A semiconductor shortage is battering the global auto industry at a crucial moment, and the pressure shows no sign of easing soon.
What’s happening: Ford (F) told investors Thursday that the chip crunch could shave up to 20% off first-quarter production.
Chief Financial Officer John Lawler said that if the problem drags on through the spring, the company’s earnings could take a $1 billion to $2.5 billion hit.
It’s not just an issue for Ford. GM (GM) is shutting some plants in the United States, Canada and Mexico next week due to the insufficient supplies, while Volkswagen, Fiat Chrysler (FCAU), Toyota (TM), Nissan (NSANF) and Honda (HMC) have also been affected.
“Despite our mitigation efforts, the semiconductor shortage will impact GM production in 2021,” GM said in a statement this week. “We are currently assessing the overall impact, but our focus is to keep producing our most in-demand products — including full-size trucks and SUVs and Corvettes — for our customers.”
The backstory: Leading semiconductor manufacturers reassigned capacity from automakers last year after the pandemic hurt car sales, instead shipping chips to companies that produce smartphones, gaming systems and other tech gadgets that were in high demand. Now, supplies remain tight, and carmakers are struggling to secure the chips they need.
The tiny parts are essential to production. The average car has between 50 to 150 chips, which are used in a growing number of applications, including driver assistance systems and navigation control.
Bottlenecks may persist for months, weighing on the auto sector as it tries to recover from the pandemic. It could even force some companies to raise prices.
“The current chip shortage poses a big threat of further slowdowns in production for the entire industry,” Jessica Caldwell, executive director of insights at Edmunds, told clients this week.
Investor insight: Wall Street is mostly looking past the turmoil, sending auto stocks higher as companies make increasingly bold commitments about future production of electric and autonomous vehicles.
Ford said Thursday it will invest invest $29 billion in electric and self-driving cars, though it needs to play a bit of catch-up. EVs already make up nearly 3% of Volkswagen’s global sales, while GM announced last week that is expects to exclusively sell emission-free vehicles by 2035.
But the longer the chip shortage drags on, the more it could hurt the industry — even as lockdowns end and demand for cars starts to pick back up.
Up next: How bad is it? Investors will monitor Toyota, Nissan and Honda earnings next week for additional details.
Kuaishou stock soars in biggest IPO since 2019
Kuaishou’s stock skyrocketed Friday as the TikTok-like video app scored the world’s biggest IPO since the coronavirus pandemic began.
The details: Shares closed at 300 Hong Kong dollars ($38.70) apiece, a 161% jump over the 115 Hong Kong dollars ($14.80) issue price. The company raised a total of 41.3 billion Hong Kong dollars ($5.3 billion) in the offering.
If the company exercises an over-allotment option, the total raised could hit 47 billion Hong Kong dollars ($6.1 billion).
Big picture: It’s the world’s biggest tech listing since Uber’s IPO in May 2019, and the largest public offering globally since Saudi Aramco’s in December 2019, according to Refinitiv.
Kuaishou is one of China’s leading social media firms. The Tencent-backed company, whose name means “fast hand” in Chinese, owns an eponymous short-video and live-streaming app. Its platforms and mini programs have more than 300 million daily active users.
It gets most of its revenue from the live-streaming business, where users can buy virtual items and present them as gifts to their favorite hosts. Live-streaming transactions accounted for 84% of revenue in 2019, according to a stock exchange filing. It also makes money off online advertising.
“This is an incredible outcome,” said David Chao, co-founder and general partner of DCM, a Silicon Valley venture capital firm with $4 billion under management. His company was one of the earliest investors in Kuaishou, leading one of its first funding rounds back in 2014.
DCM still has a 9% stake in the social network, which is now worth more than $14 billion. The firm said that would generate a return of roughly 600 times its original investment.
That said: The listing also comes as the tech sector faces an escalating regulatory clampdown in China. Tensions with regulators derailed Ant Group’s IPO late last year.
Kuaishou alluded to that risk in its filings, pointing to “the fact that the internet business is highly regulated in China.”
Super Bowl LV will be a bonanza for gambling companies
The Kansas City Chiefs or Tampa Bay Buccaneers? We don’t know who will win Super Bowl LV. But the big sports betting and fantasy firms are already champs.
See here: DraftKings shares have surged 35% this year ahead of Sunday’s game. Its stock is up 260% since it went public last April following a merger with a “blank check” special purpose acquisition company, or SPAC.
This is the third Super Bowl since the Supreme Court legalized sports betting at the state level in 2018. More than two dozen states and Washington, D.C. have since approved measures allowing bets to be placed at physical locations (known as sportsbooks), via mobile apps or online. That means 2021 could be the best year yet for the gambling giants.
Shares of UK-based Flutter Entertainment, owner of DraftKings rival FanDuel, are up about 67% in the past year. Casino owner Penn National Gaming, which bought a big stake in Barstool Sports last year, has soared nearly 300% since the beginning of February 2020.
“Demand is off the charts,” said FanDuel CEO Matt King. “This will be biggest event in the company’s history.”
Major growth: For 2019’s Super Bowl, Robins notes, DraftKings was able to take bets from users in just one state: New Jersey. Last year, the app was live in five states. Now, it’s up to 12. Game on.