders of the U.S. motor vehicle industry are urging the Trump administration and Congress to resolve Trump’s trade war against the world and end the government shutdown.

They also declare the political uncertainty being engendered by Trump is hobbling the industry.

Fiat Chrysler Automobiles NV Chief Executive Mike Manley said U.S. metals tariffs imposed by trading partners in response to Trump’s will boost Fiat’s costs by $300 million to $350 million this year. The price hike comes to some $135 to $160 per vehicle.

Manley also said the U.S. government shutdown is preventing certification of one of the company’s new heavy duty pickup truck models. “The earlier it can be resolved, clearly the better,” he said.

Toyota Motor Corporation executive vice president for North American sales, Bob Carter, said the company has had to increase prices three times because of higher tariff costs. This, despite 96 percent of steel used in Toyota U.S. vehicles comes from U.S. steel plants. Carter said retaliatory tariffs boosted their vehicles prices by about $600 on average.

General Motors Company and Ford Motor Company are groaning from the U.S. steel and aluminum tariffs imposed by Trump.

GM Chief Executive Mary Barra promised investors the company will boost 2019 profit despite tariff-related costs and investments in electric vehicles. She restated an earlier decision to close five North American factories and cut nearly 15,000 jobs.

Ford Executive Chairman Bill Ford Jr. said “Certainty is something we really desire because of our product lead times. We don’t have that right now.”

Ford said he has no idea when the various trade and political issues will be resolved.

And then there’s NAFTA or its updated version Trump is trying to foist as a totally new agreement. Industry leader want the U.S. Congress decide quickly on the updated agreement’s fate.

“We just need it resolved,” said Brian Smith, CEO of Hyundai Motor Company in North America. Smith said his company needs clarity so it can adjust its supply chain as necessary. “It’s been going on way too long.”

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U.S. Army Will Test Missiles for Mobile A2/AD Zones in Asia

The U.S. Army is pushing ahead with a plan to establish mobile anti-access/anti denial (A2/AD) zones along the coastlines of allied nations in Asia and will test the first such zone in Okinawa this month.

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Arthur J. Villasanta – Fourth Estate Contributor

Washington, DC, United States (4E) – The U.S. Army is pushing ahead with a plan to establish mobile anti-access/anti denial (A2/AD) zones along the coastlines of allied nations in Asia and will test the first such zone in Okinawa this month.

The tests will confirm the capability of its battlefield surface-to-surface missiles (SSMs) to sink warships of the People’s Liberation Army Navy (PLAN) when it conducts its first-ever missile tests of these weapons in Asia on Okinawa.

The United States Forces Japan (USFJ), which is responsible for all United States Armed Forces units in Japan, has informed the Japan Self-Defense Force (JSDF) of plans to conduct missile tests in the waters around Okinawa later this year as a deterrent against the PLAN, according to Japanese media.

Japan’s Ministry of Defense said this will be the first missile test in or around Okinawa, which is a Japanese Prefecture.

The Army will test two of its battle-proven tactical missiles on Okinawa: the MGM-140 Army Tactical Missile System (ATacMS) and the M142 High Mobility Artillery Rocket System (HIMARS). Originally designed as land-attack missiles, both ATacMS and HIMARS are being developed into anti-ship missiles (ASMs) capable of attacking and sinking PLAN warships.

The new role for these mobile missiles is in keeping with the Army’s new concept of establishing anti-access/anti denial (A2/AD) zones along the coasts of allied nations such as Japan and the Philippines using ATacMS and HIMARS. Both these weapons are long-range missiles with a maximum range of 300 km.

Previous tests beginning 2016 sought to confirm if both SSMs could become effective ASMs. To this end, ATacMS has been upgraded to attack moving targets on land and at sea.

Using ATacMS as an ASM will eliminate the massive cost and long wait times often associated with developing a new weapons system. The newest version of ATacMS — MGM-168 ATacMS-Block IVA — can hurl its 230 kg unitary warhead towards a target 300 km away while flying at Mach 3 (3,700 km/h). This version will be converted into an ASM capable of attacking warships.

Analysts said the Army will have to integrate an existing seeker capable of detecting and tracking moving targets onto the front of the ATacMS. The seeker is effective against warships and mobile land targets such as tanks.

With this capability, what before was an Army surface-to-surface missile system will soon prevent enemy warships such as those from the PLAN from venturing inside the ATacMS kill zone.

The HIMARS mobile launcher will be shipped to Okinawa by cargo aircraft and operated by soldiers from the U.S. Army 1st Infantry Division headquartered at Fort Riley, Kansas.

HIMARS can carry either one ATacMS missile or six HIMARS rockets. It gained notoriety by being one of the weapons that slaughtered more than 300 Russian mercenaries on Feb. 7, 2018 near the town of Khasham (or Al Tabiyeh) in the Deir ez-Zor governorate in Syria.

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China’s Annual Trade Surplus with U.S. in 2018 is Largest on Record

Another month and again, another record for China. China’s annual trade surplus with the United States reached the highest level on record in December, marching upwards to $57.06 billion, the largest since December 2015.

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Arthur J. Villasanta – Fourth Estate Contributor

Beijing, China (4E) – Another month and again, another record for China. China’s annual trade surplus with the United States reached the highest level on record in December, marching upwards to $57.06 billion, the largest since December 2015.

And here’s another record: for all of 2018, the surplus rose by 17.2% to $323.32 billion, which is the highest level yet. Surprisingly, total bilateral trade rose by 5.7% compared to the levels seen in 2017 despite Trump’s trade war with China that began in July, said China’s General Administration of Customs.

Analysts expected the December surplus to increase to only $51.5 billion after rising to $44.71 billion in November. As in November, front loading of China’s exports to the U.S. explained the hefty number.

On the other hand, China’s monthly trade surplus with the U.S. fell to $29.87 billion compared to $35.54 billion in November. Imports from the United States grew by 0.7% year-on-year, far outpaced by a 11.3% increase in the value of exports to the U.S.

Good news for the U.S.: the value of China’s imports and exports fell by the largest value since 2016 in the 12 months to December.

Analysts said the declines reflect the reversal of a front-loading in orders before higher import tariffs were introduced in China and the U.S. earlier in the year.

Including trade with all countries, China’s trade surplus with the world fell to the lowest level since 2013. The value of Chinese imports and exports was the lowest for the year in December, adding to evidence all is not well in China today.

The value of exports plunged 7.6% year-on-year in U.S. dollar terms, coming in well below the median economist forecast for an increase of 5%. Exports fell by 4.4% in U.S. dollar terms from December 2017, missing forecasts for an increase of 3%.

China’s year-on-year drop in imports and exports was the largest since the second half of 2016. The drop mostly reflects the reversal of front-loading of trade orders before increased trade tariffs were implemented by both the U.S. and China earlier in 2018.

Compared to 2017, China’s trade surplus with the world (including the U.S.) fell to $351.8 billion, the smallest since 2013. The value of imports rose by 15.8% in U.S. dollar-denominated terms, faster than the 9.9% rise in exports.

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