The R&D World Index (RDWI) for the week ending August 20, 2021, closed at 5,448.97 for the 25 companies in the R&D World Index. The Index was down -0.97% (or -35.07 basis points) from the week ending August 13, 2021. The stock of 11 R&D World Index members gained value from 0.26% (Roche Holdings) to 3.93% (Microsoft). The stock of 14 R&D World Index members lost value from -0.22% (Alphabet/Google) to -16.25% (Alibaba).
Japan’s Ministry of Defense announced last week that it plans to increase the number of staff at its Acquisition, Technology and Logistics Agency (ATLA) by more than 100 from its current 1,820 level to enhance its R&D for cutting edge technologies. The ministry also said it plans to continue to increase the number of ATLA staff in 2023 and beyond. To support these increases, the ministry will seek an R&D budget increase of more than 40% in 2022, siting the need to keep up with extensive defense technological advances being made by China, Russia and the U.S. The ministry’s current defense R&D budget is more than $2 billion.
RDW Index member Toyota Motor Corp. stated last week that it will cut automotive production in Japan by 40% in September due to a shortage of semiconductor chips. Toyota had boasted about their advanced planning to prevent production slowdowns in the past. Other RDW Index members General Motors and Ford Motor Co. also stated last week that they are scheduling extended downtime into September at several North American factories due to the chip shortages and virus-related restrictions at overseas parts suppliers. Toyota also said it had reduced production at its North American factories by up to 60% in August. Some of these current production losses are due to new COVID-19 surge affected production of chip assemblies coming out of Malaysia. These production slowdowns are affecting the companies’ overall fiscal projections for 2021 and 2022 and their ability to finance 2022 R&D budgets.
Executives from RDW Index member Intel have been meeting with U.S. and other global government officials over the past several weeks to propose future semiconductor device incentives for Intel. As noted in previous issues of this newsletter, Intel and other chipmakers are planning new chip factories to meet current chip shortages and future demand. The executives have stressed the lucrative incentives being offered by Asian governments for their devices and increased subsidies by U.S. and European governments would level the playing field for their production plans. New semiconductor fabrication plants are long-lead, expensive investments taking several years to complete and costing $2 to $5 billion each to complete and equip. Intel executives have made the same pitch to governments in China, Singapore, Vietnam, Malaysia and India. Intel had been in talks to purchase New York-based chipmaker GlobalFoundries (previously owned by Advanced Micro Devices, or AMD), but those talks stopped when GlobalFoundries decided to go public.
U.S.-based Honeywell Technology Solutions last week stated that it had signed a pact with the Indian Institute of Technology, Hyderabad (IIT-H), to create a center for artificial intelligence (AI) to conduct joint research on AI and related emerging technologies. The new center will also create an academic environment for Honeywell employees to conduct research while enabling Indian students to upgrade their skills and improve their employment opportunities. Honeywell had previously funded a materials research lab at IIT-H and enrolled employee engineers for PhD courses at the institute.
The government of Belarus last week announced that it intends to raise its R&D intensity as a percentage of gross domestic product (GDP) to 1% over the next five years. According to RDW’s annual Global R&D Funding Forecasts, the current R&D intensity for Belarus is approximately 0.75%. The Belarus announcement was made by the Director for Science of the Economics Institute of the National Academy of Sciences of Belarus. About two-thirds of its annual R&D funding comes from its commercial sector, similar to the average European level.
President Biden last week stated that his administration is looking at linking pharmaceutical drug prices to individual companies’ R&D costs per new molecular entities (NMEs). However, recent studies by pharmaceutical economists note that the R&D environment is constantly changing and that current costs cannot be used to predict the development of future drugs. “Average R&D costs mask essential sources of heterogeneity”, according to the report. Current trends on the capitalized costs per NME are shown to be increasing.
Lafayette, Colo.-based Planterra Foods announced last week their opening of a new headquarters space and R&D Innovation Center in Lafayette. The new location is expected to add new jobs for the Denver community over the next year. Planterra is a new plant-based protein (meat-substitute) start-up company, which is owned by JBS USA, a wholly owned subsidiary of Brazil’s JBS SA.
The U.K. government announced last week that it was considering an in-depth probe of U.S.-based chipmaker Nvidia’s proposed $40 billion takeover of the U.K.’s Arm Holdings. U.K. regulators say they have received many concerns over the anti-competitive nature of the proposed merger. This announcement came as Nvidia announced its sales had increased by 68% in the quarter ending in July, with profits quadrupling to $2.4 billion. Arm Holdings is a U.K.-based subsidiary of Japan’s SoftBank Corp. Arm designs the basic blueprints for more than 95% of the global smartphone production. Nvidia invested more than $3 billion in R&D in 2020.
RDW Index member General Motors announced last week the expansion of its recall to include 73,000 newer production Bolt electric vehicles (EVs), citing defects that could cause potential fire issues with their lithium batteries. The recall involves replacement of the entire battery module, produced for GM by LG Chem. The expected cost to GM of this recall is more than $1 billion and adds to previous older Bolt battery recalls. Lithium battery fires have been shown to be an issue with EVs which is very difficult to extinguish, sometimes taking more than 100 times the amount of water over conventional automotive fires to put out. First responders called to a lithium-battery-based EV fire scene often let the fire burn itself out rather than struggling to extinguish it.
R&D World’s R&D Index is a weekly stock market summary of the top international companies involved in R&D. The top 25 industrial R&D spenders in 2019 were selected based on the latest listings from Schonfeld & Associates’ June 2020 R&D Ratios & Budgets. These 25 companies include pharmaceutical (10 companies), automotive (6 companies) and ICT (9 companies) who invested a cumulative total of nearly 260 billion dollars in R&D in 2019, or approximately 10% of all the R&D spent in the world by government, industries and academia combined, according to R&D World’s 2021 Global R&D Funding Forecast. The stock prices used in the R&D World Index are tabulated from NASDAQ. NYSE, and OTC common stock prices for the companies selected at the close of stock trading business on the Friday preceding the online publication of the R&D World Index.