Global strategist for eToro, Ben Laidler, in his daily analysis on the crypto market, has commented on the changes in Apple’s supply chain. and to which countries these adjustments benefit, in addition he also spoke about the PMI data in Spain and the eurozone and, about the analysis carried out by Callie Cox, regarding the statements of Jerome Powell, president of the FED.
Regarding the issue of supplies, eToro’s global markets strategist comments that the American company that designs and produces electronic equipment, software and online services, Apple, has the largest market capitalization in the world and makes almost 60% of its sales of approximately USD 400,000 million outside the United States, in addition to having an extensive supply chain worldwide.
In addition, Apple has long released its list of vendors and an ESG accountability report, which Laidler says means that the company can obtain an above-average scorein the metrics recently released by the eToro investment platform.
China versus Apple diversification
According to Ben Laidler, even as Apple leads change in supply chains, it is also showing the limits. The company has strengthened and diversified its factories, cutting exposure to China and also to the United States in favor of the rest of Asia, contrary to what happens with Mexico or India. This while China’s global manufacturing share continues to rise.
As part of the analysis, a comparison was made between the number and location of factories in Apple’s supply chain, from Amkor to Western Digital, over the past five years. There it is shown how the corporation has reduced the total number of plants in China from 46% to 32%.
It is worth noting that this reduction does not mean that the plants have relocated to the United States.
Currently only 11% of Apple factories are located in the North American region, which translates to a figure lower than 18% five years ago.
The countries that have benefited from this diversification correspond to a large part of the Asian continentled by Taiwan, Japan, Korea and all the ASEAN economies.
Secondly; Laidler comments that the so-called “critical points” of relocation, Mexico and India, are very small and their supply chain has become consolidated, with the number of factories falling rapidly from approximately 800 to 500, even though sales grew 50% since 2017.
According to Laidler’s perspective, this situation occurs at a time when global trade pressures are increasing with falling volumes and increasing protectionism.
“This has offset the sharp drop in global supply chain disruptions as the pandemic has subsided. But China is not easily relinquishing its position as the “world’s factory,” accounting for 30% of the world’s total, a figure that’s up 5 percentage points in the past five years alone and nearly double number two. from the United States, as global demand for goods skyrocketed and benefited from its huge economies of scale,” Laidler explained.
Adding that, on the contrary, as “structural and cyclical trade pressures” continue to increase, the Asian country will most likely focus its attention on developing its own domestic consumption.
PMI Spain and euro zone, continues in contraction mode
The second point addressed by Laidler was about the comments made by Javier Molina, senior market analyst at eToro, about the PMI data in Spain and the Eurozone.
According to what has been said, Spain’s manufacturing PMI continues in a phase of decline, with a reading in November of 45.7, although it reflects an improvement compared to the previous month, where it had a contraction of 44.7. What this trend continues to reveal is that “we are at a rate of decrease in the volume of orders,” Laidler points out.
In your opinion, the cause of this situation is due to high inflation and the rise in interest rates, which causes demand, in turn, to continue weakening, which shows that “this contraction is still far from seeing a bottom.”
“The positive part is that perhaps this deterioration is not so strong, an important aspect in order to see how prolonged this recession can be that finally ends up impacting us,” he stressed.
Although, the manufacturing PMI of the euro zone supposes a “slight recovery” Compared to the month of October, it is still in the contraction zone.
This is thanks to the high operating costs, which continue to be one of the main problems and added to this, the lack of consumption by economic actors due to the high inflation rate.
In this regard, Laidler comments that it is worth noting that companies maintain a high level of inventory, so it will be necessary “A strong demand for more positive readings to begin.” However, he considers that the critical may be staying in the past and that “the next few quarters will not be as negative as expected in October.”
Comments by Callie Cox, US Analyst at eToro, on Jerome Powell’s statements
To conclude the analysis, Laidler refers to the statements by Jerome Powell, President of the Federal Reserve System, prepared by Callie Cox, US analyst at eToro.
According to Fed Chairman Jerome Powell, rate hikes “could” start to slow down in the next few weekswhich implies that “We are one step closer to controlling inflation and getting prices out of this bear market”Powell said about what the market has been thinking at this time.
Adding that, before it is necessary to keep in mind that this is an adjustment, not a change in trend, highlighting that rates could stay high for some time. Likewise, he made it clear that an environment of high rates is not the easiest or most recommendable to invest, and it could be facing a more difficult path towards the maximum, until the inflationary crisis subsides significantly.
“However, these comments need not be accompanied by too many warnings. The economic data, coupled with the Fed’s willingness to ease off the throttle, could make a good case for the market bottoming out. However, we may be in a window until we have decisive evidence that inflation is back to normal or a recession is on the horizon,” he noted.
This may be the point at which the time is right to start sowing the seeds of the next bull market,” but don’t get carried away. High rate environments benefit quality companies that demonstrate their ability to execute.
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