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Small PHL EV production capacity to limit competitiveness with foreign rivals

PHILSTAR FILE PHOTO

By Almira Louise S. Martinez, Reporter

THE Electric Vehicle Association of the Philippines (EVAP) said its members are “far behind” international brands and will struggle to compete due to the limited scale and sophistication of domestic-based production.

“Local manufacturers do not have the capacity in terms of technology and capitalization,” EVAP President Edmund A. Araga told BusinessWorld in an interview.

“We are far beyond compared to competitors outside the Philippines,” he added.

According to the Department of Energy (DoE), the lack of familiarity with electric vehicle (EV) technology among consumers and industry participants impacts consumer confidence and slows the pace of adoption.

It added that the EV industry is experiencing challenges with “limited manufacturing capacity, an underdeveloped value chain, and insufficient investments in charging systems and services.”

“Local EV companies should first be strengthened and expanded to meet domestic demand, and eventually compete with international brands,” the DoE said in an e-mail.

The DoE is monitoring the progress of the Electric Vehicle Industry Development Act and the Comprehensive Roadmap for the EV Industry (CREVI) to address these shortcomings.

Key measures include the “rollout of EV charging infrastructure, provision of fiscal incentives for both manufacturers and consumers to reduce cost, awareness campaigns, and capacity-building initiatives, including research and development efforts.”

“That’s why we’re looking for solutions and the right programs that will set forth the rollout of our local manufacturers,” Mr. Araga said.

“We need to give emphasis to local manufacturing,” he added.

According to October data from the Board of Investments, domestic EV sales have totaled 15,000 units, subject to validation in the Motor Vehicle Registration data.

Hybrid EVs were the most popular type of EV on the market in 2023, followed by battery electric vehicles, the DoE said.

In 2025, the DoE sees growth in the Philippine EV market. The CREVI projects sales and registrations of 311,700 units in a business-as-usual scenario.

Navigating transfer pricing in 2024: Key insights and developments

Today marks the last day of 2024. As we bid farewell to 2024, let me wrap up the key topics and insights discussed in our monthly Let’s Talk TP articles throughout the year. From the implications of BEPS Pillar 2 to the intricacies of intercompany financial transactions, we explore the critical issues surrounding transfer pricing.

BEPS PILLAR 2 AND THE TAXATION OF PHL ENTITIES OF MNES
Early this year, we released an article about the Base Erosion and Profit Shifting (BEPS) Pillar 2 framework. The framework has evolved to address global tax challenges, particularly with the rise of digitalization. BEPS 2.0 focuses on ensuring profits are taxed where economic activities occur. Pillar 2, which includes the global anti-base erosion (GloBE) rules and the subject-to-tax rule (STTR), aims to impose a global minimum tax rate.

Under the GloBE rules, the Organisation for Economic Co-operation and Development (OECD) has recommended that the income inclusion rule (IIR) and qualified domestic minimum top-up tax (QDMTT) become effective in 2024, while the undertaxed profits rule (UTPR) becomes effective in 2025. Meanwhile, STTR, being a treaty-based rule, can only be implemented through bilateral negotiations and amendments to individual tax treaties or as part of a multilateral convention.

The impact on Philippine entities includes potential changes in tax rates and the need for local adoption of OECD guidelines. As countries begin implementing these rules, Philippine entities must prepare for the potential implications on their tax strategies and compliance requirements. The adoption of these guidelines will require significant adjustments in tax planning and reporting for MNEs operating in the Philippines.

TRANSFER PRICING AND INTER-COMPANY LOANS
Previously, we touched upon the financial transactions between related parties. The key message of the article is to ensure that intercompany financial transactions are at arm’s length. The Bureau of Internal Revenue (BIR) and OECD provide guidelines for testing the arm’s length nature of interest payments. Key considerations include delineating financial transactions, benchmarking interest rates, and assessing debt capacity to ensure compliance and avoid tax adjustments. The guidelines from the BIR and OECD emphasize the importance of accurately characterizing financial transactions and determining whether they should be treated as debt or equity, which has significant tax implications. Proper documentation and analysis are essential to support the arm’s length nature of these transactions and to defend against potential tax authority challenges.

TRANSFER PRICING AND CASH POOLING
Cash pooling, a popular method for efficient cash management among MNEs, involves either the physical or notional pooling of cash balances. Transfer pricing implications include accurately delineating transactions and appropriately remunerating cash pool leaders and members. Setting up an arm’s length cash pooling arrangement requires careful analysis of the transaction’s characterization, and the functions, risks, and rewards of all parties involved. The OECD guidelines highlight the need for proper documentation and analysis to ensure that cash pooling arrangements are compliant with transfer pricing rules. This includes understanding the economic substance of the transactions and ensuring that the remuneration reflects the functions performed and risks assumed by each participant.

REMEMBERING THE IMPORTANCE OF TRANSFER PRICING
In observance of All Souls’ Day in November, we published an article about remembering the importance of transfer pricing. Transfer pricing rules are designed to prevent profit shifting and ensure multinational companies pay their fair share of taxes. These regulations are rooted in the need for fairness and equity.

Compliance involves submitting BIR Form No. 1709 and maintaining detailed transfer pricing documentation (TPD). This includes keeping records of intercompany transactions and performing thorough analyses to justify arm’s length pricing. Vigilant documentation is crucial to prepare for scrutiny from tax authorities.

Non-compliance can lead to fines, penalties, and reputational damage. Advance Pricing Arrangements (APAs) provide certainty and clarity, helping businesses navigate complex transfer pricing issues.

TRANSFER PRICING RULES FOR BPO COMPANIES
Our last article delved into Business Process Outsourcing (BPO) companies. The CREATE MORE Act has significantly impacted the IT-BPO sector, introducing lower corporate income tax rates and flexible work-from-home arrangements. BPO companies must ensure their operations align with transfer pricing rules and maintain adequate documentation. Key concepts include the arm’s length principle, entity characterization, and the selection of appropriate transfer pricing methodologies (CUP, CPM, TNMM). The article discusses the specific challenges faced by BPO companies and the importance of thorough documentation and analysis to support their transfer pricing positions. BPO entities must carefully analyze their functions, assets, and risks to determine the appropriate transfer pricing method and ensure that their pricing reflects the economic reality of their operations.

TRANSFER PRICING HANDBOOK
In December, we released our transfer pricing handbook, both physical and digital copies, to the public for free. The handbook aims to help taxpayers become aware of the basic concepts of transfer pricing, compliance requirements, and transfer pricing audit guidelines in the Philippines. The handbook is structured in a question-and-answer format for ease of understanding.

TAKEAWAYS
As we conclude 2024, it is evident that transfer pricing remains a dynamic and complex area of taxation. The articles published throughout the year have highlighted the critical need for taxpayers to stay informed and compliant with evolving regulations. By understanding and addressing the various transfer pricing issues discussed, businesses can better navigate the challenges and opportunities in the global tax landscape. As we look forward to 2025, continued vigilance and proactive management of transfer pricing practices will be essential for ensuring fair and transparent transactions.

Let’s Talk TP is an offshoot of Let’s Talk Tax, a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.

 

Nikkolai F. Canceran is a partner from the Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.

pagrantthornton@ph.gt.com

Familiar foe Vietnam looms if PHL hurdles Thais

ASEANUTDFC.COM

VIETNAM punched its ticket to the finals of the Asean Mitsubishi Electric Cup and stands in the Philippines’ way should the Pinoy footballers take care of business against holder Thailand late Monday.

The Vietnamese beat Singapore in the second leg of their semifinal duel at the Viet Trio Stadium Sunday night, 3-1, to win the two-game tie with a goal aggregate of 5-1.

Nguyen Xuan Son, who sealed Vietnam’s 2-0 away victory in Leg 1, opened scoring from the spot in the first minute of first-half stoppage time then doubled the lead with a 63rd minute strike.

Kyoga Nakamura pulled one back for the Lions in the 74th before Nguyen Tien Linh iced it with an injury-time penalty.

The Golden Star Warriors, champions in 2008 and 2018 and runner-up in 2022, now await the outcome of the match between the Philippines, whom they played to a 1-1 draw in Manila in Group B, and the War Elephants.

The Philippines took a 2-1 lead against the three-peat-seeking Thais after an unforgettable result in Leg 1 last Friday in Manila. 

They sought to complete their takedown of the seven-time titlists with a draw or a win in the crunch match in Bangkok.

Vietnam is set to host the first leg of the championship on Jan. 2 in Viet Tri City before the two-leg series swings to its opponent’s turf three nights later. — Olmin Leyba

Seven ejected late in Heat’s comeback win over Rockets

MIAMI HEAT guard Tyler Herro (14) handles the ball against Houston Rockets forward Dillon Brooks (9) during the third quarter at Toyota Center. — REUTERS/ ERIK WILLIAMS-IMAGN IMAGES

TYLER HERRO recorded game highs of 27 points and nine assists before being ejected during a hostile final minute as the Miami Heat rallied from a 12-point second-half deficit to beat the host Houston Rockets 104-100 on Sunday.

Herro was one of five players tossed in the final 47.4 seconds after Nikola Jovic’s 3-pointer gave Miami a 98-94 lead.

Houston’s Fred VanVleet was ejected first for arguing a five-second call on the Rockets’ ensuing inbounds play. Twelve seconds later, Herro and Rockets forward Amen Thompson ignited a skirmish that led to both being disqualified along with Heat guard Terry Rozier and Houston guard Jalen Green. Rockets head coach Ime Udoka and assistant Ben Sullivan were also kicked out.

Jovic tacked on two free throws after the chaos to help Miami close out the win. He finished with 18 points, seven rebounds and six assists off the bench.

Haywood Highsmith tallied 15 points and eight rebounds for the Heat, who played a fifth consecutive game without Jimmy Butler. Bam Adebayo paired 12 points with 10 boards.

Dillon Brooks scored a team-high 22 points for Houston after missing the last three games with right ankle soreness. Alperen Sengun added 18 points and 18 rebounds, while Green scored 19 points before his ejection.

Herro led a 20-9 run that closed Miami to within 82-81 at the end of the third quarter. He also fueled the Heat down the stretch in the fourth, assisting on Highsmith’s tying 3-pointer with 4:47 left before adding a 9-footer for a 95-94 lead with 1:56 to play.

Brooks tallied nine points during a 14-2 spurt early in the third quarter that pushed the Rockets to a nine-point lead. Green’s 3-pointer made it 73-61 with 5:19 left in the third before Miami began to chip away behind Herro, who finished the quarter with 11 points and four assists.

The Heat used a 12-0 run to build a 31-27 lead after the first quarter.

Neither team gained control of the second as Miami carried a 53-50 lead into the break.

Rozier led the Heat with 12 points in the first half, while Sengun paced Houston with 14. — Reuters

Darnold-led Vikings down Packers for ninth straight win

SAM DARNOLD completed 33 of 43 passes for a career-best 377 yards to go with three touchdowns and one interception, and the Minnesota Vikings escaped with a 27-25 win over the Green Bay Packers on Sunday in Minneapolis.

Justin Jefferson had eight catches for 92 yards for Minnesota (14-2), which won its ninth game in a row. Jalen Nailor, Jordan Addison and Cam Akers had one touchdown reception apiece for the Vikings.

Jordan Love completed 19 of 30 passes for 185 yards and one touchdown for Green Bay (11-5). Josh Jacobs and Emanuel Wilson each rushed for a touchdown and Malik Heath had a touchdown catch for the Packers, who lost to the Vikings for the second time this season.

Minnesota’s nine-game winning streak matches its third longest in franchise history. The Vikings are enjoying their longest stretch of success since 1975 when they won 10 straight.

Green Bay rallied with back-to-back touchdowns in the fourth quarter to pull within two.

Wilson scored on a 5-yard run to cut the Packers’ deficit to 27-18 with 6:12 to go.

Love brought Green Bay within 27-25 with 2:18 to play. He fired a 3-yard touchdown pass to Heath, who scored on a quick slant.

The Vikings got the ball on the following kickoff and never gave it back to Green Bay. Darnold secured the win when he lobbed a pass to Akers for a first down to set up the victory formation.

The Packers opened the scoring late in the first quarter with a 22-yard field goal by Brandon McManus.

Minnesota responded to grab a 13-3 lead at the half.

Darnold found Nailor for a 31-yard touchdown with 11:52 remaining in the first half. Nailor was wide open and made a basket catch near the back of the end zone.

Reichard rounded out the first-half scoring with field goals from 25 yards and 50 yards.

The Vikings increased their lead to 20-3 on the opening drive of the second half. Addison made a diving grab for an 18-yard touchdown.

Green Bay pulled within 20-10 with 5:07 left in the third quarter. Jacobs scored on a 2-yard run.

Darnold’s third touchdown pass, this time to Akers, made it 27-10 in favor of the Vikings with 51 seconds remaining in the third quarter. — Reuters

Frustrated Djokovic says players kept in dark over high-profile doping cases

NOVAK DJOKOVIC — REUTERS

NOVAK DJOKOVIC expressed his frustration at being “kept in the dark” about world number one Jannik Sinner’s doping case, saying in Brisbane on Sunday that it was not a good look for tennis.

Anti-doping authorities said in August Sinner twice tested positive in March for the anabolic androgenic steroid clostebol and was cleared of wrongdoing by an independent tribunal that accepted his explanation of unintentional contamination.

The 23-year-old Italian faces a potential ban of up to two years after the World Anti-Doping Agency appealed that decision at the Court of Arbitration for Sport.

“It’s not a good image and not a good look for our sport,” Djokovic told reporters ahead of the Brisbane International.

“You don’t want to see that. I believe that in the last 20-plus years that I’ve been playing on the professional tour that we’ve been one of the cleanest sports. I’ll keep believing in that clean sport.

“I’m just questioning the way the system works, really, and why certain players are not treated the same as other players.”

Sinner’s was not the only recent high-profile case in the sport as world number two Iga Swiatek accepted a one-month ban that ended on Dec. 4 after a positive test for trimetazidine, which she said was due to contamination of her sleep medication.

The International Tennis Integrity Agency maintains that all doping cases are dealt with based on facts and evidence and not a player’s name, ranking or nationality, but has not been able to fend off allegations of double standards.

“The issue is the inconsistency and the transparency. We’ve been kept in the dark with Jannik’s case,” Djokovic added.

“I’m not questioning whether he took the banned substance intentionally or not. I believe in a clean sport, I believe that the player will do everything possible to be playing fair.

“I’ve known Jannik since he was very young. He doesn’t strike me as somebody who would do such a thing. But I’ve been really frustrated as (have) most of the other players to see that we’ve been kept in the dark for five months.”

Outspoken Australian Nick Kyrgios said the cases involving Sinner and Swiatek were “disgusting” for the sport and slammed authorities over what he saw as lenient treatment. — Reuters

Zverev fires as Germany begins United Cup title defense with win

PERTH — Alexander Zverev eased past Thiago Monteiro 6-4 6-4 as Germany beat Brazil for a winning start to their United Cup defense on Sunday while the Czech Republic, US and Italy were all victorious.

Zverev had a lengthy spell on the sidelines after damaging his ankle ligaments at the 2022 French Open but returned to his career-high ranking of number two following his Paris Masters triumph last month.

The 27-year-old continued his good form in the mixed team tournament that kicks off the new season as he used his heavy shots from the baseline to grab a break in the first game and took the opening set on serve with a huge ace.

Zverev stepped up a gear at the start of the next set with a stunning backhand winner en route to another break and he closed out the match comfortably to give Germany an unassailable 2-0 lead ahead of the mixed doubles match.

“I’m very happy to be back, very happy to be playing for team Germany,” said Zverev. “Perth is one of my favorite cities in Australia, I really enjoy my time here.

“I didn’t play that much tennis in the off season, I was actually in the gym… so the work has paid off I guess.”

Laura Siegemund had earned Germany their first point in the Group E encounter with a 6-3 1-6 6-4 victory over Beatriz Haddad Maia at the RAC Arena. She later partnered with Tim Puetz in a 7-6(8) 6-4 win over Carolina Alves and Rafael Matos for a clean sweep.

The US, inaugural champions of the tournament in 2023, clinched their Group A tie with Canada well past midnight as Coco Gauff and Taylor Fritz beat Leylah Fernandez and Felix Auger-Aliassime 7-6(2) 7-5.

Gauff earlier defeated Fernandez 6-3 6-2 before an inspired Auger-Aliassime stunned Fritz 4-6 7-5 6-3 to draw Canada level.

Italy crushed Switzerland in Group D in Sydney, as Flavio Cobolli defeated Dominic Stricker 6-3 7-6(2) and Jasmine Paolini beat Belinda Bencic 6-1 6-1 in 58 minutes.

Sara Errani and Andrea Vavassori made it 3-0 by dispatching Bencic and Stricker 6-4 6-4.

Earlier, 2023 French Open runner-up Karolina Muchova got her campaign up and running with a 6-2 6-2 win over Malene Helgo but Norway leveled the Group B clash against the Czech Republic thanks to Casper Ruud’s fighting effort.

Ruud needed a couple of medical timeouts for a left thigh problem before seeing off Thomas Machac 7-6(6) 5-7 6-4 but the world number six was unable to return for the mixed doubles decider that followed.

United Cup debutant Muchova and Machac then shrugged off the quick turnaround from their singles matches to ease past Ulrikke Eikeri and Viktor Durasovic 6-4 6-4 at the Ken Rosewall Arena. — Reuters

Win puts Forest five points behind leader Liverpool

LIVERPOOL, England — Goals from Chris Wood and Morgan Gibbs-White gave Nottingham Forest a 2-0 win over Everton on Sunday to move up to the heady heights of second in the Premier League after another superb performance away from home.

The win gives Forest, who battled relegation for much of last season, 37 points after 19 games. They are five behind leaders Liverpool, who have two games in hand and face West Ham United later on Sunday.

Forest is one ahead of third-placed Arsenal, who do not see action again until New Year’s Day, and two ahead of Chelsea, who can overtake them if they beat Ipswich Town on Monday.

Everton got off to a bright start as Iliman Ndiaye created the game’s first chance, slicing through the heart of the Forest defense before firing a shot high over the bar in the sixth minute.

That positive opening came to an abrupt end when the visitors took the lead in the 15th minute as Chris Wood nodded a long ball to Anthony Elanga on the counter-attack.

The Swedish winger headed it back into his path, teeing New Zealander Wood up to deftly lift it over the advancing Jordan Pickford and into the net.

Gibbs-White made it two on the hour mark as Wood rescued a broken-down counter-attack by sliding the ball through to him in the penalty area to cut back inside and fire home.

Everton did its best to knock the visitors out of their stride, picking up four yellow cards during some tough tackles, and defender James Tarkowski sailed close to the wind with a couple of challenges that could have earned him a second booking.

With Forest sitting back and protecting their lead, the Toffees enjoyed plenty of possession and registered 13 shots on goal, but only two of them were on target as their four-match unbeaten run came to an end.

The combination of Wood’s physicality and the speed of the rest of the Forest forward line may have been too much for Everton, but goal-scorer Wood was not getting carried away with his side’s high spot in the league table.

“It is nice, but we are not worried about that. We have got to keep focusing on what we are doing and take it game by game,” he told the BBC.

“It was a hard-fought victory today but a nice one… It is about taking your opportunity when it comes, and fortunately, I was able to do that,” the 33-year-old added. — Reuters

Liverpool’s Dutch master Slot rounds off almost perfect year

LONDON — Replacing Kop idol Juergen Klopp at Anfield looked to many like mission impossible for Dutchman Arne Slot when he was named as the German’s successor in May.

Now the appointment looks like a masterstroke halfway through his maiden Premier League campaign.

Liverpool’s 5-0 thrashing of West Ham United on Sunday put Slot’s side eight points clear of surprise second-placed side Nottingham Forest and 14 ahead of champions Manchester City.

They have lost only once in all competitions this season and Slot can look back on an almost perfect 2024.

His Feyenoord side was unbeaten from the turn of the year to when he left as they finished runners-up to PSV Eindhoven.

The only side to get the better of Liverpool this season is Nottingham Forest and the way Slot’s side has ended the year, a 20th title for the club now looks in their grasp.

“Compliments to Nottingham Forest. They were the one,” Slot said after his side’s rout of West Ham at the London Stadium.

While Slot inherited a high-quality squad and has not had to instigate a major rebuild, the tweaks he has made to Liverpool’s style have put them in total control of the table.

They are a little more pragmatic than they were under Klopp’s high-octane pressing game, but Slot has still retained Liverpool’s attacking verve, evidenced by the fact they have scored 45 goals in 18 games including 14 in the last three.

The 46-year-old has benefited hugely from Mohamed Salah having what promises to be his best-ever season at Liverpool despite the ongoing saga of the Egyptian’s contract talks.

Salah’s goal on Sunday took his tally for the season to 20 and his two assists mean he has been involved in 30 goals in 18 Premier League games for Liverpool this season.

The 32-year-old Salah has been involved in 52 goals in all competitions in 2024 (29 goals, 23 assists), which is more than any other player in Europe’s big five leagues.

“Mo and the word extraordinary is something I’ve heard a lot in the last six months,” Slot told reporters.

“He truly deserves this and probably for the eight years, but I am involved in the last half-year. I don’t think he keeps surprising us because we know what a player he is and we know he is able to do so. We can only hope he can keep bringing these performances in, but I would like to add that if he scores there’s also a lead-up to him scoring.

“So there are also other players that bring him into these positions, but if you bring Mo in these positions, he is extraordinary. Definitely.”

While Slot was delighted to see five different players on the scoresheet on Sunday, a first clean sheet in five games was equally satisfying after his side conceded nine goals in their previous four.

“Clean sheets are one of the reasons why you win a lot. If every time you have to score two, three or four goals it is difficult,” he said. “At the moment we do but it is not sustainable for a longer period of time.

“Sometimes you need a win by keeping a clean sheet and scoring one or two.” — Reuters

Nvidia supplier Ibiden weighs faster expansion for AI demand

FILE PHOTO: The logo of technology company Nvidia is seen at its headquarters in Santa Clara, California February 11, 2015. REUTERS/Robert Galbraith/File Photo

IBIDEN CO., the dominant supplier of chip package substrates used in Nvidia Corp.’s cutting-edge semiconductors, may need to dial up the pace of production capacity increases to keep up with demand, according to its chief executive officer (CEO).

Sales of the 112-year-old company’s artificial intelligence (AI)-use substrates are robust with customers buying up all that Ibiden has, CEO Koji Kawashima said, adding that that demand is likely to last at least through next year.

Ibiden is building a new substrate factory in Gifu prefecture, central Japan, expected to go online at 25% production capacity around the last quarter of 2025 before reaching 50% by March 2026. But that may not be enough, Mr. Kawashima said. The company’s in talks about when to get the remaining 50% capacity online.

“Our customers have concerns,” he said in an interview. “We’re already being asked about our next investment and the next capacity expansion.”

Ibiden’s shares rose as much as 5.5% in Tokyo on Monday, their biggest intraday gain in more than a month.

Ibiden’s clients include Intel Corp., Advanced Micro Devices Inc., Samsung Electronics Co. and Taiwan Semiconductor Manufacturing Co., as well as Nvidia, according to data compiled by Bloomberg. Many of them consult with the Japanese company early in product development, because the substrates — which help transmit signals from semiconductors to the circuit board — need to be tailored for each chip. Substrates must be made to withstand the heat of an Nvidia graphics processing unit to form an AI chip package complete with components such as memory.

Founded as a power utility company in 1912, Ibiden developed semiconductor expertise through a partnership with Intel that Mr. Kawashima cultivated by waiting every day in front of the Santa Clara company to stop engineers and executives for product feedback in the early 1990s. At one point, Intel comprised around 70% to 80% of Ibiden’s revenue from chip package substrates. That fell to around 30% in the fiscal year ended March as the US chipmaker struggled to execute a turnaround that recently saw the ousting of CEO Pat Gelsinger.

Reliance on Intel has hurt Ibiden’s stock, down around 40% this year. In October, Ibiden revised down its profit outlook after sluggish demand for components used in general purpose servers outweighed AI server-related growth. But while noting it was important to expand business with chipmakers other than Intel, Mr. Kawashima said he was confident Intel will bounce back.

“Intel’s overall technology is very sophisticated,” the 61-year-old said. “Intel raised us up and opened so many doors. Our relationship with Intel will always be our treasure, and Intel will forever be an important customer.”

With many foreign chipmakers unwilling to transfer their latest technology to the US, Intel is likely to play a key role in Washington’s goal to boost cutting-edge semiconductor production capabilities at home, Mr. Kawashima said. Ibiden itself has no manufacturing facilities in the US. It has no plans to build any due to the cost of labor and logistics, Mr. Kawashima said, irrespective of US president-elect Donald J. Trump’s plans to impose tariffs on a wide range of products.

All of Nvidia’s AI semiconductors now use Ibiden’s substrates, although Taiwanese rivals such as Unimicron Technology Corp. are eyeing the field. But it won’t be easy to break Ibiden’s position as dominant supplier, according to Toyo Securities analyst Hideki Yasuda.

“Nvidia’s AI chips need sophisticated substrates, and Ibiden is the only one that can mass produce them at a good production yield,” he said. “Taiwanese competitors won’t be able to take Ibiden’s share away by much.”

AI semiconductors earn more than 15% of Ibiden’s sales of around ¥370 billion ($2.3 billion), with that percentage expected to rise further. Nvidia’s said it’s begun full production of its next-generation Blackwell chips after encountering some initial technical challenges.

Over the long term, Nvidia may face growing competition from application-specific chips by Marvell Technology, Inc. and Broadcom, Inc. as well as in-house silicon from Alphabet, Inc.’s Google and Microsoft Corp. In theory, Ibiden should be able to accommodate them all, as AI chip package design and material will likely remain similar to Nvidia’s, according to Mr. Kawashima. Bloomberg

Most Asian FX subdued; South Korean markets slide on deepening political woes

Currency dealers stand in front of electronic boards showing the Korean Composite Stock Price Index (KOSPI) and the exchange rate between the U.S. dollar and South Korean won at a dealing room of a bank, in Seoul, South Korea, Dec. 9, 2024. — REUTERS

Most Asian currencies were muted on Monday, weighed down by high U.S. Treasury yields and a firm dollar while the South Korean markets reversed course to trade slightly lower after last week’s parliament vote to impeach acting President Han Duck-soo.

Most equities in Asia traded in a tight range while shares in Malaysia and Singapore climbed 0.4% and 0.3%, respectively.

The South Korean won slipped 0.1% after rising as much as 0.3% earlier in the session while equities skidded 0.2% after rising up to 1%.

Following the impeachment of Han on Friday, South Korean investigators sought an arrest warrant for suspended President Yoon Suk Yeol on Monday over this month’s short-lived imposition of martial law.

“The political uncertainties and faster rate cut pace should keep the won on the back foot in the coming months,” said Ken Cheung, chief Asia FX strategist at Mizuho Bank.

The won is the worst performing currency in emerging Asia so far this year, having lost more than 12% weighed down by political tensions in the country and economic woes, coupled with fears of U.S. tariffs.

Most other Asian currencies were largely unchanged amid pressure from high U.S. Treasury yields at near eight-month highs and a firm dollar at a multimonth peak.

Mizuho Bank’s Cheung expects persistent dollar strength to weigh on Asian currencies in the first half of 2025. However, U.S. economy’s cyclical softening and tariffs relief could lead to rebounds in Asian currencies, he added.

“The tariff threats are likely to materialize but the implementation may come in lower than expected,” Cheung said.

In Asia, the Indonesian rupiah rose 0.5% but was not far from the more than 4-month low touched on Dec. 19 after the U.S. Federal Reserve adopted a hawkish stance at its policy meeting.

The Thai baht climbed 0.1% after rising as much as 0.4% earlier in the session while equities rose 0.4%.

The strength in the baht “could be driven by a rebound in gold prices and somewhat sideways movement in the U.S. dollar,” said Poon Panichpibool, a markets strategist at Krung Thai Bank.

“There could be some positions adjustment especially for those with net short THB positions after THB could rise beyond the 34.00 support zone.”

Markets are now awaiting Singapore’s GDP data for the fourth quarter and inflation reports from Indonesia and South Korea later this week. — Reuters

Dollar reigns with support of higher yields

A trader shows U.S. dollar notes at a currency exchange booth in Peshawar, Pakistan. — REUTERS

SINGAPORE — The Japanese yen traded around five-month lows on Monday against a dollar underpinned by rising U.S. yields as thin year-end liquidity kept most currencies in tight ranges.

The yen was changing hands at 157.82 with only the risk of Japanese intervention preventing another test of the 160 level last seen in July.

The dollar index measure against major rivals was flat at 107.99.

The euro stood at $1.0429, not far from recent troughs and in a holding pattern in holiday trading. The currency is heading for a calendar-year drop of roughly 5.5% on the dollar.

Rising U.S. Treasury yields have been a tailwind for the dollar, with the benchmark 10-year note US10YT=RR hitting a more than seven-month high last week. The yield hovered close to that mark on Monday, at 4.625%.

“Despite paid forecasters almost universally calling for a weaker U.S. dollar in 2024, the greenback looks set to close the year higher against all major currencies with the buck reigning supreme,” said Chris Weston, head of research at Australian online broker Pepperstone.

For the month, the dollar index is up 2.3%, bringing year-to-date gains to 6.6%.

It has gained in each of the last three months, helped by expectations President-elect Donald Trump’s policies of looser regulation, tax cuts, tariff hikes and tighter immigration will be both pro-growth and inflationary and keep U.S. yields elevated.

The dollar has gained 10 yen since Dec. 3, with much of the decline in the Japanese currency coming after the Federal Reserve’s Dec. 18 message of caution around future rate cuts.

That view has weighed heavily on the yen, which hit its weakest level since July 17 last week at 158.09 per dollar and has shed 10.6% so far this year.

It came off those lows on Friday after a summary of opinions from the Bank of Japan’s December policy meeting showed some policymakers gaining confidence in an imminent rate increase, while the Japanese central bank also cut its monthly bond purchases.

Still, Japanese yields remain notably low, and recent comments have sown doubts about the BOJ’s commitment to lift rates. The BOJ held interest rates steady at 0.25% at this month’s meeting, and governor Kazuo Ueda said the central bank was scrutinising more data on next year’s wage momentum and clarity on the incoming U.S. administration’s economic policies.

A Reuters poll taken earlier this month showed the BOJ could raise rates to 0.50% by end-March, and interest rates markets are pricing in only a 42% chance of a rate rise in January.

Traders are on watch for any potential intervention by Japanese officials to shore up the currency if it continues to weaken, as they have done multiple times this year.

Japan Finance Minister Katsunobu Kato on Friday reiterated concerns over a sliding yen, repeating his warning to take action against excessive currency moves.

Pepperstone’s Weston said dollar buyers continued to dominate trading in the dollar-yen pair.

“It rarely sits well buying into any market pushing new run highs, but in my view, any upside break of 158.00 is good for chasing – although yen shorts do run the increasing risk of credible MOF yen jawboning and possible intervention,” Weston wrote in a note to clients.

Barring the yen, currency moves in major markets were tepid last week. The yen fell 0.9%, the euro shed 0.2% and sterling rose 0.1% while the dollar index climbed 0.2%.

The next interest rate cut by the European Central Bank could be longer in coming after a recent uptick in inflation, ECB Governing Council member Robert Holzmann was quoted as saying on Saturday.

Leading cryptocurrency bitcoin too was sluggish around $93,052, and is down about 4% on the month after retreating from a record high of $108,379.28 hit on Dec. 17. It has surged about 115% so far this year. — Reuters