COVID-19 Black Swan Crisis

History shows that pandemics are the mass murders of humankind, outperforming wars, and natural hazards.

Bill Gates, George W. Bush, and Barack Obama warned of the subsequent pandemic in speeches.

Historical swan events include the First World War, the Black Tuesday (Wall Street Crash) led to the Great Depression in the 1930s, and also the 2008 financial crisis.

Pandemics like the Black Death in the 14th century, Spanish flu, and COVID-19 today.

Research estimates that Black swans and pandemics cause a downward impact on interest rates for years.

Robert Barro, the macroeconomist from Harvard, estimates that each half-century event occurs which causes a sharp drop in the major economy’s GDP.

Turning Point for Better World

Society has shown throughout history to learn and develop from black swans.

Daron Acemoglu, an institute professor from MIT, considers pandemics as a challenging and crucial moment for the development of institutions.

• Industrial Revolution was founded in England in the 17th-century.
• Spanish flu led to the establishment of public health systems in European countries.
• Organization to combat epidemics at the international level, opening in Vienna in 1919, will be considered the vanguard of today’s WHO.
• 2008 financial crash, domino effect triggered by subprime mortgage-backed securities, a spread of the latest Fed financing structures assisted to fill in the deficiencies in the financial sector.

Hyper-Globalization – Shifting the Value Chains

Since WTO (World Trade Organization) was founded in 1995, hyper-globalization has soared more rapidly than world GDP.

Cross-border economic integration has gone too far, being forced by the growth of global trade, SNS (social networking service), and AI (Artificial Intelligence).

COVID-19 shock could help to stimulate the world’s economic transition towards the digital economy and green economy.

Semiconductor – Global Technology Trade Weapon

Sino-US trade tensions are escalating and heating up.

COVID-19 crisis is highlighting the risks of today’s global semiconductor supply chain model.

TSMC (Taiwan Semiconductor Manufacturing Company, Limited) dominates roughly 1/2 the world’s semiconductor contract manufacturing with $35 billion in revenue, 60% of sales from the U.S., around 20% from China.

First and foremost Apple – relies on TSMC’s highly sophisticated production.

In May 2020, the Trump administration issued a brand new export control regulation, all non-U.S. semiconductor manufacturers who use U.S. technology and digital infrastructure to supply chips must require a U.S.license before shipping them to Chinese companies.

Claimed that the Chinese tech companies could be a threat to national security for espionage reasons and therefore the sensitive data are often shared with the Chinese political party.

The White House has been ramping up its stance against Huawei and has long pressured allies with TSMC, effectively banned TSMC from selling chips to Huawei if it wanted to stay doing business with the U.S.

TSMC fully complied and stopped taking new orders from Huawei, announced it’d invest $12 billion in building an advanced Semiconductor factory in Phoenix, Arizona that might create 1,600 jobs.

References:

• Coronavirus is significant, but is it a true black swan event? – theconversation.com
• COVID-19 and black swans: lessons from the past for a better future – caixabankresearch.com
• How COVID-19 will change the way we produce – caixabankresearch.com
• COVID-19: A black swan event for the semiconductor industry? – 2.deloitte.com
• How the 1918 Flu Pandemic Revolutionized Public Health – smithsonianmag.com
• Semiconductors are a weapon in the U.S.-China trade war. Can this chipmaker serve both sides? – fortune.com
• TSMC no longer taking orders from Huawei amid new US regulations – theburnin.com
• U.S. tries to narrow loophole that allowed China’s Huawei to skirt export ban – washingtonpost.com
• Who really fixed the financial crisis? – politico.com