NAOS CEO Insights

CEO INSIGHTS – Week Ending 19 March 2021 By NAOS Asset Management

March 19, 2021

“There’s a serious imbalance in supply and demand of chips in the IT sector globally” Koh Dong-jin, Co-CEO, Samsung Electronics

CEO INSIGHTS – Week Ending 19 March 2021 By NAOS Asset Management

“There’s a serious imbalance in supply and demand of chips in the IT sector globally” Koh Dong-jin, Co-CEO, Samsung Electronics


As part of the NAOS investment process, we pay particular attention to the comments made by company CEOs and business leaders in order to gain a greater understanding of the current investment environment and key trends that may be emerging. Below are quotes from the week which in our view detail some of the most important and prominent industry trends and economic factors impacting their businesses.  
 
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Global Semiconductor Chip Supply Crisis

“There’s a serious imbalance in supply and demand of chips in the IT sector globally” Koh Dong-jin, Co-CEO, Samsung Electronics

“The digital-first world, everybody talked about the trends that accelerated in 2020. The digital-first world [has] put a big increase in demand as we’ve seen on semiconductor fabrication” Mike Roman, CEO, 3M Company [global industrial conglomerate]

“We expect the situation to become critical during the second quarter and have therefore decided to take measures [reducing car production]” Market Statement, The Volvo Group

“We’re seeing some constraints in the semiconductor supply chain. It’s impacting global automotive. The build rates have been rolled down from where we thought we would be as we entered into the year. We’re seeing that connection between electronics and automotive ever more impactful” Mike Roman, CEO, 3M Company [global industrial conglomerate]

Automotive

“Within 2 life cycles the car industry will change dramatically, radically. Profit pools will shift from conventional cars, first into EVs [electric vehicles] and then radically into software. That has a lot to do with automated driving, which is going to happen” Herbert Diess, CEO, Volkswagen AG

Domestic Economy & JobKeeper

“The reality is that the so-called [post JobKeeper] cliff that we all feared is a very, very shallow cliff, if at all” Shayne Elliott, CEO, ANZ Bank Group Ltd

“It feels like customers are becoming more prudent in terms of their spending – we’ve definitely seen that change in the last month” Andre Reich, CEO, The Reject Shop Ltd

“As confidence builds the savings rate will reduce to more normal levels, which will be another retail stimulus effect dropping into the economy” Ian Bailey, MD, Kmart Group

Global Economy

“At the Fed [Federal Reserve], we will continue to provide the economy the support that it needs for as long as it takes” Jay Powell, Chair, US Federal Reserve

“We're also seeing an increasing tailwind from inflation, which started in commodities, but is now flowing through in the finished goods due to rising input, manufacturing, and transportation costs” Kevin Murphy, CEO, Ferguson plc [multinational plumbing/heating product company]

Energy & Resources

“All of us in the resources sector, including our colleagues in the coal industry, know that [environmental] change is coming” Andrew Forrest, Chairman, Fortescue Metals Group Ltd

Commercial Property

“We’re seeing rents come down but it’s not a material number at this stage. As we get through the latter half of this year, vacancy rates will probably increase in shopping centres, so rental deals will become better” Andre Reich, CEO, The Reject Shop Ltd

Building & Construction

“Everybody’s expecting a boom and so, if there is a boom, that’s when subcontractors’ and suppliers’ prices rise. If you go in really cheap now and activity picks up, you’ll lose money. The subcontractors and supplier prices will go up” Scott Hutchinson, Chairman, Hutchinson Builders [one of Australia’s largest privately owned construction companies]

Retail

“Beauty is a habit-forming, high frequency purchase – our customers see beauty shopping as essential not discretionary” Tennealle O'Shannessy, CEO, Adore Beauty Group Ltd

“Last year, we suddenly discovered a number: $60 billion - which is money that Australians spend overseas. I think most retailers will never ever forget that number again. Whilst we feel for international tourism operators...while Australians can’t travel, the harsh reality is that money is staying in Australia and with low-interest rates being pretty good for the property market...[this has been] very good for retail.” Richard Murray, CEO, JB Hi-Fi Ltd

“Safety and hygiene are here to stay – we’ll be selling a lot of hand sanitiser for many years to come” Sarah Hunter, Managing Director, Officeworks

E-Commerce

“It’s a long-term trend that’s been accelerated in the last year, but it’s early days for e-commerce” Dhivya Suryadevara, CFO, Stripe [US$95bn global payment processing software company]

Technology & Telecommunications

“Today the data centre industry is supporting an enormous boom in technology and information creation, all of which are powered by computers and global networks that consume significant amounts of electricity” Craig Scroggie, CEO, NextDC Ltd

“Our ageing [national fibre] infrastructure isn’t really designed for where the world is going. When these were built, the cloud and Space X weren't around” Bevan Slattery, Founder, HyperOne/Megaport/NextDC/PIPE Networks/Superloop

“Even as we can now see the other side of the pandemic – people have learned behaviours of the new digital world. It’s work from anywhere, do from anywhere – that world is here to stay. I believe the available opportunity for us is expanding” Michael Dell, CEO, Dell Technologies Inc

Food & Beverage

[Due to eating more at home] “We are seeing no shortage of [butter] demand” Rene Dedoncker, MD, Fonterra Australia

Travel & Leisure

“We're seeing an improving trend in forward bookings across the globe” Kyle Gendreau, CEO, Samsonite International S.A. [world’s biggest luggage manufacturer & retailer]

Important information: This material has been prepared by NAOS Asset Management Limited (ABN 23 107 624 126, AFSL 273529) (NAOS) for general information purposes only and must not be construed as investment advice. Certain economic, market or company information contained in this material may have been obtained from published sources prepared by third parties. Nothing contained herein should be construed as granting by implication or otherwise, any license or right to use such third party content without the written permission of the owner.