WEBVTT - US Taking Back the Chip Market

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<v Speaker 1>You're listening to Bloomberg Business Week with Carol Messer and

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<v Speaker 1>Bloomberg Quick Takes Tim Stenovic on Bloomberg Radio.

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<v Speaker 2>Folks, one of the major stories on the geopolitical front,

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<v Speaker 2>didn't I want to see the markets front as well,

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<v Speaker 2>is semiconductors. It's chips. It has everything to do with

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<v Speaker 2>President Biden's kind of plan to bring back a lot

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<v Speaker 2>of the production state side. So we decided we would

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<v Speaker 2>speak to an industry expert who could shed a little

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<v Speaker 2>bit more light on that very story. We are joined

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<v Speaker 2>by Jonathan Clampkins, CEO of Aluma from Santa Barbara, California.

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<v Speaker 2>First off, Santa Barbara, California. Oh my gosh, so jealous,

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<v Speaker 2>it sounds amazing. We're gonna get his travel tips in

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<v Speaker 2>just a second. But let's give a little bit of

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<v Speaker 2>information on what Aluma actually is. Almu is the stock symbole,

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<v Speaker 2>It's a semiconductor company. But I'm gonna let him get

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<v Speaker 2>into the nitty gritty in a second. To me, what

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<v Speaker 2>really stands out, Jonathan about your company is when you

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<v Speaker 2>talk about production, your exposure to China is zero. You

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<v Speaker 2>are making it right here in the United States. Talk

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<v Speaker 2>to us a little bit about how that affects your pricing.

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<v Speaker 1>Yeah, that's sort of been our strategy from the onset,

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<v Speaker 1>and Aluma is a unique company. We have a very

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<v Speaker 1>disruptive technology. We do a piece of the manufacturing process

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<v Speaker 1>in house in Santa Barbara, California, and then we also

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<v Speaker 1>work with external foundries that currently are all US based.

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<v Speaker 1>We're an early stage company. We're at that point where

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<v Speaker 1>we're transitioning from R and D to production, so we're

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<v Speaker 1>not in mass production. But I do think there's a

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<v Speaker 1>benefit to building your semiconductor chips on shore. For one,

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<v Speaker 1>we can protect our technology to a greater degree, and

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<v Speaker 1>I think this puts US in a good position moving forward,

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<v Speaker 1>given all the incentives to do manufacturing on shore via

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<v Speaker 1>the Chips and Science Act.

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<v Speaker 3>Okay, but not to be the debbie downer here, Jonathan.

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<v Speaker 3>As you know, a lot of production has taken overseas

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<v Speaker 3>in order to scale and of course keep cost down.

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<v Speaker 3>So what is your solution to that, particularly on the

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<v Speaker 3>labor side for keeping costs down.

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<v Speaker 1>So what's interesting about our technology is we're not building

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<v Speaker 1>the advanced node semiconductors that you hear about in the

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<v Speaker 1>news quite a bit. So now there are incentives to

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<v Speaker 1>bring some of that manufacturing back on shore, some of

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<v Speaker 1>the incentives to build advanced node semiconductor large semi fabs

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<v Speaker 1>in the US, we focused on what are known as

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<v Speaker 1>mature node technologies, high performance compound semiconductors. Today, they're extremely

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<v Speaker 1>expensive regardless of where you manufacture them, and what Aluma

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<v Speaker 1>has is the ability to mass manufacture those high performance technologies.

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<v Speaker 1>So we're already showing our customers that we have the

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<v Speaker 1>potential to reduce costs by a factor of ten x

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<v Speaker 1>regardless of where our chips are manufactured.

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<v Speaker 2>Are you concerned at all about tariffs, whether that's in

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<v Speaker 2>terms of importing materials or exporting your final product.

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<v Speaker 1>No, I don't think so. I mean we do worry,

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<v Speaker 1>of course about export laws. That's very critical, and I

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<v Speaker 1>think we're going to see export laws become more and

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<v Speaker 1>more strict as we forward, for fear of losing some

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<v Speaker 1>of our technologies to our adversary. So it's something that

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<v Speaker 1>we invest resources in understandingstanding export law, ensuring that if

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<v Speaker 1>we were to send technologies to other countries, to customers

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<v Speaker 1>and other countries, that we have the proper export licenses.

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<v Speaker 1>For now, all of our manufacturing is done in the US.

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<v Speaker 1>All of our customers are in the US or at

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<v Speaker 1>least have US offices that we're directly selling to, So

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<v Speaker 1>not a major concern for us today.

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<v Speaker 3>Yeah, I wonder to what extent I guess what you

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<v Speaker 3>are worried about when it comes to not just I

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<v Speaker 3>know you're in the semiconductor space, and that's a key

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<v Speaker 3>indicator of big tech overall. Are you concerning yourself with

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<v Speaker 3>some of the macro headwinds that we talk about all

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<v Speaker 3>the time here at Bloomberg that are impacting some of

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<v Speaker 3>those megacap tech companies. For sure.

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<v Speaker 1>I mean we're a small, early stage company, but we

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<v Speaker 1>of course worry about what's happening in the broader economy,

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<v Speaker 1>in the broader industry, Like, for example, we hear about

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<v Speaker 1>all the issues in the banking industry. We weren't doing

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<v Speaker 1>any direct banking with the banks that were impacted, but

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<v Speaker 1>we do worry about what that does to investor confidence.

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<v Speaker 1>We rely heavily on our investor to keep our company afloat.

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<v Speaker 1>We want our customers to be doing well, otherwise they'll

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<v Speaker 1>retract and sort of the global economy. We do worry

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<v Speaker 1>about security. We've heard a lot in the context of

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<v Speaker 1>chips about security, about national security, about economic security, about

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<v Speaker 1>apply chain security, which are all very important, but we

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<v Speaker 1>also wonder and worry about what I referred to as

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<v Speaker 1>innovation security. If we offshore our manufacturing, we're handing technologies off,

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<v Speaker 1>we're handing manufacturing, we're also handing over the intellectual property

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<v Speaker 1>and that doesn't come back. That's an issue. I also worry,

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<v Speaker 1>for example, about our country and the fact that we're

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<v Speaker 1>so inventive. But if we're not doing as much manufacturing,

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<v Speaker 1>if we're not doing things, if we're not building hardware,

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<v Speaker 1>we won't invent or innovate as much, and that's critical,

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<v Speaker 1>especially for high tech, and we're part of that ecosystem.

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<v Speaker 3>Well, I know that you're a company. Part of the

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<v Speaker 3>reason that you are part of the major team responding

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<v Speaker 3>to the Chips Act initiatives is everything that you just mentioned.

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<v Speaker 3>I wonder if I can get your take on the

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<v Speaker 3>Chips ACT. If you had to give it a letter

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<v Speaker 3>grade in terms of potential impact, what would you give it?

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<v Speaker 1>Can I give it a plus? At least in context?

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<v Speaker 1>I think it's great. There's so much more interest in semiconductors.

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<v Speaker 1>There was a lull there for a few years where

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<v Speaker 1>investors weren't looking at hardware, weren't looking at semiconductors as much.

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<v Speaker 1>They were looking more at software companies. But semiconductors are

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<v Speaker 1>so important. They fuel essentially everything that we do. We're

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<v Speaker 1>relying on semiconductors to speak right now, So I think

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<v Speaker 1>fundamentally the Chips and science that's is great. We're starting

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<v Speaker 1>to see roll out of some of the solicitations that

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<v Speaker 1>teams are responding to. We've already responded the one of

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<v Speaker 1>the solicitations that's come out through the Department of Defense,

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<v Speaker 1>and there's many more to come. So we're very excited

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<v Speaker 1>about what the Chips Act is going to do. And

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<v Speaker 1>in terms of public funding and support for research and

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<v Speaker 1>development for semiconductor manufacturing, this is bigger than anything I've

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<v Speaker 1>seen in my career, and it's really once in maybe

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<v Speaker 1>fifty year opportunity for the semiconductive industry. So I think

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<v Speaker 1>this is a great thing that's happening.

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<v Speaker 2>Jonathan, of course you'd give it an A plus. That's

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<v Speaker 2>like if I could give ward myself a grade, I

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<v Speaker 2>would also give myself an A plus. But Jonathan, talk

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<v Speaker 2>to me a little bit about kind of how becomes

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<v Speaker 2>a bell weather to some extent. Maddie was talking a

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<v Speaker 2>lot about how chips are, at the end of the day,

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<v Speaker 2>extremely exposed to the macro atmosphere and the macro environment.

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<v Speaker 2>In my eyes, they are a bigger bell weather for

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<v Speaker 2>recession than Caterpillar or Exon or some of these other

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<v Speaker 2>kind of more value specific companies. Talk to us about

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<v Speaker 2>your recessionary call here, when do you expect it?

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<v Speaker 1>Yeah, I think, well, we saw this in this specific

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<v Speaker 1>industry that we work in. We build very advanced sensor

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<v Speaker 1>chips that can be used, for example, in the automotive industry,

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<v Speaker 1>in cell phones, in ARVR and others. But in particular

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<v Speaker 1>in the automotive industry, there was some retraction. For the

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<v Speaker 1>last couple of years. There was a supply chain shortage.

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<v Speaker 1>Car manufacturers were worried about getting sort of the conventional

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<v Speaker 1>chips that they needed to put on board in their

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<v Speaker 1>vehicles so they could get the cars off the manufacturing line.

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<v Speaker 1>And the technology that we're building is sort of a

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<v Speaker 1>next generation technology that's going to go on cars, advanced

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<v Speaker 1>sensors to enable more driving safety, to enable autonomish driving.

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<v Speaker 1>So if some of these macro issues are at play,

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<v Speaker 1>our customers are not going to invest as readily in

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<v Speaker 1>sort of the next generation technology and adding technology to cars.

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<v Speaker 1>They're going to worry about the technology that's already there.

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<v Speaker 1>But I think things are looking up in our industry.

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<v Speaker 1>The automotive OEMs, the car manufacturers are all very dedicated

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<v Speaker 1>and committed to deploying this technology, and we're seeing increases

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<v Speaker 1>in the number of chips and sensors that are being

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<v Speaker 1>demanded by those automotive oms. So we're very excited for

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<v Speaker 1>what's to come.

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<v Speaker 2>Yeah, a lot of pieces to digest. Jonathan Clampkin, the

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<v Speaker 2>CEO of Aluma. ALMU is a ticker on the New

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<v Speaker 2>York Stock Exchange. I believe we thank you as always

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<v Speaker 2>for your time and insight on a chip sector. Matty.

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<v Speaker 2>That is I still think driving the conversation. I mean,

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<v Speaker 2>this was the entire story of twenty twenty one, right

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<v Speaker 2>that there are no chips, How are we going to

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<v Speaker 2>make washing machines and cars and phones? And what will

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<v Speaker 2>Tesla do? And right, what happened to that?

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<v Speaker 3>I mean, it's exactly what Jonathan said. It's part of

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<v Speaker 3>everything that we touch, including how we're having this conversation,

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<v Speaker 3>and it's also a really key component of what we're

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<v Speaker 3>going to see from these big tech companies. We keep

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<v Speaker 3>having the conversation about how Apple is looking to diversify,

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<v Speaker 3>going into Ireland, India, even here in the US. So

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<v Speaker 3>as those geopolitical tensions continue with the US and China,

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<v Speaker 3>it's a very tenuous situation.

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<v Speaker 2>And how some of the big tech companies, to your point,

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<v Speaker 2>Apple were making their own chips certainly something that's going

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<v Speaker 2>to be a hot topic this week. Folks were still

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<v Speaker 2>not done stick with us. This is Bloomberg