top of page

Subsidy Now, Overcapacity Later

Yesterday the USA announced a $6.4 Bn subsidy package to Samsung this came after various announcements of the same nature. This pattern started after the pandemic to secure future industries like Electric Vehicles and semiconductors. But in the past few quarters, this had spread to almost all the sectors.

Though these are important policies to attract local manufacturing to one’s own country given the global scale there might be a risk of overcapacities in the long run. This might result in every country trying to impose import restrictions or duties to protect these local suppliers.

This is in some way happening now as US Treasury Secretary Yellen mentioned during her China visit that nothing is off the table relating to actions against dumping by China. The same pressure is put by the EU on Chinese EV imports.

The overcapacity and lower demand can be already seen, as Apple iPhone shipments drop by 10% and Tesla delivery reduction forces it to cut 10% of jobs that is 14000 jobs.

The important question becomes will listed firms garner more market share in every sector and country? And if yes, then will they be able to maintain the margins on a sustainable basis without price hikes?


bottom of page