Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.
Speaker 1: I'm Joe Wisn't Thal and I'm Tracy Away so trazy
Speaker 1: you know. A long time ago. Now it feels like
Speaker 1: we had the joke about, well, should we just turn
Speaker 1: this into a semiconductor podcast? Yes? Yes, and you've you've
Speaker 1: really run with that joke. Okay, Well, the thing is
Speaker 1: is we keep we can't escape it, like we keep thinking,
Speaker 1: like you know, we like first started talking about it's like, oh,
Speaker 1: this is like an interesting topic for ries. But it
Speaker 1: turns out, little did we know when we first started
Speaker 1: covering this story on the podcast, which I think was
Speaker 1: the last October or last November, that actually you would
Speaker 1: blow up into this huge issue semiconductor manufacturing that became,
Speaker 1: like I sent, a national topic of national news far
Speaker 1: outside sort of like the niche audience, right, semiconductors secretly
Speaker 1: rule all our lives. And I'm joking obviously, but nowadays
Speaker 1: everything is so high tech that there are a lot
Speaker 1: of appliances that you wouldn't necessarily think of that have
Speaker 1: chips in them. Um, So smartphones, computers, things like that obviously,
Speaker 1: but also lots of cars um And I saw one
Speaker 1: headline float by I haven't had a chance to read
Speaker 1: it yet, but something about aluminum producers warning of a
Speaker 1: downturn because of a chip shortage as well. So chips
Speaker 1: are everywhere, and I think we're really starting to realize
Speaker 1: how important they are, and also how important chip makers are,
Speaker 1: and of course, as we've been discussing, there's a limited
Speaker 1: number of those, right, And so anyone who sort of
Speaker 1: listened to our series we started talking about the decline
Speaker 1: of Intel. We talked about why US manufacturing and generally
Speaker 1: sort of gone away, and we talked, of course about
Speaker 1: the dominant role of Taiwan Semi and it's like almost
Speaker 1: like again it was not intentional, but now there's like
Speaker 1: this huge thing and everyone is waking up to how
Speaker 1: dependent we all are on Taiwan Semi Conductor and a
Speaker 1: few other major fabs, and it's a it's become a
Speaker 1: legit U S national security question, and we know the
Speaker 1: Biden administration is looking at it and you know, looking
Speaker 1: at different ways to reduce US dependent. So we really
Speaker 1: can't get away from this story. And obviously we're gonna
Speaker 1: be talking about it again today and I bet it
Speaker 1: won't even be the last time we talked about it.
Speaker 1: I think he might be right on that one. So, uh, well,
Speaker 1: I'm really excited because actually we're going to be uh
Speaker 1: going back to our very first guest who gave a
Speaker 1: sort of great overview of some of the best clear
Speaker 1: English descriptions of the challenges of chip manufacturing, and uh,
Speaker 1: it was the first one. Everyone should go back and
Speaker 1: listen to that one. We're then talking about the decline
Speaker 1: of Intel, but we're gonna zoom out a little bit
Speaker 1: and get the acute shortage that the world is facing
Speaker 1: right now. Why are so many companies struggling with their
Speaker 1: ability to source chips? And then the longer term issue
Speaker 1: of this is scarce. The capacity is scarce, and even
Speaker 1: if we get through this current phase, there is going
Speaker 1: to be still this sort of perhaps a dangerous over
Speaker 1: reliance on a few manufacturers that are capacity limited. So
Speaker 1: very excited we're going to be speaking again second time
Speaker 1: on the show. Stacy Raskin his managing director, Senior analyst
Speaker 1: U S Semi Conductors at Bernstein Research. Uh, Stacy, thank
Speaker 1: you so much for coming back on out lot. That's
Speaker 1: fantastic to be back. Thank you for having me again.
Speaker 1: What's it like I mean, you know, you're like a
Speaker 1: star now because at one point semi conductors were just
Speaker 1: like this thing that maybe investors mostly cared about. But
Speaker 1: it really does feel like, you know, correct me if
Speaker 1: I'm wrong, but it really does feel like in the
Speaker 1: last few months, everybody is now obsessed with this story.
Speaker 1: Uh you know, I think I may have mentioned this
Speaker 1: last time I was on, But that's one reason I
Speaker 1: love this space. It's literally a ground zero for everything
Speaker 1: that's been going on. And it's it's you know, it's
Speaker 1: not just the last few months. It was all the
Speaker 1: trade and the PRIs and and then the burgeoning geopolitics
Speaker 1: and and now obviously the shortages and everything else. Like
Speaker 1: it's and like you have to remember, I mean, like
Speaker 1: the global electronics like enterprise. Like I mean, it's like
Speaker 1: a four five trillion dollar industry, like worldwide. If you
Speaker 1: add up all the PCs and and and and all
Speaker 1: of the consumer electronics, and then all the services and
Speaker 1: software and everything that that goes with that trillions and
Speaker 1: trillions of dollars, and it all rests on semiconductors. Semis
Speaker 1: are the fundament of all of that. Like, we don't
Speaker 1: have any of that without semi conductors, and so I
Speaker 1: think it's a phenomenal place to spend time. It's and
Speaker 1: and it's and it's job security for me too, So
Speaker 1: that that's a yeah, that's that's the most important thing
Speaker 1: that helps for sure. So I guess just to begin,
Speaker 1: maybe you could describe how bad things are at the
Speaker 1: moment in terms of the chip choic UM. It depends
Speaker 1: on on the market. Obviously, automotive is getting the most pressed,
Speaker 1: and that is where the shortages are most are most acute.
Speaker 1: Although it is they are starting to bleed into other
Speaker 1: areas UM slowly, but they are and I think the
Speaker 1: driver is a little bit different. Let's talk a little
Speaker 1: bit automotive, and automotive was was sort of unique. UM.
Speaker 1: Most end markets in SEMIS through COVID actually proved to
Speaker 1: be fairly remarkably resilient. UM. Automotive, however, had some fairly
Speaker 1: sizable shocks, and if you sort of look at like
Speaker 1: end market production for off for cars in terms of
Speaker 1: like year of year growth in the trough quarter of COVID,
Speaker 1: it was actually worse than what we saw on the
Speaker 1: finding and the trough court of the financial crisis. I
Speaker 1: think in COVID the in the in in was a
Speaker 1: que two or whenever it was or whatever month I
Speaker 1: was like, I remember it was down or something that
Speaker 1: in terms of production it was a lot. And then
Speaker 1: it's obviously production snap back faster than the financial crisis,
Speaker 1: but it was it was a very big hit. Part
Speaker 1: of that was obviously because of of supply. So we
Speaker 1: have a lot of auto plants that are in obviously
Speaker 1: in places like China, but also in like the US
Speaker 1: and Europe, and they were all shut down with the
Speaker 1: early lockdowns. And then there was a demand shock as well,
Speaker 1: and people were trapped in their houses and they weren't
Speaker 1: driving anywhere, and autos are pretty big purchase and so
Speaker 1: people weren't like rushing out to go by cars. And
Speaker 1: because of that, the auto oams, I mean they kind
Speaker 1: of in some sense did this to themselves. They went
Speaker 1: and they canceled all the all all the orders for
Speaker 1: all the chips and everything else that goes into this
Speaker 1: stuff because demanded collapse. And and the problem is when
Speaker 1: they canceled those orders for companies like you know an
Speaker 1: n XP and in Finnian that that have their own
Speaker 1: factories and they reduced their factory loadings, they didn't make
Speaker 1: the parts, and you know for parts that were being
Speaker 1: outsourced to companies like t SMC. You know, those orders,
Speaker 1: those auto orders went away, but like other demand for
Speaker 1: other things was so strong that capacity immediately got backfilled.
Speaker 1: Right now, we go forward a little bit and you know,
Speaker 1: some parts of the world, you know, even in the
Speaker 1: US and in Europe, like the auto plans started to
Speaker 1: open up. And then parts of the world like China,
Speaker 1: who actually came out of COVID. You know, I guess
Speaker 1: good for them, much better than we have in the
Speaker 1: U S. Here, demands started to go off the charts
Speaker 1: because you know, people they didn't want to take public transportation,
Speaker 1: they wanted to drive, and so there's a lot of
Speaker 1: pent up demand and everything, and so you have this
Speaker 1: massive demand snappeck and so they all went and to
Speaker 1: recover the orders. But the problem is you can't turn
Speaker 1: a semiconductor factory on and off like a light switch.
Speaker 1: Like if I if I take my factory loadings down,
Speaker 1: if I reduce that I mean, if I start away
Speaker 1: for a raw way for today, I don't get chips
Speaker 1: out the other end of the factory for three or
Speaker 1: four five months, and and this gets the last issue
Speaker 1: of automotive. They don't run with any inventory. The auto
Speaker 1: supply chain has tended to run much more on like
Speaker 1: a just in time kind of kind of inventory management,
Speaker 1: not just for semis, but like across the board. So
Speaker 1: there's not a lot of slack in the system. And
Speaker 1: so now they're coming back like hat in hand they
Speaker 1: want said there there's just no parts. It's just gonna
Speaker 1: take time to build them. And so this is problematic,
Speaker 1: and this is why we're seeing the effects to the
Speaker 1: degree that we are in automotive. Do it just to
Speaker 1: be clear when you say the effects that we're seeing
Speaker 1: to the degree that they are. I know, I think
Speaker 1: these stories have really emerged over the last month and
Speaker 1: a half or so. What do you put into context
Speaker 1: how big of a problem this is for the industry? Well,
Speaker 1: I mean, I just just came out with their forecast.
Speaker 1: They think the Q one we're gonna lose close to
Speaker 1: a million cars in terms of production levels, right, which
Speaker 1: is what I mean? You figure the industry and what's
Speaker 1: the typical like um uh, sometimes you'll hear me say
Speaker 1: star the stars is a people refer to that, um
Speaker 1: it's it's an acronym but it basically means like how
Speaker 1: many cars are they gonna sell? They are seasonally adjusted
Speaker 1: at annual rate, I think is what it stands for.
Speaker 1: For for for for car sales, UM. You know, normal
Speaker 1: stars at a ballpark, ninety million cars a year get
Speaker 1: built something like that, UM. And so we've got a
Speaker 1: million in one quarter. I mean, it's it's it's a
Speaker 1: decent amount of cars that are missing. Hopefully those will
Speaker 1: get those will get built later on in the year.
Speaker 1: You know, hopefully you can argue that demand will stick
Speaker 1: around it for now. That's the kind of impact and
Speaker 1: you can, i mean make a price assumption for what
Speaker 1: a car sells for and that's what it tells you
Speaker 1: from from an autoo em stamp and how much revenue
Speaker 1: they're they're losing. You know, GM and Ford have put
Speaker 1: out some numbers UM, and it's in you know, it's
Speaker 1: in the multiple billions of dollars in terms of many
Speaker 1: billions of dollars of law sales at least for now
Speaker 1: that that that's that's impacted in the auto supply chain. Now,
Speaker 1: in terms of the auto semi suppliers, they're actually a
Speaker 1: really good place because if you sort of look at
Speaker 1: these dynamics, it also suggests that the auto recovery from
Speaker 1: a semi standpoint has some legs to it. The reason
Speaker 1: there's and there's a number of reasons. One is obviously
Speaker 1: there's there's just selling everything that they can possibly make
Speaker 1: right now. The the the channel is bone dry, there
Speaker 1: are no parts, and so everything that the semi guys
Speaker 1: can possibly make is getting shipped and it's getting put
Speaker 1: into a car, and they're ramping their production levels up,
Speaker 1: and so that will carry on for a while and
Speaker 1: you're not just like going to set eventually to UM
Speaker 1: to go into a car. You also need to refill
Speaker 1: the channel somewhat. And then longer term, it is highly
Speaker 1: likely in my opinion that the auto supply chain may
Speaker 1: be rethinking this whole just in time inventory management. And
Speaker 1: so if they need to run with higher levels of
Speaker 1: offer inventory UM, that will be an additional layer on
Speaker 1: top of everything else that will need to be shipped
Speaker 1: to to to build that that level of parts up.
Speaker 1: Since that's good, and then if you just look at
Speaker 1: the overall level of the recovery, we're still early in
Speaker 1: the unit recovery in general. If I look at like
Speaker 1: the I H. S forecast for autos. I think the
Speaker 1: Auto star was down. I think the current forecast at
Speaker 1: least like from I h S have it up like
Speaker 1: fourteen percent year over year, but at levels that are
Speaker 1: still below pre COVID levels. And I can make the
Speaker 1: argument that post COVID, maybe auto demand in general will
Speaker 1: be higher. You know again, maybe people will want to
Speaker 1: drive more and and everything else, and so like, I
Speaker 1: can make the argument from from the semiconductor side of
Speaker 1: things that this has some legs, but we're gonna we
Speaker 1: have to see how this works out. We're gonna get
Speaker 1: more disruption. Obviously, these guys are all trying to to
Speaker 1: to build this up. But you have to remember the
Speaker 1: other problem with cars is there's a ton of semiconductors
Speaker 1: in them, and they come from all over the place,
Speaker 1: and you need all of them. You need the full
Speaker 1: kit before you can build the car. I'll make it up.
Speaker 1: But if you're building a fifty automobile, if I'm short
Speaker 1: the one two dollar micro controller that goes into you know,
Speaker 1: into the into the driver's seat of with the motor
Speaker 1: to make the seat go back and forth, if I
Speaker 1: can't get that one part, I can't build the car.
Speaker 1: I need, I need everything. And so if you you
Speaker 1: love some companies that sort of start to correct like
Speaker 1: faster than others maybe, but in general, everybody, the whole
Speaker 1: supply chain kind of has to get back into balance
Speaker 1: before things can really be smooth again. That's that's gonna
Speaker 1: take a while, but from it, it's it's probably a
Speaker 1: good thing to be an auto semi vendor right now. So,
Speaker 1: I mean, what's coming through from those conversations that cars
Speaker 1: are clearly the most affected. And this brings me to
Speaker 1: a question that I've been wanting to ask for a while.
Speaker 1: But given we have an overwhelming demand for chips versus
Speaker 1: available supply, how do chip makers actually decide to allocate
Speaker 1: their orders? So I imagine if they get an order
Speaker 1: from Sea Apple for a million chips, that's probably going
Speaker 1: to be treated differently to an order from um Ford
Speaker 1: or something like that. Yeah, and it depends. And so
Speaker 1: there again, there's two mechanisms. We may have talked about
Speaker 1: this a little bit last time. Two mechanisms that the
Speaker 1: industry uses to make chips. So one is, like I said,
Speaker 1: it's called an i d M model Integrated device manufacturer.
Speaker 1: These are companies that that that make their own chips,
Speaker 1: and then there's companies that that outsourced production to come
Speaker 1: to to what's called a foundry. This is a company
Speaker 1: like TCC in Taiwan, right, Uh. And some companies split
Speaker 1: the difference, like you know n XP they make a
Speaker 1: bunch of stuff in the house and then the outsource
Speaker 1: depending on on what it is. So in some cases, um,
Speaker 1: they've got a mixed they've got a mixed model. I
Speaker 1: guess what you're referring to primarily is probably the foundry
Speaker 1: model because they're like t SMC, is is a company
Speaker 1: that makes products for everybody across every end market. Right.
Speaker 1: This is another problem at least with auto. Auto is
Speaker 1: a very small piece of t SMC's business even in
Speaker 1: a in a normal year, it's like four percent of
Speaker 1: their revenues, and so it went down to like two
Speaker 1: in because, like I said, when they canceled those orders,
Speaker 1: like other other people backfill them, and like every everybody
Speaker 1: went bananas obviously over this. You know, we were seeing
Speaker 1: you know, like Germany and like all these other companies
Speaker 1: they were trying to put pressure on t SMC. But
Speaker 1: I mean, at the end of the day, like auto
Speaker 1: is not a very important market for t SMC it's
Speaker 1: actually very small. So I mean it's quite obvious they're
Speaker 1: gonna obviously prioritize like higher volume stuff, especially if it's there.
Speaker 1: We're actually hearing now that that they may be starting
Speaker 1: to push some of these auto orders like through the
Speaker 1: fab faster now to try to make up for this,
Speaker 1: and they can't do that. But you disrupt others. You've
Speaker 1: got to push other guys aside, and so it costs money,
Speaker 1: typically cost extra. So we'll see um what that means.
Speaker 1: But yeah, I mean in general, I mean you you order,
Speaker 1: at least at the foundry, like you put your orders
Speaker 1: and you order a certain amount of wafers, a certain
Speaker 1: amount of capacity. It it depends on the relationship. If
Speaker 1: it's a big order and you've got a long relationship, yeah,
Speaker 1: you'll probably get prioritized. If you're small. And again, you know,
Speaker 1: if a lot of this stuff, maybe the volumes aren't
Speaker 1: that high, I mean that that becomes problematic, especially if
Speaker 1: you give up those of those capacity slots, and that's
Speaker 1: that's what these guys did when they gave them up. Well,
Speaker 1: can you explain that a little bit further. How commoditized
Speaker 1: I guess is the production capacity such that Okay, the
Speaker 1: automakers canceled their orders in the spring when it looked
Speaker 1: like the industry was collapsing, or at least there was
Speaker 1: this lull. How translatable is one type of chip capacity
Speaker 1: to another such that they could just build the slot
Speaker 1: with a totally different kind of customer, I guess. I
Speaker 1: mean at t SMC, it's it's fungible on a process
Speaker 1: by process basis. So I mean we're talking like you know,
Speaker 1: I'll make it up if it's you know, and if
Speaker 1: there's something leading edge, it was some sort of advanced
Speaker 1: processor that goes into the infotainment and in the car
Speaker 1: or something maybe that's being made at t SMC on
Speaker 1: like their seven animeter like that gets canceled up. I
Speaker 1: mean like like like media tackle snap that up in
Speaker 1: a heartbeat. Right for the smartphone, it's the same process,
Speaker 1: different chip and same process on a more lagging edge thing,
Speaker 1: you know, analog. I mean, because the other thing is there.
Speaker 1: There's been a very strong like eneneral like industrial demand,
Speaker 1: and so even on mature node stuff, if that capacity
Speaker 1: opens up, it's it's it's available. And like at t SMC,
Speaker 1: I mean you're basically booking is it a certain process
Speaker 1: mostly and and you know it's in some sense it
Speaker 1: is fungible. It depends on the product. There are some
Speaker 1: products that are used more specialized manufacturing, more specialized materials
Speaker 1: or structures, and that may be less so, but by
Speaker 1: and large, I mean, especially for the stuff that's being outsourced. Yeah,
Speaker 1: that capacity is available. That's that's t SMC's business model,
Speaker 1: that's what they do. So Stacy, you mentioned the idea
Speaker 1: that the chip shortage is bad enough that maybe it's
Speaker 1: going to encourage car companies to rethink the way they're
Speaker 1: actually ordering and stop piling all these chips. I guess
Speaker 1: the other big question is will it be enough to
Speaker 1: encourage the factories themselves to try to expand supply in
Speaker 1: a meaningful way or can they actually do it? And
Speaker 1: also it will it encourage efforts by governments to build
Speaker 1: their own sort of independent supply of chips. Yeah, well
Speaker 1: that's your to your second question. That's already happening, and
Speaker 1: we can address that. And um, there's there's a whole
Speaker 1: thing around um trying to bring more to diversify the
Speaker 1: manufacturing supply chain and bring more back and back on house.
Speaker 1: And you guys have talked about this in other semi
Speaker 1: conductor odd lots the whole you know, full dependence on
Speaker 1: Taiwan and everything. So that's going on. Anyways, We've actually
Speaker 1: had some some talk, I mean, like like I know
Speaker 1: there was a letter that went I think from the
Speaker 1: s i A signed by a whole bunch of semi
Speaker 1: conductor CEOs recently, and I know people have been to
Speaker 1: the Biden administration and I know people have been pushing
Speaker 1: them to try to do something to alleviate the capacity concerned.
Speaker 1: There's not a whole lot they can do in the
Speaker 1: in the near term. I mean, even if they decided
Speaker 1: tomorrow to to fund a bunch of capacity expansion. You know,
Speaker 1: it takes years to to build this stuff out right,
Speaker 1: so nothing they're doing will will affect the issues right now.
Speaker 1: The only thing you can do right now is you
Speaker 1: can encourage the the guys that do their own manufacturing
Speaker 1: to round capacity, which are doing and I'll get to
Speaker 1: the other part of your question a minute on that
Speaker 1: UM and encourage t SMC you know, and other foundaries
Speaker 1: to to to try to accelerate UM the auto wafers
Speaker 1: through the fabs, which again they seem to be doing
Speaker 1: in some suspended will take time. A lot of the
Speaker 1: guys that do their own manufacturing actually are increasing capacity.
Speaker 1: And you know, uh NXP talked about this a little bit.
Speaker 1: They're the rounding it just it just takes time to
Speaker 1: do it. Like none of this, none of this stuff
Speaker 1: is instant, right. You have to buy the tools, you
Speaker 1: have to install them, you have to qualify them. With
Speaker 1: automotive in particular, the qualification there's a there's what's called
Speaker 1: a qualification process to make sure that the part itself
Speaker 1: works um and you have to qualify the part typically
Speaker 1: made on a specific process at a specific location. And
Speaker 1: the reason is within automotive, the reliability levels need to
Speaker 1: be really really high. Like you can't like have recall,
Speaker 1: you know, thousands of fifty dollar automobiles because the two
Speaker 1: dollar micro controller doesn't work right. So there's a whole
Speaker 1: qualification process you have to go through too as you're
Speaker 1: bringing capacity up. So it just takes time. As far
Speaker 1: as TSMC goes like, I'll be honest, like autos not
Speaker 1: a big piece of their business. I don't know how
Speaker 1: we how eager they are to bring on more automotive
Speaker 1: capacity in general, but it'll get to the other point
Speaker 1: of like where the rest of these constructions, t SMC
Speaker 1: actually is adding a ton of capacity this year just
Speaker 1: because demand is off the charts. So that was something
Speaker 1: that came out well after our last discussion, and I
Speaker 1: think it was even after when we did our t
Speaker 1: SMC specific episode, might have even been like a couple
Speaker 1: of days later. What they announced it was like something
Speaker 1: like they were gonna do twenty billion dollars in fresh
Speaker 1: capital expended from seventeen last year. Yeah. I was just
Speaker 1: gonna say, like, what is that? Put that into context
Speaker 1: because that number came out t SMC tellent somebody they're
Speaker 1: gonna do twenty eight billion in capital expenditures. How what
Speaker 1: does that mean? How big is that? It's like the revenues,
Speaker 1: it's big. Intel's average capital expenditure given your ballpark fifteen billion. Wow,
Speaker 1: it's it's it's a it's big. And some of it
Speaker 1: actually may even be Intel because like Intel will be
Speaker 1: doing more outsourcing. Although my guess is, you know, and
Speaker 1: when they saw that, people saw that guide actually people
Speaker 1: really thought Intel was would be doing a ton of outsourcing.
Speaker 1: Although when Gelsinger a talk on Intel's earnings called recently,
Speaker 1: he basically said, we think we fixed seven, Like we'll
Speaker 1: see we think we fixed that. In the majority of
Speaker 1: our products like will be in house, although they will
Speaker 1: be increasing their use of outsourcing. So but this is
Speaker 1: that this is a guide, Like I think a lot
Speaker 1: of the just in general, demand overall is off the charts,
Speaker 1: so you can look at it. And this gets to
Speaker 1: your other the question you asked like first, which is
Speaker 1: what about the other supply constrains outside of bottle, right,
Speaker 1: So they're actually being driven more by by demand versus
Speaker 1: like massive whipsaws in the supply situation, like we didn't
Speaker 1: really see all that much. And and by and large,
Speaker 1: like I said, semis in general through COVID have been
Speaker 1: pretty resilient. PCs have been off the charts, like anything
Speaker 1: that was worked from home, study from home, play from home, PCs,
Speaker 1: five G smartphones, game on solds GPUs AI, data center stuff,
Speaker 1: um in industrial in general, especially in areas like China,
Speaker 1: it has all been just really really strong. And like
Speaker 1: PCs for example, and we had three hundred million PCs,
Speaker 1: we haven't seen numbers like that in years and years.
Speaker 1: Notebooks grew like thirty five year over year, total PCs
Speaker 1: grew like sixteen or something. UM to give you some
Speaker 1: contexts there, that the prior kind of normalized run rate
Speaker 1: for the industry was like two D and fifty million
Speaker 1: units and it had been falling for a decade. All
Speaker 1: of a sudden we went to three hundred million. I mean,
Speaker 1: like demand is off the charts. UM smartphones. Smartphones have
Speaker 1: been kind of weak, but five G has been incredibly strong,
Speaker 1: and five G has much higher semiconductor content. Game consoles,
Speaker 1: go try to buy a PlayStation or a switch, like
Speaker 1: you can't sold out the same thing with a GPU, right,
Speaker 1: Like that that that demand for leading edge capas TSMC
Speaker 1: is sold out, I mean they've been sold out. And
Speaker 1: then on the more mature note stuff, industrial has been
Speaker 1: very strong. And again we can talk about some of
Speaker 1: the risks here sustainability and everything else, but like areas
Speaker 1: like in China, they were covered very rapidly. I mean
Speaker 1: China's GDP grew this year. Right. UM industrial has been
Speaker 1: very strong, and it just sucks up all that capacity.
Speaker 1: And TSMC has been tight forever and they're even tighter now.
Speaker 1: And so they're they're they're adding right and and and
Speaker 1: they see I think they talked about kind of multi
Speaker 1: year growth. You know, I can't remember twenty percent a year.
Speaker 1: I think for the next five years or something. I
Speaker 1: think that's what they said. But that's what's causing most
Speaker 1: of the other shortages. It's it's less of a you know,
Speaker 1: the the supply went offline and then you have to
Speaker 1: come back. It just demands been off the charts, and
Speaker 1: just there's only so much supply that's out there in
Speaker 1: the first place. So this feeds into something else I
Speaker 1: wanted to ask, which is how normal is it in
Speaker 1: the chip industry to have capacity constraints after a downturn,
Speaker 1: Like does it always take some time for supply to
Speaker 1: balance out with demand given it's hard to sort of estimate,
Speaker 1: you know, when people are going to start buying computers
Speaker 1: and things like that again, or and how how exceptional
Speaker 1: is this current situation versus what we've seen before. Yeah,
Speaker 1: I'll need to step you back, but first I got
Speaker 1: to tell you for Semis was not a downturn. Sendy
Speaker 1: Sendys grew six and a half percent year over year
Speaker 1: in nineteen was a downturn, and twenty eight were very
Speaker 1: twenty eighteen were very strong. Twenty was was a good year.
Speaker 1: In one I mean, if you just roll up like
Speaker 1: normal seasonality from where we are now, I mean, you
Speaker 1: could be up double digits, Like, assuming we don't hit
Speaker 1: a wall, we can get we can talk about that.
Speaker 1: But twenty was not a downturn. That and that, like,
Speaker 1: that's part of the thing. I think in your early
Speaker 1: and people thought it would be a downturn, right, and
Speaker 1: so you sort of planned accordingly, and then and then
Speaker 1: it wasn't. You sort of asked, like, how does this
Speaker 1: compare versus history? The cyclical nature of the industry has
Speaker 1: actually changed quite a bit, And so you're right, it
Speaker 1: used to be very cyclical, and you would get big
Speaker 1: swings in industry utilization and big mismatches between supply and demand,
Speaker 1: um and and and the reasons. I mean, you can
Speaker 1: go back to like two thousand for example, this was
Speaker 1: like this is the tech bubble, but it was sort
Speaker 1: of an extreme example of a supply driven cycle. What
Speaker 1: used to happen is demand would be strong, supply would
Speaker 1: be tight, Companies would build out incremental capacity because you'd
Speaker 1: be leaving money on the table, right. Pricing would go
Speaker 1: up because like end custers would be fighting to to
Speaker 1: to fill up that capacity and then to get the products.
Speaker 1: It would take you know, eighteen to eighteen months or
Speaker 1: whatever it was to sort of bring that capacity back online,
Speaker 1: to bring the new capacle on. Usually by then the
Speaker 1: business cycle would be turning all of a sudden. That
Speaker 1: and I have the charts like that. The caps of
Speaker 1: the historically would come on right when when demand was
Speaker 1: falling off. All of a sudden. You go from full
Speaker 1: fabs empty fabs. You would lower price now because like,
Speaker 1: once you have the acids in the ground, it's always
Speaker 1: better to fill it with something rather than nothing, as
Speaker 1: long as you're covering your cash cost. And so you
Speaker 1: get in the industry, units and pricing moving together, and
Speaker 1: you get really big swings. And I mean it wasn't uncommon.
Speaker 1: We used to to see like normal revenues sins year
Speaker 1: year in semi conductors. It could be in either direction.
Speaker 1: Like it was very very common. Um And like I
Speaker 1: said two thousand, two thousand and one, the tech bubble
Speaker 1: was sort of an extreme example of this kind of
Speaker 1: supply driven cycle. We don't really get these kinds of
Speaker 1: cycles anywhere. We get them in memory, but for the
Speaker 1: rest of the industy, supply and demand has actually been
Speaker 1: much better matched over the last like five to ten years. Yeah,
Speaker 1: I remember like when I first started, Like I I
Speaker 1: briefly had a job in like two thousand four, two
Speaker 1: thousand five, and it involves some equity research, and like
Speaker 1: the Book to Build race ratio. Isn't that like a thing?
Speaker 1: Didn't that used to be a big thing in semis?
Speaker 1: Maybe it still is, but yeah, it depends on the company.
Speaker 1: It still can be. But like that was like a
Speaker 1: big indicator in terms of like where we were at
Speaker 1: any given time for the industry in that cycle that
Speaker 1: you just described. Yeah, yeah, it's it's it's less important now.
Speaker 1: I mean we've we've had just like I said, we've
Speaker 1: had better you know kind of channel management. Um, we've
Speaker 1: had some companies like Texas Incidents or for example, that
Speaker 1: do a lot of stuff on consignment where the Book
Speaker 1: to Build by definition is one anyways, So it's it's
Speaker 1: it depends on the company. For some of these, like
Speaker 1: large diversified guys that sell a lot to the channel,
Speaker 1: Book to Build can still be important for the semi
Speaker 1: caap guy's Book to Build in some sense can still
Speaker 1: be important, but it's probably less meaningful metric than it was.
Speaker 1: You know, like like in the early two thousands, which
Speaker 1: is when you're talking about Yeah, like I said, these
Speaker 1: kind of supply cycles, we do get them in memory,
Speaker 1: and and memory is a supply demand driven business, and
Speaker 1: we can we have probably another whole call just on
Speaker 1: memory at some point if you wanted to. But in
Speaker 1: general for the broader industry, we don't really see massive
Speaker 1: supply cycles anywhere. What we mostly see our inventory cycles,
Speaker 1: like we'll see, we haven't so we've seen constraints before,
Speaker 1: but I we've never really had constraints that were in
Speaker 1: some part driven by a by a potential global catastrophe.
Speaker 1: That's we we've had, whether we've had natural disasters and
Speaker 1: things that have caused problem. I want to and I
Speaker 1: want to talk about that because I remember, like and
Speaker 1: this is something that actually I want to bring up
Speaker 1: because I remember, like I know, that was an earthquake
Speaker 1: in Taiwan, and briefly not Taiwan semis production of With
Speaker 1: the world so dependent on Taiwan and Taiwan is on
Speaker 1: a fault line, what are the risks of a big
Speaker 1: earthquake that seriously disrupts the semi inductor supply chain, which
Speaker 1: now as we understand, is the supply chain of everything
Speaker 1: for a sustained period of time, and how how much
Speaker 1: of that is an issue? Yeah, look so I mean TSMC,
Speaker 1: I mean they build pretty well in Taiwan, and they're
Speaker 1: prepared for earthquakes, but if we had like an eight
Speaker 1: and a half or something in Taiwan, Yeah, it would
Speaker 1: be really problematic. Um. Sure, This is one reason that
Speaker 1: they've in general, people have pushed for diversification, like like
Speaker 1: you take Global Founders for example, I mean that the
Speaker 1: global in their name is not an accident. Like part
Speaker 1: of their value proposition was we have fabs everywhere right
Speaker 1: there in Singapore and they're in Europe and they're in
Speaker 1: the US. Right Obviously, they don't do leading edge anymore.
Speaker 1: It's it's it's, it's other stuff. But that was part
Speaker 1: of the theory their value proposition was was geographical diversification.
Speaker 1: I mean, you can get disasters anywhere, obviously. I mean
Speaker 1: we even just recently we had the earthquake in Japan.
Speaker 1: You know, we we've we've got the storms in Texas
Speaker 1: right now. We've got fabs semiconductor fabs a number of
Speaker 1: them in Austin that are that were shut down because
Speaker 1: of that. But yeah, I would say, like we had
Speaker 1: some like massive like natural disaster in Taiwan, it would
Speaker 1: be problematic. Yeah, so I have a million dollar question
Speaker 1: for you. But um, you know, is is the shortage
Speaker 1: going to be intense enough or bad enough to help Intel?
Speaker 1: Intel is a little different, right, So they're they've got
Speaker 1: some shortage of less a year or so, but but
Speaker 1: not so much because I mean they brought an initial supply.
Speaker 1: It's just PC demand has been off the charts, right,
Speaker 1: So it's not like if you're asking, like, because of
Speaker 1: the shortages, are they going to pick up incremental customers? No,
Speaker 1: they do not have a custom foundry business, right, And
Speaker 1: this gets part of the part of the argument of
Speaker 1: like building new factories in the US, and I've we've
Speaker 1: written about that. We may have even talked about this
Speaker 1: the last time. I think I told you last time,
Speaker 1: like the twenty or twenty five billion dollars over like
Speaker 1: five years, which is I think what some of the
Speaker 1: numbers we're hearing about in the US, right, it's it's
Speaker 1: rounding her. I think I used the phrase we need
Speaker 1: an apollo moment, right, but you could imagine like what
Speaker 1: could happen. Let's let's imagine a scenario where like Intel
Speaker 1: was anointed a national champion and we're gonna help them
Speaker 1: build like tons of new fabs in the US. They
Speaker 1: don't have a third party business, so either they'd have
Speaker 1: to find some way to attractive into third party customers,
Speaker 1: which we can talk about why they had problems with
Speaker 1: that in past, or like that number money maybe better
Speaker 1: off going through like a non US company like a
Speaker 1: t SMC or Samson that has customers. So no, I
Speaker 1: don't think that like because of shortages at t SMC
Speaker 1: or something that like Intel is going to pick up
Speaker 1: a bunch of incremental revenue from that. We're Intel is
Speaker 1: benefiting right now, is that PC demand is off the
Speaker 1: charts right and they Intel, to their credit, had a
Speaker 1: very good year last year. I wonder whether, and it's
Speaker 1: sound horrible to say it, but I wonder like what
Speaker 1: they would have looked like if it wasn't for COVID.
Speaker 1: My guess is PCs would not have been nearly as
Speaker 1: strong as they were. And and we'll see what happens,
Speaker 1: you know, going forward. I mean just my personally, like
Speaker 1: I live in Los Angeles and I've got four kids,
Speaker 1: and like they've all been home from school since April.
Speaker 1: I bought four notebooks last year. Wow, I'm probably not
Speaker 1: buying any notebook computers for a while. Lifting like buying
Speaker 1: a notebook As a semiconductor analyst, you know, it's like
Speaker 1: I go on every I buy a new computer every
Speaker 1: few years, I like click a few buttons. I don't
Speaker 1: really care because all I do is tweet and record
Speaker 1: this podcast with Tracy. But like you know, once the
Speaker 1: computer buying process, like for someone who knows as much
Speaker 1: as you, I learned a lesson, which is to try
Speaker 1: to buy better. And I gotta give Intel credit for him.
Speaker 1: And I bought cheap PCs in the past. They don't
Speaker 1: they never last. I bought good ones on the hope
Speaker 1: that they can use them for a while. Um, but
Speaker 1: that's that's kind of and that's that's what I bought.
Speaker 1: So if you had to choose like one lasting impact
Speaker 1: of the chip shortage, like one big thing it's going
Speaker 1: to change in the industry, what would it be, Like,
Speaker 1: what is the most likely likely outcome? Well, I think
Speaker 1: there's a few things. I mean, I mean, look, we
Speaker 1: we've already talked about like all what's auto gonna do
Speaker 1: with with inventories that I think they're gonna have told
Speaker 1: higher inventories. I think that's fine. The other is, like,
Speaker 1: you know, again I wonder about t SMC, so like
Speaker 1: they've got this like massive capex guide. Is it ever
Speaker 1: gonna go structurally lower? I don't know, right, um. I
Speaker 1: mean again, they were doing you whatever it was, you know,
Speaker 1: fifteen billion, seventeen billion, Like, is that capex number ever
Speaker 1: gonna not have a two in for of it? Maybe not,
Speaker 1: Like maybe it'll stay up here. So I think that's
Speaker 1: that's quite possible that that capex level. I mean, there
Speaker 1: are there are reasons to think that that that semiconductor
Speaker 1: capex should be structurally higher going forward anyways. But I
Speaker 1: mean like that that is when we're actually seeing a
Speaker 1: lot more demand. And by the way, especially if you
Speaker 1: think that, like coming out of COVID, that semiconductors are
Speaker 1: going to be more important than they weren't. And I've
Speaker 1: kind of been coming around to this, you know, I
Speaker 1: was of the belief for a while, for a long time, frankly,
Speaker 1: that semi's were mature. I even did a big piece.
Speaker 1: It was what Burnston calls a black book of years
Speaker 1: back called Playbook for maturing industry, and the idea is
Speaker 1: that maybe the industry has gone ex growth and like
Speaker 1: in that environment, like you want to invest in certain ways.
Speaker 1: And I'm no longer convinced that that's necessarily true. We've
Speaker 1: had a number of good growth here since then and
Speaker 1: coming out of COVID. I'll put the near term cyclical
Speaker 1: concerns aside for a minute, but if I'm looking long term,
Speaker 1: I gotta say I'm more positive on Semi's longer term
Speaker 1: than I think I have been in a long time.
Speaker 1: I think we are seeing real not not the only,
Speaker 1: but real growth growth applications that are that are there
Speaker 1: are people driving real businesses off of whether it's a
Speaker 1: I you know or whether it's you know you know
Speaker 1: um otto. I've been an auto Semi both for a
Speaker 1: long time. That that continent story is really coming through
Speaker 1: an autonomous driving and even five G and IoT and
Speaker 1: all this stuff. I also think COVID has really pulled
Speaker 1: digitization forward by by years, and then we're seeing like
Speaker 1: both from a functional as well as a strategic standpoint,
Speaker 1: just given all of like the sovereign interest, how important
Speaker 1: is this industry actually is you you know, to to
Speaker 1: the global economy. Yeah, I'm I'm more important. I'm I'm
Speaker 1: more positive long term on on on semis, I think
Speaker 1: well than than than maybe I have been in a
Speaker 1: long time. And so maybe that's the third change that
Speaker 1: could be coming out of out of all this and
Speaker 1: maybe not having to necessarily just with the shortages. But
Speaker 1: I mean we're just seeing in general, like how important
Speaker 1: this stuff really is and when we have a lack
Speaker 1: of them, like how much it hurts? Could you? Actually
Speaker 1: I feel like we brush over a little bit the
Speaker 1: impact of the shortage on the sort of the non
Speaker 1: auto areas. I mean, like, so like I assume there
Speaker 1: are semiconductors and refrigerators. We know there's big shortages of those,
Speaker 1: and I think there's various reasons. I know, demand is
Speaker 1: off the chart. Tracy and I recently did an episode
Speaker 1: about shipping, and so I think just getting like a
Speaker 1: you know, washing machine or a a refrigerator shipped is
Speaker 1: probably a pretty big bottleneck right now for that industry.
Speaker 1: But how much is uh the sourcing of chips even
Speaker 1: an issue for like things that we don't really think
Speaker 1: of as tech per se. There's chips and everything, and frankly,
Speaker 1: like even things that didn't used to have chips, are
Speaker 1: getting chips in now even even your refrigerator, which, by
Speaker 1: the way, you could argue maybe it's not the right
Speaker 1: way to go. I don't I don't really need like
Speaker 1: like internet on my fridge, but you buy one, right, Um,
Speaker 1: but no, but I mean semis in general. I mean like,
Speaker 1: but is that part of like when when all when
Speaker 1: all these when all these customers are complaining about shortages
Speaker 1: and I can't give this et cetera. Like I don't
Speaker 1: know if it's as big of a deal as it
Speaker 1: is for cars, But is that part of the story
Speaker 1: here that people need to understand. Look, it's it's not
Speaker 1: as like I said before, it's not as as as
Speaker 1: much of an issue as it is with cars because
Speaker 1: I don't think you have the supplies chain disruption that
Speaker 1: we had with cars, and I think automotive had some
Speaker 1: of these unique characteristics that made it particularly vulnerable to this.
Speaker 1: But we are seeing shortage and just just again, just
Speaker 1: because demand is off the charts and capacity is what
Speaker 1: it is. It will take t SMC time and other
Speaker 1: foundries time to bring more capacity online. Um. But but yeah,
Speaker 1: I mean anything that requires like semi conductors in general,
Speaker 1: UM is going to be tight because you've got lots
Speaker 1: of and some of these end markets that are fighting
Speaker 1: for capacity are very big, right, and they're gonna suck
Speaker 1: suck up more again, you had we just went through
Speaker 1: an Apple cycle, Like Apple takes up a ton of capacity. Um,
Speaker 1: You've got the data centered growth and and and and
Speaker 1: everything else, everything else that's going to take up way
Speaker 1: for volume. There's only just so much to go around.
Speaker 1: So yeah, I mean, and look, over time, it will normalize.
Speaker 1: Right by definition, like over a long period of time,
Speaker 1: supply has to exactly equal demand, right, I mean, if
Speaker 1: we if we take it out to infinity like eventually
Speaker 1: like that that's how it will play out. So it will,
Speaker 1: it will normalize. But there's other things you gotta worry
Speaker 1: about it because like since some end markets, if I
Speaker 1: don't ship the parts now, I can ship them later
Speaker 1: in some but in other end markets, if I don't
Speaker 1: ship it now, that demand just vanishes. Right. PCs is
Speaker 1: a good idea, but we're seeing strong PECS right now.
Speaker 1: But in a normal year, you know, there are product cycles,
Speaker 1: like if you miss like back to school, like you
Speaker 1: don't ship it, right, I mean, it just doesn't. It
Speaker 1: doesn't happen. People don't buy two pieces later to make
Speaker 1: up for the PC that they didn't buy, right. I
Speaker 1: think this is you know, these are things that people
Speaker 1: are gonna have to worry about. So here's a really
Speaker 1: basic question. But do prices of chips just go up
Speaker 1: or become prohibitively be expensive at some point at least
Speaker 1: four I guess um non essential uses like maybe we
Speaker 1: get fewer fridges with chips and internet capacity and things
Speaker 1: like that. You know, it really depends on on the chip.
Speaker 1: Like in some some markets, like we're seeing the so
Speaker 1: for EGAM with some of the auto guys, they're taking
Speaker 1: up price it by they're not exactly better it because
Speaker 1: this isn't the only shortage we're seeing. Like the semiconductor
Speaker 1: manufactors themselves are seeing costs go up because like raw
Speaker 1: wafers are, we're getting a shortage, so the costs are
Speaker 1: going up. And then for some of these guys that
Speaker 1: are using foundries, some of the foundries are taking their
Speaker 1: quotes up right, and so we're seeing them so they
Speaker 1: are like taking up price where they need to sometimes,
Speaker 1: but in other are another and another market you may
Speaker 1: have like long term agreements already that that stopped you
Speaker 1: from doing this over time though, I mean pricing adjust
Speaker 1: right if there's a continued strong demand and no supply
Speaker 1: like wels, we'll see what happens, but pricing tends not
Speaker 1: it depends on the end market. But like you're not
Speaker 1: gonna see it like right away, right. I have one
Speaker 1: more question. It's very important to you. You mentioned maybe
Speaker 1: we'll uh we we should do a memory episode. So
Speaker 1: at some point in maybe in a couple of months, again,
Speaker 1: we'll have you back, we'll talk memory. What is the
Speaker 1: next episode besides that people tell us that we should
Speaker 1: do an a s M l UM episode. Is that
Speaker 1: where we we should go next with our semi conductor journey?
Speaker 1: Well maybe, I mean, like if you're arguing, like what
Speaker 1: are the most important strategic, the most important companies in
Speaker 1: the world. One I think is certainly t SMC. The
Speaker 1: other you could argue with SML because especially leading edge
Speaker 1: manufacturing like it requires advance what's called lithography. This is
Speaker 1: the process that's used to imprint on the circuitry patterns
Speaker 1: on the chip. SML was the only game in town.
Speaker 1: They're the only ones that make the tools that can
Speaker 1: actually make features that small for for leading edge logic
Speaker 1: and so yeah, and would and and but it is
Speaker 1: a it is a phenomenally interesting company and they do
Speaker 1: like if there's any like I always I think I
Speaker 1: said before, you know, I think semiconductor manufacturing in general
Speaker 1: can be it's got to is of black magic to it. Um,
Speaker 1: and those guys are there are the ones that are
Speaker 1: that are you know those are the wizards, right, Um,
Speaker 1: they're the ones that enable it, like without a sm
Speaker 1: L there's no t SMC. Like it's like a big
Speaker 1: part of their capex is basically of check that they
Speaker 1: write to s mL. Yeah. I mean you've got to
Speaker 1: think about these tools. Have you ever seen like a
Speaker 1: leading edge lithography tool? I mean they're there, so it's
Speaker 1: this big thing. It's like the size of a room.
Speaker 1: Like the e V tools can cost like two million
Speaker 1: dollars a piece. It's like this the price of like
Speaker 1: like like like a jumbo jet. Right. I mean they're
Speaker 1: incredibly complicated. Again, we we could talk about like how
Speaker 1: they work and and and but I like, again I
Speaker 1: go back to that I'm amazed it works at all,
Speaker 1: Like it shouldn't work. It's it's it's It's unbelievable the
Speaker 1: level of of of engineering and science that goes into
Speaker 1: these things, um, just to get the tool to be
Speaker 1: able to do what it needs to do, to make
Speaker 1: the chicks um to do what they need to do.
Speaker 1: So yeah, I have one more question actually, which is
Speaker 1: I've seen a number of commentators now talking about chips
Speaker 1: as the new oil, and you can kind of see
Speaker 1: the analogy there. I wonder, like, how how far does
Speaker 1: that analogy go? Is it the right way to be
Speaker 1: thinking about chips or do you have your own sort
Speaker 1: of conceptual commodities framework for how you're thinking about semi
Speaker 1: conductors right now? Yeah? I mean, look, so semmy's is
Speaker 1: the new oil. And I mean look, if you figure
Speaker 1: like a lot of the the you know, the industry
Speaker 1: ran on oil and shortages cause problems. I mean, semis
Speaker 1: are important, right, I mean, they're critical components of everything
Speaker 1: that's around us. And I guess in that sense you
Speaker 1: could argue that that that they are the new oil. Um.
Speaker 1: I guess one of the differences. I mean, like, I
Speaker 1: don't know how how far you want to draw the analogy.
Speaker 1: OI oil is a pure commodity, right, and so like
Speaker 1: the price of the oil is like is set completely
Speaker 1: by by the supply demand situation and and and fright,
Speaker 1: the cost structures of the various producers, you know, semis
Speaker 1: are probably a little more differentiated, I guess from that standpoint,
Speaker 1: so the dynamics aren't entirely similar. But I mean the
Speaker 1: idea that it's like a single do you want to
Speaker 1: call semi conductor is a single homogeneous like sort of
Speaker 1: which they're not. But if you wanted to sort of
Speaker 1: look at it at the industry that way, Um, it
Speaker 1: is a very large, sort of very strategically important thing
Speaker 1: that right now is getting concentrated in some areas of
Speaker 1: the world we're get that are getting increasingly risky. I
Speaker 1: think that analogy kind of holds. This is great. I
Speaker 1: love you know, I love talking chips with you. Uh, Tracy,
Speaker 1: anything more from you? I think, Stacy, you've made it
Speaker 1: so clear that we've run out of questions. So thank you.
Speaker 1: That was great, Stacy, Uh as awesome. I really appreciate
Speaker 1: you joining us. I probably will thank you some questions
Speaker 1: you don't. I've always wanted to do. I've always wanted
Speaker 1: to do a two part podcast where we interview someone
Speaker 1: and then publish it and then let a bunch of
Speaker 1: people ask like send us follow up questions and to
Speaker 1: do another one. Maybe we'll do that one day. I
Speaker 1: do because I've been do it. Look at any time
Speaker 1: you want me to come on, I'm happy to come on. Yes,
Speaker 1: if you want to, like, put like a request on
Speaker 1: and we can we can just do a free form
Speaker 1: Q and I will do that in a few months. Stacy,
Speaker 1: thank you how much for coming on back on My pleasure,
Speaker 1: my pleasure. Thanks guys, Thanks Stacy. That was great. I
Speaker 1: love this topic. We're going to do more. Sorry, I
Speaker 1: don't know. I do you want to do more? I
Speaker 1: really want to do more. I feel like we have
Speaker 1: to do at least two more. I can tell you're
Speaker 1: you're gunning for that a s m L episode, So
Speaker 1: that's fine, I do. I do think it's going to
Speaker 1: come up again and again, um as it has just
Speaker 1: in the past six months. So yeah, I'm in for
Speaker 1: more CHIPS episodes. I do think we should do a
Speaker 1: sort of Q and A with Stacy. Maybe, uh, maybe
Speaker 1: we should get to a clubhouse. We could do a
Speaker 1: clubhouse with You said you hate clubhouse, but this is
Speaker 1: a legitimate you just a hater. But you know what
Speaker 1: or what do we do, like am I think we
Speaker 1: should we should do like one of our streaming episodes
Speaker 1: with Stacy and then take people's questions. But you know,
Speaker 1: the other the thing is that I really like. I mean,
Speaker 1: obviously he does a good job of explaining how there's
Speaker 1: like two proximate causes for the cute shortage, and one
Speaker 1: is the sort of distinct situation that happened with autos
Speaker 1: where they canceled a bunch of orders and then scrambled
Speaker 1: when they realized that auto demand was off the charts,
Speaker 1: and then just the fact that the demand for everything
Speaker 1: else was off the charts. I mean hearing him describe
Speaker 1: buying for uh that books, tablets or whatever was for
Speaker 1: his kids and everyone by you know, new monitors and
Speaker 1: new computers at home and five G and ai and
Speaker 1: video games and PS fives and all that stuff. So
Speaker 1: you can really see there is essentially like two things
Speaker 1: that came together at once. They're just totally overloading the
Speaker 1: system right now. Yeah, I mean, this I think gets
Speaker 1: back to the uniqueness of the downturn that we just saw,
Speaker 1: right Everyone was sort of treating it like a normal recession. Yeah,
Speaker 1: but it really isn't a normal recession, and we saw
Speaker 1: consumer demand in many ways was much much stronger than
Speaker 1: people might have expected. Well, you know something I was
Speaker 1: thinking about early on, and this should have been my
Speaker 1: clue that we're going to get this sort of more
Speaker 1: robust recovery than we realized. I thought to myself, it's like, man,
Speaker 1: there's never been an economic downturn that was so expensive,
Speaker 1: Like because everyone I just had to go out and
Speaker 1: buy a bunch of stuff, right, so you like go out.
Speaker 1: A few episodes I talked about how I was like,
Speaker 1: went out and bought a bunch bunch of sardines. People
Speaker 1: bought toilet paper, people bought uh, you know, kittie pools
Speaker 1: for their backyards so that their kids wouldn't go crazy
Speaker 1: computers like it would We would never have recessions if
Speaker 1: every recession required people to spend a bunch of money.
Speaker 1: But this one, who was like, we had this huge
Speaker 1: downturn and it was very expensive, and so it's like
Speaker 1: the stabilizing mechanism of more spending kicked in in a
Speaker 1: way automatically. Of course, the fiscal stimulus helped too, but
Speaker 1: obviously the tech industry and chips in particular, one of
Speaker 1: the huge beneficiaries of that sort of for spending that
Speaker 1: lots of people had to do right away. Yeah, that's
Speaker 1: a good way of looking at it. Um, I guess
Speaker 1: you had like a lot of displaced services, um that
Speaker 1: you could no longer go to, right so you couldn't
Speaker 1: go to restaurants, you can't go to schools, you can
Speaker 1: go to your workplace, and so you kind of had
Speaker 1: to recreate a lot of those at your home if
Speaker 1: you have the means to do so, obviously, and basically
Speaker 1: you had a sort of like double demand for um
Speaker 1: goods that would enable you to do that pretty extraordinary.
Speaker 1: And then of course, you know, obviously beyond the acute thing, um,
Speaker 1: it really does seem like the sort of supply constraints,
Speaker 1: as judged by that huge Taiwan semi cap forecast for
Speaker 1: the coming year, like that part isn't going away. So
Speaker 1: even if okay, maybe in a couple of quarters or whatever,
Speaker 1: the car cycle is back and everything, and maybe some
Speaker 1: of this one off demand, you know, I don't think
Speaker 1: Stacy is going to be by for new netbooks for
Speaker 1: his kids this year, so some of that one off
Speaker 1: demand will fade. It really doesn't seem like, um, that's
Speaker 1: going the broader story of like how much demand there
Speaker 1: is for chipped overall, It is gonna go away anytime soon,
Speaker 1: and so we still are going to be left with
Speaker 1: his issues of the world extremely reliant on a couple
Speaker 1: of manufacturers in both a physical and a geopolitical hotspot.
Speaker 1: That's your way of saying that we're going to be
Speaker 1: recording semi conductor episodes for the next ten years. Yeah,
Speaker 1: that is basically that. Okay, all right, shall we leave
Speaker 1: it there. This has been another episode of the All
Speaker 1: Thoughts podcast. I'm Tracy Alloway. You can follow me on
Speaker 1: Twitter at Tracy Alloway and I'm Joe wisn't thought You
Speaker 1: could follow me on Twitter at the Stalwart. Follow Stacy
Speaker 1: on Twitter at s Raskin. Follow our producer Laura Carlson.
Speaker 1: She's at Laura M. Carlson. Follow the Bloomberg head of
Speaker 1: podcast Francesco Levi at Francesca Today, and check out all
Speaker 1: of our podcasts at Bloomberg under the handle at podcasts.
Speaker 1: Thanks for listening.