Tag Archives: production

Nvidia Reportedly Ending Production of Nintendo Switch Processor

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Nvidia has been interested in making its own mobile chips for years, going all the way back to 2008 and the original Tegra chip that powered the Microsoft Zune HD. Tegra has been at the heart of more successful devices in recent years, most notably the Nintendo Switch. Things might be changing in Nintendo’s lineup if a new report is to be believed. According to “a person familiar with the matter,” Nvidia is ending production of the Tegra chip that powers the Switch, PCMag reports. 

The Tegra X1 system-on-a-chip (SoC) is designed around technology that’s a few years old, but it can still pull its weight thanks to the powerful GPU. The original Switch used the stock Tegra X1 (codename Erista), but that chip had a vulnerability that modders used to modify the Switch’s system software. Nintendo updated the console in 2019 to use a new Tegra X1+ (codenamed Mariko). Now that chip is apparently finished. 

There are a few ways this could affect Nintendo, including not at all. It’s possible Nintendo intends to use the same Mariko chip for all its future Switch hardware, and Nvidia ending production won’t change that. Nintendo could be working to stockpile all the chips they’ll need for the rest of the Switch’s life cycle, in which case, this news won’t affect you at all. 

It’s also plausible that Nintendo plans to upgrade the Switch with better hardware. There are rumors of a high-end Switch revamp, featuring a larger OLED display and support for 4K docked gaming. The current Tegra X1+ would struggle with 4K, so many have speculated it could use AI-powered DLSS to upscale graphics. However, a more powerful SoC could just do 4K natively. 


Nvidia, which is trying to acquire UK-based Arm Holdings, has several newer Tegra chip designs, but they’ve only appeared in developer-focused products and a few cars. The newest is Orin, which was announced in 2019, but we know almost nothing about it other than it would be much faster than the Mariko chip. 

There may also be an outside chance that Nintendo is going to struggle to get enough parts to keep building the Switch. Although, I have to think Nvidia wouldn’t end production if Nintendo was still buying millions of current-gen Tegras. If this report proves accurate, I think it will serve to legitimize the rumors of a revamped Switch console. When we’ll see that is anyone’s guess, though.

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Trudeau says J&J vaccine faces production challenges

Prime Minister Justin Trudeau said today Canada has been warned of manufacturing problems plaguing the Johnson & Johnson vaccine.

The viral vector vaccine developed by J&J’s subsidiary, Janssen Pharmaceuticals, was authorized by Health Canada as safe and effective last week.

Canada pre-ordered 10 million doses of the vaccine, which is the first and only one in Canada’s vaccine plan that requires only one dose.

But Trudeau said Canada still doesn’t have a target date for the first deliveries.

“We have heard in many conversations with Johnson & Johnson that there are challenges around production of the Janssen vaccine, but we will continue to engage with them and we look forward to receiving doses as soon as possible,” he said today at a news conference in Ottawa.

“And as soon as we get confirmation of doses being sent to Canada, we will let everyone know.”

Canada’s vaccine rollout stepped up this month after deliveries slowed to a trickle in February. Nearly one million doses of Pfizer-BioNTech and Oxford-AstraZeneca vaccines were delivered last week, and 910,000 doses of Pfizer and Moderna are arriving this week.

It took Canada 67 days to vaccinate the first one million people. It will take less than one-third of that time to vaccinate the second million.

As of noon on Tuesday, more than 1.9 million Canadians have now received at least one dose.

Canada not ready yet to issue guidance on relaxing measures 

Chief Public Health Officer Dr. Theresa Tam said Canada isn’t quite ready to follow the U.S. Centers for Disease Control and issue guidance on how vaccinated individuals can relax their public health measures.

The CDC said Monday that those Americans who received their second dose at least two weeks ago can now visit indoors, without masks, with other fully vaccinated people, or with those who are not vaccinated but are at low risk of serious illness.

Tam said there are still too many unknowns, including the effect of COVID-19 variants and how vaccines will affect the spread of the novel coronavirus.

“So I think we need to take a thoughtful approach, but it is important that we have to evolve our public health approach as more Canadians are getting vaccinated,” she said.

The United States is far ahead of Canada, having now vaccinated more than one in four people. Canada has vaccinated about one in 20.

Tam said there are “initial positive signs” that the Pfizer and Moderna vaccines are preventing transmission, as well as reducing the severity of illness, but it is still early.

The emergence of variants that aren’t all responding as well to vaccines is also a concern, she said. Tam said Ontario now believes almost one-third of its new cases are one of those variants, with the B.1.1.7 variant first identified in the United Kingdom the most common.

That variant also appears to be the most receptive to the current vaccines.

The number of new cases in Canada has plateaued at about 2,900 cases per day in the last couple of weeks, but the number of people dying appears to be diminishing.

WATCH | Trudeau addresses challenges Johnson and Johnson face in vaccine production

Prime Minister Justin Trudeau addresses production challenges Johnson and Johnson is facing with its COVID-19 vaccine. 0:53

On Feb. 23, Tam reported a one-week average of 2,900 new cases and 54 deaths per day. On March 2, the weekly average was 2,933 cases and 42 deaths. On Tuesday, it was 2,900 new cases per day and 37 deaths.

Newfoundland and Labrador also seems to be recovering from a major outbreak that swept through St. John’s last month. Public health officials reported one new case Tuesday and said active infections are down to 80, from 203 a week ago.

Johnson & Johnson hasn’t even yet confirmed for Canada where its vaccine doses will be made. The company is producing the vaccine in the U.S. and Europe, and Health Canada has authorized facilities in both places to make it.

But neither the company nor Canadian officials will say yet where Canada’s doses will be made. The United States isn’t allowing exports of doses made there until the U.S. is fully served, but that may happen by late May.

Still, J&J’s production problems are affecting Europe and the U.S. as well. Several European countries, where the vaccine isn’t yet authorized, said they don’t expect as many doses of it next month as originally planned.

U.S. President Joe Biden said last week that when he took office, he was informed that Johnson & Johnson was behind on production and efforts began to find additional production space. Sanofi was first contracted to help produce the vaccine in Europe and last week Biden announced Merck would help produce it in the United States.

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Where should U.S. vaccine production go next? Canada and Mexico, says one lawmaker

This story is part of Watching Washington, a regular dispatch from CBC News correspondents reporting on U.S. politics and developments that affect Canadians. 

What’s new

News Tuesday that the United States is racing ahead to mass-vaccination against COVID-19 months faster than expected is a big deal not only for Americans but could also have implications for Canada, which has so far been prevented from importing U.S.-made vaccines.

U.S. President Joe Biden tweeted Tuesday that the U.S. should have enough vaccines for all Americans by the end of May, two months sooner than the previously announced target.

So, where will massive American production volumes shift next?

One U.S. lawmaker’s suggestion: Canada and Mexico. 

Vicente Gonzalez, a member of the House of Representatives, says the U.S. must make it a priority to ship vaccines across the border to its neighbours once Americans are inoculated.

The Texas Democrat says he’s looking forward to when the U.S. can ease up on an export ban that has prevented foreign shipments of doses produced in the country.

Biden’s administration, like the Trump administration before it, has blocked exports and rebuffed requests from Canada and Mexico for supplies.

“The borders are closed in my district,” the Democratic lawmaker, whose district sits along part of the U.S.-Mexico border, told CNN Monday.

“Mexican nationals with visas who normally travel here or own second homes [or] come and do business here are not allowed across the border right now.

“So, we definitely need to immunize our friends across the border at some point, once we’re finished doing it here in our country.”

Gonzalez said the U.S. will only truly recover from the pandemic when its neighbours are safe, too.

Vicente Gonzalez, seen here at an August 2020 press conference, serves a Texas-Mexico border community in the House of Representatives, and says the U.S. should lift its ban on the export of COVID-19 vaccines. (Joel Martinez/The Monitor via AP)

“I think we have five vaccines for every American, so we certainly have some extra vaccines that we could share with other countries — especially somebody like Mexico or Canada, who we do a lot of business with … where a lot of commerce and tourism flow on a regular basis,” Gonzalez said in the interview. 

“So we don’t live in this world, isolated. It’s a global community, and certainly, North America is a very tight-knit community. We have relatives on both sides of the border, we do business on both sides of the border, whether it’s Canada or Mexico.”

What’s next

Gonzalez’s comments point to a question that will only intensify over the coming months about what happens to the big production capacity within the United States once export bans are lifted on plants such as Pfizer’s in Michigan and Moderna’s in New England.

The United States has vaccinated residents at quadruple the rate of Canada. Biden has said in the past that there should be enough vaccines for all Americans by the end of July before revising that to late May on Tuesday.

That puts the U.S. schedule several months ahead of Canada’s.

Biden says vaccines arriving faster than expected:

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Microsoft Has Asked AMD to Boost Xbox Series S, Series X Production

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The ongoing shortage of Xbox and PlayStation consoles has been a story since these platforms launched in November. The shortage isn’t unique to console gaming — there are problems with hardware availability across both PCs and consoles as recently launched GPUs from Nvidia and AMD remain difficult to find, as do AMD’s Ryzen 5000 CPUs.

According to Xbox head Phil Spencer, the company has been fielding questions related to Xbox production for weeks.

“I get some people [asking], ‘why didn’t you build more? Why didn’t you start earlier? Why didn’t you ship them earlier?’ All of those things,” Spencer said on a Major Nelson podcast, as spotted by VGC.

“It’s really just down to physics and engineering. We’re not holding them back: we’re building them as fast as we can. We have all the assembly lines going. I was on the phone last week with Lisa Su at AMD [asking], ‘how do we get more?’ So it’s something that we’re constantly working on.”

I don’t want to say that there’s nothing AMD can do to improve the situation for Microsoft, but the company’s ability to change the situation are probably limited. AMD’s involvement with the chip is limited to designing it — the actual job of manufacturing and shipping it in sufficient volume is done by TSMC.

There may indeed be some knobs and dials that AMD has some indirect control over, or it might be able to work with TSMC to enhance yields if a certain number of Xbox Series X|S SoCs are just barely missing spec. Small tweaks to improve yield and performance are common. From the mid-aughts to the mid-2010s, it wasn’t unusual to see AMD or Intel introduce a newer variant of an older chip, but with a lower TDP compared with what they’d shipped right out the door. These improvements reflected low-end optimizations.

But, while AMD might be able to boost Xbox production by reducing orders in other 7nm product families, the company will be limited by how much 7nm capacity TSMC has. Last fall, multiple reports suggested TSMC would be able to build 140,000 7nm wafers a month by the end of 2020. In the first half of 2020, TSMC’s WPM (wafers per month) was estimated at 110K. This implies the company increased its 7nm capacity by 1.27x throughout the year.

Clearly, it hasn’t been enough, and Nvidia’s decision to build with Samsung on 8N instead of tapping TSMC’s 7nm hasn’t been enough to save Ampere’s availability, either. Nvidia is currently expected to move to TSMC 7nm for additional Ampere production in 2021, which may put even more pressure on the situation.

Relief might come in the form of drawdowns on 7nm mobile demand as companies transition to 5nm. Currently, a number of companies have told consumers to expect better product availability after the March – April 2021 timeframe, which could reflect anything from new capacity coming online, to improved yields, to decreased 7nm utilization as companies transition to 5nm. It could even be that companies are forecasting decreased shutdown levels by that point, which might lead to a slackening of demand, especially in the short term. Once people can leave the house safely again, we’ll probably see spending flow out of video games and home entertainment and back towards other types of leisure, even if the pandemic creates a long-term uptick in the number of people buying consoles, subscribing to streaming services, or working from home.

Image by VGChartz

The best data we have on the two console manufacturers’ relative performance comes from VGChartz. They’ve compiled their estimates for sales over the first six weeks since launch (the Switch data is aligned to its launch, not present-day sales). The results are not particularly great for Microsoft, though we’d caution that only a very limited amount of data can be drawn from the first six weeks, especially at a time when console sales continue to be supply limited. All indications suggest that Microsoft and Sony continue to sell every console they can make.

US sales, VGChartz

US sales are a better story for Microsoft. While the Xbox Series S|X are still lower than PlayStation 5, they’re off by roughly 30 percent, not nearly 50 percent. This is also the one region where Xbox is actually beating Switch in terms of worldwide sales. Everywhere else, Switch leads, including Japan.

For now, evidence indicates the PlayStation 5 is strongly outselling the Xbox Series (both flavors) globally, with a tighter (but still Sony-favoring) competition in the US. Whether AMD can do anything to put more console SoCs in the hands of its partners is unknown. Also, wasn’t it the PlayStation 5 that was supposed to be facing the severe supply constraints?

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Sony Reportedly Increases PlayStation 5 Production by 50 Percent

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Sony and Microsoft are gearing up to battle for game platform supremacy with the PlayStation 5 and Xbox Series X, and this is an unusual time to do it. With the ongoing COVID-19 pandemic, people are spending more time than ever alone in dark rooms where some games can really come in handy. Determined to avoid another PS3-style console shortage, Sony has reportedly ramped up PS5 production

As recently as several weeks ago, analysts believed Sony was on-track to produce about six million consoles for the late 2020 launch. Today, Nekkei says Sony’s new target is 9 million, and Bloomberg believes 10 million is more accurate. So, we’re looking at a roughly 50 percent boost in production. Both publications agree that increased demand from quarantining gamers is the driving force behind the move. 

If these numbers are correct, Sony could be looking at a huge launch success even if there are ample units left on the shelves after holiday shopping tapers off. Sony reported just 4.2 million sales in 2013 when the PlayStation 4 launched. It has since passed 100 million sales globally. Microsoft, by comparison, moved just 2 million Xbox One units. 

Sony PS5 DualSense.

Sony most likely sees this as an opportunity to get more people invested in its next-generation console. Microsoft will also be pitching the Series X hard this holiday season. If more people than usual buy consoles to stave off quarantine boredom, they’re likely to buy the occasional game in the next few years. It’s not uncommon for console hardware to earn very little (or even zero) profit. It can be worth taking a hit on the console to get people buying those high-margin games. 

Gaming products, in general, have been in higher demand during the pandemic. Coming off a huge 2019 holiday season, Oculus has been unable to keep its VR headsets in stock for more than a few days at a time. Meanwhile, the Nintendo Switch was in such short supply this spring that third-party resellers were selling them above retail price. 

Speaking of price, we still don’t know how much the PS5 or Xbox Series X will cost. Sony and Microsoft seem to be locked in a game of chicken — neither one wants to announce pricing first and give the other company a chance to undercut them and win the news cycle. Someone’s going to have to crack eventually.

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Report: Nvidia Ends Production of RTX Turing GPUs, Ampere Is on the Way

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A new report suggests Nvidia has halted production of Turing GPUs in preparation for an imminent Ampere ramp-up. An end to production doesn’t mean the launch of Ampere is immediately imminent — there’s going to be a certain amount of volume in the channel to soak up — but it definitely indicates Nvidia is prepping the next-generation GPU’s launch.

Nvidia, apparently, has told its GPU manufacturers to raise prices on high-end cards to reflect the lack of production. I suspect this is a reaction to what happened several years ago, when Turing debuted. Nvidia — which has been accused of deliberately misleading investors as to its product split between gaming GPUs and cryptocurrency back in 2018 — wound up with a glut of GTX Pascal cards it had expected to sell, at exactly the time that Turing was launching at significantly higher prices.

Nvidia's RTX Architecture as extended with the introduction of Turing and new types of cores

Ampere is expected to retain GTuring’s high-level organization but we don’t know anything about the resources dedicated to each task yet.

Nvidia’s wounds back in 2018 were self-inflicted, driven by the company’s decision to raise prices rather than holding to GTX 1080’s excellent value. The situation undoubtedly improved after this time last year, with the RTX 2080 Super and 2070 Super debuted with higher performance and lower prices, but the damage was done — assuming Nvidia thought it was damage in the first place. It isn’t clear they did.

The price increases contemplated by the report at ITHome appear to apply to Turing cards. A price increase for Ampere over Turing isn’t specifically stated, and I’m not sure Nvidia would communicate that information two months ahead of a theorized September 17 release date. Price is always the last thing a manufacturer finalizes, and handing out its price data this early would make it trivial for AMD to make whatever adjustments are required for RDNA2 to launch aggressively against Ampere. Ending Turing manufacturing early and suggesting OEMs raise prices will prevent the situation that occurred in 2018, where cheap GTX 1080’s selling for $ 500 blew holes in Nvidia’s attempted value proposition around Turing.

High prices on the RTX 2070 Super, 2080 Super, and 2080 Ti will definitely make Ampere cards look more attractive by comparison, but only to a point. If AMD is telling the truth about its ability to deliver a further 1.5x performance-per-watt improvement for RDNA2 over RDNA — and I want to say up-front that’s a very large gain without a process node shrink to support it — then RDNA2 should be at least in Ampere’s ballpark. It’s been 6-7 years since AMD matched Nvidia’s power efficiency at the same process node, so even being within 10 percent of Ampere would be a real step forward for Team Red.

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Segway Ends Production of ‘Iconic’ Personal Transporter

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In the beginning, they called it “IT” for reasons that were never entirely clear to me. Steve Jobs said it would be bigger than the PC. John Doerr, a venture capitalist who funded Netscape and Amazon, said it might be “bigger than the Internet.”

IT, aka Ginger, aka the star of Paul Blart: Mall Cop is otherwise known as the Segway Personal Transporter. And as of this week, IT’s dead. Manufacture of the Segway PT will stop on July 15, with 21 employees laid off. Twelve will stay on temporarily to handle warranties and repairs, while five Segway employees working on Segway Discovery will remain with the company.

It’s the end of a line for a strange product that delivered exactly what it promised — specifically, a gyroscopically balanced two-wheeled vehicle that was much easier to ride (and far faster) than walking. The company originally hoped to sell 100,000 units in the first 13 months. According to FastCompany, it sold approximately 140,000 vehicles over its entire existence.

Ironically, its own engineering may have been part of the problem in that regard. Segways are apparently quite durable, with internal components that hold up well even at the 100K mile mark. Sales have reportedly been flat for three years, even as the Segway PT fell to just 1.5 percent of Chinese scooter manufacturer Ninebot’s revenue (Ninebot bought Segway in 2015).

This is one problem that didn’t start with the coronavirus. The Segway’s problem was simple: It was never clear who was supposed to buy the thing, or how they were supposed to avoid looking utterly ridiculous while riding it. At 10mph, Segways were too fast for sidewalks, but they’re clearly not street vehicles, either. They were snapped up by enthusiasts like Steve Wozniak, and by businesses that require employees to move a great deal. The aforementioned Paul Blart: Mall Cop movies accurately captured a big chunk of Segway’s business.

Segway’s core IP isn’t going anywhere; Ninebot has already introduced additional products that use the company’s patents, and it showed off ‘hoverchairs’ dubbed S-Pods at CES in 2020, though there’s no word on whether that product has been canceled in the wake of these changes or not. The S-Pod is capable of hitting a terrifying 24 miles per hour and was supposed to be for sale in 2021.

Segway’s biggest problem, in my personal opinion, wasn’t any intrinsic failure of technology, but of optics. Technology doesn’t have to make the end-user look cool, but it certainly doesn’t help if it does. Segways didn’t just fail to make you look more interesting; they actively made anyone riding them look bad. And I genuinely think part of the problem is that no one riding a Segway ever looks as if they are moving.

Run a Google image search for “Bike riding” and look at the results:

Almost every single photo implies motion, to one degree or another. Bodies are bent over handlebars, legs captured mid-stroke. Search for “Segway riding” and here’s what you get:

The only images suggesting motion have been obviously Photoshopped. Ignoring the hoverboard picture, none of these people appear to be doing anything but standing still. Segway’s own website did no better:

People who rode Segways often reported liking them and the vehicles were, by all reports, fairly easy to use — though that didn’t prevent the then-owner of the Segway company from killing himself with one in 2017 — but it simply never looked like a product that would be all that much fun to use, which undoubtedly harmed efforts to find a use case for it.

Feel free to check out our “Now Read” coverage below. ExtremeTech actually wrote quite a bit about the Segway 19 years ago, and I’ve linked up some of our stories to let you eyeball the difference in how a couple of decades changed impressions of the technology.

Feature image is CC BY 2.0, by FaceMePLS, Flickr

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Sony Scaling Back PlayStation 5 Production Over Price, Not Coronavirus

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Sony may be reducing the number of PlayStation 5s that it intends to sell this year, thanks to a mixture of price concerns and COVID-19. The PlayStation 5 is widely expected to cost more than its predecessor, with estimates of $ 499 to $ 549 not being uncommon. It’s worth noting that the PlayStation 4’s $ 400 launch price in 2013 is ~$ 442 in 2020 when accounting for inflation. A $ 500 PS5 wouldn’t actually be all that much more expensive than the launch price of the PS4. For comparison, the PlayStation 3 launched at $ 640 and $ 767 in 2020 dollars ($ 499 and $ 599 in 2006 dollars). Sony expects the PS5’s price to be higher at launch thanks to expensive internal components, Bloomberg reports, and as a result, the company will produce “far fewer” units than with the PS4.

As for COVID-19, the ongoing pandemic has reportedly changed Sony’s marketing plans for the new console, but not its production figures.

Why Are Manufacturers Moving Back Towards More Expensive Hardware?

One of the big differences between this generation and the last is the way both Sony and Microsoft are approaching their hardware loadouts. While we don’t know how much either console will cost, both companies have aggressively pushed the envelope in terms of CPU and GPU performance.

The PS4 and Xbox One used a capable but ultimately lower-end CPU core intended for modest laptops and paired it with an already in-market GPU core in what was, at most, a midrange PC GPU configuration. One of the most common complaints about both systems, however, was that they didn’t offer as much of an improvement compared with previous consoles as expected. The Xbox One X and PS4 Pro were mid-cycle refreshes intended to solve this problem. But, having introduced them, the two companies will need to both demonstrate a significant-enough performance improvement with the PS5 and XSX to make them worthwhile upgrades.

Sony PS5 DualSense

Much will depend on whether Sony and Microsoft were willing to start shipping console hardware at a loss again, but I suspect part of the argument for selling more expensive hardware this generation is that the hardware itself is far more capable. Day One backward compatibility is a fairly rare feature. Sony offered it with the PS2 and the initial run of PS3 systems, but neither the Xbox One nor the PS4 were immediately compatible with their predecessors. This time, that’s going to be different. The Xbox One and PlayStation 5 will both play their predecessors’ games, which means the two companies may feel more comfortable asking gamers to pony up for new hardware.

This is a subtle point, but an important one. If I built a new gaming PC tomorrow, it would still run every game I already own, presumably at better detail levels and resolutions than I could previously achieve. Previous console launches have not offered this kind of compatibility regularly enough for gamers to expect it as a baked-in feature, but console players may feel more comfortable shucking out higher prices for hardware if they know it’s compatible with the library of software they already own.

I don’t envy Sony or Microsoft the difficulty of planning a console launch this year. While it’s true that gaming is one of the only markets seeing robust engagement right now, it’s not at all clear what the global economy will be doing in the back half of the year. But pushing back launches is also fraught with peril, because the software developers who are building launch titles for the PS5 and Xbox Series X need to recoup those investments in order to stay in business. Pushing the launches back 6-12 months might be fine from Sony and Microsoft’s perspective, but their various studio partners might not be able to absorb the financial hit. Plenty of game studios have gone out of business when they couldn’t ship a game on time for reasons that had nothing to do with a global pandemic.

We don’t know how large these production cuts would be, but the PS4 sold 4.2 million units by the end of 2013 and 5.3 million as of February 8, 2014.

Top image: PS5 render by LetsGoDigital

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Global pact forged to drastically cut oil production to contain price crash

The OPEC cartel and other oil producers agreed Sunday to cut crude production by at least a tenth of global supply — an unprecedented move to stabilize the market.

Russian President Vladimir Putin, U.S. President Donald Trump and Saudi Arabia’s King Salman all support the deal, which would see global crude output cut by 9.7 million barrels a day, the Kremlin said Sunday.

OPEC confirmed in a release the cuts will begin May 1 and continue until June 30. After that, the countries will keep gradually decreasing curbs on production until April 202. From July until December of this year, output cuts will continue at 7.7 million bpd, and 5.8 million bpd for the 16 months after that.

The so-called OPEC+ countries agreed to have Mexico reduce its daily output by 100,000 barrels only for those two months, which had been a sticking point for the accord. The pact came after a marathon video conference between officials from 23 nations. The group will meet again in June to determine if further actions are needed.

OPEC+ said in a draft statement seen by Reuters effective oil output cuts could amount to more than 20 million bpd, or 20 per cent of global supply, if contributions from non-members, steeper voluntary cuts by some OPEC+ members and strategic stocks purchases were taken into account.

Global measures to slow the spread of the coronavirus have destroyed demand for fuel and driven down oil prices, straining budgets of oil producers. Consumption has dropped by an estimated 30 million bpd.

Trump had threatened OPEC leader Saudi Arabia with oil tariffs and other measures if it did not fix the market’s oversupply problem. Low prices have put the U.S. oil industry, the world’s largest, in severe distress.

Canada hasn’t committed to specific cuts

OPEC+ has said it wanted producers outside the group, such as the United States, Canada, Brazil and Norway, to cut a further five per cent, or five million bpd. 

Canada and Norway had signalled their willingness to cut, but as of Friday, Natural Resources Minister Seamus O’Regan had said Canada had yet to promise any specific production cuts.

Alberta, Canada’s biggest oil-producing region, “has already formerly curtailed 80,000 barrels per day,” O’Regan said.

“This is good. We welcome any news that brings stability to global oil markets,” O’Regan said in an emailed statement to CBC News Sunday.

“The federal government is deeply concerned about oil price instability and the impact on thousands of workers in Canada’s energy sector, and their families. 

“Canada is committed to achieving price certainty and economic stability. We will keep working with provinces, businesses, labour, Indigenous communities and our international partners, including the G20.”

A government source told CBC News Sunday that Canada has not committed to production cuts as that would fall under provincial jurisdiction.

Deal won’t turn market around, economist says

Concordia University economics professor Moshe Lander said while the news should in theory be good for Canadian producers, “the proof is in the pudding.”

“I think that markets in general are usually pretty suspicious of OPEC announcements unless there’s a clear announcement of enforcement and consequences for noncompliance,” he said. “Maybe when markets open on Tuesday you might see oil prices jump a little bit.

“I don’t think that this is going to turn the market around.”

Kevin Birn, an analyst with IHS Markit in Calgary, said though the scale and scope of the deal was unprecedented, it is not a sufficient solution to ongoing demand shock brought on by COVID-19.

“What it will potentially do is stave off the lowest potential price that we could’ve seen,” he said. “Of course, the outcome of this remains to be seen in how well the producers adhere to it themselves, which has always been a traditional problem of any of these deals.”

Additional volumes will still have to come off during this period, Birn said, implying there is still a tough road ahead for producers around the world and in Western Canada.

“I think it’s reasonable that we will see some movement on price coming out of the other side of this when the markets open, some optimism,” he said. “But I would caution being too excited about this. We still have a larger issue.”

The United States, where legislation makes it hard to act in tandem with cartels such as OPEC, said its output would fall steeply by itself this year due to low prices.

Mexico had initially blocked the deal but its president, Andres Manuel Lopez Obrador, had said Friday that he had agreed with Trump that the U.S. will compensate what Mexico cannot add to the proposed cuts.

“The United States will help Mexico along and they’ll reimburse us sometime at later date when they’re prepared to do so,” Trump said at a White House press briefing Friday.

‘Economic conditions continue to worsen’

Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto, said in a release that while the deal was historic, challenges remain — such as the capacity of storage facilities before the deal begins, and questions about what enforcement mechanisms will apply to nations who renege on the agreement. 

“Perhaps most importantly, economic conditions continue to worsen on a global basis, with shutdowns extending, trade flat lining, and unemployment levels surging to historic levels. Demand declines may outpace any production cuts, leaving storage facilities to continue filling,” he wrote.

A 15 per cent cut in supply might not be enough to arrest the global price decline, banks Goldman Sachs and UBS predicted last week, saying Brent prices would fall back to $ 20 US per barrel from $ 32 at the moment, and $ 70 at the start of the year.

As Asian markets reopened Monday local time, West Texas Intermediate crude was trading at $ 22 US per barrel.

Alberta Premier Jason Kenney said on Twitter Sunday that while there are challenging months ahead, the deal puts the sector on a path to recovery.

“We are glad to see sanity return to global oil markets. As I have said, OPEC+ started the fire, and it was their responsibility to put it out,” he wrote.

A spokesperson for Alberta Energy Minister Sonya Savage referred CBC News to a Friday statement, saying the minister was cautiously pleased by the deal.

“The agreement to implement production limits by OPEC+ brings global energy producers in line with measures that Alberta has reluctantly taken since January 2019,” she said

“However, demand will return as economies around the globe recover from this pandemic. Life will return to normal. In the interim, we hope that the measures taken by OPEC+ will stabilize the global price of oil and prevent further stress to energy workers in Alberta.”

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Yes, Even You, Elon: Sheriff Tells Tesla to Halt Fremont Production

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Propping up your $ 900 stock price and cranking out the new Tesla Model Y is not “essential business.” And so the Alameda County Sheriff told Tesla Tuesday to cease operations at its massive Fremont, California, plant outside San Francisco. This a day after Bay Area counties told employers to shut down non-essential businesses and have employees shelter at home for three weeks in the wake of the coronavirus outbreak.

Tesla’s largest factory is in Fremont. It had just begun producing, and shipping, the first Model Y compact SUVs in a manner previously unheard of for Tesla: ahead of schedule.

Per the tweet Tuesday from Alameda County Sheriff’s office, “Tesla can maintain minimum basic operations.” That would certainly include security at the 370-acre site with 5.3 million square feet of manufacturing and office space – think 50 Home Depots or 100 football fields – plus maintenance staff, and plus a skeleton office staff if they can’t work from home. But it doesn’t include the 10,000-plus workers at the facility, many of whom ride crowded shuttles to remote parking sites. The Los Angeles Times described this scene Tuesday morning at daybreak:

The parking lot was packed to capacity with about 3,000 cars, as dozens of morning-shift workers searched for overlooked spaces. Workers even parked in fire lanes. Dozens of shuttles and full-size buses ferried morning workers to the factory and took night-shift workers away. Departing workers packed shoulder to shoulder at the door of each bus, waiting to get on. The buses take workers to offsite lots and as far away as Tracy and Stockton.

There had been confusion Monday night when Alameda County spokesman Ray Kelly said Tesla qualified as an “essential business.” Twenty-four hours later, Kelly flipped and said while he believed that to be true Monday – probably meaning someone above him believed that to be the case – “Tesla is not an essential business as defined in the Alameda County health order.”

Replying to the Sheriff’s closure order: the wit and wisdom of the twitterverse.

Naturally, this wouldn’t be Tesla without drama and virtual fistfights online. Above is a selection of comments on the stop-production order, saying, for instance, that some vocal proponents of stopping Fremont production are short-sellers of Tesla stock (who make money if it goes down) … that it’s not clear what’s a basic minimum operation (see below) … and that Tesla workers are left in the dark.

As in many areas that have either ordered or urged non-essential businesses to close, the exceptions include, per the Alameda County order:

  • Healthcare operations (obviously)
  • Businesses provide food, shelter (as opposed to a tax shelter), social services
  • “Necessities of life” for the poor or needy
  • Sellers of both fresh and non-perishable foods including 7-Eleven type stores
  • Gas stations, banks, cleaners
  • “Businesses and services necessary for maintaining the safety, sanitation and essential operation of a residence.”

What other car-related businesses are exempted? “Gas stations and auto-supply, auto-repair, and related facilities.” Automobile manufacturing is not. The Fremont plant makes the Model 3, Model X, Model S, and now the Model Y compact SUV.

Tesla shocked the world by announcing that not only it would ship the Model Y on time but that the first cars were being delivered to the first-in-line customers (Tesla employees) this week, almost a half-year ahead of schedule. The company was obviously hoping to produce more of everything but especially the Model Y. Tesla has been hoping to produce a half-million cars in 2020.

Easy come, easy go: Tesla stock this week is trading at 40% of its peak value, $ 969, a month ago when the company was worth $ 140 billion (chart: NASDAQ/Google)

Tesla is mostly about cars, electrification, and the triumph of technology. But it’s also about stock price. Tesla earlier this soared to as much as $ 969 a share last month and a market cap (capitalization, the stock price multiplied by the number of shares held by investors) of more than $ 175 billion, more than the value of GM, Ford, and the USA parts of Fiat Chrysler.

Even as the stock market as a whole suffered the fastest major correction (read: precipitous fall) in history in the span of a few days, things have been even tougher if you held TSLA. Shares are down about 60 percent from their peak in February 2020. Anyone who bought Tesla stock before late December (at around $ 400) is still above water. People who bought since then have problems.

In spite of this, Tesla’s future seems bright: In the US where 70 percent of new car sales are non-sedans, the Model Y could become Tesla’s biggest seller, since it’s an SUV where the current best-seller Model 3 is a sedan. Additionally, investors who want the purest stock market play on battery electric vehicles have turned to Tesla, since that’s all they make: EVs.

Or this week, EVs are all they’re not making.

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