The Weekly Scan January 24, 2022

Welcome to the Weekly Scan. Here’s what we’re following for the week of January 24, 2022.

Chipping away. Microprocessor maker Intel said that it will invest $20 billion in the construction of two new semiconductor factories near Columbus, Ohio. Construction will begin at the end of 2022, and conclude in 2025. Intel also promised to invest $100 million in partnerships with educational institutions to support talent development in the area. The project is expected to create 3,000 factory jobs, 7,000 construction jobs, and tens of thousands of support jobs. The new factories will reportedly be part of Intel’s efforts to reclaim its reputation as a top chip manufacturer. In 2020, chipmaker Nvidia surpassed Intel as the most valuable semiconductor maker in the U.S. Also last year, Samsung beat out Intel as the biggest chipmaker by quarterly revenue. In 2021, Intel said it would invest in chipmaking in Arizona and New Mexico, and promised $95 billion towards those efforts in Europe. 

• The takeaway: Intel is one of many semiconductor manufacturers investing in increased  chip production, as the U.S. and Europe struggle with a chip shortage. Samsung said in 2021 that it would invest more than $205 billion over the next three years and Taiwan Semiconductor Manufacturing said it would put $100 billion into greater production capacity over the next three three years. Micron Technology said it would spend $150 billion over the next decade to develop its memory chips and Texas Instruments will spend $30 billion building a new facility in Sherman, Texas. Semiconductors are essential to many electronic products, and are found in many of today’s cars, as well as home appliances, computers, smart phones, and more. Since early 2021, chip makers have experienced shortfalls in manufacturing microprocessors used in those products.

NPR

Just spinning. In response to decreasing consumer demand, exercise equipment company Peloton will pause production of several of its most popular connected fitness products. From February to March 2022, Peloton will stop making its Bike. Peloton also will not produce the Tread for six weeks and the Tread+ for all of 2022. The company previously halted manufacturing its Bike+ in December 2021, and will not produce it again until June 2022.The decision is a big shift from the height of the pandemic, when Peloton faced high demand, and not enough supply, as more consumers worked from home and avoided public gathering spots including gyms. Peloton recorded its first-ever quarterly profit in September 2020, with a 172% increase in sales and 1 million people subscribing to its virtual fitness classes. In March 2020, Peloton acquired exercise equipment maker Precor for $420 million to keep up with the demand. 

• The takeaway: Lower demand for Peloton’s core products could prove that gyms and traditional fitness services are making a resurgence, and that at-home fitness might not outlive the pandemic. For the third and fourth quarter of 2021, Peloton reportedly set demand and delivery goals that were far too high, according to a company presentation, and Peloton issued new goals on December 14, 2021. For the quarter ended September 30, Peloton added 161,000 net new subscribers, the lowest growth the company had seen in two years.

CNBC

Game on. As part of its effort to expand into the metaverse, Microsoft announced last week that it will acquire video game maker Activision Blizzard for a record $68.7 billion in an all-cash deal. The deal, reportedly the largest acquisition ever by a technology company, needs to be approved by regulators, but it would make Microsoft the third-largest video game company in the U.S. The tech company has made several gaming acquisitions since Satya Nadella became CEO in 2014, including its $2.5 billion acquisition of Mojang and a $7.5 billion acquisition of ZeniMax Media. Microsoft, creator of the gaming console Xbox, has its own games, like Minecraft and Doom.  But this deal will allow Microsoft to add Activision Blizzard’s portfolio of games, including Call of Duty, World of Warcraft, and Candy Crush.

• The takeaway: Microsoft cited its interest in expansion into the metaverse as one of the reasons for the acquisition. The metaverse is a much-hyped concept that people will increasingly be able to do in-person activities like playing games, attending shows, and watching sporting events as three-dimensional virtual experiences. Big tech companies have started exploring the potential of the metaverse, with Facebook even changing its name to Meta Platforms in 2021. Shares of gaming rival Sony fell 13% in response to the news, reducing its valuation by $20 billion. Microsoft is pushing its subscription games service, Game Pass, which gives gamers access to its portfolio of games. Microsoft’s acquisition of more games could put pressure on Sony, which relies mostly on exclusive title and hardware sales. 

Bloomberg

Let’s talk about it. “We Don’t Talk About Bruno,” a song from the new Disney animated movie Encanto, became the first song from a Walt Disney Animation Studios movie to reach the top of Billboard Streaming Songs chart. Separately, the song was number four on Billboard’s Hot 100 last week, becoming the first song from a Disney animated movie in 26 years to reach a top spot on that chart. The music, whose lyrics were written by songwriter, singer, playwright, and producer Lin-Manuel Miranda, has Latin American influences. The last song to reach Billboard’s Hot 100  top four was “Colors of the Wind” from 1995’s “Pocahontas.” Billboard has compiled charts of top popular songs since the 1950s.

• The takeaway: Disney has recently made changes to address criticism that the company has included stereotypical or racist themes in movies and theme park rides. Encanto focuses on a Colombian character. Disney’s decision to make Encanto appears to be paying off, with the movie reportedly becoming one of the biggest animated movies of the pandemic, bringing in $93.1 million domestically and $222.6 million globally. 

Wall Street Journal

 Here’s what we covered last week in the Scan: 

• The Supreme Court overturned a Biden administration mandate for Covid-19 testing and vaccines for workers at large businesses.
• Bank of America announced that next month it will end its $35 non-sufficient funds (NSF) fee, and it will reduce its overdraft fee to $10 from $35 in May. 
• Starting January 15, 2022, U.S. health insurers are required to cover eight over-the-counter testing kids for Covid-19 per month.
• Navient, one of the largest student loan servicers in the U.S., will cancel the debt of 66,000 borrowers
• Poet, writer, and civil-rights activist Maya Angelou is the first Black woman to be featured on a U.S. quarter.