Growing Demand for Semiconductors May Hinder Volkswagen Production: Live Updates

By Julie Creswell and Gillian Friedman

A Volkswagen assembly line in Wolfsburg, Germany. Volkswagen said it would have to adjust production at several factories because of a shortage of semiconductors.
A Volkswagen assembly line in Wolfsburg, Germany. Volkswagen said it would have to adjust production at several factories because of a shortage of semiconductors.Credit...Pool photo by Swen Pfoertner

Volkswagen warned Friday of production delays at factories in China and other locations after an unexpectedly strong rebound in car sales during the pandemic created a worldwide shortage of semiconductors used in automobiles.

Modern automobiles are heavily computerized, and they require semiconductors for engine controls, automatic braking systems and many other applications.

Semiconductors are at the heart of the high-performance computer chips that power electronic devices like computers and mobile phones, gadgets whose demand has grown as pandemic-induced lockdowns keep people inside their homes.

After the pandemic gutted auto sales earlier this year, many semiconductor makers shifted production to consumer products, Volkswagen said.

But then car sales bounced back faster than expected, especially in China, the world’s largest car market. Semiconductor makers have not been able to meet demand and will take several months to realign production.

As a result, Volkswagen said, it would have to adjust production at factories in China, Europe and North America. Volkswagen has factories in Chattanooga, Tenn., and Puebla, Mexico.

The shortage of parts will mostly affect smaller and midsize cars sold by Volkswagen and the company’s SEAT and Skoda units. Some Audi cars will also be affected, Volkswagen said.

Infineon, one of the largest suppliers of semiconductors to the auto industry, said in a statement that it could not comment on individual customers. But the company said it was planning to step up investment in new production capacity in 2021 to as much as 1.5 billion euros, or $1.8 billion, compared with €1.1bn in 2020.

Automobile sales in most regions are still far below 2019 levels, but the decline has not been as severe as it first appeared.

In Europe, new car registrations plunged more than 75 percent in April compared with a year earlier. For the first 11 months of 2020, registrations were 26 percent below last year’s level, according to the European Automobile Manufacturers Association.

WASHINGTON — The Trump administration imposed greater restrictions on dozens of Chinese companies on Friday, including Semiconductor Manufacturing International Corporation, citing national security concerns with the companies’ ties to the Chinese military.

The U.S. Commerce Department’s order restricts S.M.I.C.’s ability to import tools used to produce its chip, putting the company on a so-called entity list intended to starve foreign companies of U.S.-sourced goods and services. The agency announced a total of 77 foreign entities that are subject to the restrictions, the majority from China.

The dronemaker DJI was also included on the list because of the technology’s alleged connection to China’s human rights abuses, such as spying on ethnic minorities in China.

“Between S.M.I.C.’s relationships of concern with the military industrial complex, China’s aggressive application of military civil fusion mandates and state-directed subsidies, S.M.I.C. perfectly illustrates the risks of China’s leverage of U.S. technology to support its military modernization,” said Commerce Secretary Wilbur Ross.

The order is part of President Trump’s ongoing offensive against Chinese companies, which the administration has accused of posing a national security threat. The administration has focused in particular on technology transfers between the two nations, saying China is trying to use American technology to gain an economic and military advantage.

The Trump administration has penalized dozens of Chinese companies in previous months by adding them to the so-called entity list over national security concerns related to advanced technology, including the telecom giants Huawei and ZTE. It has also added a growing number of companies accused of human rights violations against Muslim minorities in the Xinjiang region to the list, along with companies accused of helping China’s encroachment in the South China Sea, which stretches south of Hong Kong and borders the Philippines, Vietnam, Malaysia and other countries.

About one-third to one-half of S.M.I.C.’s semiconductor tool purchases come from the United States, according to one U.S.-based semiconductor industry expert. But the Commerce order was written narrowly, the person said, and may affect only a small slice of those imports.

The Commerce Department said that S.M.I.C. was targeted because its advanced semiconductors were being used by companies to support the Chinese military’s creation of short-range and ballistic missiles and military aircraft.

Lee R. Raymond became a director at JPMorgan Chase in 1987 and has served as the bank’s lead independent director since 2004.
Lee R. Raymond became a director at JPMorgan Chase in 1987 and has served as the bank’s lead independent director since 2004. Credit...Chip Somodevilla/Getty Images

Lee R. Raymond, who served as Exxon’s chief executive from 1993 to 2005 and has for years held an influential post on JPMorgan Chase’s board, is stepping down from the bank at the end of the year, according to a regulatory filing.

Mr. Raymond, 82, became a director at the bank in 1987 and has served as JPMorgan’s lead independent director since 2013. After pressure from climate groups and activist shareholders who criticized Mr. Raymond’s ties to the fossil fuel industry, JPMorgan announced in May it would choose a new lead independent director. In September, the bank said it had picked Stephen B. Burke, a senior executive at the Comcast Corporation, to fill the role.

“Lee has served our company with distinction in a number of critical capacities,” Jamie Dimon, the chairman and chief executive of JPMorgan, wrote in a memo to employees that was seen by The New York Times. Mr. Dimon added that Mr. Raymond had “helped shape today’s JPMorgan Chase” and that “there is no question that we are a far better company because of him.”

Climate activists have been pushing JPMorgan for years to stop funding fossil fuel projects and do more to help reduce greenhouse gas emissions, and Mr. Raymond, who spent his years as an Exxon executive steadfastly rejecting scientists’ findings that carbon emissions were causing global temperatures to rise, stood out as a target of their ire.

The Sierra Club’s website took note of the bank’s announcement that it would replace Mr. Raymond, calling it “huge news” in a post on its website. The group took part in an effort by activists to persuade JPMorgan’s shareholders to vote Mr. Raymond off the bank’s board at the annual shareholders meeting on May 19.

A bank spokesman said on Friday that Mr. Raymond’s decision to leave the bank’s board was not a result of outside pressure.

Brian Armstrong the chief executive of Coinbase.
Brian Armstrong the chief executive of Coinbase.Credit...Jason Henry for The New York Times

Cryptocurrency had a banner week in an already big year. Over the past day, the value of Bitcoin set a new high and the digital currency exchange Coinbase, the most valuable American cryptocurrency company, announced that it had filed for an initial public offering with the Securities and Exchange Commission. As the DealBook newsletter discusses, there are both practical and philosophical issues with Coinbase’s listing.

Cryptocurrencies like Bitcoin are borderless, decentralized assets championed in particular by libertarians, anarchists and others who reject centralized control and regulation. Coinbase is in the business of popularizing these rebel currencies via an app that makes it easy for anyone to trade Bitcoin like they would stocks or bonds. An I.P.O. would thrust Coinbase — and by extension, cryptocurrency — further into the mainstream, with regulators, bankers and other trappings of official legitimacy.

Coinbase is “spiritually” built for an offering of digital tokens, Fred Ehrsam, a co-founder of the company, told Fortune. But for all of the bullishness about Bitcoin at the moment, tapping traditional sources of institutional funds could be a more lucrative route, with less regulatory uncertainty.

The traditional I.P.O. underwriting process could be fraught, too. Misreading retail demand in the market debuts of Airbnb and DoorDash made other I.P.O. hopefuls rethink their plans. Adding crypto true believers into this mix only increases the difficulty. That could make a direct listing more appropriate, from a pricing efficiency view, as previous reports have suggested. (Slack and Spotify went public this way, in which shares are sold directly to the public, bypassing intermediaries.)

Coinbase was last valued at $8 billion in a funding round in 2018, but may be worth more now, thanks to the surge in crypto prices and the frenzy for tech stocks. Brian Armstrong, Coinbase’s chief executive, recently addressed the rapid rise of the Bitcoin price on the company blog:

“While it’s great to see market rallies and see news organizations turn attention to this emerging asset class in a new way, we cannot emphasize enough how important it is to understand that investing in crypto is not without risk.”

Whatever stock investors think Coinbase is worth as it prepares to list, crypto investors are convinced that Bitcoin’s long-term prospects are bright. “It’s gold 2.0 for sure,” said Daniel Polotsky of CoinFlip, a Bitcoin A.T.M. company. “It’s going to eat gold’s lunch.”

  • Stocks ended lower on Friday, as Congress rushed to reach agreement on a $900 billion coronavirus relief package before a Friday deadline.

  • The benchmark S&P 500 index was down 0.4 percent. Encouraged by the rollout of coronavirus vaccines, investors have shrugged off the rising number of cases and heightened pandemic restrictions.

  • Negotiations were continuing in Washington as lawmakers tried to hammer out the final terms of a $900 billion pandemic stimulus bill. But top Democrats and Republicans in Congress hit a barrier over a last-minute Republican effort to cut off the Federal Reserve’s ability to restart pandemic relief programs and severely limit the central bank’s ability to fight future financial crises.

  • Stocks in Europe were lower. In Asia, most indexes closed out the week on a down note.

  • Oil futures were edging higher, while the yield on United States 10-year Treasury notes was falling. Gold was trending lower, at $1,890 an ounce.

  • The British pound slipped more than 0.5 percent after European and British leaders offered pessimistic assessments about the chance of reaching a trade deal before the Brexit transition period ends Dec. 31. Talk on a deal between Britain and its largest trade partner, the European Union, are quickly running out of time; the European Parliament, which must ratify an agreement, has set a deadline for Sunday. Without a deal, imports to both sides would face hefty tariffs.

  • Michael Hewson, chief market analyst at CMC Markets, said the recent dour comments were probably “just the latest in a choreographed tap dance by both sides to ensure that when a deal is done, both sides can claim that they went to the very end to extract every last concession.”

  • Shares in the video game developer CD Projekt, based in Warsaw, fell 15 percent after Sony said it would remove the company’s latest game, Cyberpunk 2077, from the PlayStation store and offered full refunds. Players have complained that the game, recently introduced, is riddled with bugs.

With 43 locations scattered across the United States, Fogo De Chão has been dealing with a patchwork of pandemic regulations. At this location, in Rosemont Ill., only two panels of an outdoor structure must be kept open.
With 43 locations scattered across the United States, Fogo De Chão has been dealing with a patchwork of pandemic regulations. At this location, in Rosemont Ill., only two panels of an outdoor structure must be kept open.Credit...Lyndon French for The New York Times

For larger dine-in chains, the ever-changing patchwork of rules around dining poses a particular logistical challenge: How do you come up with a companywide approach when different locations are dealing with their own specific regulations?

New restrictions have been placed on indoor and outdoor dining, though they are far from uniform (no indoor dining in Philadelphia, Chicago and New York, indoor dining curfews in New Jersey and Massachusetts, no restaurant dining at all in much of California).

Restaurants must work with local health departments that hand down specific guidance on measures that must be taken to prevent the spread of the virus. Some require outdoor dining tents or structures that have no more than two walls to provide adequate ventilation. Others want three sides of tents to remain open.

Left with empty dining rooms, casual and upscale dining chains moved quickly to beef up or offer to-go options the first time around. They started curbside pickup and signed on with food delivery partners like DoorDash and Grubhub. Some states loosened liquor laws, allowing chains to offer alcoholic beverages for takeout. And when restaurants were allowed to serve diners again, with restrictions, many rented tents or opened up patios to create outdoor seating.

But chains saw uneven performance among their restaurants.

By the end of summer, Olive Garden restaurants were averaging $70,000 in sales per week. But sales at the chain’s superstar restaurant in Times Square in New York, which was offering only takeout during the summer, plummeted to $17,500 per week, down from roughly $288,000 per week, executives of Darden Restaurants, which owns Olive Garden, LongHorn Steakhouse and The Capital Grille, told Wall Street analysts in September.