Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: You're listening to Bloomberg Business Week with krol Messer and
Speaker 2: Tim Stenebek on Bloomberg Radio. We've got with us The
Speaker 2: guy who wrote the book on chips, Chris Miller is
Speaker 2: Associate Professor of International history at Tufts University. He's the
Speaker 2: author of the New York Times bestseller Chip War, The
Speaker 2: Fight for the World's Most Critical Technology. That book, a
Speaker 2: geopolitical history of the computer chip, also a winner of
Speaker 2: the FT Business Book of the Year Award. Chris also
Speaker 2: advises semiconductor companies and tech startups and investors. He joins
Speaker 2: us from Naples, Florida.
Speaker 3: Oh my god, Chris, Like, where to start? You wrote
Speaker 3: this in twenty twenty two. A lot has happened in
Speaker 3: the last two years. How are you thinking about what
Speaker 3: you wrote and kind of where we are today in
Speaker 3: the chip space?
Speaker 1: Like, there are two big shifts happening simultaneously right now.
Speaker 1: One is the surge of spending on AI infrastructure, which
Speaker 1: means lots of very expensive AI accelerator in high powered
Speaker 1: data centers. And two is the ratcheting up of tension
Speaker 1: around the US and China with the new administration in
Speaker 1: the US coming into office in just a month's time,
Speaker 1: planning to increase tariffs and controls on China's semiconductor industry.
Speaker 1: So those two trends are intersecting in ways that impact
Speaker 1: pretty much every company in the sector.
Speaker 2: Chris, I'm curious, you know what we're hearing about the
Speaker 2: Trump transition team and their plans when the Trump administration
Speaker 2: takes office on January twentieth, they're ramping up into full gear.
Speaker 2: No question, have you heard from anyone on the transition team.
Speaker 1: Well, I think the transition is in the process of
Speaker 1: sketching out who will be the officials who will be
Speaker 1: responsible for chip policy. We know the cabinet secretaries Marco
Speaker 1: Rubio at State, Howard Lutnik at Commerce, but a lot
Speaker 1: of the key decisions we will be shaped by the
Speaker 1: mid level officials will be responsible for implementing the Chips
Speaker 1: Act or implementing the export controls on chip technology, and
Speaker 1: those are names that we just don't know yet, But
Speaker 1: I think it'll be really worth following who gets a
Speaker 1: pointed to those roles because they'll have a pretty big
Speaker 1: influence on the shape of policy.
Speaker 2: What would you advise in terms of names in terms
Speaker 2: of people, in terms of expertise and policy, if you
Speaker 2: were speaking with the transition team.
Speaker 1: What we've seen thus far is that Trump has opted
Speaker 1: for a range of officials with different views. Some folks
Speaker 1: very close to financial markets who want a very stable
Speaker 1: US China economic and financial relationship. Others like Marco Rubio,
Speaker 1: Secretary of State nominee and noted China hawk, who's advocated
Speaker 1: more decoupling not just of the supply chain and technology relationship,
Speaker 1: but also the financial relationship too. And I think this
Speaker 1: is similar in a lot of ways to what we
Speaker 1: saw in the first trumpdministration, where there really was a
Speaker 1: broad spectrum of views among Trump's advisors and ultimately up
Speaker 1: to Trump to make the final decision.
Speaker 3: Hey, listen, I do think about the struggle between policy
Speaker 3: and government a new administration versus the realities of big
Speaker 3: tech companies who want to sell their stuff to everyone.
Speaker 3: They're thinking about their top and bottom line. The New
Speaker 3: York Times out with the story today and they get
Speaker 3: into how the US firms, so with these big tech
Speaker 3: firms battles with that government contract to keep tech sales
Speaker 3: to China, to kind of keep that crack down going.
Speaker 3: Where are we going to see that kind of line
Speaker 3: in the sand when it comes to selling technology to China,
Speaker 3: and then the big tech companies saying, but wait a minute,
Speaker 3: this starts to impact our business because China is a
Speaker 3: massive market. Does the battle continue? I don't know thoughts
Speaker 3: about that constructive thoughts, because I'm assuming, as we said
Speaker 3: in the introduction, that you talk to some of these
Speaker 3: major players in the you know, our consult in the
Speaker 3: semi industry, and I'm curious what you are hearing about
Speaker 3: them about the pressure they are putting on government when
Speaker 3: it comes to policy.
Speaker 1: I think you talked to any CEO or executive off
Speaker 1: the record, and they'll say that my biggest problem is
Speaker 1: that China is both my largest customer and my number
Speaker 1: one competitor in most cases, and that I think structures
Speaker 1: how the industry deals with this issue and tries to
Speaker 1: lobby the US government. They all sort of understand the
Speaker 1: logic of the US government, understand that chips are key
Speaker 1: for AI, understand that AI is key to national security
Speaker 1: as well as economic prosperity. But they all also realize
Speaker 1: that they have really substantial markets in China, and so
Speaker 1: wherever you look in the supply chain, of the makers
Speaker 1: of the tools that make chips, the manufacturers of chips themselves,
Speaker 1: they're all going to lobby, and they all have lobbied
Speaker 1: very successfully to keep their ability to sell to China open.
Speaker 1: And the National Security Apparatus, the Pentagon, the Commerce Department,
Speaker 1: of the intelligence agencies are pushing for more restrictions than
Speaker 1: companies themselves want, and that a balancing act that any
Speaker 1: president of got a balance. I think we've seen the
Speaker 1: Biden administration end up with a more lapse approach than
Speaker 1: one might have expected given their early tough rhetoric on
Speaker 1: this issue, and it'll be interesting to watch how the
Speaker 1: Trump administration addresses this balance. There will certainly be voices
Speaker 1: of administration saying, let's focus on continue to export to
Speaker 1: China of technology. It's important economically. But there will also
Speaker 1: be voices of the opposite side saying, if you export
Speaker 1: advanced technology to China, you're only giving China the capability
Speaker 1: to learn how to manufacture high end SIPs domestically and
Speaker 1: eventually replace US firms in the Chinese market.
Speaker 3: Chris, with your understanding and knowledge of this world, are
Speaker 3: we right us, the United States right to be concerned
Speaker 3: about exporting technology to China. We've certainly seen this play
Speaker 3: out where things get exported the technology and China becomes
Speaker 3: really good at doing things. We're seeing it kind of
Speaker 3: play out in the EV market as we speak. So
Speaker 3: I'm curious, how concerned should we that we will export
Speaker 3: our expertise, our knowledge and lose control of another industry.
Speaker 1: You know. I think it's worth noting that China only
Speaker 1: imports a couple of types of manufactured goods semiconductors semiconductor
Speaker 1: manufacturing equipment. Those are the two largest categories of China's
Speaker 1: manufacture good imports, because China can produce everything else that
Speaker 1: needs domestically when it comes to manufactured goods, and I
Speaker 1: think that speaks to China's capabilities in this sphere, which
Speaker 1: means that the more capabilities you give to China, the
Speaker 1: more they can be able to use those to replace
Speaker 1: Western firms. And they're desired to replace Western firms, and
Speaker 1: I think eminently well documented. It's evidence in the fact
Speaker 1: that they don't buy anything abroad unless they absolutely have to.
Speaker 1: And I think some connector companies are all worried that
Speaker 1: their market share is going to decline over time, and
Speaker 1: I think they all realize that the more chip making
Speaker 1: tools that are auld to China accelerates that process.
Speaker 3: Hey, listen, we want to get to Broadcom because they
Speaker 3: are out with their earnings and the stock is up
Speaker 3: about two and a half percent here in the market.
Speaker 3: Actually now it's down about one percent. It's bouncing around
Speaker 3: here to be fair, but we did see a quick rally.
Speaker 3: So let's get to some of the headlines, and let's
Speaker 3: go to the outlook. Company sees first quarter revenue of
Speaker 3: about fourteen point six billion. That's spot on in terms
Speaker 3: of what analysts we're expecting fourth quarter just at EPs,
Speaker 3: so looking backward at the last quarter, a dollar forty two.
Speaker 3: That's three cents better than what the street was expecting.
Speaker 3: Fourth titter, justin net revenue was fourteen point zero five billion,
Speaker 3: pretty much in line a little bit light a hair
Speaker 3: light the yes have been on the street was fourteen
Speaker 3: point zero eight billion.
Speaker 2: Chris Miller. We're going to be speaking in just a
Speaker 2: few minutes with kun John Sabani, Bloomberg Intelligence senior semiconductor analysts,
Speaker 2: who's going to give us the details on this report.
Speaker 2: But just remind everybody sort of in the chip ecosystem
Speaker 2: and the world of chip ecosystems where broadcomplays.
Speaker 1: Broad Comes one of the biggest designers of semiconductors. They
Speaker 1: don't manufacture, but they do the design process, and they've
Speaker 1: been focusing in particular on designing AI chips for other
Speaker 1: companies some of the big hyperscalers that are investing in
Speaker 1: their own ship designs. Those are often done in partnership
Speaker 1: today with Broadcom.
Speaker 2: So report such as this now shares up two percent
Speaker 2: postmarket after results. The company sees first quarter revenue about
Speaker 2: fourteen point six billion dollars. Looking across the ecosystem, who
Speaker 2: does Broadcom have to be most worried about? Because we
Speaker 2: got that report yesterday from the information about Apple working
Speaker 2: with Broadcom, and we're reminded Ian King a little earlier
Speaker 2: today that these two companies have sort of done this
Speaker 2: dance of scorpions where they sting each other. But also
Speaker 2: then well he was saying, it was like, what mating scorpions?
Speaker 2: Is that right?
Speaker 3: Yes, two scorpions mating. Yeah, we know it's not easy.
Speaker 3: I want a little complicated.
Speaker 2: I won't describe it, but let's just use the term
Speaker 2: forrenemies instead perfect.
Speaker 1: You know, I think that's that's a great analogy broad
Speaker 1: companies is a really wide range of products, and so
Speaker 1: they simultaneously cooperate and compete with a bunch of different
Speaker 1: companies in the technology space. I think if you focus
Speaker 1: on the AI portion of their portfolio, in some ways
Speaker 1: they're competing with in Nvidio because a lot of the
Speaker 1: in house designed processors that the hyperscalers are designing right
Speaker 1: now are intended to be replacements for invidious products, at
Speaker 1: least to a certain degree. And so I think investor
Speaker 1: is going to look at this result and ask what
Speaker 1: does this mean for the process of bringing more chip
Speaker 1: design in house at some of the big hyph for scalers.
Speaker 2: Hey, Chris, can I have to leave it there? I
Speaker 2: always love it when you take the time to join us.
Speaker 2: Do appreciate that very much. Chris Miller Associate professor of
Speaker 2: International history at Tufts University. He's the author of the
Speaker 2: New York Times best selling book Chip War, The Fight
Speaker 2: for the World's most critical technology