1 00:00:00,120 --> 00:00:04,080 Speaker 1: So chip makers bracing for a particularly severe shift in 2 00:00:04,080 --> 00:00:07,480 Speaker 1: the coming months, a record setting a sales surges threatening 3 00:00:07,520 --> 00:00:09,959 Speaker 1: to give away to the worst decline in a decade 4 00:00:10,119 --> 00:00:13,200 Speaker 1: or more. Joining us now to unpack this a little more, 5 00:00:13,240 --> 00:00:17,560 Speaker 1: Ian King, Bloomberg News u S Semiconductor reporter, Ian give 6 00:00:17,640 --> 00:00:21,800 Speaker 1: us a sense of the demand supply picture at the moment. Well, 7 00:00:22,040 --> 00:00:25,040 Speaker 1: what we've heard from a number of companies, Paul Is, 8 00:00:25,920 --> 00:00:29,680 Speaker 1: has been pretty stark. We've had Intel, we've had in Vineer, 9 00:00:29,800 --> 00:00:33,640 Speaker 1: we've had Micron and my brothers saying the demand is 10 00:00:33,680 --> 00:00:36,760 Speaker 1: falling off really quickly. They've been forced to pre announce 11 00:00:36,960 --> 00:00:41,519 Speaker 1: they've cut multiple billions off revenue forecasts, and most of 12 00:00:41,560 --> 00:00:44,400 Speaker 1: that so far has been concentrated in the sort of 13 00:00:44,440 --> 00:00:50,520 Speaker 1: computer related products. But you know, also there's concern about 14 00:00:50,520 --> 00:00:53,640 Speaker 1: what's going on in smartphones. And then Micron sort of 15 00:00:53,680 --> 00:00:55,440 Speaker 1: made a little bit worse by saying, oh, it's not 16 00:00:55,520 --> 00:00:58,680 Speaker 1: just this area, it's also spreading into data center another 17 00:00:59,240 --> 00:01:02,400 Speaker 1: another parts of the economy feast or famine. Right, it 18 00:01:02,440 --> 00:01:04,280 Speaker 1: was only a couple of months back that we were 19 00:01:04,520 --> 00:01:06,840 Speaker 1: pulling our hair out because we couldn't get our hands 20 00:01:06,880 --> 00:01:10,080 Speaker 1: on computer chips. Now there seems to be an abundance, 21 00:01:10,200 --> 00:01:14,280 Speaker 1: or so it would seem. Is this typical of the industry, 22 00:01:14,319 --> 00:01:19,440 Speaker 1: This kind of boom bust cycling in is unfortunately absolutely typical, 23 00:01:19,680 --> 00:01:24,120 Speaker 1: and we're you'll remember all of the industry executives that 24 00:01:24,240 --> 00:01:26,440 Speaker 1: told us, I don't know this time was different, and 25 00:01:27,160 --> 00:01:30,280 Speaker 1: but unfortunately that's not the case. I mean, we'll forgot 26 00:01:30,280 --> 00:01:32,520 Speaker 1: the two thousand and nineteen is actually a down here 27 00:01:32,640 --> 00:01:36,000 Speaker 1: for the industry. And then we've had this tremendous um 28 00:01:36,160 --> 00:01:38,480 Speaker 1: growth over the last couple of years, which some people, 29 00:01:38,600 --> 00:01:40,560 Speaker 1: I think the more cynical ones to say maybe a 30 00:01:40,560 --> 00:01:42,720 Speaker 1: lot of this is just kind of panic buying. Maybe 31 00:01:42,880 --> 00:01:45,680 Speaker 1: we're we're over expending ourselves. Maybe a lot of these 32 00:01:45,760 --> 00:01:47,960 Speaker 1: chips are just ending up in warehouses, and it's sort 33 00:01:47,960 --> 00:01:51,440 Speaker 1: of just in case frenzy um. And right now, at 34 00:01:51,520 --> 00:01:53,640 Speaker 1: least in some areas, it's looking like those that were 35 00:01:53,640 --> 00:01:56,520 Speaker 1: taking that that sort of dim view of things that 36 00:01:56,640 --> 00:01:59,960 Speaker 1: were right. How valuable is it to take a much 37 00:02:00,080 --> 00:02:03,400 Speaker 1: longer term view here? Though demands in the long term 38 00:02:03,520 --> 00:02:06,080 Speaker 1: is only ever going to increase. Should we look past 39 00:02:06,200 --> 00:02:09,880 Speaker 1: these cycles, or considering how expensive these plants are and 40 00:02:09,919 --> 00:02:12,840 Speaker 1: how long they take to bring them online, and how 41 00:02:12,919 --> 00:02:16,480 Speaker 1: rapidly they become obsolete. Is that sort of viewpoint not useful? 42 00:02:17,120 --> 00:02:18,520 Speaker 1: I mean, there are there are a couple of ways 43 00:02:18,520 --> 00:02:21,000 Speaker 1: to look at it. I think you're right. You know, 44 00:02:21,320 --> 00:02:24,880 Speaker 1: the industry has only ever grown when measures over an 45 00:02:24,919 --> 00:02:29,280 Speaker 1: extended period. But the vicious ups and downs that we 46 00:02:29,360 --> 00:02:33,120 Speaker 1: see in the meantime cause casualties, and those casualties are 47 00:02:33,440 --> 00:02:36,520 Speaker 1: companies and they are stocks. You know, companies that were 48 00:02:36,560 --> 00:02:38,960 Speaker 1: once industry leaders, that once did really well. A few 49 00:02:39,000 --> 00:02:41,760 Speaker 1: time it wrong. If you bring a plant in at 50 00:02:41,760 --> 00:02:45,560 Speaker 1: the wrong time, you're in big trouble. And that really 51 00:02:45,560 --> 00:02:48,160 Speaker 1: hasn't changed. And that explains why there's only really three 52 00:02:48,240 --> 00:02:51,120 Speaker 1: companies that are on the absolute leading edge now, and 53 00:02:51,200 --> 00:02:54,480 Speaker 1: one of those, which is Intel, is struggling. Is it 54 00:02:54,480 --> 00:02:56,119 Speaker 1: fair to say that there really has been I don't 55 00:02:56,120 --> 00:02:58,959 Speaker 1: want to say a lack of innovation, but we haven't 56 00:02:58,960 --> 00:03:02,840 Speaker 1: had a meaningful analyst for an upgrade cycle. Evs are 57 00:03:02,880 --> 00:03:05,440 Speaker 1: out there. We know that the technology is pretty much 58 00:03:05,480 --> 00:03:08,040 Speaker 1: in place. I think the same could be said for 59 00:03:08,200 --> 00:03:13,120 Speaker 1: the five G infrastructure smartphones. You reference the fact that 60 00:03:13,280 --> 00:03:15,840 Speaker 1: some people are saying the market is saturated earlier, right, 61 00:03:16,200 --> 00:03:18,960 Speaker 1: and I'm wondering whether we just what we need is 62 00:03:19,000 --> 00:03:21,560 Speaker 1: a new form of technology to drive a little bit 63 00:03:21,560 --> 00:03:25,160 Speaker 1: more tech innovation as it relates to computer chips. Yeah, 64 00:03:25,160 --> 00:03:29,240 Speaker 1: I mean, that's definitely representative of the one viewpoint, and 65 00:03:29,400 --> 00:03:33,360 Speaker 1: in a slightly suspicious viewpoint. The flip side of that 66 00:03:33,560 --> 00:03:36,000 Speaker 1: is that the industry is arguing, Look, chips are being 67 00:03:36,440 --> 00:03:38,840 Speaker 1: and are getting into more things than they've ever been 68 00:03:38,840 --> 00:03:42,440 Speaker 1: in one not just dependent on smartphones and PCs. Look 69 00:03:42,760 --> 00:03:45,720 Speaker 1: at these giant data centers are part of everyday life. 70 00:03:45,720 --> 00:03:48,840 Speaker 1: Your washing machine now has more brains than your PC 71 00:03:49,080 --> 00:03:51,480 Speaker 1: had twenty years ago kind of thing. And you know 72 00:03:51,520 --> 00:03:56,520 Speaker 1: that that semi conductors are utterly pervasive, is the argument. 73 00:03:57,280 --> 00:04:00,680 Speaker 1: And that may be true and is certainly more true 74 00:04:00,680 --> 00:04:03,360 Speaker 1: than it used to be. But whether that amounts to 75 00:04:03,720 --> 00:04:07,000 Speaker 1: linear up into the right demand is is obviously another question, 76 00:04:07,040 --> 00:04:09,920 Speaker 1: and we're seeing evidence, at least in the short term 77 00:04:09,960 --> 00:04:12,320 Speaker 1: that that is not the case, and that's what causing 78 00:04:12,360 --> 00:04:15,640 Speaker 1: the situation we're in. Now. What are the implications for 79 00:04:15,680 --> 00:04:18,599 Speaker 1: the fifty two billion dollar Chips and Science Act that 80 00:04:18,760 --> 00:04:21,200 Speaker 1: just got signed into law in the United States. Does 81 00:04:21,240 --> 00:04:23,600 Speaker 1: it look like a waste of money and a potential 82 00:04:23,640 --> 00:04:26,760 Speaker 1: political football now or was it a prudent investment for 83 00:04:26,800 --> 00:04:31,080 Speaker 1: the future as supply chains, but are so uncertain. Again, 84 00:04:31,120 --> 00:04:33,640 Speaker 1: you know, there are no shortage of opinions on this, 85 00:04:33,760 --> 00:04:37,400 Speaker 1: and they're all quite divergent. I think the concerned, the 86 00:04:37,440 --> 00:04:41,320 Speaker 1: most fundamental amount of level of concern is that, look, 87 00:04:41,360 --> 00:04:44,239 Speaker 1: the industry has has been you know, ups and downs 88 00:04:44,880 --> 00:04:49,000 Speaker 1: aside pretty much fine tuned towards efficiency. Everything is because 89 00:04:49,040 --> 00:04:52,080 Speaker 1: it's so expensive, because it is so brutal. Everything is 90 00:04:52,920 --> 00:04:57,479 Speaker 1: geared towards making as not have these giant gluts, or 91 00:04:57,520 --> 00:04:59,400 Speaker 1: that the gluts are nowhere near as bad as they 92 00:04:59,480 --> 00:05:01,600 Speaker 1: used to be be because we need to be more efficient. 93 00:05:01,760 --> 00:05:06,640 Speaker 1: If you throw in free money and forced geographical diversity 94 00:05:06,720 --> 00:05:08,840 Speaker 1: just for the kind of sake of it, and this 95 00:05:09,080 --> 00:05:12,479 Speaker 1: kind of just in case mentality, then you're going to 96 00:05:12,560 --> 00:05:16,440 Speaker 1: have perhaps worse gloats is one of these arguments, so 97 00:05:16,480 --> 00:05:18,159 Speaker 1: that maybe in a couple of years time, when a 98 00:05:18,160 --> 00:05:20,880 Speaker 1: lot of these factories come online, then look out, if 99 00:05:20,880 --> 00:05:23,320 Speaker 1: we don't have really really good demand, then we're going 100 00:05:23,360 --> 00:05:26,000 Speaker 1: to have yet another DWANTA in what do we know 101 00:05:26,040 --> 00:05:29,120 Speaker 1: about input cost? I'm thinking either of silicon which is 102 00:05:29,200 --> 00:05:32,280 Speaker 1: used in the manufacturing of the wafers, the neon gas 103 00:05:32,279 --> 00:05:35,280 Speaker 1: that is used to etch some of those wafers. I mean, 104 00:05:35,560 --> 00:05:38,359 Speaker 1: our companies dealing We talk a lot on this program 105 00:05:38,400 --> 00:05:42,440 Speaker 1: about rising inflation. Are they dealing with inflated input cost Yeah, 106 00:05:42,440 --> 00:05:45,800 Speaker 1: I mean, infut costs are definitely a problem, but I mean, 107 00:05:46,000 --> 00:05:48,880 Speaker 1: arguably they're one of the biggest problems that they've had 108 00:05:49,000 --> 00:05:52,520 Speaker 1: is shortage of chips themselves, because you know, the machinery, 109 00:05:52,560 --> 00:05:55,160 Speaker 1: which is really the most expensive part of this. You're 110 00:05:55,160 --> 00:05:57,360 Speaker 1: looking at some individual machines that costs as much as 111 00:05:57,360 --> 00:06:00,400 Speaker 1: two hundred million dollars in these factories. There's been a 112 00:06:00,440 --> 00:06:03,080 Speaker 1: shortage of those, which is because guess what, I haven't 113 00:06:03,080 --> 00:06:04,720 Speaker 1: been enough of the right type of chips to make 114 00:06:04,800 --> 00:06:07,680 Speaker 1: enough of them. So that's been the biggest sort of 115 00:06:07,760 --> 00:06:11,000 Speaker 1: inflated everything that's been going on for the chipmakers themselves 116 00:06:11,040 --> 00:06:13,359 Speaker 1: is the short to do chips, which is a pretty 117 00:06:13,440 --> 00:06:16,880 Speaker 1: vicious irony. Right, even we've got about a minute lift, 118 00:06:17,040 --> 00:06:20,360 Speaker 1: to what degree are we seeing the supply chain getting duplicated? Now? 119 00:06:21,640 --> 00:06:24,080 Speaker 1: We haven't seen it so far, but we are seeing 120 00:06:24,440 --> 00:06:28,960 Speaker 1: plants being created in Arizona, in Ohio in the United 121 00:06:29,000 --> 00:06:32,120 Speaker 1: States and also planned in Europe. Um you know that 122 00:06:32,200 --> 00:06:34,880 Speaker 1: those plants are at very early stages. At this point, 123 00:06:35,200 --> 00:06:39,440 Speaker 1: they will be essentially duplicate production facilities if the demand 124 00:06:39,480 --> 00:06:41,920 Speaker 1: isn't there to meet them. But if history is a guide, 125 00:06:42,560 --> 00:06:45,160 Speaker 1: the shells the actual buildings that were built, and they 126 00:06:45,160 --> 00:06:47,599 Speaker 1: won't be equipped if there isn't the demand for them. 127 00:06:47,640 --> 00:06:50,400 Speaker 1: So you know, we've got to see how that comes 128 00:06:50,400 --> 00:06:52,919 Speaker 1: out yet. Ian, good stuff. Always a pleasure. Thanks for 129 00:06:52,960 --> 00:06:56,280 Speaker 1: making time to chat with us. Ian King is semiconductor reporter. 130 00:06:56,360 --> 00:07:00,120 Speaker 1: He covers the industry from our studios and bureau in 131 00:07:00,160 --> 00:07:01,000 Speaker 1: San Francisco.