Thailand's Blockchain Move, Global Online Shopping Nuances & the Semiconductor Industry
Thailand explores introducing a new digital wallet; diverse online shopping behaviors from around the globe; and TXOne Networks' role in bolstering security of the semiconductor industry.
Hello dear reader,
I’ve decided to shake up the newsletter a bit and have introduced a new section called 'Company of the Week.' This is probably not the final shake-up, however.
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Thailand is Creating a Blockchain-based Digital Wallet (maybe)
The Pheu Thai Party won the recent general election in Thailand, and one of the key reasons for their victory was their digital wallet proposal. The Pheu Thai Party plans to distribute 10,000 baht, equivalent to $275, to every Thai citizen aged 16 and above. This money can be spent within a four-kilometer radius of the recipients' homes. Given that the average salary in Thailand stands at $413, this sounds appealing.
The premise behind this idea, like many others of its kind, is straightforward: giving money to people across the country would lead to both increased purchasing power and less centralized spending.
According to the party’s plan, this digital wallet is projected to add 5% to the country’s economic growth. To finance the project, the government plans to use:
An increase in state revenue — 46% of total financing;
Savings from improved budget management — 23%;
Additional tax earnings from the policy's implementation — 18%;
Savings from eliminating redundant welfare budgets — 13%.
People are generally happy with the plan, and why wouldn't they be? Although 56% do express some level of concern about inflation due to an increased monetary supply, 79% said they would accept the one-time subsidy. 60% believe that the party’s popularity will suffer if the plan is not realized. However, since the plan’s announcement, several issues have arisen.
1. The digital wallet solves a problem that doesn’t exist. According to a representative from the Bank of Thailand, consumption is expanding and the labor market is recovering. A similar sentiment is echoed by the former Thai finance minister, who believes the funds would be better spent on upskilling needs. Indeed, private consumption as a percentage of GDP has been steadily rising, reaching its highest level in a decade in early 2023 and expanding by 7.8% in Q2 of this year. While one could cite GDP’s growth, which has been slower than before the pandemic, as a reason to stimulate additional growth, to some extent, that can be attributed to a slowdown in exports.
2. Inflation and other fiscal concerns. An obvious concern relates to inflation. Additionally, there are risks that the scheme will push Thailand to hit the ceiling of 70% debt to GDP two years ahead of schedule. 99 economists opposed the plan, mentioning, among other things, that such a measure could lead to increased inflation, debt levels, and interest rates. The government disagrees, however, insisting that the stimulus package won’t impact inflation.
3. There’s no need for another digital wallet. Krungthai Bank, a state-owned bank by the way, has a super app, Pao Tang, with 40 million users. Through this app, users can not only make payments but also invest, schedule doctor appointments, and participate in lotteries. Then there’s TrueMoney with its 26 million users. Another option is Rabbit LINE Pay, a payment service boasting 8 million users, integrated into the immensely popular messaging app LINE, which has 50 million users in Thailand. Simply put, creating a new app seems redundant given these existing options.
4. The blockchain component hardly makes much sense. First, there are questions about why a blockchain system is even needed for this wallet. Thailand already has government issued IDs, so identifying people shouldn’t be an issue. Second, the specifics of how blockchain will benefit the country remain nebulous; general statements about enhancing the nation’s digital capabilities and promoting certain policies aren’t it.
The project has experienced delays. Originally set to debut on February 1st, it has now been pushed back to some point in Q1 2024. Time will soon tell whether it will be implemented or if the government will allocate resources to a more pressing concern.
Differences in Online Shopping Behavior Around the World
Last year, a media organization in the finance space, PYMNTS, published a report examining the shopping and payment habits of consumers in six countries: Brazil, India, Mexico, the UAE, the UK, and the US. I took a look at this report and wanted to highlight a few observations related to the digital/technological aspects.
1. UAE has the most satisfied consumers. Participants were asked how satisfied they were with various digital shopping features they used, such as buy now, pay later (BNPL), free shipping, recommendations, among others. In the UAE, every feature garnered a minimum of 87% approval. Indians echoed a similar sentiment with 85% of consumers expressing satisfaction with different facets of their shopping experience. In contrast, Brazilians showed the least contentment, with not a single feature hitting an 80% approval rate. Broadly, consumers find the return experience lacking, but highly value the availability of free shipping.
2. The ability to use a preferred payment method is paramount. Consumers ranked 34 different online shopping attributes in order of importance. Interestingly, the option to use a preferred payment method topped the list in every country. Easy navigation and a smooth mobile experience were also deemed crucial by shoppers everywhere. Some regional nuances did emerge, though. For instance, Indians prioritize the option to refund an order (ranked 2nd most important, but not higher than 7th in other countries), while British and American shoppers express greater concern about how their data is utilized.
3. Buy online pick up in-store (BOPIS) is not the norm, but getting more popular. Only in the US over 30%, or 31.5% to be precise, used BOPIS last year. Consumers in other countries weren’t as enthusiastic about omnichannel commerce, mostly preferring home deliveries. However, BOPIS demand has seen an uptick, with a 26% increase in consumers opting for it. The primary motivation? Cost savings. Picking up an order in person often proves cheaper than bearing direct or hidden delivery charges.
4. Digital wallets are gaining traction globally. In every country surveyed, a larger proportion of consumers have started using digital wallets for in-store purchases. The extent of this adoption varies widely: from a modest 2.8% in Mexico to a significant 34% in India. Interestingly, there's no direct link between a country's level of development and the popularity of digital wallets. For instance, 19.6% of UK consumers used a wallet, compared to just 6.5% in the US.
One last observation concerns voice commerce. I remember there was so much talk about voice search and commerce around 2015, with bold predictions that it could replace traditional visual interfaces. Some even projected that voice commerce might hit $40 billion by 2022. Well, as it turned out, no one cares about buying using voice commands: in 5 out of 6 countries voice purchasing was the least important e-commerce feature.
Company of the Week: TXOne Networks
This week’s company of the week is TXOne Networks. Founded in 2019, they're dedicated to securing industrial and critical infrastructure environments. Even though they position themselves as a solution for the entire industry, their emphasis on the semiconductor sector is evident. From the background video on their main page where the computer chip is the first thing you see, to products purpose-built for the semiconductor industry, right down to semiconductor companies like MediaTek being among their investors.
TXOne Networks offers three solutions:
Security Inspection — for scanning standalone devices;
Endpoint Protection — to shield Industrial Control Systems (ICS), which are integrated systems of hardware and software that oversee or handle industrial processes;
Network Defense — aimed at protecting the local network.
The company is based in Taiwan, and Taiwan is known for two things: i its ongoing tensions with China and its stature as the global semiconductor hub. Taiwan holds sway over 64% of the foundry market1, with 92% of the planet's most advanced chips being churned out in the region by a single powerhouse — TSMC. Semiconductors stand as the backbone of the contemporary economy. They lay the groundwork for every computing gadget that stores or processes data. The massive economic role of the semiconductor industry, combined with the incredible complexity its production entails, makes the sector both alluring for competition and unforgiving of mistakes. Precision in design, production, and shipping is vital not only for the industry but also for the world's functioning.
Even with super stringent guidelines in place2, the sector isn't immune to cyber onslaughts, TSMC included. The perpetrators behind these breaches aim either to swipe confidential corporate data, with some even speculated to be state-sponsored, or to launch ransom attacks. TSMC has been a target of such attacks, with a 2018 malware attack draining around $85 million from its coffers, and a more recent cyber strike this past June, where the culprits demanded a staggering $70 million ransom (important to note that the breach occurred at one of TSMC’s suppliers).
This presented TXOne Networks with an opportunity:
A $115 billion dollar industry in Taiwan alone;
An industry that holds global significance;
The leading player, TSMC, has a net profit margin over 45%, so they can easily afford a security upgrade;
There are further opportunities for vertical integration, as most security solutions are imported.
With the geopolitical landscape becoming more turbulent, TXOne Networks might just see a surge in demand.
Foundries are factories where semiconductors are produced.
For instance, visitors aren't allowed to bring their phones and computers into the factory, and suppliers must check their machines for viruses.