Wealth Outlook 2024 - Slow then grow

99 Wealth Outlook 2024 | Unstoppable trends The implications of G2 polarization on global technology Considerations: • Amid the splintering of the old "Group of 2", technology has become an industrial and political battleground. • While the bifurcation of tech industries is not the most efficient way to build global supply chains, it does have some benefits. • The US and its allies have seen a reverse flood of onshoring jobs and China has cut into the West’s lead in advanced chipmaking. • We favor the agile enablers of these shifts, notably semiconductor equipment makers. The US-China relationship is the most important and complex in the world today. Both countries have global reach but different histories, cultures, ideologies and forms of government. Still, for decades, this “Group of Two” (or “G2”) relationship appeared to be working well for both sides, greater Asia, and the world. Over the past 10 years, there has been a growing rivalry as China sought to expand its global political and economic influence. The response of the US has been to use technology as the centerpiece of its policy responses. Given China’s ability to copy US intellectual property (IP), the US is limiting its access to chips, chip manufacturing technology and other IP deemed critical to US national security. Further, the US and the West have taken the position that some tech goods manufactured in China present a security and surveillance threat. This dynamic has created a fissure between the countries and caused China to seek to develop its own technology industrial base. While the bifurcation of tech industries is less efficient and cost-effective than a globalized model, it is not without some offsetting benefits. The redundancies now being built in semiconductor supply chains, electric vehicle (EV) batteries and solar panels is a result of this divorce. They add to the economic activity in and around both neighborhoods. It is also somewhat inflationary over the short run as the two compete for resources. Recently, as talks have picked up between China and the US to thaw relations, another possibility has emerged as well: that the added distance ultimately makes for a more civil and stable arrangement.