Pioneer Newsletter Q3 – 2021

"We come into a world and get caught up in its preformed structures. The most important thing we need to do is to develop ourselves beyond them and flourish.” (Gerald Hüther) This quote fits well into the present situation...

We are caught up in current structures such as the shortage of components, radical price increases of components and raw materials, unpredictable logistics, the Chinese economy slightly out of sync, the pandemic, and a massive increase in demand on top of that.  

Although the global economy turns out to be more flexible than expected, it is still largely determined by external factors. 2022 will present us with multidimensional challenges, but also with a chance to position ourselves and to grow – if we develop ourselves beyond this situation and flourish. 

Despite all the critical factors, the global Purchasing Managers’ Index shows a very high level, significantly exceeding the pre-pandemic values of 2019. The IMF has also kept its global growth forecast of 4.9% for 2022 unchanged in October. Our chances are still good, provided that we adapt to the situation. Central banks will use their monetary policy to counter the danger of inflation and other financial risks. However, it is a balancing act for all of us.  

Everyone is gearing up. Semiconductor capacities are being expanded on all continents. This is the case of TSMC, the largest global chip job shop, planning to invest enormous amounts into building new plants. Recently, they approved an investment of USD 12 bn for a new factory in Arizona, followed by 9 bn for Japan, including contributions from the State. The future distribution of technology remains unclear.  While manufacturers of communication devices are mostly after the later (22 / 28 nm - Japan) and the latest (7 nm - Arizona) chip structures, the automotive industry, and the industry in general, needs the previous chip generation (> 28 nm). Focusing only on the latest structures would put the general industry at a disadvantage.  

The EU's intent to subsidize the production of these smallest structures with EUR 100 bn is not economically viable. This would force the taxpayer to throw money into a bottomless pit. Conversely, focusing on the previous chip generation would create an interesting economic potential.  

Logistics and transport companies are investing in harbors and other transport infrastructure. The first timid signs of normalization become visible. However, we shouldn't expect full recovery before the 2nd half of 2022.

The Chinese central government will overcome their current challenges and surely find a clever solution to the Evergrande problem. They will also deal with the power shortage in the next few months. It remains to be seen how long they can sustain the drastic measures against the pandemic.  Continued isolation from the rest of the world will play into the hands of other economic actors and can be detrimental to China's global role.

On top of that, the COVID-19 situation is still not resolved. The quicker we deal with it, the quicker will we achieve the social and economic normalization. The infection numbers are increasing again and may well lead to another (partial) lockdown. Vaccination is currently the only proven method against it, so do get vaccinated. In the meantime, the world is opening up for those who already have. The United States are a good example. Since November, it is possible to travel to the U.S. again with a vaccination certificate and so the communication and business relationships take their normal course.

Hopefully, most external parameters will get back to normal in 2023. All the ongoing investments and an expected decline in demand will lead to advantageous conditions in sourcing and logistics. Will we experience a super “pork cycle"?

The CEDES Group wants to keep on developing and flourishing. Delivery capability is our top priority and so far we have managed to deliver our products with high reliability, which has brought us additional revenue. Moreover, we continuously invest in quality and the joint effort of our employees has made us to a quality leader in our industry. Sustainability is of paramount importance to CEDES, as demonstrated by numerous projects towards energy neutrality and environmental protection. Our customers will show understanding for price adjustments in the present situation, as we are all in the same boat. We are continuously expanding our product portfolio: the latest addition is a cost-optimized light curtain for elevators.

Under these circumstances, we will be able to reach our growth target of 9% in 2021 and keep growing considerably in 2022.

Christian-Erik Thöny

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