Economic

Bechtle secures €770 million deal with German government

Bechtle has secured a significant framework agreement with the German government to provide up to 300,000 iPhones and iPads, all equipped with approved Apple security software. The contract, valued at €770 million ($835.22 million), will run until the end of 2027, according to an announcement on Thursday.

This deal aligns with Germany’s recent IT security law aimed at restricting untrustworthy suppliers and ensuring robust security measures for government officials. Bechtle’s partnership with Apple underscores the importance of reliable technology and security in government operations.

The agreement comes some time after Apple’s legal challenges in Germany, including an injunction from a German court over a patent case back in 2018. Despite these hurdles, the collaboration with Bechtle demonstrates Apple’s continued commitment to providing secure and trusted devices for essential functions within the public sector.

JPMorgan deploys in-house AI research analyst tool to boost firm productivity

As per the Financial Times report, JPMorgan Chase has started deploying an in-house generative AI tool, claiming that its proprietary version of OpenAI’s ChatGPT can perform the task of a research analyst. As per an internal memo accessed by Financial Times, the company has granted its asset and wealth management employees access to the language model platform, LLM Suite. The rollout represents one of Wall Street’s major LLM applications.

The memo described the LLM suite as a ‘ChatGPT-like product’ intended for general productivity, complementing its other applications handling private financial information called Connect Coach and SpectrumGPT. Earlier this year, JPMorgan began rolling out the LLM Suite to select bank areas, and currently, approximately 15% of the workforce has access to the tool.

JPMorgan CEO Jamie Dimon told shareholders that the use of AI has the potential to augment virtually every job and impact our workforce composition. It may reduce certain job categories or roles, but it may create others as well. It is worth noting that so far, the company has not disclosed the number of research analysts it employs.

SK Hynix invests $6.8B in South Korea chip plant

SK Hynix, the world’s second-largest memory chip maker and a key Nvidia supplier, will invest 9.4 trillion won ($6.8 billion) for its inaugural chip plant in South Korea. Kim Young-sik, the company’s head of manufacturing technology, explained that this is a strategic investment for the company in response to the surge in demand for AI semiconductors. The ambitious project will involve building four state-of-the-art semiconductor plants near Seoul. The construction is expected to start in March next year, and its completion is slated for May 2027.

The site will span 4.2 million square meters and will house four cutting-edge chip plants and over 50 local firms in the semiconductor sector. The facility will also boast a ‘mini-fab’ research centre for processing 300-mm silicon wafers, offering local chip materials and equipment manufacturers a realistic environment to test their innovations.

Why does it matter?

It is worth noting that this new fab will be set in the Yongin Semiconductor Cluster near Seoul, where the government aims to build a large-scale chip operations complex. As such, SK Hynix’s investment will help supplement the South Korean government’s efforts to sustain its leadership in-memory technology, which is crucial for AI applications.

WTO Joint Initiative on e-commerce close to finalising negotiations

The co-conveners of the Joint Initiative (JI) on e-commerce – Australia, Japan and Singapore – have published a stabilised text of an “Agreement on Electronic Commerce“. The publication represents a significant milestone, and comes after almost seven years of discussions and negotiations.


The text proposes rules on a range of substantive issues, including:

  • Openness and electronic commerce, which includes commitments on customs duties on electronic transmissions; open government data; and access to and use of the internet for electronic commerce.
  • Trust and electronic commerce, which covers online consumer protection;
    unsolicited commercial electronic messages (spam); personal data protection; and cybersecurity.
  • Telecommunications, which presents a revised version of the Telecommunications Reference Paper
  • Cross-cutting topics related to transparency, cooperation, and development.
  • Exceptions, including for security, prudential reasons, data protection, and preferences for indigenous peoples.

The current draft text has been published by the co-conveners on behalf of 82 out of 91 JI members. Some countries, notably Brazil, Colombia, El Salvador, Guatemala, Indonesia, Paraguay, Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu, Türkiye and United States are still undertaking domestic consultations on the text.  

Why this is important

The regulation of e-commerce and digital trade has taken place so far within preferential trade agreements (PTAs), celebrated bilaterally or plurilateraly among countries. Nevertheless, there is no specific agreeemnt on this issue in the context of the WTO.

An e-commerce agreement would be an important step towards promoting global harmonisation of norms. Although the participation of LDCs and of some regions, such as the Caribbean, is still limited, the JI counts on the participation of a significant number of WTO members, which account for approximately 90% of global trade. While topics under ‘enabling electronic commerce’ carry special importance to development, consumer protection and privacy help to put individuals at the center of the digital economy.

In addition, the text of the “Agreement on Electronic Commerce” enshrines a commitment not to impose customs duties on electronic transmissions (to be reassessed after five years). Currently, a moratorium on customs duties on electronic transmissions is in place among all WTO members, exempting  digital products, such as online films, music, and software from tariffs (customs duties) as they cross borders. Nevertheless, this WTO-wide moratorium is likely to expire at the next WTO Ministerial Meeting. The inclusion of a moratorium in the e-commerce agreement means that the status quo – the non-application of custom duties – would continue to be the rule among most WTO members, regarless of the expiration of the wider moratorium.

Finally, the agreement also presents extensive provisions aiming to cater to the specific needs of developing countries and LDCs. Nevertheless, there are doubts with regards to whether these provisions would be fit for purpose, since most of them are formulated in a ‘best effort’ language, and they do not follow the model of the Trade Facilitation Agreement (TFA), which links implementation with the existing capacity, and with “mandatory” technical assistance.  

What is missing

The JI officially began negotiations with an ambitious agenda, which included enabling issues, customs duties and market access, as well as a wide range of digital policy issues, such as data flows, localisation, access to the source code, and cybersecurity.  

Negotiations on some of the most ‘digital’ issues, such as data flows and source code, halted when the United States decided to withdraw its support for these areas in order to preserve domestic policy space. Although data flows are the lifeblood of the digital economy, it seems unlikely that rules on this issue will be harmonised on a multilateral basis anytime soon. The co-conveners simply state that “participants recognise that some issues of importance to digital trade have not been addressed in this text. Participants will discuss the inclusion of these issues in future negotiations”.

The mechanism to include a future agreement on e-commerce in the WTO legal architecture is also an open issue.  The members of another Joint Initiative on Investment Facilitation for Development (IFD) have not managed to secure the inclusion of the agreed text under Article 4 of the Marrakesh Agreement, which deal with WTO Plurilateral Agreements. Such an inclusion requires a hard-to-achieve consensus among WTO Members, given the explicit opposition by some countries. This raises questions on the path forward towards the incorporation of the outcomes of other JIs, including on e-commerce. 

The negotiations at WTO JI will continue pending endorsement by several countries. According to the United States, “the current text falls short and more work is needed, including with respect to the essential security exception”.

EU prepares hefty fine for Meta’s Marketplace practices

Meta Platforms is facing its first EU antitrust fine for linking its Marketplace service with Facebook. The European Commission is expected to issue the fine within a few weeks, following an accusation over a year and a half ago that the company gave its classified ads service an unfair advantage by bundling it with Facebook.

Allegations include Meta abusing its dominance by imposing unfair trading conditions on competing classified ad services advertising on Facebook and Instagram. The potential fine could reach as much as $13.4 billion, or 10% of Meta’s 2023 global revenue, although such high fines are rarely imposed.

A decision is likely to come in September or October, before EU antitrust chief Margrethe Vestager leaves office in November. Meta has reiterated its stance, claiming the European Commission’s allegations are baseless and stating its product innovation is pro-consumer and pro-competitive.

In a separate development, Meta has been charged by the Commission for not complying with new tech rules due to its pay or consent advertising model launched last November. Efforts to settle the investigation by limiting the use of competitors’ advertising data for Marketplace were previously rejected by the EU but accepted by the UK regulator.

European chip firms face challenges, even harder for those with less AI exposure

Shares in European semiconductor firms fell on Thursday as demand from automotive and industrial clients dropped, contributing to a broader sector downturn. While companies like ASML and ASM International benefit from the booming AI chip market and high-end tech clients, they are not entirely immune to stock valuation corrections and trade tensions involving China, the US, and Europe. Shares in both firms declined by about 3%.

Chipmakers with less AI exposure were hit harder. STMicroelectronics, a supplier for Tesla, saw a 14% drop after cutting sales and margin targets for the second time this year. Germany’s Infineon, a major automotive chip supplier, fell by 6%. NXP Semiconductors reported its worst revenue decline in four years due to weak automotive demand, negatively impacting US peers with similar exposures.

Despite the challenges, some companies still see growth prospects. Siltronic raised its guidance due to the AI market, which is expected to grow this year. However, BE Semiconductor Industries experienced a 13% slump after forecasting flat third-quarter sales, impacted by weak growth in mainstream assembly markets, particularly in China, even as AI-related orders increased.

The broader European semiconductor sector, represented by the STOXX 600 Technology index, was down 2.8%, dragged by various firms including ams OSRAM, Melexis, Technoprobe, Soitec, and Nordic Semiconductor. Despite current struggles, industry fundamentals remain strong, with companies hopeful that electric vehicle demand will recover, particularly for silicon carbide components.

Alphabet stocks drop on AI investment concerns

Google’s parent company stocks fell by over 3% on Wednesday amid concerns that rising investments in AI infrastructure could squeeze margins and that YouTube is facing stiff competition for ad dollars. The Google parent company saw its capital expenditure rise to $13.2 billion in the second quarter, exceeding expectations as it invests heavily in the infrastructure needed to support generative AI services and compete with Microsoft.

While Alphabet has been cutting costs through layoffs to protect profitability, analysts noted that seasonal hiring of fresh graduates and the earlier-than-usual Pixel launch would impact margins in the third quarter. Additionally, YouTube’s ad sales growth slowed to 13% in the second quarter from nearly 21% in the first quarter, as it grapples with tough year-on-year comparisons and competition from Amazon in the online video ad market.

Despite these challenges, many analysts remain positive about Alphabet, citing its AI efforts driving up cloud revenue and minimal disruption to Search revenue from its AI overviews. Cloud computing services revenue rose by 28.8%, outpacing expectations and signalling robust enterprise spending. Analysts believe Alphabet’s AI advancements position it as a market leader, and 25 brokerages have raised their price targets for the stock. Their failed Wiz acquisition echoes the company’s ambitions to expand their market share and reclaim their place at the top.

Alphabet’s stock, which has gained about 30% this year due to the AI stock rally, is set to lose around $60 billion in market value. However, its 12-month forward price-to-earnings ratio of 22.2 remains competitive compared to Nvidia’s 38.6, indicating continued confidence in Alphabet’s long-term growth prospects.

Huawei’s rise challenges Apple’s position in Chinese market

Apple’s market share in China declined by two percentage points in the second quarter of 2024, dropping from 16% to 14%, according to data from market research firm Canalys. The drop highlights the challenges Apple faces in its third-largest market as it battles intensifying competition from rivals like Huawei.

Huawei saw a 41% year-on-year increase in smartphone shipments during the quarter, driven by the launch of its Pura 70 series. This surge has propelled Huawei back into the high-end smartphone segment, despite facing US sanctions that have restricted its access to global chip supplies. Huawei’s market share in China is projected to reach 19% in 2024, making it the top vendor.

Overall, China’s smartphone shipments rose by 10% in the quarter, with Vivo leading at 19% market share, followed by Oppo, Honor, and Huawei. Apple’s market share drop resulted in its ranking falling from third to sixth place. To combat the decline, Apple has ramped up its discounting efforts, offering significant price cuts on select iPhone models.

Despite being deemed a national security threat by American officials, Huawei’s sales have rebounded, demonstrating resilience in the face of U.S. restrictions. Analysts predict Huawei’s strong performance will continue, challenging Apple’s position in the Chinese market.

FCA fines Coinbase subsidiary for lax anti-money laundering controls

The Financial Conduct Authority (FCA), UK’s financial regulatory body, has fined CB Payments Limited (CPBL), a Coinbase subsidiary, £3.5 million ($4.5 million) for inadequate anti-money laundering controls, marking it FCA’s first action against a crypto trading firm.

CBPL is a platform for trading cryptoassets within Coinbase Group and the FCA stated how after an FCA visit in October 2020, it voluntarily agreed to enhance its financial crime controls. The agreement required CBPL to halt accepting new high-risk customers until the issue was resolved. Nevertheless, the company continued providing e-money services to 13,416 such customers, with nearly a third of them depositing $24.9 million. The fund in turn facilitated various cryptoasset transactions through other Coinbase entities, amounting to approximately $226 million in total. The FCA reported that this repeated breaches of the voluntary agreement went undetected for about two years.

Despite these breaches, CBPL agreed to a resolution, receiving a 30% reduction on its fine—lowering it from £5 million to £3.5 million. Coinbase, for its part, reiterated its commitment to working with top financial regulators like the FCA to ensure their platform remains compliant, secure, and trusted by customers.

EU and Singapore finalise digital trade deal

The European Union and Singapore have finalised a digital trade agreement to facilitate cross-border data flows and establish global rules for digital trade. This new deal, which enhances the existing EU-Singapore free trade agreement from 2019, includes provisions for e-signatures, consumer protection, and limits on spam. It also addresses data access and transfer concerns, particularly regarding technology mandates from countries like China.

The agreement is expected to reduce business costs and boost services trade, benefiting both parties. Singapore, a major player in the EU’s services trade, saw its digital services trade reach 43 billion euros ($47 billion) in 2022. For the EU, this deal aligns with its goal to set global standards for digital trade, particularly in the Asia-Pacific region. The EU already has similar agreements with Britain, Chile, New Zealand, and Japan and is negotiating with South Korea.

The agreement, which must be ratified by Singapore, the EU’s national governments, and the European Parliament, reflects the growing importance of digitally delivered services, which have been rising at an average annual rate of 8.1% globally.