Hello and welcome to World Business Report from the BBC World Service.
I'm Sam Fenwick. Coming up today, a peek into AI profits.
In a moment we'll hear from the president of ASML, the giant Dutch semiconductor company.
Iceland's payment revolution, why it's rolling out a new online system.
The reason that we have a very rapidly diminishing usage of cash in Iceland, We have about 1 % of payments in stores made by cash.
The rest of the payment is made by international cards.
Can airports spur economic growth?
The UK government is optimistic they can.
And Ghana's nutty boost.
You've got cashew nuts here.
Yes. People like cashew.
People like cashew.
How a humble nut could significantly boost Ghana's economy.
So today, we've gained an insight into the robustness of the AI market.
ASML, the world's largest semiconductor manufacturing machine maker, has released its latest earnings, revealing that 2024 was a record -breaking year and that its outlook for 2025 remains equally promising.
I spoke to ASML's President and Chief Executive Officer, Christophe Fouquet, about how the last 12 months have been for the business as a company that's key in supporting chip making.
We have seen a major shift on the market with AI, which created, of course, a huge opportunity for the future and some turbulence on the short term, as we have seen in Q3.
And I'm also very happy that in the last 12 months, ISML came up with a major technological breakthrough that would be very useful in the coming years for our customers.
So AI is driving demand, but you've also talked about uncertainty.
with some customers.
Who are those customers and what are they uncertain about?
Well, I think I won't go to customer name, but you have two types of customers.
So AI is driving the demand and the demand is for high power computers and for high bandwidth memory.
So that's logic, memory.
In 2024, some of our customers have been very successful in providing the right technology for those applications.
And those are the customers that are doing very well.
some of the other players are playing a bit catch up.
And for them, of course, I would say we are looking maybe at a delayed success on AI.
So who are those that are having to catch up?
I think if you go back to some of the press last year, I think some of the names have been mentioned many, many times, so I don't need to do that.
It's also true for the winners.
I think they are well known.
This week has been a busy week for AI and we've seen that a Chinese artificial intelligence startup, which seems to be able to show that AI systems can be made more efficiently.
Does their approach question the need for powerful AI hardware like the stuff that you're making?
No, it does not. AI creates a huge opportunity in this market.
So I think that the fact that a new company brings novel approach to try to beat whoever maybe seems to be the leader today is very, very normal.
And we believe also that for AI to be really accessible to a very large public, the cost of AI has to go down.
So, I think innovation that will drive costs down, either for the model, later on with the hardware, later on with the process, I think all of that is very necessary.
So, what you have seen in the last two weeks, I think that we will see a repeat of that, most probably for the next few years, because this is typically the way an opportunity like AI can become reality.
So from my point of view, this doesn't change the fundamental at all.
I think you still need the hardware because there's still a need to invest heavily today in R &D.
But over time, there will be a need also to really reduce costs, reduce energy consumption so that AI can really reach everyone.
Can we talk about export controls now?
These are rules which prevent you selling some of your kit to China.
There are restrictions from the US government as well as the Dutch government.
How difficult do they make your business in navigating businesses in China and the US?
The difficult part for us usually on that is the lack of stability.
You don't know exactly what you can, cannot do tomorrow.
I think that's been the biggest challenge.
Once the rule is set, we are a company that acts within the law and we are going to adjust to that.
I think stability is the key word here.
We hope, of course, that at some point of time we reach that point.
Do you agree that there should be restrictions on what you can sell and to whom?
Well, I think it's, you know, it's not, I would say, a question for ASML when it comes to matter of national security.
We are good citizens in this case, and we have to trust our political leader to make the right call for their citizens.
I think as a citizen, we also understand that in some cases, this is a tool that may be used.
Some companies have tried to circumnavigate those rules by sort of making tweaks to their technology so it doesn't come within a particular regulation.
Is that something that you've looked to do?
No, I think the biggest decision when it came to export control was to prevent the export of EUV to China.
And well, we have not shipped any tool there.
So I think it's not something we'll look at.
I think you should have a discussion before if you believe that the decision is not the best.
I don't think that trying to go around decision is right in any way.
Your net sales are up.
They are flying. You've said it's been it's been a very good year, 2024, but the share price over the last year has been down 20 % and then down again 12 % this week, which perhaps suggests that investors are concerned about the future growth of the company.
Do you think they're right to be concerned?
When we look at the opportunity for SML, we always look at the long term.
We had in November, what we call a capital market day, where we shared that view with our investor, but also with a very large public.
And we are focusing on the long -term because we know by experience that this industry is very cyclical.
We also know that when you have a new technology like AI, you know, it's not going to just be a walk in the park, right?
You're going to have challenges, you're going to have changes.
So this is in the long -term that you win or you lose.
I think a lot of what you describe is more related to reaction on short -term news than anything else.
And therefore you see those swing.
But this is something we don't really comment or try to even manage, because I think this has to do with the way people see that opportunity at a certain point of time.
But if you look at the long term, I think people should have no doubt that AI is a huge opportunity.
So when you look to the long term, when do you see things starting to sort of level out?
Things start to reach more normality for a business like yours?
Well, if you look at this story, I think there's no such a time.
I think the industry has been cyclical forever.
We went from downturn, upturn.
So this is something that is part of our industry.
I think when it comes to AI, maybe more specifically, we don't know exactly how AI will be rolled out.
We believe this will take a few years.
I would say mostly by the end of the decade when it comes to AI, the rules of the market will be more clear.
You know, I think we have another couple of years where you may see people getting extra changes.
So this is in the long term that you win or you lose.
I think a lot of what you describe is more related to reaction on short term news than anything else.
And therefore, you see those swing.
But this is something we don't really comment or try to even manage, because I think this has to do with the way people see that opportunity at a certain point of time.
But if you look at the long term, I think people should have no doubt that AI is a huge opportunity.
So when you look to the long term, when do you see things starting to sort of level out, things starting to reach more normality for a business like yours?
Well, if you look at this story, I think there's no such a time.
I think the industry has been cyclical forever.
We went from downturn, upturn.
So this is something that is part of our industry.
I think when it comes to AI, maybe more specifically, we don't know exactly how AI will be rolled out.
We believe this will take a few years.
I would say mostly by the end of the decade when it comes to AI, the rules of the market will be more clear.
You know, I think we have another couple of years where you may see people getting excited again because of different news.
So a few more days like this to come.
I'm certain, yes. That was ASNLs.
Christophe Fouquet speaking to me a little bit earlier Well what do investors think about AI?
Let's have a chat now with Ross Mould He is the investment director at AJ Bell Publicly bosses always say that don't they They never worry too much about daily share fluctuations but what do you think they say in private about them?
I'm sure that those who are lucky enough to have shares or stock options in their company would only be human if they were to look at the valuation of that but the best managers manage the assets of the company to get the best risk -adjusted returns over time, invest in their competitive position, invest
in what makes customers come to them and want to pay for their products and services.
And they don't worry about the share price.
They cannot manage the share price because in the end, they've very little control over it.
You would have a bit of a heart attack, wouldn't you, every day if you were looking at the share price, especially of some of these AI companies.
It's very volatile, isn't it?
Yeah, and as a manager, you can't adapt for that.
They're sometimes trapped in this terrible situation of having to report results every three months to appease their shareholders, and I understand that.
But the best managers look at investing in R &D, in research and development for the long term and products and service.
And ASML is a glorious example of how that's worked.
They had two major competitors in Japan, Nikon and Canon, 15 or 20 years ago.
And they've kicked them right out of the way.
Russ, stay there. We will come and talk to you again in a moment.
We're going to head to the independent London -based newspaper.
Does this feel like, here we go again, Simon, it's back on the cards?
Very much so. And I can tell you that at Paris, Charles de Gaulle, at Frankfurt, at Amsterdam, Schiphol, at Istanbul airport and Doha, Dubai and so on, they're not really too miserable about this, even though, of course, London Heathrow is the busiest airport in Europe.
They know that they can carry on growing and Heathrow cannot.
I did actually, after the UK Chancellor spoke about supporting this, ask Heathrow itself When's this going to open then?
And they say, well, we really don't know.
But even though Britain's biggest budget airline, EasyJet, has said, yep, we're going to fly in and out of Heathrow, I wouldn't book any tickets until at least the early 2030s, by which stage the aviation industry right across Europe, right across the world, may look very different indeed.
If you look at some of those airports that you've mentioned, so we've got Paris, Charles de Gaulle, we've got Frankfurt, they've both got four runways.
Amsterdam Schiphol has got six runways.
It is hard for the UK to compete there, isn't it?
Well, it is as a hub airport.
But the other rather contradictory factor is that London is by far the biggest city in the world for aviation.
Many more millions of people fly in and out of the UK capital than out of New York, out of Tokyo, out of Beijing, Shanghai, any of those airports at any of those cities is just that london is dependent on some really creaky infrastructure it hasn't really built a full -length runway for the last 70 years
at the same time as you say as all those airports have developed but the hope is that at least by signaling this by getting things moving london may be able to compete during the 2030s meanwhile while it is still going to continue to be for people who are changing planes at Heathrow, maybe getting used
to the idea that you will be flying around in circles over southeast England for a few more hours while you wait to land.
It is absolutely full.
When it does work, it's the busiest two runway airport in the world.
It works fantastically efficiently, but I'm afraid an awful lot of the time, as we've seen over the past month with repeated closures, delays, diversions, cancellations, it doesn't always work at all.
And you mentioned that those airports that we've listed off aren't going to be worried about them taking business.
But that is the aim of the UK government, isn't it?
They say it's not to increase air traffic, but it's to take business from those European airports.
Yes, I mean, there's various ways of looking at this.
Heathrow itself wants to increase by 50 % the number of flights.
You could actually build a third runway and improve the environment because you will have less so -called stacking of aircraft.
But really, it is just a question of how far the U .K.
slips behind those airports in continental Europe, in the Gulf.
It really will just wait and see if somehow the U .K.
can get through this.
Or indeed, if maybe a decade from now, when we're next talking about this, things have changed radically and maybe the world is traveling in different ways.
We shall see, but at the moment, business as usual.
Thank you very much, Simon Calder there, the travel correspondent at The Independent.
Ross Mould is with us today.
So, Ross, there's shovels in the ground which will generate jobs, you know, building this airport runway, even though Simon Calder says it's going to be many, many years away.
What other types of growth can airport expansion bring?
Well, once you've got the people who are driving the diggers or carrying the shovels, then they'll be going out to spend their pay packets in restaurants or shops.
You've got travellers coming through who may find the UK now a more attractive, easier destination to get to with a more modern airport.
There'll be shopping and dining at the airport, more tourism, and also cargo as well.
So there are lots and lots of different possibilities that you could use an extra runway to drive growth.
And do you think that they will actually do as much as what the government is hoping?
In fact, bring in enough to the economy to warrant this extra runway?
And the odds on the thing being built at the moment are pretty long, given that we've been talking about this since 2009.
mind. So actually in delivering on the promises, well, that would be the next amazing thing to see.
I'd love to see it.
We will wait and see what happens with that.
Russ Mould is staying with us throughout the programme.
We'll come and talk to him again in a few moments time.
You're listening to World Business Reports from the BBC World Service with me, Sam Fenwick.
As African nations attempt to recover from the economic downturn caused by the pandemic, many are turning to their startups and small businesses to drive growth.
But that's a challenge.
Many predominantly agricultural African economies still rely heavily on imported food.
Ed Butler's been exploring this issue in Ghana, focusing on one widely cultivated local product, the cashew nut.
So we've stopped at the side of the road now.
This is just one of the busiest thoroughfares of central Accra.
There's a lady here with a whole bag of nuts.
Can I see you've got cashew nuts?
It's with me, Sam Fennec.
As African nations attempt to recover from the economic downturn caused by the pandemic, many are turning to their start -ups and small businesses to drive growth.
But that's a challenge.
Many predominantly agricultural African economies still rely heavily on imported food.
Ed Butler's been exploring this issue in Ghana, focusing on one widely cultivated local product, the cashew nut.
So we've stopped to the side of the road now.
This is just one of the busiest thoroughfares of central Accra.
There's a lady here with a whole bag of nuts.
Can I see? You've got cashew nuts here.
Yes. People like cashew.
People like cashew.
I'm buying my nuts.
And they're costing me about 75 US cents for, to be honest, a pretty tiny 30 gram or one ounce bag.
Now, these nuts have been shelled, roasted and packaged, but I've done the mass, and this tiny bag I'm crunching on now, it comes at a pretty astonishing mark -up.
40 times the farm gate price.
Yep, that's 40 times more than you pay for these raw nuts from a Ghanaian farmer.
So how does that happen?
My theory of why Africa's economic transformation has been slow, which is we focus a lot on the supply side.
How do we get the soil to yield more cashews?
But a lot of the beauty is on the demand side.
Bright Siemens is a social commentator, innovator and entrepreneur himself in Accra, and he's given a lot of thought to this cashew question, what he calls a basic market failure that's symptomatic of many others in Ghana.
So basically, Ghanaians haven't learned to love cashews yet.
Very good. You need to turn Ghanaians into cashew lovers.
And that's a different set of capacities.
the best entrepreneurs are not performing.
It's massive brain drain.
Many of them have left.
And you don't have an entrepreneurial class that can create new markets.
But it's not all bad news.
Some Ghanaian entrepreneurs are also cracking open the local market.
Hello. Hi. Good to have you.
Yes, it is. This is Mildred Akutia, founder and CEO of Akwaba, a cashew processing firm based on the outskirts of the capital.
It's an automated roasting machine.
We've had to acquire this to increase our efficiency and scale us up and all that.
In a residential house that she's adapted into affect foreign multinationals.
Currently, we can't even meet demand.
We can't get enough canals to roast because we have a lot of foreigners from India and Vietnam coming in with funding with lower interest rates.
And they are able to carry a lot from Ghana away.
So is that why I've seen in the marketplace Southeast Asian cashew nuts on sale here in Ghana?
Because that seems crazy, doesn't it?
You're growing millions of tonnes of cashews here in Ghana and yet they're being imported all the way from 10 ,000 kilometres away.
Yeah, that's very true.
So these guys come in with a lot of funds and they're able to buy in bulk.
And so they have their economies of scale, unlike local processors who don't have a lot of funding and are struggling to keep up.
And that competition from better -funded and more powerful exporters is what's driving many Ghanaian processors out of business, according to Darren Achimoglu.
He's a Nobel Prize -winning economist and author of Why Nations Fail.
He says supporting entrepreneurs like Mildred with cheaper finance and better access to foreign markets is going to be the only way you'll see domestic producers like her succeed in their own markets.
These entrepreneurs really need the foreign market because, you know, with the exception of South Africa, Nigeria and a few other places, the domestic market is not large, the middle class is small, so they need the outside market.
And the government has very little capacity.
So the future will have, hopefully, higher government revenues and therefore better services in Africa, but it's getting there in a coherent and non -distortionary way is not easy.
And in a global era of more tariffs and rising trade barriers, there may not be any short -term fix for Ghana's cashew processors or cashew eaters like me.
Ed Butler reporting there for us from Ghana.
Now Iceland is creating a domestic payment system.
They're doing it because they want to create a more secure, independent and cost -effective payment infrastructure for the country.
The legal framework for the new system was agreed last year because there was an increase in cyber attacks.
I spoke to Cedric Goodjohn's daughter.
She's the CEO of a company owned by the Central Bank, which operates online payment systems.
And I started by asking her to explain.
For Ghana's cashew processors or cashew eaters like me.
Ed Butler reporting there for us from Ghana.
Now, Iceland is creating a domestic payment system.
They're doing it because they want to create a more secure, independent and cost effective payment infrastructure for the country.
The legal framework for the new system was agreed last year because there was an increase in cyber attacks.
I spoke to Cidrig Gudjon's daughter.
She's the CEO of a company owned by the Central Bank, which operates online payment systems.
And I started by asking her to explain the types of attacks that they're experiencing.
There are quite few reasons for this payment system in Iceland.
One of them is just increased risk of financial attacks, not some specific risks or attacks that we have been facing.
There's also the reason that we have a very rapidly diminishing usage of cash in Iceland.
We have about 1 % of payments in stores made by cash in Iceland.
The rest of the payment is made by international cards.
I understand. So if that system, if that payment system goes down because there's been a cyber attack, then people won't be able to pay for anything.
Yeah, we will be facing some difficulties if the card schemes would be attacked in Iceland.
And just explain to us what some of these financial attacks look like.
It is quite difficult because we have not been talking about this payment solution because of some specific attacks.
But overall, the attacks that we have been facing in Iceland are some typical DDoS attacks on financial infrastructure.
Do we know where those attacks are coming from?
No, there's not something that we can declare right now.
OK, so how is this new system going to be more secure?
This new system is supposed to be an option to other payment methods in Iceland.
This is supposed to be a centralised infrastructure for account -to -account payments in Iceland.
And today we don't have any infrastructure for account -to -account payments in Iceland.
So this infrastructure is supposed to make us more resilient in payments.
And how will it work alongside other payment systems?
This is supposed to be a core infrastructure owned by the Central Bank of Iceland.
The payment service providers are supposed to be able to connect to this core infrastructure and provide payment solutions for customers.
So we hope that this infrastructure will be able to enhance competition in payments and make the payment system in Iceland more and be a payment solution that could operate in Iceland if we lose connections through our seed data cables.
And presumably because you are an island a lot of the transactions that are made in Iceland or on Iceland will be going to your neighbouring countries overseas so you're fairly dependent on those cables.
Yeah we are very dependent on the cables because as the development today is also in a way that we are more and more moving our data to clouds and the clouds only work if we have connections through our data cables.
That was Sigridor Gudjon's daughter and she is from Iceland's Central Bank.
Well we're coming to the end of the program but we've just got time to have a look ahead at some upcoming decisions from the Federal Reserve, the US Federal Reserve regarding interest rates.
Ross Mould, Investment Director at AJ Bell has been with us on the program today.
Now we're expecting them to hold rates steady.
Why is that? That's correct Sam, yes, at 4 .5 % and the reason is that inflation has started to warm up again, it's re -accelerated and at 2 .9 % is running against ahead of the US Federal Reserve's 2 % target.
We should also note that wages are running above inflation at 3 .9%, unemployment is historically low at 4 .1 % so it would be unusual for the US Federal Reserve to be cutting aggressively now unless it was frightened of something else, which could be the strong dollar, which could be the US federal debt
and it could be the new US President.
It could be those tariffs.
I thought we could maybe get through a programme without mentioning the keyword.
The last time, I mean, this comes after three straight reductions, though, doesn't it, by the Fed?
And two more reductions are expected by Christmas to take us down to 4%.
The Bank of Canada has just cut for the sixth consecutive time and the European Central Bank is expected to cut on Thursday.
So central banks are still looking to ease and that's because of this growth word that we've been talking about so much in the UK.
They are looking to try and support economies to help them grow out of the considerable debts that in the West have been accumulated, particularly since the great financial crisis of 2007 to 2009 and then COVID five years ago.
And you mentioned the European Central Bank.
We had Sweden. They did cut rates today, like Canada.
They did. We've had eight interest rate cuts globally this year now against just two increases.
The direction of travel still seems to be down.
It's just a matter of how far and how fast.
Well, the Bank of Canada cited US trade policy, particularly the threat of tariffs as a major source of uncertainty for their economy.
And we'll be talking more about that in tomorrow's programme.
That is all for today.
Thank you very much to Ross Mould.
And thank you to you for listening.
