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GLOBALOUTLOOK


Thereturn ofCapex


A NEWINVESTMENT CYCLE IS SHAPING UP, BUT IT DIVERGES ACROSS GEOGRAPHIES AND INDUSTRIES. JACOPO DETTONI REPORTS


the wrong reasons. Generally speak- ing, these manufacturers produce goods for their clients, keeping a low profile throughout. TSMCused to be no exception,


C


until it just got too big to be ignored. At time of publication, the Taiwanese chip contractmanufac- turer is the sixth most valuable com- pany in the world, ahead of Tesla and Alibaba. The chips it produces for the likes of Apple and Qualcommare in everything anything fromfridges to data centres. Their ubiquitymakes TSMCa tremendous proxy for the cycle of the global economy, and the message the company is sending out is loud and clear. “Today, asweenter another period


of higher growth,webelieve a higher level of capital intensity is appropriate to capture the future growth opportu- nities,”Wendell Huang, thecompa- ny’s chief financial officer, said dur- ing an earnings call on January 14. Thecompany plans to invest $100bn over the next three years. While uncertainties persist, the


global economy is bouncing back stronger than expected and is now set to grow by 6% in 2021, the fastest pace since the 1970s, and 4.4% in 2022, the IMF estimates. Meanwhile,


April/May 2021 www.fDiIntelligence.com


ontractmanufacturers seldom steal the limelight—Foxconn does sometimes, albeit for all


governments and central banks remain committed to generous fiscal andmonetary stimuli, keeping the cost of capital at historic lows. This unique combination of fac-


tors is shaping up a new investment cycle. After the Covid-19 pandemic forcedmost companies to put invest- ment campaigns on hold, global cor- porations are finally deploying cash to add newcapacity, or make exist- ing capacity more efficient. Yet the ensuing economic rebound is diverg- ing across industries and geogra- phies, distributing opportunities and challenges unevenly, depending mostly on the local level of intensity of the Covid-19 crisis.


Investment rebounds The investment intentions of compa- nies across the globe in March mark a sharp turning point from the pre- vious 12months,which were domi- nated by the concerns and uncer- tainties of the pandemic. “One year ago, companies tight-


ened operational and capital expenditure (capex),” Andrew Chang, a director for corporate rat- ings at credit rating agency Standard &Poor’s, says. “Today, global growth is expected at over 5%, and that is extremely high.Companies are look- ing more bullish, and that will drive the capex cycle.”


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