WEBVTT - Lots More on How CHIPS Act Money Got Awarded 0:00:00.800 --> 0:00:11.280 Bloomberg Audio Studios, podcasts, radio news. That's cool that they're 0:00:11.320 --> 0:00:12.639 all standing desks though. 0:00:12.880 --> 0:00:13.399 It is nice. 0:00:13.440 --> 0:00:15.480 Yeah, they have like a little switch on the right 0:00:15.520 --> 0:00:17.800 side that like it's because I when I had when 0:00:17.800 --> 0:00:19.639 I asked for a standing desk in New York, I 0:00:19.720 --> 0:00:22.119 got like a platform that was maybe a quarter the 0:00:22.160 --> 0:00:24.760 size of my actual desk, yeah, which they put like 0:00:25.000 --> 0:00:28.400 the screens basically, yeah, And I was like, this gives 0:00:28.400 --> 0:00:30.200 me no workspace. 0:00:30.080 --> 0:00:31.880 And then you have to like bend down if you 0:00:31.920 --> 0:00:33.800 want to like write a notepad and paper. 0:00:34.040 --> 0:00:36.480 Yeah. Yeah, So the DC desk definitely win on that front. 0:00:36.479 --> 0:00:38.879 I think San Francisco are maybe the same, but I 0:00:38.880 --> 0:00:40.720 haven't paid enough attention in other offices. 0:00:41.159 --> 0:00:44.360 I kind of want to try a standing desk one day, 0:00:44.400 --> 0:00:48.120 but I don't want to like loom over Joe Weird. 0:00:48.200 --> 0:00:49.960 I think I'm intimidated enough. 0:00:51.520 --> 0:00:52.159 But I think I'd be. 0:00:52.120 --> 0:00:54.120 Annoyed if I was sat down and then like someone 0:00:54.200 --> 0:00:55.920 was standing next to me. I don't know, I think 0:00:55.920 --> 0:00:56.520 it would feel well. 0:00:56.560 --> 0:00:58.640 It is a little bit of a posturing thing, I think. 0:00:59.000 --> 0:01:00.959 And when I had a standing desk in New York, 0:01:01.000 --> 0:01:03.280 I would like forget it existed for three weeks and 0:01:03.280 --> 0:01:05.319 then I would make a whole show of standing for 0:01:05.360 --> 0:01:08.399 an entire day and people are like, you never stand, Like, 0:01:08.520 --> 0:01:09.640 what are you standing? 0:01:13.520 --> 0:01:16.880 I did a deadlift one two, Jimmy, Okay, go. 0:01:18.640 --> 0:01:20.600 Y up, Marges. 0:01:20.720 --> 0:01:22.800 This isn't after School Special, except. 0:01:22.480 --> 0:01:25.039 I've decided I'm going to base my entire personality going 0:01:25.040 --> 0:01:28.280 forward on campaigning for a strategic pork reserve in the US. 0:01:28.360 --> 0:01:30.120 Where's the best in posta? 0:01:30.280 --> 0:01:31.720 These are the important question? 0:01:31.840 --> 0:01:33.240 Is that robots taking over the world. 0:01:33.319 --> 0:01:33.479 No. 0:01:33.560 --> 0:01:36.440 I think that like in a couple of years, the 0:01:36.520 --> 0:01:38.720 AI will do a really good job of making the 0:01:38.720 --> 0:01:42.200 odd lotch podcast, And people say, I don't really need 0:01:42.240 --> 0:01:44.440 to listen to Joe and Tracy anymore, But we do 0:01:44.600 --> 0:01:50.120 have the perfect welcome to lots More where we catch 0:01:50.200 --> 0:01:52.600 up with friends about what's going on right now. 0:01:52.760 --> 0:01:56.040 Because even when Odd Lots is over, there's always lots 0:01:56.080 --> 0:01:57.160 More and. 0:01:57.080 --> 0:01:59.320 We really do have the perfect guest. 0:02:02.040 --> 0:02:04.760 So we're talking about Chips, right, Chips. 0:02:04.640 --> 0:02:05.040 I hope. 0:02:05.080 --> 0:02:06.680 So yeah, that's what I know about. 0:02:06.800 --> 0:02:09.600 So, uh, how's it going, McKenzie? 0:02:09.919 --> 0:02:12.240 I am doing well. How are you guys doing great? 0:02:12.639 --> 0:02:14.519 Yeah, I'm coming off of like the busiest month of 0:02:14.600 --> 0:02:16.000 Chips news efforts. 0:02:15.600 --> 0:02:17.600 You've had a lot of scoops. I feel like I 0:02:17.600 --> 0:02:19.600 feel like I've seen your byline quite a lot. 0:02:20.160 --> 0:02:24.079 There have been a couple of busy weeks and I'm yeah, 0:02:24.120 --> 0:02:26.679 now I'm like recuperating. But unfortunately this is not I 0:02:26.760 --> 0:02:29.120 mean fortunately, but unfortunately for my sleep schedule. This is 0:02:29.160 --> 0:02:30.919 not a beat that really seems to ever rest. 0:02:31.240 --> 0:02:34.080 So is all the chips sech money now dispersed? Like 0:02:34.360 --> 0:02:36.800 where are we because it sort of feels like we 0:02:37.120 --> 0:02:38.359 were like an end of. 0:02:38.360 --> 0:02:39.160 Some stage here. 0:02:39.480 --> 0:02:42.800 I would say we're at the end of stage one. 0:02:43.040 --> 0:02:45.800 Commerce Secretary Gino Raimondo referred to it as the bottom 0:02:45.840 --> 0:02:48.200 of the second inning at a Semaphore event in DC. 0:02:48.400 --> 0:02:50.480 Recently, the department. 0:02:50.160 --> 0:02:54.840 Has burned through about eighty five percent of the direct 0:02:54.840 --> 0:02:57.639 grant funding that they set aside to convince them conducting 0:02:57.680 --> 0:03:00.680 manufacturers to build more factories in the US. But that 0:03:00.720 --> 0:03:02.760 doesn't mean that the money's actually out the door. These 0:03:02.760 --> 0:03:06.720 are all preliminary agreements. There are seven agreements and ounce 0:03:06.760 --> 0:03:09.120 so far, and then there's three and a half billion 0:03:09.160 --> 0:03:11.760 set aside for this military chips program that we can 0:03:11.800 --> 0:03:14.600 get into that all accounts for, Like eighty five percent 0:03:14.639 --> 0:03:17.440 of the money is spoken for nearly eighty five percent. 0:03:17.960 --> 0:03:18.919 But now all these. 0:03:18.800 --> 0:03:22.280 Companies are entering these months long due diligence stages to 0:03:22.360 --> 0:03:25.520 actually reach a final term sheet, and then the money 0:03:25.520 --> 0:03:28.360 will only be dispersed when they hit key construction and 0:03:28.400 --> 0:03:32.200 production benchmarks, So it will actually take several years for 0:03:32.320 --> 0:03:33.880 all of the money to get out the door. And 0:03:33.960 --> 0:03:36.320 none of these companies have seen a single dime yet. 0:03:36.640 --> 0:03:40.480 So we are speaking to our Bloomberg Collie Chips expert 0:03:40.520 --> 0:03:44.320 and reporter Mackenzie Hawkins. She's been on the show before, 0:03:44.400 --> 0:03:46.600 but we're trying to get an update on all these 0:03:46.680 --> 0:03:50.120 latest semiconductor headlines because I again going back to what 0:03:50.160 --> 0:03:52.040 I was saying earlier, there happened a lot of them 0:03:52.320 --> 0:03:56.000 kind of flying around and it's sort of hard to 0:03:56.080 --> 0:03:59.720 keep track. But I think the one that is probably 0:04:00.080 --> 0:04:04.440 freshest in my mind is the Intel drama. Can you 0:04:04.480 --> 0:04:07.320 maybe talk a little bit about that, Mackenzie. I want 0:04:07.320 --> 0:04:10.200 to understand, like, why does it count as drama the 0:04:10.560 --> 0:04:14.400 whole It seems to be very dramatic for people in 0:04:14.480 --> 0:04:16.159 this space. What's going on here? 0:04:16.960 --> 0:04:22.040 So a bit over a month ago, Intel one the 0:04:22.160 --> 0:04:25.160 largest grant from the ships ACKed program eight and a 0:04:25.200 --> 0:04:30.799 half billion dollars to support construction projects spanning four states, 0:04:30.839 --> 0:04:33.640 including this megafab that they're trying to build in Ohio, 0:04:33.920 --> 0:04:37.640 this massive expansion in Arizona. They have an advanced packaging 0:04:37.680 --> 0:04:40.520 project in New Mexico, which is the technology that fits 0:04:40.560 --> 0:04:43.680 chips together for use, and this really big R and 0:04:43.760 --> 0:04:45.480 D effort and organ which is where all of their 0:04:45.600 --> 0:04:49.080 R and D is housed. Intel has in many ways 0:04:49.080 --> 0:04:51.960 been a focal point of this program. It's the only 0:04:52.520 --> 0:04:56.800 US company that makes cutting edge logic semiconductor chips. Its 0:04:57.240 --> 0:05:00.000 main rivals in that space would be Taiwan Semi conduct 0:05:00.160 --> 0:05:05.320 Manufacturing Company and South Korea's Samsung, which also received billions 0:05:05.320 --> 0:05:07.440 and billions of dollars in ships ACKed grants over the 0:05:07.440 --> 0:05:10.160 past couple of months. But as the American leader and 0:05:10.200 --> 0:05:13.560 as you know, CEO, Pat Gelsinger has been so vocal 0:05:13.560 --> 0:05:16.480 about the chips ACKed from you know, encouraging the Biden 0:05:16.480 --> 0:05:19.400 administration and lawmakers to pass in the first place, you know, 0:05:19.480 --> 0:05:21.920 wanting to be the first company to get a really 0:05:21.960 --> 0:05:23.960 big award, which you know is the fourth company to 0:05:23.960 --> 0:05:26.279 get an award in general, but the first company to 0:05:26.360 --> 0:05:29.080 ink you know, multiple billions of dollars eight and a 0:05:29.120 --> 0:05:31.880 half billion dollars. There's been a lot of back and 0:05:31.920 --> 0:05:35.400 forth between officials and Intel over how much money this 0:05:35.480 --> 0:05:36.800 company should get. 0:05:37.240 --> 0:05:39.240 And a lot of drama. 0:05:39.040 --> 0:05:43.040 Ensued in late February early March. So Intel's award was 0:05:43.080 --> 0:05:46.160 supposed to be announced like the last Monday in February, 0:05:46.240 --> 0:05:50.719 was tentatively scheduled, and it was rescheduled for some White. 0:05:50.560 --> 0:05:51.719 House scheduling reasons. 0:05:52.040 --> 0:05:57.359 And that Thursday, the Pentagon informed the Commerce Department that 0:05:57.400 --> 0:06:00.480 they would be pulling out of their two and a 0:06:00.560 --> 0:06:04.440 half billion dollar commitment to this program called Secure Enclave. 0:06:04.880 --> 0:06:07.040 Now that's the three and a half billion dollar program 0:06:07.080 --> 0:06:10.599 for military chips that I referenced earlier. So originally the 0:06:10.640 --> 0:06:13.719 Commerce Department was supposed to put a billion, the Pentagon 0:06:13.800 --> 0:06:16.039 was supposed to put two point five billion, And the 0:06:16.120 --> 0:06:18.919 idea is that this would be dedicated government funding to 0:06:18.960 --> 0:06:23.479 produce cutting edge semiconductors with military and intelligence applications. And 0:06:23.640 --> 0:06:27.120 Intel was the sole intended recipient of that funding. But 0:06:27.320 --> 0:06:31.640 when the Pentagon pulled out of their portion, lawmakers then 0:06:31.720 --> 0:06:35.000 who were coming up actually against a government shutdown, They 0:06:35.000 --> 0:06:39.159 were trying to move appropriations bills for pretty much every 0:06:39.200 --> 0:06:44.760 single major federal agency that weekend. This single item whether 0:06:44.960 --> 0:06:48.160 to make the Commerce Department pay the full three and 0:06:48.200 --> 0:06:52.839 a half billion out of chipsacked funding drag negotiations over 0:06:53.040 --> 0:06:57.840 this broader budget and spending package several additional days. Ultimately, 0:06:57.960 --> 0:07:01.680 lawmakers directed the Commerce Department to spend three and a 0:07:01.720 --> 0:07:04.640 half billion dollars out of a total thirty nine billion 0:07:04.720 --> 0:07:08.160 dollars on this program from military chips, which we've reported 0:07:08.200 --> 0:07:10.360 Intel is the sole intended recipient. 0:07:11.400 --> 0:07:12.000 Now, I just like. 0:07:12.040 --> 0:07:14.560 Don't understand, like, you know, okay, you have this pot 0:07:14.600 --> 0:07:17.080 of money in different agencies within the government, Like how 0:07:17.080 --> 0:07:19.280 does the Defense Department You're like, you know what, We're 0:07:19.320 --> 0:07:21.320 not going to pay. We're just like, we're not doing this. 0:07:21.400 --> 0:07:23.600 I don't even understand how that happens, Like it does 0:07:23.640 --> 0:07:27.160 not seem like a very coordinated, unified government to something 0:07:27.240 --> 0:07:29.240 can just be like thrown up at the last second. 0:07:28.960 --> 0:07:31.360 Like that, Oh well you said on me, Joe. I 0:07:31.400 --> 0:07:34.480 mean certainly there are folks on the hill who are 0:07:34.640 --> 0:07:37.160 very very upset about this. You might imagine that the 0:07:37.200 --> 0:07:39.640 Commerce Department, which has you know, they stood up a 0:07:39.640 --> 0:07:43.640 two hundred person team spanning everybody from bankers who came 0:07:43.680 --> 0:07:47.280 down from Wall Street to career bureaucrats in Washington to 0:07:47.360 --> 0:07:51.080 semiconductor industry experts to decide, Okay, we have thirty nine 0:07:51.080 --> 0:07:53.680 billion dollars in grants, plus there's some loans and loan 0:07:53.680 --> 0:07:57.040 guarantees and a tax credit program that will also provide 0:07:57.360 --> 0:08:00.000 significant funding in the companies, but thirty nine billion dollar 0:08:00.200 --> 0:08:04.120 and direct grants. Our goal is to get twenty percent 0:08:04.240 --> 0:08:06.600 of advanced logic tips produced in the US by the 0:08:06.720 --> 0:08:09.680 end of the decade. We want ship making clusters at 0:08:09.760 --> 0:08:12.960 least two of them to be bought back to the US, 0:08:13.440 --> 0:08:15.760 and we want to reduce reliance on Asia and better 0:08:15.800 --> 0:08:18.440 compete with China. So I mean, these folks have been 0:08:18.480 --> 0:08:21.800 working round the clock for months and months to figure 0:08:21.800 --> 0:08:25.080 out which companies have the most viable projects, how much 0:08:25.120 --> 0:08:27.000 money should be given to each company. And they think 0:08:27.040 --> 0:08:28.800 that they have a certain amount of money, and then 0:08:28.800 --> 0:08:30.560 they have two and a half billion dollars less of that, 0:08:30.800 --> 0:08:32.800 and so that triggers a whole other round of negotiations 0:08:32.840 --> 0:08:34.439 where they have to figure out, Okay, where are we 0:08:34.480 --> 0:08:36.080 going to pull this two and a half billion from? 0:08:36.440 --> 0:08:39.040 So did some entity get two and a half billion 0:08:39.120 --> 0:08:40.880 less than they might have expected? 0:08:41.480 --> 0:08:46.280 So we're still actually seeing the fallout. One direct consequence, 0:08:46.320 --> 0:08:50.160 it seems, is that the Commerce Department scrapped a funding 0:08:50.160 --> 0:08:53.920 opportunity and application process for commercial R and D facilities. 0:08:54.480 --> 0:08:57.960 So they released applications over a year ago for large 0:08:58.000 --> 0:09:00.959 scale manufacturing projects the type that we're seeing from Intel, 0:09:01.000 --> 0:09:05.200 from TSMC, from Samsung. There's also a smaller application process 0:09:05.200 --> 0:09:07.880 where they've set aside five hundred million dollars, so really 0:09:07.880 --> 0:09:11.920 a small amount of this overall funding pool for manufacturing 0:09:11.960 --> 0:09:15.600 projects and supply chain projects with under three hundred million 0:09:15.760 --> 0:09:19.160 in expenditors from the company. There was originally intended to 0:09:19.160 --> 0:09:22.360 be a third application process still from that thirty nine 0:09:22.400 --> 0:09:26.319 billion dollar funding pool for commercial research and development projects, 0:09:26.720 --> 0:09:29.800 and they canceled that in late March. They attributed that 0:09:29.920 --> 0:09:33.560 to the recent congressional appropriations decision, which was a reference 0:09:33.600 --> 0:09:37.360 to this Secure Enclave program. And we've already actually started 0:09:37.400 --> 0:09:40.680 to see some industry fallout. Applied Materials had planned to 0:09:40.800 --> 0:09:44.280 build a four billion dollar R and D facility in California. 0:09:44.640 --> 0:09:46.520 They're now saying, we're not so sure. 0:09:47.360 --> 0:09:52.040 So you touched on the reasoning for the Secure Enclave project, 0:09:52.160 --> 0:09:54.120 but I think there's been quite a lot of criticism 0:09:54.280 --> 0:09:57.120 over like why have it at all? And I was 0:09:57.160 --> 0:09:59.679 reading I can't remember where it was, but there was 0:09:59.720 --> 0:10:03.280 a quote from it was a Department of Defense person 0:10:03.360 --> 0:10:05.800 or a Congressional aid or something, and they basically said, 0:10:05.920 --> 0:10:09.240 we have systems for getting the military the sensitive chips 0:10:09.280 --> 0:10:12.079 that they need already, which sounds very ominous. It sounds 0:10:12.160 --> 0:10:14.360 very like we have ways of dealing with you kind of, 0:10:14.720 --> 0:10:17.880 But why do you need to carve out that special 0:10:17.880 --> 0:10:19.960 funding for military applications at all? 0:10:20.480 --> 0:10:21.600 It's a great question. 0:10:21.960 --> 0:10:24.960 There is certainly a lot of disagreement in Washington about 0:10:24.960 --> 0:10:27.600 whether this program is necessary and whether it's smart to 0:10:27.679 --> 0:10:31.640 rely on one singular company. There's a separate program that's 0:10:31.960 --> 0:10:35.000 existed for quite some time called a Trusted Foundry program, 0:10:35.040 --> 0:10:39.040 where basically US officials go and vet a factory, say okay, 0:10:39.160 --> 0:10:41.280 this is secure, we trust it as part of a 0:10:41.320 --> 0:10:44.760 military and intelligence supply chain. And the biggest company that's 0:10:44.800 --> 0:10:47.319 part of that program is Global Foundriies. And so when 0:10:47.320 --> 0:10:52.360 we first reported this whole Pentagon Commerce Congress funding squabble, 0:10:52.720 --> 0:10:54.880 Global Founderies went on the record and talk to. 0:10:54.880 --> 0:10:55.440 Us about it. 0:10:55.840 --> 0:10:58.920 So there are certainly folks here who think it's not 0:10:58.960 --> 0:11:01.679 a great idea to align on one company. It's also 0:11:01.800 --> 0:11:04.200 maybe not a great idea to rely on of the 0:11:04.280 --> 0:11:07.840 three big logic chip makers, the company that lags behind 0:11:08.120 --> 0:11:10.960 its peers. But there's an acceptance that if we're going 0:11:11.000 --> 0:11:13.080 to do this, if we're going to have this secure 0:11:13.200 --> 0:11:16.959 facility within a facility for chips that are going into 0:11:17.040 --> 0:11:20.480 our most sensitive intelligence military applications, they have to come 0:11:20.480 --> 0:11:22.840 from an American company. So if you want a dedicated 0:11:22.880 --> 0:11:26.600 supply chain for cutting edge chips for the Pentagon, you 0:11:26.720 --> 0:11:29.120 almost have to go to Intel. And so that's the 0:11:29.200 --> 0:11:31.400 question that folks have been wrestling with, and I think 0:11:31.400 --> 0:11:36.000 that it points to a broader reality sort of shaping 0:11:36.000 --> 0:11:40.240 the entire chips program, is that, you know, Intel has 0:11:40.840 --> 0:11:43.560 fallen off over the past decade and a half in 0:11:43.640 --> 0:11:48.600 terms of its technology advancement compared to TSMC and SMSUNG, 0:11:48.800 --> 0:11:52.679 but it's also the only American company that competes at 0:11:52.679 --> 0:11:56.000 the cutting edge in logic chips. And so you know, 0:11:56.360 --> 0:11:59.040 while there is all this back and forth, Raimondo, the 0:11:59.040 --> 0:12:02.480 Commerce Secretary, has all so called Intel an American champion company. 0:12:02.760 --> 0:12:05.319 In some ways, the US government doesn't have a choice 0:12:05.320 --> 0:12:08.040 but to make and tell the face of this program, 0:12:08.360 --> 0:12:10.880 but they've also tried to be very clear that this 0:12:11.080 --> 0:12:14.200 is not a subsidy program that's for just one company. 0:12:14.280 --> 0:12:16.080 The goal is not to spread the money to thin 0:12:16.200 --> 0:12:19.880 so that it's ineffective, but to strategically try to secure 0:12:19.920 --> 0:12:23.360 investments from the top manufacturers all over the world. And 0:12:23.840 --> 0:12:26.360 the US is actually the only country of you know, 0:12:26.480 --> 0:12:30.439 dozens of governments that are doing similar semiconductor substy efforts, 0:12:30.760 --> 0:12:32.640 the US is the only one secure investments from the 0:12:32.640 --> 0:12:35.840 top five chip companies. So that does speak volumes about 0:12:36.200 --> 0:12:39.240 the interest that you know, global competitors in this space 0:12:39.320 --> 0:12:42.040 have in American funding opportunities and in the growing semi 0:12:42.040 --> 0:12:43.240 conductor ecosystem here. 0:12:43.800 --> 0:12:46.360 You know, there was a big story recently, I think 0:12:46.360 --> 0:12:49.359 it's in the rest of world about TSMC in Arizona, 0:12:49.400 --> 0:12:52.160 but there's you know, this is a big concern generally, 0:12:52.760 --> 0:12:54.760 which is like, Okay, it's great, we're going to build 0:12:54.760 --> 0:12:58.000 all these factories, but what about local environmental regulations, what 0:12:58.120 --> 0:13:01.000 about labor regulation, what about lack of. 0:13:01.000 --> 0:13:02.040 Talent, etc. 0:13:02.440 --> 0:13:05.560 To do all this stuff? Like generally, what is your 0:13:05.679 --> 0:13:08.719 sense about these various big the big projects that are 0:13:08.720 --> 0:13:12.199 going up in terms of like essentially how hard we 0:13:12.320 --> 0:13:15.680 make it for them in this country to build new things. 0:13:16.320 --> 0:13:19.480 It's a very real concern. I mean, you know, hypothetical 0:13:19.520 --> 0:13:22.760 money is great, but these factories actually have to get built, 0:13:23.880 --> 0:13:27.480 and we have seen some hiccups along the way. I 0:13:27.480 --> 0:13:31.880 mean there have been delays at TSMC, there was a 0:13:31.920 --> 0:13:35.160 delay at Samsung. The companies, of course say that, you know, 0:13:35.760 --> 0:13:39.160 these are tens of billions of dollars worth of capital expenditures. 0:13:39.200 --> 0:13:41.520 These are projects that take years to stand up. Moving 0:13:41.520 --> 0:13:43.520 our timeline back by a quarter maybe isn't that big 0:13:43.520 --> 0:13:46.640 of a deal, but you know, to the TSMC example 0:13:46.679 --> 0:13:49.200 in particular, the company had a lot of issues with 0:13:49.280 --> 0:13:52.560 local unions in Arizona over the summer. They said in 0:13:52.640 --> 0:13:55.560 July that they were delaying the start of production at 0:13:55.640 --> 0:13:58.160 their first of what is now three fabs that they're 0:13:58.200 --> 0:14:01.800 building in Arizona because there are not enough skilled workers 0:14:01.840 --> 0:14:04.719 in Arizona. And this was specifically workers who are going 0:14:04.760 --> 0:14:09.120 to install the most high end equipment, equipment that TSMC says, 0:14:09.120 --> 0:14:11.600 we've actually only had experience installing in Taiwan, so we 0:14:11.640 --> 0:14:14.320 need to bring Taiwanese workers over to help handle this. 0:14:14.400 --> 0:14:18.080 You might imagine that did not go over particularly well 0:14:18.360 --> 0:14:20.600 with the Arizona Building and Trades Council. There was a 0:14:20.600 --> 0:14:23.360 petition to stop the Taiwanese workers from coming. There were 0:14:23.400 --> 0:14:27.040 all sorts of allegations of safety and mismanagement issues. Those 0:14:27.080 --> 0:14:30.840 are somewhat resolved in Arizona. The Building and Trades Council 0:14:31.040 --> 0:14:35.680 and the company reached a labor accord in December, and 0:14:35.800 --> 0:14:38.680 their construction as of now is on schedule with that 0:14:38.720 --> 0:14:41.440 delayed timeline for the first fab, which is set to 0:14:41.480 --> 0:14:45.200 open in twenty twenty five. They're also building a second facility. 0:14:45.400 --> 0:14:47.840 Originally that was supposed to open in twenty twenty six. 0:14:47.880 --> 0:14:50.120 They said in January that it would open in twenty 0:14:50.160 --> 0:14:52.200 twenty seven or twenty twenty eight. We now know that 0:14:52.240 --> 0:14:55.840 it'll be in twenty twenty eight. They're evaluating market conditions. 0:14:55.880 --> 0:14:58.440 They also said that the level of technology they'd produce 0:14:58.480 --> 0:15:01.080 would depend on the level of US grants that they receive. 0:15:01.760 --> 0:15:03.240 They are going to produce their most. 0:15:03.120 --> 0:15:05.080 Cutting edge technology in Arizona. 0:15:05.280 --> 0:15:07.800 So there's, you know, maybe some feeling in Washington that 0:15:07.960 --> 0:15:12.320 was part of a negotiating tactic, but they have certainly 0:15:12.360 --> 0:15:15.680 seen delays. You know, the second company to receive a 0:15:15.760 --> 0:15:19.960 chips ACKed award Microchip Technology a couple of days later 0:15:20.120 --> 0:15:22.160 said that they were going to shut down their factory 0:15:22.160 --> 0:15:25.000 for a couple of weeks because they're trying to match 0:15:25.040 --> 0:15:29.240 market demand. And you know, their concern is not finishing 0:15:29.280 --> 0:15:32.240 the expansion that the federal government is funding. Their concern 0:15:32.520 --> 0:15:35.560 is meeting their customers where they are. This is an 0:15:35.640 --> 0:15:39.040 industry that goes through crazy booms and crazy bus and 0:15:39.160 --> 0:15:42.520 so whether this is all funny money or real money 0:15:42.560 --> 0:15:45.920 will depend on whether the companies see sufficient demand for 0:15:46.040 --> 0:15:47.800 the chips that they are going to produce. You know, 0:15:47.880 --> 0:15:51.640 Micron has said we could spend up to one hundred 0:15:51.680 --> 0:15:55.040 billion dollars in upstate New York to produce high bandwidth 0:15:55.040 --> 0:15:58.280 memory chips. Right now, we're committing to fifty, we're committing 0:15:58.280 --> 0:16:01.320 to two fabs. Certainly, local officials in New York would 0:16:01.360 --> 0:16:03.320 like to see a sprawling semic conductor complex that at 0:16:03.400 --> 0:16:09.760 umployed nine thousand people. They might get half of that from. 0:16:18.760 --> 0:16:21.400 This was always sort of one of the criticisms of 0:16:21.440 --> 0:16:24.160 this particular project, the idea that yes, you can build 0:16:24.360 --> 0:16:28.040 fabs and spend billions of dollars doing it, but if 0:16:28.080 --> 0:16:30.920 the customers aren't there, or if there isn't a reliable 0:16:30.960 --> 0:16:35.120 source of demand, then it doesn't really amount to a 0:16:35.160 --> 0:16:39.280 sustainable business model. Have you seen anything like on the 0:16:39.320 --> 0:16:42.800 policy side in terms of addressing that aspect of it. 0:16:42.880 --> 0:16:45.680 Are people talking about that a little bit more in 0:16:45.800 --> 0:16:46.760 recent months? 0:16:47.360 --> 0:16:51.320 I mean, there's certainly a recognition, you know, especially when 0:16:51.320 --> 0:16:55.160 we get stories coming out about delays at these major projects. 0:16:55.200 --> 0:16:58.360 There's a recognition that it's not going to be a 0:16:58.480 --> 0:17:03.120 linear path to the US producing some significant market share 0:17:03.280 --> 0:17:08.240 of advanced semiconductors. There's also a recognition that this artificial 0:17:08.280 --> 0:17:11.840 intelligence boom is going to drive massive global demand for 0:17:11.920 --> 0:17:14.320 these chips. I mean, you have some key executives in 0:17:14.359 --> 0:17:17.040 that space. Sam Altman and OpenAI of course come to 0:17:17.040 --> 0:17:19.360 mind saying, you know, we need as many of these 0:17:19.440 --> 0:17:22.679 chips as we can get. Altman is on a tear raising, 0:17:22.880 --> 0:17:24.920 you know, billions and billions of dollars to try to 0:17:24.960 --> 0:17:27.720 stand up factories across the world to produce these chips. 0:17:28.160 --> 0:17:30.880 So I don't know that there's necessarily concern here that 0:17:31.240 --> 0:17:32.840 all of a sudden interest is going. 0:17:32.640 --> 0:17:33.359 To drop off. 0:17:33.720 --> 0:17:37.640 But there are also so many different types of semiconductor 0:17:37.720 --> 0:17:40.359 technology that this program is trying to fund that each 0:17:40.400 --> 0:17:42.440 deal with their own market conditions. So, you know, we 0:17:42.520 --> 0:17:45.480 spent a lot of time talking about advanced semiconductors, like 0:17:45.480 --> 0:17:48.600 the type that Intel and TSMC are going to manufacture, 0:17:49.200 --> 0:17:52.840 but there are also older generation chips, the type that 0:17:52.960 --> 0:17:56.040 still go in your phone and your fridge and in 0:17:56.119 --> 0:17:59.360 weapons systems, and there is a smaller amount of money 0:17:59.359 --> 0:18:00.960 in the chips actually the side for that, but the 0:18:01.000 --> 0:18:03.119 government is still going to try to find production of 0:18:03.119 --> 0:18:03.960 those chips as well. 0:18:04.280 --> 0:18:06.280 This is what I wanted to ask you about because 0:18:06.359 --> 0:18:09.080 one of the ironies here, one of the strange things 0:18:09.160 --> 0:18:13.320 is sort of I think chip vulnerability. I'm sure people 0:18:13.480 --> 0:18:14.800 in the space have been talking about it for a 0:18:14.840 --> 0:18:16.960 long time, but I think it came on many people's 0:18:17.040 --> 0:18:20.479 radar in twenty twenty when the car companies couldn't get 0:18:20.480 --> 0:18:21.680 ships and couldn't make cars. 0:18:21.920 --> 0:18:24.280 Those are not definitely when it came on our radar. 0:18:24.119 --> 0:18:24.840 Yeah, certainly us. 0:18:24.880 --> 0:18:28.120 Maybe I'm just projecting on everyone else, but okay, came 0:18:28.160 --> 0:18:32.440 on the outlaws radar. Those are not particularly advanced chips 0:18:32.520 --> 0:18:35.719 that the car companies couldn't get. They're like pretty lagging edge, 0:18:36.080 --> 0:18:38.680 And there is does seem to be this other concern 0:18:38.760 --> 0:18:42.040 that the real risk is not that the US gets 0:18:42.080 --> 0:18:45.280 cut off from the leading ed chips, but that the 0:18:45.600 --> 0:18:48.440 Chinese companies, which maybe not be at the cutting edge 0:18:48.520 --> 0:18:51.040 because they don't have the same access to you know 0:18:51.080 --> 0:18:55.879 whatever ASML's equipment, but they're doing extremely well. It sounds 0:18:55.920 --> 0:18:59.120 like in the lagging edge chips like in many areas, 0:18:59.160 --> 0:19:02.840 probably much more cost competitive than the current options that 0:19:02.960 --> 0:19:05.760 you know for whatever. How much concern is there in 0:19:05.840 --> 0:19:08.960 DC that's like, okay, this project, Yes, it's a you 0:19:08.960 --> 0:19:12.120 know that twenty percent market share in leading edge technology, 0:19:12.480 --> 0:19:16.160 but meanwhile we have this big sort of bubbling dependency 0:19:16.359 --> 0:19:19.120 and challenge on the lagging edge side, which goes into 0:19:19.119 --> 0:19:20.000 every product we use. 0:19:20.880 --> 0:19:23.119 The short answer is there's a lot of concern. The 0:19:23.160 --> 0:19:25.800 Director of the National Economic Council, Lalel Brainerd has been 0:19:25.840 --> 0:19:29.520 talking about Chinese overcapacity in a range of sectors. That 0:19:29.640 --> 0:19:33.000 was a big theme of the Treasury Secretary's recent trip 0:19:33.040 --> 0:19:36.560 to China, and older generation or so called legacy chips 0:19:36.600 --> 0:19:38.879 are certainly a part of that. You know, the US 0:19:39.480 --> 0:19:43.399 cut China off from the most advanced semiconductor chips and 0:19:43.520 --> 0:19:47.440 semiconductor manufacturing equipment in twenty twenty two, with these sweeping 0:19:47.480 --> 0:19:51.040 export controls. Then they got Japan and the Netherlands, two 0:19:51.119 --> 0:19:54.680 key allies in the supply chain, on board, with relatively 0:19:54.720 --> 0:19:57.359 the same type of restrictions, although there are some key 0:19:57.440 --> 0:20:00.400 differences in loopholes that officials are now pressing. The US 0:20:00.440 --> 0:20:02.560 officials are now pressing allies to try to close those. 0:20:03.160 --> 0:20:06.320 China's response was, Okay, We're going to double down where 0:20:06.359 --> 0:20:09.560 we can. You know, they had already been building massive, 0:20:09.640 --> 0:20:14.880 massive semiconductor manufacturing capacity. The many experts say that US 0:20:15.000 --> 0:20:17.640 restrictions only incentivize them to double down on that. They're 0:20:17.640 --> 0:20:19.560 still pursuing the cutting edge. You know, we spent a 0:20:19.600 --> 0:20:21.840 lot of time this year also thinking about Huawei and 0:20:21.880 --> 0:20:25.280