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Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.

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Speaker 2: Hello and welcome to another episode of the Odd Locked Podcast.

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Speaker 3: I'm Joe Wisenthal and I'm Tracy Alloway.

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Speaker 2: Tracy, this has come up on the podcast. But one

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Speaker 2: of the things with the tariffs is I still think

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Speaker 2: for the most part, people are talking about them from

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Speaker 2: like a fiscal standpoint, which is, Okay, prices are going

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Speaker 2: to go up, What is that due to inflation? What

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Speaker 2: does that due to sales? What is that due to employment?

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Speaker 2: And less about the potential for like actual economic chaos

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Speaker 2: because something isn't getting to somewhere else that.

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Speaker 4: It needs to be.

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Speaker 3: You want to go more micro instead of the macro.

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Speaker 4: Yeah, okay, I'm good with that.

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Speaker 2: We can talk to economists all day and they all

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Speaker 2: have their estimates, et cetera. But you know, there's a limit.

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Speaker 3: To you know, I think we should so one of

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Speaker 3: the things we obviously learned during the pandemic is like,

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Speaker 3: real things exist in the world, and they have to

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Speaker 3: come from someplace where they're made and be shipped over

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Speaker 3: and if there are disruptions, then those can snowball in

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Speaker 3: quite a big way. And there's one product in particular

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Speaker 3: that I think kind of embodies a lot of what

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Speaker 3: we talk about when it comes to tariffs and manufacturing

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Speaker 3: and disruptions, and that's computers right totally. And if you

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Speaker 3: look at one of those supply chain graphics for computers,

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Speaker 3: it's just a bunch of lines crisscrossing the world, basically,

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Speaker 3: like the raw materials coming from Africa or South America

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Speaker 3: going over to China, and then chips being made in Taiwan,

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Speaker 3: and then all of those components heading over to the

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Speaker 3: US where they're put together. It is extremely complex, and again,

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Speaker 3: like you look at it on a map, it just

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Speaker 3: looks like a spider web.

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Speaker 2: It's a total spider web, because then the chips get made,

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Speaker 2: and then they go to Malaysia for packaging, and then

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Speaker 2: they go back to somewhere I skipped up. I think

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Speaker 2: a lot of people like this idea of reshoring more tech,

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Speaker 2: and that's obvious. We saw it during the Biden administration

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Speaker 2: and various efforts on chips et cetera. But it certainly

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Speaker 2: can't be done overnight. Certainly, And you know again because

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Speaker 2: as you say, it's this such intense spider web, you know,

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Speaker 2: it's not even as simple as like, oh, let's move

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Speaker 2: it from China to the US or something like that.

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Speaker 4: It's just so.

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Speaker 2: Many different links and parts of what's assembly and packaging

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Speaker 2: and components and all that, et cetera, that you're going

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Speaker 2: to announce a new set of tariffs one day and

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Speaker 2: then an industry will just like digest those tariffs and

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Speaker 2: then you.

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Speaker 3: Know, put them up a US factory the next day, or.

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Speaker 2: Put a little markup on it. It's like, okay, you

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Speaker 2: know whatever, here's the tariff raid. It is twenty five percent.

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Speaker 2: You know, add twenty five percent to what we sell,

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Speaker 2: to the selling price. Like the idea that it could

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Speaker 2: be that simple is uh kind of unrealistic.

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Speaker 3: We should talk about it. Let's get granular, Okay.

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Speaker 2: So I am very excited. We are going to be

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Speaker 2: speaking with Steve Burke. He's the editor in chief of

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Speaker 2: a publication YouTube channel, et cetera called Gamers Nexus. They

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Speaker 2: do a lot of technical coverage of computer hardware, et cetera,

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Speaker 2: which is a world that I basically know nothing about.

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Speaker 4: I don't know much about gaming.

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Speaker 2: I know that gamers, you know, they buy their own chairs,

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Speaker 2: and they buy their own speakers, and they buy you know,

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Speaker 2: decked out cooling towers. So that they could play, you know,

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Speaker 2: super high speed. But I really don't know much about it.

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Speaker 2: But Steve and his team at Gamers and Nexus about

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Speaker 2: a week ago, actually two weeks ago, I think it

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Speaker 2: was April fourteenth, put out an insane documentary, three hour

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Speaker 2: long documentary on YouTube called the Death of Affordable Computing

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Speaker 2: and the tariffs impact on the world of gaming Hardware.

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Speaker 2: It's a truly extraordinary piece of journalism, and we wanted

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Speaker 2: to talk to the creator behind it and what he

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Speaker 2: did and what he learned. So Steve Burke, thank you

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Speaker 2: so much for coming on Odd Lots.

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Speaker 4: Oh thanks for having me. Yeah, I'm excited.

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Speaker 2: When Tracy and I do an episode of the podcast

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Speaker 2: talk about terriffs. We're worried that it's going to be

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Speaker 2: out of date and irrelevant by the very next day.

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Speaker 2: And that's just like a forty minute conversation sometimes with

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Speaker 2: like one economist. Just tell us, how did you quickly,

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Speaker 2: within basically twelve days of quote liberation day unquote, put

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Speaker 2: together and what did you put together this three hour

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Speaker 2: documentary about this world of computer hardware, gaming hardware? What

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Speaker 2: is what was this project?

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Speaker 4: It was fun, I mean, it was born from chaos

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Speaker 4: and so for us, the moment we pulled the trigger

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Speaker 4: on it was when the use the formal name, the

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Speaker 4: reciprocal traps as they are called, were put in place.

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Speaker 4: And so basically immediately as soon as that happened, I

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Speaker 4: called a bunch of companies I worked with over the

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Speaker 4: last sixteen years and everybody was ready to go on record,

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Speaker 4: which is very rare, as I'm sure you all know,

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Speaker 4: and we booked the flights for twelve hours from that moment.

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Speaker 4: Wow got on the plane without a return flight and

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Speaker 4: just went out and started talking to people. So it

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Speaker 4: was a The underlying concern of this will all be

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Speaker 4: out of date was definitely there. Our approach to that was,

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Speaker 4: if we tackle this story in a way where it's

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Speaker 4: partly about that, if it's about the uncertainty and about

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Speaker 4: the story of getting the story, that resolves some of

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Speaker 4: those concerns, because then what you're capturing at least is

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Speaker 4: the sort of real feelings and the real decision making

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Speaker 4: that these companies are doing at any given moment.

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Speaker 3: Yeah, and at the very least people will learn about

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Speaker 3: the supply chain of PCs, so you always have that

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Speaker 3: aspect of it. It seemed like people and again you

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Speaker 3: spoke to dozens of companies here, but it seemed like

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Speaker 3: people really wanted to talk about all of this, and

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Speaker 3: in fact, I think you got some like competitors all

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Speaker 3: together in a room to have a conversation about how

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Speaker 3: they were all thinking and dealing with potential tariffs.

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Speaker 4: That's right.

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Speaker 3: People want to come on and talk about this, which

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Speaker 3: really highlights the urgency here.

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Speaker 4: Yeah, So the biggest challenge that a lot of them

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Speaker 4: are facing is I think they're concerned about what the

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Speaker 4: consumer perception will be as prices go up or as

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Speaker 4: stock drives out. And there's good reason for that. I mean,

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Speaker 4: consumers absolutely are are kind of Number one coverage angle

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Speaker 4: is his cynicism. You know, it's being really critical of

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Speaker 4: what the companies are saying at a given point. This

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Speaker 4: was an interesting scenario though, where the price increases are

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Speaker 4: functionally guaranteed in this industry, and I think what the

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Speaker 4: companies we're worried about is if we're not transparent right

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Speaker 4: now when we have this opportunity, then people won't necessarily

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Speaker 4: believe us when we explain why the prices went up.

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Speaker 4: And you know, consumers, to be clear, should still remain

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Speaker 4: cynical to a healthy degree, but but should also be

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Speaker 4: aware that there are real world impacts you know, from

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Speaker 4: these decisions that are much bigger than any of the companies.

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Speaker 2: So no, that actually makes a ton of sense. Why

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Speaker 2: it would be strategic for these companies to talk about

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Speaker 2: the real impact so that when they raise the price

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Speaker 2: of whatever, that people understand. Why but actually talk about this,

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Speaker 2: setting aside the tariffs, what is this industry? Talk to

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Speaker 2: us about the existing gamer hardware industry that you set

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Speaker 2: out to describe.

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Speaker 4: In this documentary.

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Speaker 2: Oh sure, who are these players? And like where do

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Speaker 2: they sit? And you know, what do they sell? What

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Speaker 2: kind of products? You know, give us an overview of it.

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Speaker 4: Yeah, So I think the most important thing for anyone

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Speaker 4: who doesn't pay close attention to it is to be

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Speaker 4: aware that computer gaming hardware is used in workstations and

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Speaker 4: scientific computing around the world. So companies that everyone in

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Speaker 4: your audience would already be aware of, like Nvidia, Intel,

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Speaker 4: AMD so forth, all the stuff they make for scientific

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Speaker 4: computing and AI and data center, a lot of that

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Speaker 4: stuff also exists in some capacity in gaming, and it's

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Speaker 4: it's potentially the same supply as in the same way

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Speaker 4: for supply. If it's silicon or shares at least the

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Speaker 4: architecture of whatever that generation of product is using. And

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Speaker 4: so there's a lot of crossover. And what that means

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Speaker 4: is that these multiple technology industries all sort of prop

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Speaker 4: each other up. You get economies of scale across them.

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Speaker 4: Because if you're making the wafer that can be used

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Speaker 4: in a data center card and can also be used

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Speaker 4: in a gaming card, right, the company has some more

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Speaker 4: strategic levers to pull for where do they want this

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Speaker 4: particular chip to go, Which market has demand, has one

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Speaker 4: dried up, they can move that supply over to something

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Speaker 4: else and market up more if it's has good yield.

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Speaker 4: So it's a huge industry. And then as far as gaming,

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Speaker 4: I don't have the exact numbers off the top of

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Speaker 4: my head anymore, but not too long ago we received

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Speaker 4: a press briefing from one of the big three, Intel

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Speaker 4: and Video or AMD, I don't remember which, but talk

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Speaker 4: about the sort of worldwide gaming audience PC gaming depend

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Speaker 4: on who you look at, it's anywhere in the very

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Speaker 4: high hundreds of millions to the low billions of individuals

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Speaker 4: who do some form of PC gaming. So it's a

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Speaker 4: huge industry.

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Speaker 3: So you know, Joe's first question was about all the

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Speaker 3: uncertainty over the tariffs themselves and the fact that we

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Speaker 3: don't know what's going to happen tomorrow, maybe there's another announcement,

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Speaker 3: and then maybe the day after there's some backtracking on it.

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Speaker 3: It seems really difficult to plan for tariffs coming in

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Speaker 3: when you don't even know what exactly they're going to

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Speaker 3: look like, or you know when they might actually be

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Speaker 3: phased in. What were companies actually saying about their plans

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Speaker 3: for handling this so far?

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Speaker 4: So the plans are interesting. The number one thing they

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Speaker 4: were telling us is that it's difficult to plan when

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Speaker 4: the plan potentially changes on a daily basis. So a

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Speaker 4: number of the companies we spoke with, including an Austin,

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Speaker 4: Texas based repair shop run by a guy named Lewis

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Speaker 4: Rossman who's kind of well known for Right to Repair

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Speaker 4: Course Air, which is a huge publicly traded company, so

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Speaker 4: like you have this huge range, and generally speaking, the

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Speaker 4: message we received was we can deal with a high tariff,

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Speaker 4: what we can't deal with is uncertainty. So I don't

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Speaker 4: know if the timelines are maybe interesting for people, but

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Speaker 4: just to give an idea for things without even getting

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Speaker 4: into the discussion of where is the thing made, The

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Speaker 4: question of how long does it take to make the

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Speaker 4: thing is maybe kind of colors you know, where their

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Speaker 4: strategic decision making is coming from. So a silicon wafer

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Speaker 4: takes maybe about three months to produce, assuming they don't

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Speaker 4: run a hot lot, and so that's just to kind

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Speaker 4: of make the wafer. It might be an EID or

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Speaker 4: a twelve inch wafer that then contains all the silicon

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Speaker 4: that eventually goes into a computer. So wafer is just

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Speaker 4: a disc, right, It looks like a CD basically, and

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Speaker 4: they pattern the silicon on it in a fab. So

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Speaker 4: Intel has fabs they're building some of the US as

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Speaker 4: an example, and they then dice that they send it

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Speaker 4: out to packaging to test to eventually turn into a

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Speaker 4: finished CPU or GPU that goes on a board and

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Speaker 4: gets put in a computer. Just to make the wafer,

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Speaker 4: it's about three months. And so when you're making decisions

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Speaker 4: that involve macroeconomics, not that I'm not an expert on

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Speaker 4: that part of it, but you could imagine that it

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Speaker 4: would be very difficult right to plan how many of

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Speaker 4: these things you might need. And that's just one part

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Speaker 4: the computer cases are typically twelve to eighteen months counting

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Speaker 4: the design stage to get through mass production. The actual

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Speaker 4: mass production part of it, they might order about four

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Speaker 4: to maybe six months in advance of when they need

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Speaker 4: the parts, depending on where Chinese New Year falls in

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Speaker 4: that window. And so these types of numbers I think

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Speaker 4: probably you know, give a better indication as to why

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Speaker 4: it's so difficult to project, because the decisions they're making

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Speaker 4: now are based off of inventory they placed orders for

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Speaker 4: at the end of last year.

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Speaker 2: You know, I've never been a PC gamer, or really

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Speaker 2: a gamer of any sort. When I think about computers,

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Speaker 2: you know, have a I have a Macus or you know,

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Speaker 2: some laptop, I forget which one, and I run my

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Speaker 2: Bloomberg terminal on a computer made by Hewlett Packard or

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Speaker 2: and I think I have a webcam, probably made by Logitech.

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Speaker 2: When we're talking about the world of the hardware that

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Speaker 2: you cover, what does the constellation look like of different

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Speaker 2: players and what the role that they play, Because yeah,

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Speaker 2: again I'm familiar with Intel, AMD and Video and some

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Speaker 2: of the popular consumer facing names. But who are the

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Speaker 2: big names and what do they do that a hardcore

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Speaker 2: PC gamer would.

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Speaker 4: Be thinking about. Yeah, there's a ton of them, so

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Speaker 4: as you've probably heard of. That's how I'm familiar, I think,

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Speaker 4: so yeah, yeah, yeah. So there's companies like Asus as

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Speaker 4: an example, which is one of the larger ones, and

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Speaker 4: they did just about everything, so they all symbol computers.

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Speaker 4: They also make motherboards. There's some scare quotes around that

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Speaker 4: make I'll maybe come back to, and they make video

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Speaker 4: cards all this sort of type of thing. Laptops. MSI

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Speaker 4: is another one. Course, Seria is huge. So these three

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Speaker 4: have just named they're all massive in the space. They're

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Speaker 4: billion dollar companies. You also have hundreds of smaller ones.

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Speaker 4: So just to ratle off a few, but Cooler Master,

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Speaker 4: Height Crucial is actually larger, owned by Micron, and you

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Speaker 4: get into peripherals like LG is probably well known, but

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Speaker 4: then some of their competitors are probably less known in

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Speaker 4: the space. So to list off a couple like internal

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Speaker 4: component manufacturers. Just for cooling a loane, you have a

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Speaker 4: company's named Thermal right, Thermal take, There's cooler Master. There's

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Speaker 4: a company called be Quiet Deep Cool, which is no

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Speaker 4: longer allowed to be sold in the US, which is

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Speaker 4: a different interesting story. Nocta is another huge one. So

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Speaker 4: they're all very important, but probably by and large the

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Speaker 4: way people know about them, if at all, is because

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Speaker 4: those parts that these companies make are put in the

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Speaker 4: pre built machines from a company like CyberPower, Ibypower, Dell HP.

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Speaker 4: And actually there's especially relating to the tariffs. There's something

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Speaker 4: really interesting that I didn't put in that video, and

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Speaker 4: I was thinking about it. So, factory relationships are an

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Speaker 4: interesting web in this industry where a lot of the

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Speaker 4: factories they're not owned by the manufacturers. So when we

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Speaker 4: talk about a brand, yeah like Height, Yeah, so Height

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Speaker 4: makes computer cases, coolers, keyboards. They don't actually own the factories,

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Speaker 4: but they work with them. And so there's contract manufacturing,

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Speaker 4: which is true in most industries. But what's interesting in

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Speaker 4: this one is those contract factories often are self branded

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Speaker 4: manufacturers as well, so they're competitors of their own customers.

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Speaker 4: A great example of this would be deep Cool. Have

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Speaker 4: you ever Did you ever hear Deep Cool? I don't

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Speaker 4: think so. Okay, So long story short, Deep Cole got

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Speaker 4: banned from the US, and that happened last year, but

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Speaker 4: there's still a good example for this. Deep Cool owns

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Speaker 4: factories in China. They do contract manufacturing, and they also

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Speaker 4: are a self branded company and the US they're no

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Speaker 4: longer sold that they were pretty big here. Deep Cool also,

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Speaker 4: I haven't stated this publicly, but it's known. I've been

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Speaker 4: in their factory, We've done videos. But what I haven't

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Speaker 4: said publicly is that they make products for a company

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Speaker 4: called be Quiet, which is a German based manufacturer. They

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Speaker 4: designed cooling components and cases and things like that, and

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Speaker 4: so some of their products in the past were made

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Speaker 4: by Deep Cool. Deep Cool is a competitor to be Quiet.

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Speaker 4: So these two companies that one sources from the other,

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Speaker 4: but they fight each other in the marketplace. And to

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Speaker 4: be clear, today I'm not sure if be Quiet so

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Speaker 4: they use is Deep Cool because of the US band.

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Speaker 4: But that's not important for this. What's important is that

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Speaker 4: where we have these tariffs coming into play, the factories

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Speaker 4: that are supplying their customers. I think the read I'm

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Speaker 4: getting is that they have more room to cut margin

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Speaker 4: or keep prices suppressed because there's not that middleman step.

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Speaker 4: So I think you're going to see this really interesting

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Speaker 4: thing to happen where some of these companies we spoke to,

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Speaker 4: including Cooler Master in the documentary Cooler Master's bringing in

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Speaker 4: four thousand pallets of computer hardware goods, which is an

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Speaker 4: absurd amount of stuff. And if they bring those in,

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Speaker 4: as other companies are kind of scared away from it,

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Speaker 4: there's going to be a sort of a vacuum forming

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Speaker 4: in the market, and depending on consumer confidence and purchasing,

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Speaker 4: they either end up filling that void where people can't

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Speaker 4: get other components, or if there's a price war later

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Speaker 4: because there's too much stuff that people brought in, then

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Speaker 4: the companies that are the factories I think would have

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Speaker 4: more room to fight on price.

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Speaker 2: By the way, Tracy, so it looks like Deep Cool.

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Speaker 2: It's a Beijing based company and they got banned from

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Speaker 2: the US for the business dealing various business dealings in Russia.

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Speaker 3: So just a little thank you, thank you Joe for

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Speaker 3: the context. Actually this reminds me so one thing I

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Speaker 3: wanted to ask is did you observe, I guess, any

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Speaker 3: differences between the larger companies that you spoke to and

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Speaker 3: the smaller companies, because I imagine, just on the factory's point,

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Speaker 3: the big guys probably have like solid relationships with their manufacturers,

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Speaker 3: and they probably have some ability to set prices or

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Speaker 3: negotiate prices with suppliers, whereas the little guys maybe they

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Speaker 3: don't have you know, as much room or as much

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Speaker 3: market power to try to negotiate on prices. Was there

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Speaker 3: much difference between the big and the small here?

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Speaker 4: Oh yeah, yeah, the biggest difference was the ability to

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Speaker 4: move production all squere So some of these companies are

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Speaker 4: moving production to Vietnam, Thailand and other countries, mostly in Asia.

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Speaker 4: Sort of what we're seeing right now is that the

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Speaker 4: largest of the companies that either can build their own

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Speaker 4: factory or more likely just have a lot of leverage

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Speaker 4: with their suppliers, maybe they're the biggest customer of the factory,

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Speaker 4: they've been encouraging either existing factories that they work with

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Speaker 4: to open in other countries or they've been going to

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Speaker 4: factories in those other countries. So specifically in this industry, Vietnam, Thailand, Malaysia, Singapore,

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Speaker 4: and Taiwan are all pretty well tooled up. They already

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Speaker 4: have factories. They might be able to absorb some of

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Speaker 4: the excess billing out of China if companies are trying

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Speaker 4: to move their production. What wasn't on the list from

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Speaker 4: anybody that I spoke to was the US. So not

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Speaker 4: one of them said they're going to try and build

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Speaker 4: a factory in the US. But what was interesting is

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Speaker 4: that even those which can success, we move manufacturing out

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Speaker 4: of China and to say Vietnam indicated and expected thirty

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Speaker 4: to thirty five percent increase in their cost just from

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Speaker 4: the inefficiency, meaning that the lack of skilled manufacturing engineers

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Speaker 4: and the lack of pipeline maturity and the lack of

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Speaker 4: supply chain in that area will add overhead and as before,

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Speaker 4: potential tariffs on those countries. So the small companies, they

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Speaker 4: don't have the negotiating power. It's very difficult to get

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Speaker 4: a factory to make a highly complicated commodity product like

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Speaker 4: a computer case with all these special bends and LCD

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Speaker 4: panels and specially crafted fans and things like that. It's

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Speaker 4: hard to get a factory to do already. But to

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Speaker 4: then try and do it in a country where there

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Speaker 4: isn't necessarily the existing know how to do it or

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Speaker 4: the existing tooling to do it is basically an impossible

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Speaker 4: ask for a smaller company where they just don't have

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Speaker 4: the leverage, they don't have anything to offer, versus a

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Speaker 4: large company.

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Speaker 2: I have to mention also that like a large company

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Speaker 2: presumably has customers outside of the US, and so many

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Speaker 2: of them prior to some extent, large swaths of their

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Speaker 2: business might not be affected by tariff. Square is like

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Speaker 2: a small, specifically US based company, you know. That's that's

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Speaker 2: the whole thing.

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Speaker 4: Yeah, And that's an excellent point because one of the

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Speaker 4: things we ran into. You're talking about competitors being in

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Speaker 4: the room in the video we shot. Yeah, So one

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Speaker 4: of them. There's two companies. There's CyberPower and iy Power.

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Speaker 4: They're both in southern California, and they're actually basically on

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Speaker 4: the same street. Despite both having power in the name,

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Speaker 4: they are not related, and they both started around the

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Speaker 4: same time in the late nineties. But one of them

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Speaker 4: remained basically entirely focused on the US, and that's CyberPower PC.

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Speaker 4: The other one Ibypower, although their pre built PCs are

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Speaker 4: mostly focused on the US. They own a brand that's

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Speaker 4: called Height, which makes computer cases. And so this brand,

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Speaker 4: because it designs other components, it's successfully been able to

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Speaker 4: get into other markets worldwide. And this is a story

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Speaker 4: that's true for a lot of companies in the industry.

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Speaker 4: And so what they were telling us they thought was

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Speaker 4: really interesting was they're in this position where they don't

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Speaker 4: need to ship into the US anymore, and in fact

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Speaker 4: they decided not to and the reason for that was

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Speaker 4: the cost is too high, so it made more sense

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Speaker 4: for them to ship the goods elsewhere. So it might

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Speaker 4: hit the port in la but they might instruct the

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Speaker 4: forwarder to keep it on the vessel and send it

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Speaker 4: around again somewhere else. So what they're doing right now

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Speaker 4: is actually the product director in that video we spoke

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Speaker 4: with Rob Teller. He flew out to some other countries

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Speaker 4: and started trying to establish relationships to build the brand

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Speaker 4: and retailers outside of the US, whereas CyberPower coming back

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Speaker 4: to them. They really only sell to the US, but

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Speaker 4: they also assemble one percent of their computers in the US,

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Speaker 4: so they kind of get screwed in a way where

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Speaker 4: they don't have these external markets like you're talking about,

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Speaker 4: and they assemble it all here, but they don't make

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Speaker 4: the stuff that they put in the computer, so they

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Speaker 4: don't really have control over where it comes from. So

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Speaker 4: getting back to the company size disparity, you can wish

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Speaker 4: as much as you want that it comes from a

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Speaker 4: country with a lower tariff, or maybe even comes from

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Speaker 4: the same country you're in, but if you don't make it,

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Speaker 4: you don't really have any control over that.

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Speaker 3: Yeah, And of course there's an irony that the company

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Speaker 3: which actually assembles stuff in the US is getting punished

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Speaker 3: more than more than some other companies. There's another business

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Speaker 3: that I wanted to ask you about specifically, and it

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Speaker 3: is a logistics company that people use to actually, you know,

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Speaker 3: transport stuff. It's called Straightforwarding, which is a great name

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Speaker 3: for like a male company. But what are they see

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Speaker 3: right now in terms of actual shipping volumes.

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Speaker 4: So when we were talking to them, it would have

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Speaker 4: been probably second week of April, I think, and what

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Speaker 4: they were starting to see is that customers were indicating

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Speaker 4: concern of the tariff. So this is just to put

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Speaker 4: into perspective. The time I spoke to them, it was

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Speaker 4: one day before the exemptions were announced, and therefore two

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Speaker 4: days before the exemptions were kind of unannounced.

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Speaker 2: I remember that weekend, yeah, yeah.

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Speaker 4: Yeah, yeah, And then it was a day or two

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Speaker 4: after the most recent round of tariffs, and so that

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Speaker 4: at that time the highest general tariff. Of course, it's

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Speaker 4: different depending on the classification of the good. The highest

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Speaker 4: general I think they quoted at one hundred and seventy

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Speaker 4: percent depending on how you count the previous administration. So

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Speaker 4: what they were seeing was a lot of customer I mean,

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Speaker 4: he just confirmed panic was the word I used, and

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Speaker 4: he confirmed that word where they're customers were panicked about

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Speaker 4: the pricing and about the uncertainty of what's the tariff

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Speaker 4: going to be and if it goes away, can we

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Speaker 4: get a refund? As far as shipment volume. In the

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Speaker 4: time since talking to them, there's been a reduction of

436
00:24:15,160 --> 00:24:19,240
Speaker 4: volume into the port in LA in particular. I think

437
00:24:19,280 --> 00:24:21,639
Speaker 4: I actually saw a Bloomberg report about that, So you're

438
00:24:22,440 --> 00:24:24,760
Speaker 4: probably more informed than I am on the specifics of it,

439
00:24:24,800 --> 00:24:27,520
Speaker 4: but I think I read there was a year over

440
00:24:27,600 --> 00:24:31,159
Speaker 4: year reduction anticipated for next week of correct me if

441
00:24:31,200 --> 00:24:33,159
Speaker 4: I'm wrong with something like thirty five percent. Does that

442
00:24:33,200 --> 00:24:33,640
Speaker 4: sound right?

443
00:24:33,800 --> 00:24:37,120
Speaker 2: It sounds yeah.

444
00:24:36,800 --> 00:24:39,800
Speaker 4: Yeah, So I think that's the number I read this morning. Anyway,

445
00:24:39,800 --> 00:24:43,679
Speaker 4: what they're seeing is potential reduction and import which means

446
00:24:44,160 --> 00:24:49,200
Speaker 4: reduction need for people who do that job, and you know, couriers,

447
00:24:49,680 --> 00:24:52,280
Speaker 4: anyone in that whole chain warehousing. There's a ton of

448
00:24:52,280 --> 00:24:56,560
Speaker 4: warehousing in City of Industry in California, and they're going

449
00:24:56,640 --> 00:24:58,120
Speaker 4: to be impacted for.

450
00:24:58,080 --> 00:25:16,400
Speaker 2: Sure, stepping back, even sitting aside the tariffs, what are

451
00:25:16,440 --> 00:25:20,960
Speaker 2: gamers looking for when they buy, Whether it's say a tower,

452
00:25:21,040 --> 00:25:23,240
Speaker 2: like you know, I know, there's some part of its design,

453
00:25:23,800 --> 00:25:27,200
Speaker 2: and then cooling I imagine sort of keeps it alive

454
00:25:27,280 --> 00:25:30,679
Speaker 2: and healthy. For high quality cooling keeps it alive. And

455
00:25:30,720 --> 00:25:33,760
Speaker 2: then there's purely you know, high performance gear for the

456
00:25:33,760 --> 00:25:38,280
Speaker 2: best gaming experience. Like what does your viewer, what do

457
00:25:38,359 --> 00:25:41,920
Speaker 2: they want and what are they benchmarking various options against

458
00:25:41,960 --> 00:25:43,280
Speaker 2: each other on what specs?

459
00:25:43,880 --> 00:25:44,160
Speaker 1: Sure?

460
00:25:44,400 --> 00:25:48,280
Speaker 4: Yeah, so our viewers tend to build their own computers,

461
00:25:48,320 --> 00:25:50,960
Speaker 4: so you call it DIY right through it yourself PC

462
00:25:51,080 --> 00:25:55,000
Speaker 4: building and for anyone who hasn't done it, it's really fun.

463
00:25:55,040 --> 00:25:57,359
Speaker 4: It's pretty easy. It's like putting together legos, except with

464
00:25:57,440 --> 00:26:02,040
Speaker 4: way fewer pieces. But typically a shop first, based you

465
00:26:02,040 --> 00:26:03,480
Speaker 4: say your budget, you have an idea of what you

466
00:26:03,560 --> 00:26:06,359
Speaker 4: might want to spend. The first two components people are

467
00:26:06,400 --> 00:26:08,879
Speaker 4: pricing out are normally the CPU and the GPU. Those

468
00:26:09,080 --> 00:26:12,800
Speaker 4: drive the performance of the computer. So a lot of

469
00:26:12,800 --> 00:26:15,280
Speaker 4: people in our audience will work on the same computer

470
00:26:15,359 --> 00:26:18,600
Speaker 4: they game on. So those users might be using something

471
00:26:18,720 --> 00:26:21,600
Speaker 4: like Adobe Audition, which I just learned you all use

472
00:26:21,640 --> 00:26:25,800
Speaker 4: for this podcast or Adobe premiere or a photoshop and

473
00:26:25,840 --> 00:26:29,400
Speaker 4: so like just these three Adobe solutions alone depend which

474
00:26:29,400 --> 00:26:30,919
Speaker 4: one it is, they could be very CPU or very

475
00:26:30,920 --> 00:26:33,439
Speaker 4: GPU intensive, and the same is true for gaming, so

476
00:26:33,480 --> 00:26:35,760
Speaker 4: people tend to speck out the GPU and the CPU first,

477
00:26:36,480 --> 00:26:39,520
Speaker 4: something like cooling. I guess to name the components. There's

478
00:26:39,840 --> 00:26:43,919
Speaker 4: cooling for the CPU, there's a case, power supply, motherboard, RAM,

479
00:26:44,480 --> 00:26:47,879
Speaker 4: and typically a solid state storage device or an SSD.

480
00:26:48,800 --> 00:26:51,480
Speaker 4: And so these are the core components. The ones that

481
00:26:51,520 --> 00:26:56,040
Speaker 4: are more commodities would include the case potentially the cooling

482
00:26:56,480 --> 00:26:58,040
Speaker 4: or what people are starting to go for if they

483
00:26:58,119 --> 00:27:02,640
Speaker 4: have a little more budget is some kind of looks focus.

484
00:27:02,760 --> 00:27:05,320
Speaker 4: So I mean, you can make computers look really cool

485
00:27:05,520 --> 00:27:08,199
Speaker 4: these days, and yeah, and so there's a lot of

486
00:27:08,200 --> 00:27:10,120
Speaker 4: that too, where it's it's all I mean, it's really

487
00:27:10,119 --> 00:27:15,320
Speaker 4: not that different in concept from car customization, where there's

488
00:27:15,359 --> 00:27:18,040
Speaker 4: people who want performance and there's people who want fashion, right,

489
00:27:18,080 --> 00:27:19,879
Speaker 4: and then there's people who want both, and there's the

490
00:27:19,880 --> 00:27:22,040
Speaker 4: ones who spend the most money on it. But yeah,

491
00:27:22,080 --> 00:27:24,800
Speaker 4: generally speaking, what they're looking for is a high frame

492
00:27:24,880 --> 00:27:28,120
Speaker 4: rate to make the gaming experience feel fluid. They want

493
00:27:28,119 --> 00:27:30,320
Speaker 4: to be able to render the graphics at the highest

494
00:27:30,359 --> 00:27:34,560
Speaker 4: quality settings with the most polygons and geometry and the graphics.

495
00:27:35,280 --> 00:27:37,680
Speaker 4: And if they do work on the side, then they're

496
00:27:37,680 --> 00:27:42,040
Speaker 4: trying to balance the parts within the system, meaning they

497
00:27:42,080 --> 00:27:44,840
Speaker 4: want to evenly distribute the money in a way that

498
00:27:45,480 --> 00:27:49,560
Speaker 4: optimizes for what each application wants so that they can

499
00:27:49,640 --> 00:27:53,240
Speaker 4: run those outside applications that might be core intensive versus

500
00:27:54,320 --> 00:27:55,760
Speaker 4: say memory intensive or something.

501
00:27:56,000 --> 00:27:58,720
Speaker 3: Joe, do you remember that old show Pimped My Ride, Yeah,

502
00:27:58,760 --> 00:28:01,560
Speaker 3: where they did make yeah, we need to like pimp

503
00:28:01,600 --> 00:28:05,760
Speaker 3: my computer kind of thing where the Yeah, I would

504
00:28:05,800 --> 00:28:07,720
Speaker 3: I would actually watch.

505
00:28:08,080 --> 00:28:12,320
Speaker 4: Yeah, I could watch. There was. There is a another

506
00:28:12,400 --> 00:28:15,440
Speaker 4: YouTuber in the space, Jay's two Cents, who basically did

507
00:28:15,480 --> 00:28:21,719
Speaker 4: that for Terry Crews. Actually hasn't the actor? Yeah, yeah,

508
00:28:21,880 --> 00:28:23,040
Speaker 4: it built them a game in PC.

509
00:28:23,440 --> 00:28:27,440
Speaker 3: Very cool. Talk to us a little bit more about pricing,

510
00:28:27,680 --> 00:28:31,520
Speaker 3: because it sounds like everyone agrees that the tariffs are

511
00:28:31,600 --> 00:28:33,520
Speaker 3: going to be the cost is going to be borne

512
00:28:33,600 --> 00:28:36,480
Speaker 3: by the American consumer, and so prices are going to

513
00:28:36,560 --> 00:28:40,040
Speaker 3: have to come up. But also when we're talking about

514
00:28:40,040 --> 00:28:43,360
Speaker 3: tariffs that are almost you know, two hundred percent in

515
00:28:43,440 --> 00:28:47,280
Speaker 3: some cases, it feels like that is such a significant

516
00:28:47,600 --> 00:28:51,400
Speaker 3: increase that You're also going to see volumes fall and

517
00:28:51,680 --> 00:28:56,600
Speaker 3: demand destruction, which normally would pull prices down, but I

518
00:28:56,640 --> 00:28:59,240
Speaker 3: guess everything is just so different this time. It's it's

519
00:28:59,320 --> 00:29:01,960
Speaker 3: kind of hard to gauge what's actually going to happen

520
00:29:02,360 --> 00:29:04,920
Speaker 3: to prices and how companies are actually dealing with that.

521
00:29:05,800 --> 00:29:09,480
Speaker 4: Yeah, I think it could pull prices down eventually in

522
00:29:09,520 --> 00:29:11,840
Speaker 4: the short term, though, I mean, if their options are

523
00:29:11,840 --> 00:29:16,080
Speaker 4: losing hundreds of dollars per device or letting it sit

524
00:29:16,160 --> 00:29:18,320
Speaker 4: on a shelf, I think right now there's not enough

525
00:29:18,320 --> 00:29:21,800
Speaker 4: pain to well for most of them anyway to take

526
00:29:21,840 --> 00:29:26,120
Speaker 4: that hit just to liquidate whatever they can. So pricing,

527
00:29:26,600 --> 00:29:28,080
Speaker 4: I think it's pretty safe to say it's going to

528
00:29:28,120 --> 00:29:30,400
Speaker 4: go up. They've told us as much, most of these companies,

529
00:29:30,400 --> 00:29:33,840
Speaker 4: and yeah, I think what we're going to see happen

530
00:29:34,120 --> 00:29:37,120
Speaker 4: is an initially increasing price for the companies that are

531
00:29:37,120 --> 00:29:39,520
Speaker 4: still bringing products to the US, because not all of

532
00:29:39,520 --> 00:29:44,760
Speaker 4: them are, and as the tariffs change, I mean, if

533
00:29:44,800 --> 00:29:47,760
Speaker 4: they come down. This is a personal opinion, but I

534
00:29:47,800 --> 00:29:49,840
Speaker 4: don't think the prices are going to come down in

535
00:29:49,920 --> 00:29:54,120
Speaker 4: step with a tariff's production, at least not without some

536
00:29:54,200 --> 00:29:57,480
Speaker 4: kind of really severe market force, such as people just

537
00:29:57,520 --> 00:30:00,680
Speaker 4: stop buying stuff because I just don't see a reason

538
00:30:00,760 --> 00:30:03,600
Speaker 4: the companies would do that. They're going to have inventory

539
00:30:03,600 --> 00:30:06,520
Speaker 4: where they already paid import costs. Maybe they can get

540
00:30:06,520 --> 00:30:10,080
Speaker 4: a government refund, maybe they can't. They are worried about

541
00:30:10,200 --> 00:30:14,000
Speaker 4: the decrease and the value of their money, and they

542
00:30:14,120 --> 00:30:16,239
Speaker 4: may also just feel like they need to shore up

543
00:30:16,240 --> 00:30:18,720
Speaker 4: more profit, you know, to be a little safer. So

544
00:30:18,800 --> 00:30:21,880
Speaker 4: I really don't see pricing coming down anytime soon unless

545
00:30:22,240 --> 00:30:24,840
Speaker 4: there's just there's zero demand left and they get desperate.

546
00:30:25,440 --> 00:30:28,520
Speaker 4: But in terms of increases, so it's not linear. So

547
00:30:28,520 --> 00:30:30,560
Speaker 4: this is pretty interesting where one of the things I

548
00:30:30,640 --> 00:30:33,160
Speaker 4: learned talking to the companies was about the retail side.

549
00:30:33,160 --> 00:30:36,680
Speaker 4: I knew nothing about how this worked before. And retailers,

550
00:30:36,720 --> 00:30:39,440
Speaker 4: so one of the biggest ones in the US is Microcenter,

551
00:30:40,160 --> 00:30:45,200
Speaker 4: and they are like a highly specialized best buy. I mean,

552
00:30:45,200 --> 00:30:49,440
Speaker 4: if you do DIYPC building, they're your number one physical choice.

553
00:30:49,800 --> 00:30:52,640
Speaker 4: The etailers would be like New Egg or Amazon. And

554
00:30:52,680 --> 00:30:56,880
Speaker 4: what we learned is that some of these retailers, like Microcenter,

555
00:30:57,800 --> 00:31:02,280
Speaker 4: have very rigid margin demand, and so for computer cases,

556
00:31:02,720 --> 00:31:04,520
Speaker 4: for some of the companies we spoke to, the margin

557
00:31:04,560 --> 00:31:07,720
Speaker 4: demand is about twenty five percent and that means these

558
00:31:07,760 --> 00:31:13,480
Speaker 4: case manufacturers are often making less than just in terms

559
00:31:13,520 --> 00:31:17,040
Speaker 4: of percentage or even dollar amount, especially if they want

560
00:31:17,080 --> 00:31:20,320
Speaker 4: to get microcenter shelf space. Correct. Yeah, okay, yeah, so

561
00:31:20,400 --> 00:31:24,360
Speaker 4: that secures the shelf space. And I think under typical conditions.

562
00:31:24,400 --> 00:31:27,480
Speaker 4: I've had companies bad mouth retailers to me privately before

563
00:31:27,520 --> 00:31:30,240
Speaker 4: and ask us to keep it off record or not

564
00:31:30,360 --> 00:31:34,400
Speaker 4: share it at all. I've never had them on camera

565
00:31:34,640 --> 00:31:37,920
Speaker 4: just straight up say you know, the retailers are making

566
00:31:37,920 --> 00:31:41,320
Speaker 4: more money than us, and then express their discontent at

567
00:31:41,720 --> 00:31:46,880
Speaker 4: retailers being unwilling to budge on their own margin requirements. Interestingly,

568
00:31:47,320 --> 00:31:49,120
Speaker 4: what they told us was that Amazon was a little

569
00:31:49,160 --> 00:31:52,200
Speaker 4: more willing to have some flexibility, which maybe they're just

570
00:31:52,240 --> 00:31:54,480
Speaker 4: big enough, right, they have enough categories where they can

571
00:31:55,520 --> 00:31:57,320
Speaker 4: it might be an opportunity for Amazon to try and

572
00:31:57,360 --> 00:32:02,959
Speaker 4: soak some of that supply from these smaller retailers. But

573
00:32:03,880 --> 00:32:07,640
Speaker 4: the question is if a three hundred and sixty dollars

574
00:32:08,640 --> 00:32:12,520
Speaker 4: computer case that has all these bells and whistles now

575
00:32:12,560 --> 00:32:15,000
Speaker 4: has to be sold for six hundred to seven hundred dollars,

576
00:32:15,000 --> 00:32:18,120
Speaker 4: which is what the companies were telling us as an example,

577
00:32:18,920 --> 00:32:21,800
Speaker 4: will a consumer actually pay for that? And when they

578
00:32:21,880 --> 00:32:26,040
Speaker 4: don't what happens at retail, is it? You know, I've

579
00:32:26,080 --> 00:32:30,080
Speaker 4: seen plenty of headlines about empty shelves. I really don't

580
00:32:30,120 --> 00:32:32,600
Speaker 4: think that's just hyperbole. I think there's real chance of that,

581
00:32:32,720 --> 00:32:34,720
Speaker 4: especially in niche industries like this one.

582
00:32:35,000 --> 00:32:36,960
Speaker 2: Yeah, so get you know, Let's say, you know, my

583
00:32:37,080 --> 00:32:41,640
Speaker 2: son isn't old enough yet, thankfully to be a hardcore gamer,

584
00:32:41,680 --> 00:32:44,160
Speaker 2: but it's probably a matter of years because I see

585
00:32:44,160 --> 00:32:46,040
Speaker 2: how much he like screens of all sorts.

586
00:32:47,040 --> 00:32:48,240
Speaker 3: I wonder where he gets that from.

587
00:32:48,320 --> 00:32:50,320
Speaker 4: Yeah, right, right, it's my It is my fault.

588
00:32:50,400 --> 00:32:52,360
Speaker 2: But let's say, you know, I you know, it's later

589
00:32:52,400 --> 00:32:53,640
Speaker 2: in the year and I'm like, okay, I want to

590
00:32:53,640 --> 00:32:56,640
Speaker 2: buy him a Christmas present for the gamer in your

591
00:32:56,760 --> 00:32:59,520
Speaker 2: family or in anyone's family. What do you think this

592
00:32:59,600 --> 00:33:03,840
Speaker 2: Christmas looks like in terms of higher prices and diminished

593
00:33:03,920 --> 00:33:05,520
Speaker 2: variety of options?

594
00:33:05,800 --> 00:33:09,720
Speaker 4: Yeah, the reduced variety is a big one, because if

595
00:33:09,760 --> 00:33:13,800
Speaker 4: you're consolidating your order volume, you're reducing your order volume,

596
00:33:13,800 --> 00:33:17,240
Speaker 4: you might have to consolidate the skews, right, so suddenly

597
00:33:17,280 --> 00:33:22,200
Speaker 4: the fifteen hundred units of red become fifteen hundred more

598
00:33:22,280 --> 00:33:26,920
Speaker 4: units of black computer cases, and so that definitely would

599
00:33:27,000 --> 00:33:30,600
Speaker 4: reduce I think the choice, or at least the variety,

600
00:33:30,640 --> 00:33:35,160
Speaker 4: like you're saying pricing. I mean, if someone really as reviewers,

601
00:33:35,200 --> 00:33:38,840
Speaker 4: our recommendation right now to the consumer very focused on

602
00:33:38,920 --> 00:33:42,920
Speaker 4: sort of consumer first, And to me it's like, I

603
00:33:42,960 --> 00:33:47,000
Speaker 4: wouldn't buy unless I know I really want the upgrade

604
00:33:47,040 --> 00:33:49,480
Speaker 4: or need it, maybe for work or just the computers

605
00:33:49,480 --> 00:33:52,080
Speaker 4: on its last legs. And if I were going to buy,

606
00:33:52,120 --> 00:33:55,400
Speaker 4: it would probably be now. But I think the greater

607
00:33:55,520 --> 00:33:58,160
Speaker 4: thing to consider there, at least in our recommendations, is

608
00:33:58,720 --> 00:34:01,080
Speaker 4: trying to remind people of hey, you know, if you're

609
00:34:01,080 --> 00:34:05,400
Speaker 4: not so sure about your job prospects, then it and

610
00:34:05,560 --> 00:34:07,680
Speaker 4: you really don't need it, then maybe hold onto the money,

611
00:34:08,440 --> 00:34:10,080
Speaker 4: which none of the companies want to hear us say,

612
00:34:10,080 --> 00:34:12,759
Speaker 4: but you know that's I think that's probably the responsible

613
00:34:12,840 --> 00:34:17,319
Speaker 4: thing to say. For Christmas or holidays. Yeah, I I

614
00:34:17,440 --> 00:34:21,879
Speaker 4: would imagine there'll be some pain, I think the lower end.

615
00:34:22,040 --> 00:34:23,960
Speaker 4: So here's where it gets interesting. The lower end components

616
00:34:23,960 --> 00:34:26,960
Speaker 4: would typically be where people would be directed in a

617
00:34:26,960 --> 00:34:28,520
Speaker 4: time like that, if prices are coming up, you go

618
00:34:28,560 --> 00:34:31,200
Speaker 4: for lower end. A percent increase on a cheaper product

619
00:34:31,239 --> 00:34:33,560
Speaker 4: doesn't feel as bad as a percent increase on an

620
00:34:33,600 --> 00:34:37,080
Speaker 4: expensive product just by the math of it. The problem

621
00:34:37,239 --> 00:34:40,799
Speaker 4: is right now, there's not a lot of cheap products

622
00:34:40,880 --> 00:34:46,000
Speaker 4: silicon in the gaming or the consumer space, So if

623
00:34:46,000 --> 00:34:46,879
Speaker 4: you want.

624
00:34:47,239 --> 00:34:49,800
Speaker 2: Why allocate silicon capacity when you could be selling to

625
00:34:49,840 --> 00:34:51,840
Speaker 2: AI data centers anyway? Sorry, keep going.

626
00:34:51,920 --> 00:34:55,080
Speaker 4: Exactly No, I mean that's exactly right. Yeah, it's and

627
00:34:55,280 --> 00:34:57,880
Speaker 4: like Intel, for example, with its GPUs, they have a

628
00:34:57,880 --> 00:35:02,600
Speaker 4: small GPU effort and consumer they've been pushing. One of

629
00:35:02,640 --> 00:35:05,640
Speaker 4: the people at Intel stated to me in the past,

630
00:35:05,719 --> 00:35:07,560
Speaker 4: we should be wrapping these and dollar bills when we

631
00:35:07,600 --> 00:35:10,680
Speaker 4: shift them out the door, because they're fighting so much

632
00:35:10,719 --> 00:35:15,319
Speaker 4: on the pricing with n video and am D that

633
00:35:15,440 --> 00:35:19,040
Speaker 4: it feels like they're losing money, and they might well be. Unfortunately,

634
00:35:19,360 --> 00:35:22,279
Speaker 4: they are not well established yet and they're the only

635
00:35:22,320 --> 00:35:27,760
Speaker 4: ones who offer a cheap ish video card for gaming,

636
00:35:28,160 --> 00:35:30,120
Speaker 4: And so you're left with this price creep where all

637
00:35:30,160 --> 00:35:32,640
Speaker 4: the video cards have pretty much moved up towards these

638
00:35:32,719 --> 00:35:35,319
Speaker 4: higher price classes. They've cut down what you get for

639
00:35:35,400 --> 00:35:39,040
Speaker 4: the dollar, which's lower memory capacity. Part of that is

640
00:35:39,160 --> 00:35:42,800
Speaker 4: product segmentation where companies like ndvideo recognize, like you said,

641
00:35:43,719 --> 00:35:46,240
Speaker 4: if I have a user who wants thirty two gigabytes

642
00:35:46,280 --> 00:35:48,800
Speaker 4: of memory, on the video card, they probably want to

643
00:35:48,880 --> 00:35:51,480
Speaker 4: use it to make money, and so if I'm on video,

644
00:35:51,520 --> 00:35:53,560
Speaker 4: I should make money because they're going to make money, right,

645
00:35:53,640 --> 00:35:57,239
Speaker 4: So you segment that, and then the consumer is left

646
00:35:57,280 --> 00:36:01,719
Speaker 4: with things that are less viable. They have less longevity,

647
00:36:02,080 --> 00:36:06,560
Speaker 4: so they won't age as well with the gaming graphics improvements,

648
00:36:07,360 --> 00:36:11,160
Speaker 4: and causes kind of a circle of buying hardware sooner

649
00:36:11,600 --> 00:36:14,440
Speaker 4: because it's gotten too unobtainable to go up to the

650
00:36:14,520 --> 00:36:17,319
Speaker 4: high end where you might have that longer, that better longevity.

651
00:36:18,640 --> 00:36:22,320
Speaker 3: So I just have one last question. Obviously, the stated

652
00:36:22,400 --> 00:36:26,640
Speaker 3: goal of the tariffs is to move manufacturing production to

653
00:36:26,800 --> 00:36:30,280
Speaker 3: the States. Did any of the companies that you actually

654
00:36:30,320 --> 00:36:34,319
Speaker 3: spoke to talk about this as a possibility, and what

655
00:36:34,400 --> 00:36:37,680
Speaker 3: are the sticking points other than the time frame of

656
00:36:37,680 --> 00:36:40,279
Speaker 3: building a new factory, what are the sticking points or

657
00:36:40,320 --> 00:36:43,920
Speaker 3: the challenges in actually making more stuff in the US.

658
00:36:44,680 --> 00:36:49,239
Speaker 4: Almost all of them indicated that this is not a

659
00:36:49,480 --> 00:36:54,399
Speaker 4: possibility anytime in the near future. There's one exception, which

660
00:36:54,440 --> 00:36:57,359
Speaker 4: is a company we spoke to called Proto Case, and

661
00:36:58,320 --> 00:37:01,000
Speaker 4: proto Case is part of a another company that makes

662
00:37:01,120 --> 00:37:03,680
Speaker 4: enterprise and server equipment called forty five drives, And so

663
00:37:04,560 --> 00:37:08,160
Speaker 4: these companies. They are headquartered in Canada, and for the

664
00:37:08,280 --> 00:37:11,000
Speaker 4: last twelve years, the owner was telling us or the

665
00:37:11,040 --> 00:37:13,040
Speaker 4: co founder, I should say, they were looking at it

666
00:37:13,120 --> 00:37:16,919
Speaker 4: opening a plant somewhere in the US for assembly and

667
00:37:16,960 --> 00:37:20,399
Speaker 4: for some light manufacturing, and so they've done that. They're

668
00:37:20,440 --> 00:37:22,759
Speaker 4: the only ones who've kind of gone that direction, but

669
00:37:22,840 --> 00:37:25,280
Speaker 4: they were already going that direction. And their whole business

670
00:37:25,280 --> 00:37:28,040
Speaker 4: model is speed, So if you need something, they can

671
00:37:28,080 --> 00:37:30,440
Speaker 4: turn it around a couple days, whereas if you need

672
00:37:30,480 --> 00:37:34,040
Speaker 4: a lot of something, you might be waiting months. Everyone

673
00:37:34,040 --> 00:37:38,080
Speaker 4: else basically said that it's it is not feasible to

674
00:37:38,120 --> 00:37:41,080
Speaker 4: bring manufacturing into the US for the products that they sell,

675
00:37:41,440 --> 00:37:44,879
Speaker 4: and a lot of that comes from supply chain. So

676
00:37:45,880 --> 00:37:48,200
Speaker 4: the best way for me to contextualize it as a motherboard.

677
00:37:48,800 --> 00:37:52,520
Speaker 4: A motherboard is roughly a one foot by one foot

678
00:37:53,280 --> 00:37:55,280
Speaker 4: board that goes right in the middle of your computer.

679
00:37:55,320 --> 00:37:57,759
Speaker 4: The CPU sockets into it, the GPU sockets into it,

680
00:37:58,000 --> 00:37:59,560
Speaker 4: the RAM goes in it. You can think of it

681
00:37:59,760 --> 00:38:02,359
Speaker 4: kind of like the brains down of the computer, and

682
00:38:03,680 --> 00:38:06,759
Speaker 4: a high end motherboard for a workstation or whatever. High

683
00:38:06,800 --> 00:38:09,399
Speaker 4: end gaming PC has somewhere between eighteen hundred and three

684
00:38:09,440 --> 00:38:12,120
Speaker 4: thousand individual components on it, so these are they get

685
00:38:12,280 --> 00:38:17,880
Speaker 4: really small? Yeah, And so these components come from all

686
00:38:17,880 --> 00:38:20,560
Speaker 4: over the place. So a motherboard factory is a service

687
00:38:20,560 --> 00:38:23,760
Speaker 4: mount technology line, it's called an SMT line to mostly

688
00:38:23,800 --> 00:38:28,879
Speaker 4: automatically pick and place components onto the board, and it's

689
00:38:28,880 --> 00:38:32,160
Speaker 4: pulling those from normally reels like drums, almost like a

690
00:38:32,239 --> 00:38:36,440
Speaker 4: film reel of components. And those reels of components come

691
00:38:36,480 --> 00:38:39,520
Speaker 4: from other companies, which come from other companies, And so

692
00:38:39,600 --> 00:38:42,919
Speaker 4: you have a factory supply chain to make one part

693
00:38:42,960 --> 00:38:46,040
Speaker 4: of one computer that might go, depending on how you

694
00:38:46,040 --> 00:38:48,719
Speaker 4: want to count it, one hundred factories deep, or if

695
00:38:48,760 --> 00:38:50,959
Speaker 4: you look at just sort of the big components after

696
00:38:51,000 --> 00:38:53,799
Speaker 4: they've come from raw materials and things like this, you're

697
00:38:53,840 --> 00:38:57,000
Speaker 4: still at maybe ten to thirty factories. And that's just

698
00:38:57,040 --> 00:39:01,440
Speaker 4: to make one part of one computer. Incredible, and so

699
00:39:01,480 --> 00:39:04,400
Speaker 4: the challenge that all the companies enumerated to us was,

700
00:39:05,480 --> 00:39:08,400
Speaker 4: you can bring the SMT line to the US and

701
00:39:08,440 --> 00:39:10,399
Speaker 4: you can stamp these components down on it. You're gonna

702
00:39:10,400 --> 00:39:14,600
Speaker 4: buy those components from somewhere else, and it's gonna be Vietnam, Thailand, China,

703
00:39:14,719 --> 00:39:20,719
Speaker 4: mostly China, Taiwan and so forth. But if there's tariffs

704
00:39:20,719 --> 00:39:24,560
Speaker 4: on those parts which are about us. You know, they're

705
00:39:24,600 --> 00:39:26,759
Speaker 4: not literal raw materials, but they're pretty close in the

706
00:39:26,760 --> 00:39:29,520
Speaker 4: computer world, then you still face all the same challenges

707
00:39:29,560 --> 00:39:31,719
Speaker 4: as before. So those would also have to come over

708
00:39:31,760 --> 00:39:36,320
Speaker 4: to America. And then now you're bringing in capacitor supply

709
00:39:36,560 --> 00:39:42,120
Speaker 4: or metal supply or rare earth metals, and pretty much

710
00:39:42,160 --> 00:39:44,520
Speaker 4: no matter where you look, you're bringing something in from someone.

711
00:39:45,040 --> 00:39:46,839
Speaker 4: And and so I think it's just the challenge of

712
00:39:47,800 --> 00:39:50,040
Speaker 4: what was stated to us was there needs to be

713
00:39:50,520 --> 00:39:54,480
Speaker 4: a plan with kind of hard timelines of here's our

714
00:39:54,480 --> 00:39:58,799
Speaker 4: target to move this industry's manufacturing by this date, and

715
00:39:58,920 --> 00:40:01,840
Speaker 4: just flipping a switch it just seems to cost too

716
00:40:01,920 --> 00:40:04,560
Speaker 4: much chaos there. You know, people would be timid to

717
00:40:05,520 --> 00:40:09,120
Speaker 4: invest in a factory in the US that might take

718
00:40:10,000 --> 00:40:13,239
Speaker 4: several years to build if they're not sure what's going

719
00:40:13,280 --> 00:40:14,080
Speaker 4: to change tomorrow.

720
00:40:14,520 --> 00:40:17,200
Speaker 2: I just have one last question too, And I sort

721
00:40:17,239 --> 00:40:20,360
Speaker 2: of have this nagging feeling that I might be stepping

722
00:40:20,400 --> 00:40:22,080
Speaker 2: into a gamer landmine.

723
00:40:22,080 --> 00:40:24,879
Speaker 4: But I literally don't know at all.

724
00:40:25,040 --> 00:40:27,760
Speaker 2: Why not just you know, all this stuff. It feels

725
00:40:27,800 --> 00:40:30,000
Speaker 2: the idea of having to worry so much about the

726
00:40:30,040 --> 00:40:32,799
Speaker 2: specs on your own computer sort of feels retro I

727
00:40:32,840 --> 00:40:35,000
Speaker 2: just do every all my work in a browser. Why not,

728
00:40:35,239 --> 00:40:37,880
Speaker 2: just like the whole industry, go to cloud gaming and

729
00:40:38,000 --> 00:40:40,799
Speaker 2: not have to worry about the spinning disk in your home?

730
00:40:41,000 --> 00:40:41,960
Speaker 4: Oh you're hurting me?

731
00:40:42,160 --> 00:40:46,960
Speaker 2: Yeah, in one minute or less. No, let's tell like,

732
00:40:47,239 --> 00:40:49,279
Speaker 2: could there be a shift to cloud gaming? I don't

733
00:40:49,280 --> 00:40:51,319
Speaker 2: know say about that? What are the constraints? Why not

734
00:40:51,360 --> 00:40:52,640
Speaker 2: on Netflix for gaming or whatever?

735
00:40:52,880 --> 00:40:58,200
Speaker 4: Sure? The shortest possible answer I have is latency and

736
00:40:58,480 --> 00:41:02,520
Speaker 4: control or customization so as quickly as possible. I mean

737
00:41:03,360 --> 00:41:06,400
Speaker 4: latency is the responsiveness between your input and what happens

738
00:41:06,440 --> 00:41:10,839
Speaker 4: on the screen, and going through networking infrastructure, you might

739
00:41:10,920 --> 00:41:14,839
Speaker 4: be at two times longer three times longer latency, meaning

740
00:41:14,840 --> 00:41:16,640
Speaker 4: that when you push the button on the controller or

741
00:41:16,680 --> 00:41:21,160
Speaker 4: the keyboard, you don't see that action until a perceptibly

742
00:41:21,280 --> 00:41:24,439
Speaker 4: long difference versus if you played it locally. The other

743
00:41:24,520 --> 00:41:28,080
Speaker 4: issue is the concern on the consumer side of you

744
00:41:28,160 --> 00:41:32,880
Speaker 4: own nothing, right, and the more you own nothing I

745
00:41:32,880 --> 00:41:37,359
Speaker 4: think kind of the more uncomfortable, certainly, and I think

746
00:41:37,400 --> 00:41:41,600
Speaker 4: most of our audience gets with the product in general.

747
00:41:42,320 --> 00:41:45,320
Speaker 4: And then the last concern is just that customization, where

748
00:41:46,000 --> 00:41:49,319
Speaker 4: it may be a somewhat equivalent would be why if

749
00:41:49,360 --> 00:41:51,280
Speaker 4: you can rent a car for about the same price

750
00:41:51,840 --> 00:41:53,640
Speaker 4: as buying a car, why would you buy a car.

751
00:41:53,920 --> 00:41:55,840
Speaker 4: There's a lot of reasons. One is external forces. You

752
00:41:55,880 --> 00:41:57,919
Speaker 4: have no control over that car. What if they want

753
00:41:57,960 --> 00:42:00,160
Speaker 4: it back, what do you do right? You like car,

754
00:42:00,239 --> 00:42:03,160
Speaker 4: they take it back. Or in the gaming world, if

755
00:42:03,160 --> 00:42:04,960
Speaker 4: they just decide this game is not going to be

756
00:42:04,960 --> 00:42:09,319
Speaker 4: available anymore, kill the license. It's gone, and you're talking

757
00:42:09,360 --> 00:42:11,960
Speaker 4: about something that people have a very deep emotional connection with.

758
00:42:12,239 --> 00:42:15,360
Speaker 4: It can just be snapped out of existence. So plus

759
00:42:15,400 --> 00:42:17,960
Speaker 4: the customization, I mean, it's really fun to build a computer.

760
00:42:18,080 --> 00:42:19,560
Speaker 4: So that's my quick version.

761
00:42:19,840 --> 00:42:22,480
Speaker 2: Our producer Dash says, I asked a new question there,

762
00:42:22,680 --> 00:42:26,160
Speaker 2: Steve Burger gamers next is it's a really phenomenal work

763
00:42:26,160 --> 00:42:28,480
Speaker 2: that you put together. I really would encourage all the

764
00:42:28,480 --> 00:42:31,080
Speaker 2: listeners to go check it out. And thank you so

765
00:42:31,200 --> 00:42:32,319
Speaker 2: much for coming on off off.

766
00:42:32,760 --> 00:42:46,640
Speaker 4: Thank you it was fun. Tracy.

767
00:42:46,719 --> 00:42:48,600
Speaker 2: I think it was one point in my life, maybe,

768
00:42:48,680 --> 00:42:51,879
Speaker 2: like I don't know, twenty ten, i'd gotten my idea

769
00:42:51,920 --> 00:42:52,920
Speaker 2: I should build a computer.

770
00:42:53,200 --> 00:42:54,160
Speaker 4: I never did it, but.

771
00:42:54,200 --> 00:42:55,840
Speaker 3: You were going to say you should get into gaming.

772
00:42:57,000 --> 00:42:58,600
Speaker 4: No, I should not get into gaming.

773
00:42:58,719 --> 00:43:00,239
Speaker 5: I thought it might be fun, and there's like, I

774
00:43:00,280 --> 00:43:02,359
Speaker 5: don't know, but it does seem it does seem cool

775
00:43:02,440 --> 00:43:06,640
Speaker 5: to build your own computer. I imagine, yes, the thing

776
00:43:06,760 --> 00:43:09,000
Speaker 5: is all I do is tweet an email, and I

777
00:43:09,080 --> 00:43:10,160
Speaker 5: really cannot.

778
00:43:09,920 --> 00:43:12,279
Speaker 3: Justify, Like you want to get your hands dirty.

779
00:43:12,080 --> 00:43:12,560
Speaker 4: No, I do.

780
00:43:12,680 --> 00:43:14,680
Speaker 2: Kind of it seems cool, but I can't really justify

781
00:43:14,719 --> 00:43:17,560
Speaker 2: it because I don't do anything this particularly computing intensive.

782
00:43:17,880 --> 00:43:20,719
Speaker 3: All right, well, let me know if you decide to,

783
00:43:21,320 --> 00:43:23,239
Speaker 3: you could do like a pie or something like that.

784
00:43:23,800 --> 00:43:27,040
Speaker 3: There's so many interesting things to actually pull out of

785
00:43:27,040 --> 00:43:29,960
Speaker 3: that episode, But I guess the big one for me

786
00:43:30,600 --> 00:43:34,160
Speaker 3: is the question of where does the pain of tariffs

787
00:43:34,600 --> 00:43:38,600
Speaker 3: actually land. And I know everyone's expecting higher prices at

788
00:43:38,600 --> 00:43:41,399
Speaker 3: this point for consumers, but there are still all these

789
00:43:41,440 --> 00:43:46,280
Speaker 3: additional layers where you could see companies or other entities

790
00:43:46,400 --> 00:43:48,640
Speaker 3: kind of absorb the costs. And so it was really

791
00:43:48,640 --> 00:43:53,240
Speaker 3: interesting when Steve was talking about microcenter and margin demand

792
00:43:53,360 --> 00:43:56,759
Speaker 3: of twenty five percent and the frustration of people that

793
00:43:56,840 --> 00:44:00,479
Speaker 3: actually make things that the retailers aren't necessarily budgeting on

794
00:44:00,680 --> 00:44:02,840
Speaker 3: the margins that they want to see at their stores.

795
00:44:03,520 --> 00:44:06,120
Speaker 3: That's really interesting, And I guess the question is if

796
00:44:06,160 --> 00:44:09,680
Speaker 3: things get really bad, do the retailers start to move

797
00:44:09,719 --> 00:44:09,960
Speaker 3: on that.

798
00:44:10,400 --> 00:44:14,759
Speaker 2: There's so many interesting micro and macroeconomic stories that you

799
00:44:14,760 --> 00:44:18,600
Speaker 2: could take out of this one industry, including who bears

800
00:44:18,600 --> 00:44:22,080
Speaker 2: the pain, who eats the margin? The question you asked

801
00:44:22,080 --> 00:44:24,799
Speaker 2: about the difference between large and small companies and the

802
00:44:24,880 --> 00:44:29,320
Speaker 2: risks that they can take. Obviously, you know, the web

803
00:44:29,360 --> 00:44:32,960
Speaker 2: of supply chain just extraordinary complex, and the uncertainty and

804
00:44:33,000 --> 00:44:36,800
Speaker 2: how even one piece of moving manufacturing back would require

805
00:44:36,840 --> 00:44:40,200
Speaker 2: like multiple different kinds of factories. I just thought that

806
00:44:40,320 --> 00:44:43,800
Speaker 2: was like incredibly interesting. It's also sort of interesting this industry.

807
00:44:43,840 --> 00:44:46,160
Speaker 2: I think part of the reason I was curious. You know,

808
00:44:46,719 --> 00:44:49,200
Speaker 2: one of the stories in politics, of course, is the

809
00:44:49,239 --> 00:44:53,360
Speaker 2: incredible success or the surprising success that Trump had with

810
00:44:53,640 --> 00:44:56,360
Speaker 2: sort of young men in particular. And so when I

811
00:44:56,400 --> 00:44:59,200
Speaker 2: think about an industry in which my guess is that

812
00:44:59,320 --> 00:45:02,600
Speaker 2: many of the people in this space have drifted more

813
00:45:02,680 --> 00:45:06,000
Speaker 2: towards that side of the aisle over the last several years.

814
00:45:06,400 --> 00:45:08,479
Speaker 2: And then now, you know, I don't know for sure

815
00:45:08,520 --> 00:45:11,520
Speaker 2: how the gamer audience voted, but I suspect that there's

816
00:45:11,520 --> 00:45:13,840
Speaker 2: a pretty solid Trump contingent in there. And so this

817
00:45:13,960 --> 00:45:15,239
Speaker 2: is just going to be, you know, it's gonna be

818
00:45:15,239 --> 00:45:16,280
Speaker 2: interesting to see the reaction.

819
00:45:16,520 --> 00:45:18,680
Speaker 3: I imagine there's going to be a lot of coverage of

820
00:45:18,719 --> 00:45:21,400
Speaker 3: this issue in the gaming community, so we'll have to

821
00:45:21,560 --> 00:45:23,680
Speaker 3: watch out for it. Maybe have Steve back on the show.

822
00:45:23,760 --> 00:45:24,440
Speaker 4: Yeah. Absolutely.

823
00:45:24,440 --> 00:45:25,520
Speaker 3: Shall we leave it there for now?

824
00:45:25,600 --> 00:45:26,319
Speaker 4: Let's leave it there.

825
00:45:26,360 --> 00:45:28,719
Speaker 3: This has been another episode of the aud Thoughts podcast.

826
00:45:28,800 --> 00:45:32,040
Speaker 3: I'm Tracy Alloway. You can follow me at Tracy Alloway.

827
00:45:31,719 --> 00:45:34,600
Speaker 2: And I'm Joe Wisenthal. You can follow me at the Stalwart.

828
00:45:34,719 --> 00:45:38,960
Speaker 2: Follow Steve Burk's coverage at gamers Nexus. Follow our producers

829
00:45:39,000 --> 00:45:42,120
Speaker 2: Carmen Rodriguez at Carman armand dash El Bennett at Dashbot

830
00:45:42,120 --> 00:45:45,160
Speaker 2: and Kilbrooks at Kilbrooks. For more Odd Lots content, go

831
00:45:45,200 --> 00:45:48,360
Speaker 2: to Bloomberg dot com slash odd Lots. We have a

832
00:45:48,440 --> 00:45:50,839
Speaker 2: daily newsletter and all of our episodes, and you can

833
00:45:50,880 --> 00:45:52,959
Speaker 2: shut about all of these topics twenty four to seven

834
00:45:53,040 --> 00:45:55,919
Speaker 2: in our discord where we even have a gaming subchannel

835
00:45:56,239 --> 00:45:57,840
Speaker 2: that's discord dot gg.

836
00:45:57,840 --> 00:45:58,760
Speaker 4: Slash out Lots.

837
00:45:58,800 --> 00:46:01,399
Speaker 3: And if you enjoy Odd Lots, if you like it

838
00:46:01,520 --> 00:46:04,440
Speaker 3: when we talk about computer games and the supply chain

839
00:46:04,480 --> 00:46:07,160
Speaker 3: of PCs, then please leave us a positive review on

840
00:46:07,200 --> 00:46:10,200
Speaker 3: your favorite podcast platform. And remember, if you are a

841
00:46:10,239 --> 00:46:13,200
Speaker 3: Bloomberg subscriber, you can listen to all of our episodes

842
00:46:13,320 --> 00:46:15,839
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843
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844
00:46:19,880 --> 00:46:20,720
Speaker 3: Thanks for listening.