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Welcome to the Daybreak Asia podcast.

I'm Doug Krer. So the US and Iran

mutually escalated their fighting on

Tuesday and these developments sent

crude oil prices higher. That surge in

crude in turn rippled through markets.

We had yields rising right across the

Treasury curve and a pullback in US

stocks. Also a bit of weakness among the

chip makers in particular. We had the

Philadelphia semiconductor index

dropping by more than 2%. Shares in

Micron Technology fell by more than

2.5%. That was after the Taipei based

Liberty Times reported Micron will

deliver its highest incentive pay plan

for Taiwan-based employees. That's in

response to the threat of a strike. For

a look at some of the market action, I'm

joined by Paul Aver for a look at some

of the market action. I'm joined by Paul

Alverano. Paul is managing director,

also head of global practice at&m's

global transaction advisory group. Paul,

thank you so much for being here. I'd

like to begin by getting your take on

where things stand, at least in your

view when it comes to the trade

regarding artificial intelligence.

You know, I I think when it comes to AI

in general, the one thing that's certain

is uncertainty, right? I I think a lot

of people are afraid to admit it, but

you know, I don't know if anyone really

knows where the future of AI is heading.

That being said, we do know it's going

to have a major impact across almost all

industries.

I know you have a strong background when

it comes to Japan, and I'd like to get

your take on what's happening in Japan's

robotics industry. I was looking at a

report from Bloomberg Intelligence. It

indicated that business seems pretty

strong, especially when you consider

demand from companies in China. H how do

you see the situation?

>> You know, when it comes to the robotics

industry, I'm not sure you know what

what we're seeing at&m I would say is

you talked about things coming out of

China. We are seeing a significant

amount of inbound uh Japanese M&A

activity and investment activity coming

from China into Japan not just in the

robotics industry but in in you know

many different industries. One industry

that's sort of correlated to robotics

that we're seeing a lot of activity in

not just in Japan but really around the

world is aerospace and defense

particularly in Japan relative to the

space industry. And I think there's a

variety of reasons that are driving that

around the world, but in particular in

Japan.

>> How would you characterize overall

economic activity in Japan right now?

>> Right now it's still fairly robust. I

think you know there's the risk with the

continued weakening of the yen for you

know inflation um which obviously would

then bring some negativity to the

economy and you know that the government

or governments actually around the world

are working to intervene on the yen

weakness. But right now the business the

business environment the economy is

still fairly robust and we're seeing

that at&m across M&A activity as well.

>> So would you expect the Bank of Japan to

raise interest rates this month?

>> Um I think it's pro it's a good

probability given the risk of inflation

relative to the weakening yen. I think

you know the yen I think is trading

around 160 per US dollar or something

around there. I think the numbers that,

you know, they've been intervening at

historically have been 162, 163. I think

if we creep up much towards that, then

you're probably going to see a risk of

of raising rates.

>> I'm curious as to whether the weak

currency makes M&A opportunities a

little more attractive in Japan.

>> Oh, yeah. I mean, there there's a

variety of reasons uh why M&A activity

in Japan, quite honestly, is probably

one of the hottest spots in the world

right now. And we're seeing a lot of

inbound M&A activity from around the

world. I mentioned China earlier. Um

interest rates or I'm sorry, the

weakening yen is is a is a primary

reason for that. But there's been some

regulatory changes, demographic changes

that are also driving um M&A activity.

But I think the one thing that's really

important for your listeners to

understand is that, you know, the we we

talk about the weakening yen and we talk

about investors coming in, you know,

essentially because there's, you know,

better valuations, right, relative to

other parts of the world. Um, but that

kind of cuts both ways. I think what

people forget is that, you know, you may

be able to buy companies at a better

valuation um as as a foreign buyer

coming into the Japanese market, but

those companies, you know, if the W if

the yen continues to deteriorate or get

weaker against other currencies around

the world, those companies, you know,

may may experience, as we discussed

earlier, also inflation um and that can

cause some economic stress. So I think

you know while the valuations may appear

more attractive in Japan relative to

other countries there's a risk

associated with that as well.

>> So I started this segment Paul by

referencing this escalation in uh

tensions between the US and Iran maybe a

little bit more in the way of fighting

underway. We had action on the part of

US forces during the day on Tuesday. So

if we can agree that this could be

somewhat of a protracted situation where

crude oil prices remain higher. What

type of headwind does that represent to

the overall Japanese economy? And

really, could it be responsible for

holding back growth in a meaningful way?

>> You know, that's a really interesting

point. I was in Japan um several months

ago, two or three months ago was the

last time I was there and meeting with

with clients and people on the ground

asking those exact same questions

because the war was underway. And

believe it or not, we have yet to see,

at least of the work we're doing at

Alvarez Marcel with our clients, we have

yet to see what I'll call a meaningful

impact of the Iran war on the Japanese

economy. M&A activity is still robust. I

I think the challenges to the Japanese

economy and the opportunities are not

being driven primarily by um the Iran

war or or the price of crude coming from

Iran. So when you were having those

conversations and fielding questions, is

there one issue that was particularly

worrisome?

>> The biggest concerns right now in

talking with our clients in Japan

besides what we talked about on the yen,

um, you know, the the government has

come in with with regulatory changes

relative to publicly listed companies

and requiring them to provide a certain

return on assets to the investors.

that's driven activist activity and then

buy and sell activity or return of

capital. Otherwise, these companies risk

being delisted. Um that that is a

significant challenge uh for a lot of

public listed companies in Japan and an

opportunity for private equity and other

strategic buyers.

>> How would you describe trade relations

among the jurisdictions across the

Asia-Pacific?

>> There there's a lot of what I'll call

around the world a retreat towards

nationalism. Um and and you see folks

focusing a little bit more inward. Um

that's what also is driving what we've

seen in the aerospace and defense

industry. Um you know, we're used to be

able to rely on partners and neighbors

for protection. Um you know, people are

saying, "Hey, we're not sure we can rely

on other countries and we need to make

sure we protect ourselves." And that's

why you're seeing a lot of internal

spending um from governments on building

up things such as aerospace and defense,

such as robotics, such as um space. um

you know in the US we have the new space

force right so these are the things that

are that are happening around the world

which are kind of knock-on effects to

trade tariffs the Iran war the war in

Ukraine I mean you know this

geopolitical environment is creating a

sort of retreat towards nationalism we

haven't seen in a long time globally

>> to what extent do you see US assets as

representing a great deal of competition

for Japanese assets

>> um you know I think listen when you look

at the largest econ economies in the

world by GDP, right? You know, the top

five include both the US and Japan. So,

I think from that perspective, it's just

natural that there is some level of

competition between the business between

the countries.

>> What about on the M&A side?

>> You're seeing crossber activity

generally go one way from the US into

Japan. That being said, um we have

Japanese companies who are also looking

to um make acquisitions outside of

Japan, which you would think, you know,

why does that make sense? because if

it's cheaper for people to invest into

Japan, isn't it more expensive for

Japanese companies to invest in other

countries? And that answer is yes.

However, they view international M&A as

sort of a hedge against the yen. If they

can have businesses that are denominated

in other currencies than yen, that's

sort of a natural hedge to the Japanese.

Yeah.

>> All right, Paul, we'll leave it there.

Very great stuff from Paul Aversano. He

he is managing director and global

practice leader of&M's global

transaction advisory group based in New

York. Joining us here on the Daybreak

Asia podcast.

Welcome back to the Daybreak Asia

podcast. I'm Doug Krer. Semicon Taiwan

is underway in Taipei. This is one of

the most influential trade shows for

micro electronic and semiconductor

manufacturing. And it was there we

caught up with Hoton Chung, the chairman

and CEO of Grand Process Technology

Corp. or GPTC. He spoke with Bloomberg's

Steven Engel. Steven began the

conversation with a question on the

company's visibility in this upcycle.

>> Okay. Due to this AI

driving the people crazy. So uh also uh

uh push us the uh uh because we make the

wave process equipment. So we also uh

enjoy this uh this growth very much.

>> Yeah. So the you you you build the

machines that do the wet process on

wafers and then also as you transition

into PLP and these are the panels,

right? Um what kind of demand is there?

I mean your main customers are like TSMC

and ASSE but really you supply up and

down across the world right?

>> Yes.

>> So there's concern no doubt that there's

been overinvestment but what does the

demand side and the order book tell you

about how long this will last? You told

me just a few minutes ago you see

visibility and strength for another

three and a half years at least.

>> Yes. I would say this AI is not

shortterm cycle, it's long-term cycle.

So I would say the I I I I mentioned to

you earlier, I didn't see the downturn

until the year of the 30. 2030 is the

>> Yeah. 2030.

>> So what does that mean for the amount of

investment you need to make? Uh you just

have a new plant that came online in

Shinju because demand is too strong.

That added 50% capacity. But you also

say it's still not enough,

>> right? I would say the uh the demand is

not the issue for us. The issue is how

we can spend our capacity

uh uh as much as possible but without

the effect the uh quality and the

delivery

to customer

>> and manpower is a problem.

>> Yes.

>> Taiwan is booming right now. Is there a

shortage of talent?

>> Yes. How how much shortage?

>> Oh, very much. Okay. Uh I would say only

for the GBT uh mother company uh

himself. Uh we have more than 200

vacancy.

So but I expect this vacancy the number

of vacancy is going to increase because

uh the order from customer keep coming

and coming. So we are very busy. Uh

before we are a shortage of the uh the

net the factory but uh uh we already

overcome but uh uh right now the

bottleneck is the uh manpower.

We do okay there's manpower but you're

also telling me that you don't have

enough capacity. So does that prevent

you? Does the manpower shortage prevent

you from maybe earmarking more funds for

another factory or will you be building

another factory?

>> Okay. Well, we have uh uh a b a a length

uh around uh 6,000 pin is meanly uh uh

probably

around 2 20

uh,000 square meter

>> the land.

>> So we got no choice because uh uh we are

trying to to uh to l to lend a factory

but still not enough. So uh right now we

are try to to build our factory uh by

ourself because we have a more tough

product uh we going to manufacture.

H how are gross margins looking right

now? Because I know they dipped a bit

because the demand was so great. You had

to actually outsource uh some of your

production because you didn't have

enough capacity to meet that demand. So

now that you have Shinju factory coming

online, how much by how much have your

gross margins improved or are they?

>> Okay. Uh I would say uh at the moment we

use a lot of the outsourcing. So uh uh

uh graph margin is not so good.

>> Yeah. But in the end we going to

assemble the tour by ourself

by uh if we have kept uh able to uh find

a more people and to ensure not only uh

able to uh provide the uh to fit the

customer expectation also we can ensure

the quality and the uh deliver time to

the customer. So the capacity

constraints and the manpower constraints

how does that impact the industry shift

to PLP the panel level packaging which

is essentially you provide the chemical

spread across the wafers and the

spinning wafers makes uniformity

chemical spread across that wafer. Now

they're going to rectangular larger

panels which has some challenges of its

own but is that the way forward to get

more chips per panel uh to keep the cost

down? Yes, I would say the panel package

that will be the future trend because uh

the utilization will be uh more uh

probably or depend on the different

calculation uh 65% some people saying

the uh 90% depend on the size of the the

chip. So I would say uh the panel

package that will be the trend compared

with the wrong wafer

>> like a 300 mm.

So I would say so uh we are uh try to

also to uh step into the uh uh uh

equipment the quality equipment into the

the peno uh uh package panel advance

package. So what kind of capital raising

do you need and what kind of

partnerships? I know in the PL in the

panel process you have uh teaming up

with challenge tech international also

singulus of Germany. Yes. Um is that the

way forward is is is these kind of

partnerships to share that burden

because you the capacity burden as well

as technology burden and the manpower

burden. Okay. Uh synchronist they make

the uh spot and but uh uh because we

know the uh the customer uh pretty well.

So we know the uh the trend uh of the

advanced package will go uh going to my

uh uh going to the uh the panel package.

So we encourage the synch

uh the panel package.

>> Yeah. Yeah. So what what do you think of

the news this week? Essentially Nvidia

doubling down again on their

partnerships with MediaTek. Is that sort

of a this circular investment within the

industry, right? Is that something you

would welcome to having a larger partner

like like an Nvidia? Is that what the

the the supply chain here in Taiwan is

looking at? Is this a big trend? How big

a news is this to you?

>> Okay. Uh I would say yeah if uh any of

the party come to us would like to talk

in the partnership I think that's more

than welcome. We got no problem at all.

So I would say beside the uh singularist

we also uh would like to because we know

what is the pat for the uh advanced

package. So uh we uh because uh GBTC

already accumulate uh uh manufacturer

experience more than 30 years

>> right.

>> So we know what the uh industry need. So

we going to step into the uh the process

equipment like uh the uh uh wabage the

wabage and string control and even the

photo

photonics.

>> Yeah. And also the plating uh uh put uh

chemical plating uh system also the u

the uh chemical solution right

>> and the methology methology

also we have another uh uh subsidiary

called tyin they are doing the uh uh

process the data analysis so we also

engage uh the tier one uh uh equipment

vendor. So we have a lot of project

ongoing.

>> So you're open to to more partnerships

and greater partnerships.

>> That was Hoan Chong, the chairman and

CEO of Grand Process Technology Corp. or

GPTC speaking with Blueberg Steven Engel

at the Semicon Taiwan conference

underway in Taipei, bringing you their

conversation here on the Daybreak Asia

podcast. Thanks for listening to today's

episode of the Bloomberg Daybreak Asia

Edition podcast. Each weekday, we look

at the stories shaping markets, finance,

and geopolitics in the Asia-Pacific. You

can find us on Apple, Spotify, the

Bloomberg Podcast YouTube channel, or

anywhere else you listen. Join us again

tomorrow for insight on the market moves

from Hong Kong to Singapore and

Australia. I'm Doug Krer, and this is

Bloomberg.