Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.
Speaker 1: I'm Joe Wisenthal and I'm Tracy Alloway. So, Tracy, you know,
Speaker 1: obviously all year we've been talking about inflation and supply
Speaker 1: chain issues and shortages, but one of the first areas
Speaker 1: that we really started talking about was the head to
Speaker 1: do with the disruptions and semiconductors. Yeah, I think this
Speaker 1: was like our entry into global supply chain issues. Um,
Speaker 1: we started talking about semiconductors and this idea that there
Speaker 1: was a shortage of these chips that were needed for
Speaker 1: all sorts of things. And I think, you know, if
Speaker 1: you are of a certain age or generation, you tend
Speaker 1: to think of semiconductors is something that goes into a computer.
Speaker 1: But of course nowadays they show up in phones, in
Speaker 1: you know, things like refrigerators, and of course some cars
Speaker 1: as well. Just almost every major appliance now seems to
Speaker 1: have some sort of chip embedded in it. Right, And
Speaker 1: we did like a six episode series I think, earlier
Speaker 1: this year about chips. But the chip story, even though
Speaker 1: we haven't talked about as much lately, it really hasn't
Speaker 1: gone away. And I think I just saw last week
Speaker 1: there was a story about some chip manufacturer in Malaysia
Speaker 1: reducing production. They're pretty regular stories. You mentioned automobiles about
Speaker 1: car companies still not being able to get an adequate
Speaker 1: supply of chips and thus being forced to cut production.
Speaker 1: So they the issues have not gone away by any straight. Yeah,
Speaker 1: I think Toyota made a massive downgrade to its expected production.
Speaker 1: But yeah, so this is something that I've been wondering about.
Speaker 1: So on the one hand, yes, we have some COVID
Speaker 1: outbreaks in Asia that have disrupted semiconductor factories or manufacturers,
Speaker 1: particularly in Malaysia where they manufactured. My understanding as they
Speaker 1: manufacture some components for semiconductors or something like that. So okay,
Speaker 1: you have the Delta variant and that's not production to
Speaker 1: some extent. But on the other hand, you know, as
Speaker 1: you said, this issue has been going on for quite
Speaker 1: some time now, like more than a year, and the
Speaker 1: big question is why aren't we getting to a better
Speaker 1: place in terms of production at this point. The semiconductor
Speaker 1: companies know that they need to boost production. They know
Speaker 1: there's lots of demand out there, so why isn't that happening. Well,
Speaker 1: hopefully we are going to get some answers today on
Speaker 1: the show. Why it is that we're now in the
Speaker 1: middle of September. Uh, and we still don't have something
Speaker 1: resembling like a smooth semiconductor supply chain. We're gonna be
Speaker 1: going back to our first guest that we had on
Speaker 1: the Semiconductor series. I think he actually appeared twice already.
Speaker 1: The last time was in March. We're gonna be speaking
Speaker 1: with Stacy Raskin. He's managing director and senior analyst at
Speaker 1: Bernstein covering u S semiconductors. He's going to hopefully answer
Speaker 1: all of our questions. So Stacy, welcome back to Odd Lots. Oh,
Speaker 1: it's great to be back. Thank you for having me again.
Speaker 1: So are we right? I mean, it appears not only
Speaker 1: are the issues persisting like in some some in some measures,
Speaker 1: things seem to be getting worse. Yeah, And so we
Speaker 1: had hoped that by now things would be getting back
Speaker 1: to some semblance of normalcy, and and you're right, they're
Speaker 1: really not. It's actually getting worse, not better, in many
Speaker 1: parts of the market. So we still are seeing you know,
Speaker 1: production shortfalls, we're still seeing shortages. You know, We've been
Speaker 1: hoping obviously that you know, COVID would be you know,
Speaker 1: on on the decline at this point, it is not
Speaker 1: it is still causing disruptions. You mentioned Malaysia and some
Speaker 1: other areas. So yeah, we're we're we're not back to
Speaker 1: normal yet. We're still seeing some of the same issues
Speaker 1: that we've been seeing for quite a while. So what
Speaker 1: exactly is driving those disruptions then? So you know, you
Speaker 1: mentioned some COVID outbreaks in parts of Asia, but it
Speaker 1: seems to be you know, we might see some factory closures,
Speaker 1: some isolated factory closures, but it seems like the issues
Speaker 1: are sort of more endemic than just you know, an
Speaker 1: outbreak at a particular factory. Yes, I mean may be
Speaker 1: helpful to go back a little bit and talk about
Speaker 1: what caused these shortages in the first place. And I
Speaker 1: talked about this, I think I can't remember, maybe it's
Speaker 1: the second time that I was on. But if we
Speaker 1: if we look at the automotive sector first, that that's
Speaker 1: where we're seeing some of the biggest issue. We've seen
Speaker 1: the biggest issues all the whole time, and you're right,
Speaker 1: we're still actually seeing production costs. You mentioned Toyota. We
Speaker 1: also had recently, GM and Ford and a bunch of
Speaker 1: others and then it's been going so they're still seeing shortages.
Speaker 1: You have to remember the issue there was initial supply
Speaker 1: chain whipsaws. You know, in the in the beginning of COVID,
Speaker 1: factories got shut down. Um you know, people were locked
Speaker 1: in their houses. They weren't driving demand at least initially
Speaker 1: for for small amount of time plummeted and remember the
Speaker 1: auto vendors canceled all their orders. Demand came roaring back
Speaker 1: obviously the plan started opening up. They went back hat
Speaker 1: in hand to try to get capacity, to get pret action,
Speaker 1: and it just didn't exist. And it was like, well,
Speaker 1: you know, get in line right, it'll it'll take time.
Speaker 1: And remember what I said. You know, even if you're starting,
Speaker 1: even if you have the capacity available, it takes months
Speaker 1: um to make these chips from a from a dead start,
Speaker 1: and so that caused you know, cascading effects. I mean
Speaker 1: it still has, right, and you know that. The other
Speaker 1: issue in the other end markets was just demand is
Speaker 1: very strong and that was part of the reason we
Speaker 1: saw issues in auto as well. I mean, the capacity
Speaker 1: that they were using got back filled in many cases
Speaker 1: by other stuff. But just in general we've seemed really
Speaker 1: really strong demand I mean much stronger than I think
Speaker 1: anybody thought was was going to be possible in things
Speaker 1: like PCs and like anything that was sort of work
Speaker 1: from home, study from home, play from home. Um. I
Speaker 1: think you also need to couple this with the fact
Speaker 1: that the industry itself, I mean, you know, remember SEMIS
Speaker 1: it cost billions of dollars dead capacity, and you know,
Speaker 1: historically they you know, they added capacity to demand that
Speaker 1: they saw and when demand was very very strong, much
Speaker 1: stronger than I just didn't have, the capacity was avail.
Speaker 1: And because that demand is still strong, you know, we're
Speaker 1: still shy, we're still short, we're still tight. Um. And
Speaker 1: so now you have to layer on on top of
Speaker 1: all that. Though you remember this, this stuff is never smooth,
Speaker 1: and when you have these kinds of problems, they do
Speaker 1: cascade and they cause more issues, and it's just it's
Speaker 1: just a big mess. I mean, it still is. And
Speaker 1: so it hasn't we haven't had time to actually bring
Speaker 1: enough capacity online to to alleviate things. And the demand.
Speaker 1: You know, in most parts of the market we can
Speaker 1: talk about where people are worried about demand maybe starting
Speaker 1: to roll over a bit, but in general, demand is
Speaker 1: still strong. Supply is still tight um and and we've
Speaker 1: still got problems and it hasn't it hasn't alleviated yet.
Speaker 1: And now you throw you know, the resurgence of Delta
Speaker 1: on top of us. And again you mentioned Malaysia. What
Speaker 1: they do A lot of Malaysia they do what's called
Speaker 1: back end. It's a lot of what what's called packaging,
Speaker 1: So they don't necessarily they don't have like semiconductor factories
Speaker 1: in Malaysia. They're not making like chips. Once you actually
Speaker 1: make the chip in the factory, you have to what's
Speaker 1: called packaging. You have to put the electrical leads and
Speaker 1: everything on it's such that you can take that chip
Speaker 1: and actually put it on a circuit board. So they
Speaker 1: do that kind of stuff assembly and testing and other
Speaker 1: things in Malaysia, and a lot of those issues were
Speaker 1: impacted in a lot of that stuff is done in
Speaker 1: Southeast Asia and and a lot of those, uh things
Speaker 1: were impacted by by COVID. So that's just something else
Speaker 1: icing on the cake on top of everything else and
Speaker 1: not getting better. Yeah, that was one of the things
Speaker 1: I remember we talked about one of our semi conductor
Speaker 1: episodes with Willie she at Harvard Business school. And obviously,
Speaker 1: just like in addition to the sort of technical challenges,
Speaker 1: any given ship has a highly globalized supply chain. And
Speaker 1: so as you mentioned, maybe it gets manufactured to wear
Speaker 1: in Taiwan, but then some sort of packaging happens in Malaysia,
Speaker 1: and so there must be to some extent issues that
Speaker 1: are the sort of generalized supply chain issues that are
Speaker 1: affecting more or less everything must have some having some
Speaker 1: impact on semi conductors specifically, it is and so you right,
Speaker 1: so semis are extremely global, and I forget, I forget
Speaker 1: how many different borders the average semiconductor crosses like in
Speaker 1: its in its lifetime, you know, from from initial production
Speaker 1: to actually getting sold to the end user. But but
Speaker 1: it's a lot, right, and you're right. They can be
Speaker 1: you know, it can be a US company that's using
Speaker 1: the Taiwanes foundry to make it, where it gets packaged
Speaker 1: in Malaysia and then it goes to a distributor in China,
Speaker 1: and like it's it's all over the place. So there's
Speaker 1: there's a lot of that, and there are big logistical
Speaker 1: channel the challenges that we're seeing right now. Shipping costs
Speaker 1: are actually getting getting much higher We've seen ports shutdowns
Speaker 1: in China and other places as are trying to control
Speaker 1: the spread of of delta um. We've seen container ships
Speaker 1: like like stacking up. I think maybe I can't remember
Speaker 1: a fifth if the sewers canal was blocked the last
Speaker 1: time we said that, I can't remember. But we're seeing
Speaker 1: tons of a logistical challenges. A lot of semi conductor
Speaker 1: comes in front. The other companies too, are starting to
Speaker 1: talk about this as well, like when when they talk
Speaker 1: on earnings, calls and everything. We're starting to see some
Speaker 1: of those costs go up and some of these supply
Speaker 1: chains are are are it's it's it's it's just a
Speaker 1: big hot mess. I mean, the whole thing, which I
Speaker 1: guess shouldn't really be a surprise is I mean, again,
Speaker 1: you know we had a global potential global catastrophe. You
Speaker 1: know that was it was causing. I'm part of me
Speaker 1: is like amaze that it's been as resilient as it
Speaker 1: has been. Frankly, but but it is, it is it
Speaker 1: is still causing problems and and and it's funny like that. Obviously,
Speaker 1: the question I get the most is how long is
Speaker 1: it gonna last? I wish I had an answer. I don't,
Speaker 1: you know. And it's really funny when you when you
Speaker 1: think about the stocks right and and and the companies,
Speaker 1: I mean, they're they're still putting up monster numbers. The
Speaker 1: sector right now, in terms of revenue is on track
Speaker 1: to grow probably twent this year and blow past five
Speaker 1: billion dollars for the first time in in in history.
Speaker 1: Um and and every quarter of the companies are putting
Speaker 1: up better and better numbers. And I would say investor
Speaker 1: conviction is getting less and less like the higher the
Speaker 1: numbers go, because we've all seen this number this movie before.
Speaker 1: We see this massive strong demand. Nobody really knows how
Speaker 1: much of it is real and how much of it
Speaker 1: is phantom. We talked about double ordering and everything else
Speaker 1: the last time it was here. Um, you know, this
Speaker 1: is when when things were uncertain, they order more and
Speaker 1: and and so like. It's it's funny the stocks haven't
Speaker 1: done much of anything, you know, even as the numbers
Speaker 1: have you continued to go up and up and up,
Speaker 1: because people still don't know how sustainable this, this this
Speaker 1: strong demand is so stacy. This is something that I
Speaker 1: wanted to ask you about. So you know, you mentioned
Speaker 1: this cascade effect early on and you didn't mention it specifically,
Speaker 1: but there is this bullwhip effect that seems to be
Speaker 1: at play where everyone was expecting demand to drop, companies
Speaker 1: cut orders, so the semiconductor manufacturers UM sort of backed
Speaker 1: off from production and then things turned out better than
Speaker 1: people had expected and there was loads of demand and
Speaker 1: the semiconductor companies have been trying to catch up ever since.
Speaker 1: But I guess my question is, like, one, is there
Speaker 1: something in particular about semiconductors and the manufacturing process that
Speaker 1: makes them more sensitive to the bullwhip effect um, this
Speaker 1: cascade idea. And then secondly, one of the things that
Speaker 1: comes into play when there's a shortage a supply shortage
Speaker 1: is every when starts stockpiling, right, So it's hard to
Speaker 1: tell what's real demand versus what's just people hoarding components
Speaker 1: because they think they're not going to be able to
Speaker 1: get them. So what's your sense of that at the moment,
Speaker 1: real demand versus stockpiloting. Yeah, yeah, so let's let's address
Speaker 1: the first question. They're like, why are semi's the bullwip right? Um? Yeah,
Speaker 1: it's there at the back of the supply chain. So
Speaker 1: then you think about them and I'll take a microprocessor
Speaker 1: for a PC just as a simple example, you know,
Speaker 1: like Intel or am D or whoever makes the processor,
Speaker 1: and then who does that get sold to, like a
Speaker 1: Taiwanese O d M maybe it's called Original Device Manufacturer
Speaker 1: who builds like a notebook computer and then they stick
Speaker 1: it on a plane or a boat, right, and they
Speaker 1: sell it, you know, they send it off to HP
Speaker 1: or or something like that, and then HP, you know,
Speaker 1: sells it to best Buy and then best Buy sells
Speaker 1: it to you or like. However, there's probably other steps
Speaker 1: in there as well. But there's a lot of points
Speaker 1: within that chain where you can get inventory building or
Speaker 1: bleeding or anything else. And and the fluctuations tend to
Speaker 1: magnify as you work from the front of the chain back. Um.
Speaker 1: This is a very well known that the thing you
Speaker 1: see it all the time, and the semis are at
Speaker 1: the back of that supply chain. So small fluctuations, even
Speaker 1: small fluctuations and end demand like at the customer level,
Speaker 1: can propagate backwards and have corresponding a larger impact like
Speaker 1: the farther back you go in the chain, and the
Speaker 1: semis are just at the back. And and remember I
Speaker 1: think we talked about this last time. But you know
Speaker 1: that the semi companies have to plan in this environment,
Speaker 1: and their actual my opinion at least, is that semi
Speaker 1: conductor company management teams their actual visibility into what their
Speaker 1: end customers are truly doing is precisely zero. They have
Speaker 1: no idea. They do the best they can. I'm not
Speaker 1: I'm not blaming them. It's not good or bad, right,
Speaker 1: it just is right. And the best companies out there,
Speaker 1: like A are willing to accept this and and deal
Speaker 1: with it. But their actual visibility is not great. But
Speaker 1: by the way, companies are trying to do some stuff
Speaker 1: right at you to to get to your second question
Speaker 1: around potential double ordering and stock piloting and so so. Yes,
Speaker 1: this this is a standard kind of behavior, and probably
Speaker 1: not just in semis. I mean this is normal human behavior,
Speaker 1: like when you can't get something that you need, you
Speaker 1: tend to order more and again. This is a phenomenon
Speaker 1: known as double ordering. And I mean a simple example.
Speaker 1: Let's say you're making widgets and you need you know,
Speaker 1: a hundred semi conductors you know whatever, right, and your
Speaker 1: inventors says, okay, I can't, I'll give you ten. I
Speaker 1: can supply ten and i'll give you the other you know,
Speaker 1: ninety the you need, I'll give you those in fifty weeks.
Speaker 1: So your next step is to order a thousand semi
Speaker 1: coffer from wherever you could hope to cobble them together
Speaker 1: on the hope that you can build up the hundred
Speaker 1: of leading and then you cancel all the other orders. Right,
Speaker 1: And so what semi conduct investors tend to watch for
Speaker 1: that this is a fundamental phenomenon as lead times like
Speaker 1: how long does it take to get the product after
Speaker 1: you order it, and those lead times are stretching out.
Speaker 1: What what what investors tend to watch for is when the
Speaker 1: lead times start to pull back in because that's usually
Speaker 1: when the cancelations start to happen. And so what a
Speaker 1: lot of companies are doing right now is they're actually
Speaker 1: doing things like putting in long lead time orders non
Speaker 1: cancelable orders, for example. Generally in the space historically that
Speaker 1: you didn't do that, there were no penalties to cancel orders,
Speaker 1: um companies. Now some companies are starting to put things
Speaker 1: like non cancelable orders. Other companies are parsing their orders.
Speaker 1: It's like, well, I know this, customers ordering a hundred parts,
Speaker 1: but I think they only need thirties, so I'm gonna
Speaker 1: only ship them thirty. Right. We're seeing some of that
Speaker 1: as well, and so the companies are doing the best
Speaker 1: they can in this environment to try to manage through.
Speaker 1: It is their stockpilot going, undoubtedly their stockpilot. I don't
Speaker 1: see how there couldn't be. Can you measure it? No,
Speaker 1: it's hard. So and I'll give you an example, like
Speaker 1: there there are some cases where, again you go, look
Speaker 1: at the auto vendors, even if they're stockpiloting, and whether
Speaker 1: they may be stocked by some much, but we were
Speaker 1: still seeing actual production cuts. So clearly, you know, even
Speaker 1: if they're they're stockpiling some parts, clearly they don't have
Speaker 1: enough of what they need to build the cars that
Speaker 1: they want. Right, So we're still seeing some some some
Speaker 1: primary examples here of situations where actual shortages, where the
Speaker 1: shortages still seem to be real, because we wouldn't be
Speaker 1: having actual production cuts if they didn't have actual shortages. Obviously,
Speaker 1: this is what you sort of described is going on
Speaker 1: in a range of industries. Are we gonna hit one day?
Speaker 1: And could this be a source of investor concerned? We're
Speaker 1: like we wake up and there is just a crazy
Speaker 1: blood of chips because so many entities or is it
Speaker 1: so is capacity so constrained generally that it's just hard
Speaker 1: to imagine there ever being a point where there's a
Speaker 1: huge oversupply. I mean never never say never, right, and
Speaker 1: the normal practices, Yeah, you'd wake up one day and
Speaker 1: you'd see a glut that that is normally how this
Speaker 1: would happen. And again, like this is why investors are worried,
Speaker 1: and this is why even though the numbers are going up,
Speaker 1: the stocks aren't really going up all that much. Multiples
Speaker 1: are coming down, and people are worried. You know that
Speaker 1: we're you know, getting closer to peak, right, And I
Speaker 1: guess mathematically, like by definition, we're getting close to peak
Speaker 1: every day. At the same time, we could be quote
Speaker 1: unquote post to peak for quite some time, right, because
Speaker 1: as long as this stuff's working. Again, the other thing
Speaker 1: you need to remember with with this is even though
Speaker 1: demand is really strong, I mean like you need, you
Speaker 1: need everything. So that's the thing is like the auto values.
Speaker 1: See I'll pick on the auto vendors again, like I
Speaker 1: mean they could be getting percent of everything they need,
Speaker 1: but if they don't have the five percent that they
Speaker 1: that they need they can't chip the car, right, And
Speaker 1: you could have a situation where like you have auto
Speaker 1: vendor A you know they have and they're they're short
Speaker 1: five percent. An auto vendor V hascent what they need
Speaker 1: in their short five percent, but it's a different five percent, right, Um,
Speaker 1: so that maybe something what we're seeing right now is
Speaker 1: like I I don't know, like at some point we
Speaker 1: may get a glot and now. At the same time,
Speaker 1: you can also argue that like post COVID, some of
Speaker 1: this demand is real and so like like I'll look
Speaker 1: at PCs for example, PCs right now we're incredib have
Speaker 1: been incredibly strong. I mean we were doing two hundred
Speaker 1: and fifty to two hundred and sixty million PCs a
Speaker 1: year pre COVID, Like we did three hundred million one
Speaker 1: right now we're on track to do probably close to
Speaker 1: three fifty, which would sort of match the peak in
Speaker 1: the industry, which is in and there's a big controversy
Speaker 1: in PC PCs. Right our PC is gonna grow next year,
Speaker 1: they're gonna be down or like whatever. But even if
Speaker 1: they're down, they're probably not going back to to fifty,
Speaker 1: right probably not like we I could argue that there's
Speaker 1: a structural case. I mean, like like whatever the normalized
Speaker 1: run righted pieces ought to be, it's probably higher than
Speaker 1: it was pre COVID. And you can make that argument
Speaker 1: about a number of event markets. And so even if
Speaker 1: we get a glut, some of the things we we
Speaker 1: probably had pulled forward in digitization and everything pre COVID
Speaker 1: or since pre COVID, and we've got more people doing remote.
Speaker 1: Remote work is going to be a thing from now on,
Speaker 1: like whether or not, like people start to go back
Speaker 1: to the office is more. Um, I could argue that
Speaker 1: some structural level event things should be higher, you know,
Speaker 1: in terms of capacity. I think Tracy, you asked during
Speaker 1: the intro, why isn't the semiconductor industry added capacity? It
Speaker 1: just takes time, right, They're all trying. I mean you
Speaker 1: can go look at like this the Semi cup guys
Speaker 1: like like way for fab Equipment w f E is
Speaker 1: is going through the roof right now, and you've got
Speaker 1: big forecast from from big companies, you know, throwing out
Speaker 1: big numbers in terms of what they're planning on spending
Speaker 1: over the next few years. Capacity probably will get added.
Speaker 1: It just takes time. To get added. So the worry,
Speaker 1: obviously is that capacity comes online right when the man
Speaker 1: starts to roll off, and I don't know what it's
Speaker 1: going to look like. I guess, well, this year will
Speaker 1: probably be fine. Still in terms of the fundamentals and numbers,
Speaker 1: we'll see what two and twenty three look like. Those
Speaker 1: are the kind of time frames we're probably talking about
Speaker 1: in terms of supply coming on UM and we'll see
Speaker 1: how well it is to well mactually is to demand
Speaker 1: like when it doesn't. So I wouldn't expect this to
Speaker 1: make a massive difference to the supply demand imbalance. But
Speaker 1: what are the chances that you start to see customers,
Speaker 1: the people who are actually ordering chips just back away
Speaker 1: or decide they're going to design more analog stuff, um,
Speaker 1: you know, in order to avoid this problem. And I'm
Speaker 1: thinking specifically, you know, last week, Bloomberg grand an article
Speaker 1: about air conditioning manufacturers dropping copper components because the price
Speaker 1: of copper was so high, and they're all starting to
Speaker 1: not all of them, but some of them are starting
Speaker 1: to switch to aluminum. So I'm wondering, like, could you
Speaker 1: see a similar thing with semiconductors or is it just
Speaker 1: you know, pretty impossible given the nature of the types
Speaker 1: of electronics we're talking about. What do you mean like
Speaker 1: switching away from semi connectors to something else? Yeah, I guess,
Speaker 1: like I guess going analog. Right, there were like a
Speaker 1: few car companies that were saying they're going to like
Speaker 1: drop some of the complicated electronics in order to produce Well,
Speaker 1: we we are seeing some of that. So some of
Speaker 1: the car we seem like cars. I'll make it up,
Speaker 1: but like you know, shipping without you know, the the
Speaker 1: electronically controlled rear view mirror or stuff like that. Right,
Speaker 1: we're seeing some things because I remember, you know, if
Speaker 1: you're gonna ship a car, you kind of need the
Speaker 1: full kid. If there's things you could leave out where
Speaker 1: the car is still sailable and then add them later
Speaker 1: like you could do, we're seeing some of that. The
Speaker 1: other thing we're seeing with like Auto that or sometimes
Speaker 1: is they're building the cars like everything. They're building the
Speaker 1: car complete except for the stuff they have, and they're
Speaker 1: parking it so that when they when they get the
Speaker 1: park they need, then they can ship. I actually suspect
Speaker 1: we're seeing this in PCs as well. My math and
Speaker 1: we published as my mass suggests that as strong as
Speaker 1: PCs are right now, I think CPUs shipments, the microprocessors
Speaker 1: shipments are even stronger. And we've heard like like HPS
Speaker 1: sort of talked about on ARMIS calls about building things
Speaker 1: like strategic Inventor. I suspect they're building kits, you know,
Speaker 1: and and and sitting on the shell phone. So as
Speaker 1: soon as they get the final parts that they're missing
Speaker 1: that they can they can ship. So we are seeing
Speaker 1: some of that. So you can call that stockpiling in
Speaker 1: some sense. Right, It's hard to know how widespread it
Speaker 1: is and everything else, but I mean it's a normal
Speaker 1: behavior that we might see in cars. We are seeing,
Speaker 1: to your to your points of some of these things
Speaker 1: are getting left up. But the thing with cars, you
Speaker 1: can't just like like we we can't go back, you know,
Speaker 1: Like my first car was the Toyota Corolla. It didn't
Speaker 1: have very much in the ways of semi conductors in it. Right,
Speaker 1: We're we're probably not going back to something that you
Speaker 1: can't all right, And in fact, some one thing we're
Speaker 1: seeing from the auto vendors, the limited supply of semis
Speaker 1: that they do have, they're actually selling higher end cars, right,
Speaker 1: They're actually prioritizing because the profits are higher, right, So
Speaker 1: they're they're they're they're they're saving the limited semi editors.
Speaker 1: They have to actually make as most money as possible
Speaker 1: with them, and so in some cases we may be
Speaker 1: seeing like mix actually going up rather than rather than down.
Speaker 1: Oh yeah, I've wondered about that with with with various industries,
Speaker 1: the degree to which, like, okay, if you have a
Speaker 1: shortage of components overall. I remember we were talking about
Speaker 1: this a little bit. We actually did an episode several
Speaker 1: weeks ago, like on bathtubs and appliances. But I've been
Speaker 1: wondering the degree to which end users of technology or
Speaker 1: raw materials are changing their mix and prioritizing the production
Speaker 1: of the the higher margin lines. Yeah, it's it's hard
Speaker 1: to know. I do think in auto we we've seen
Speaker 1: that in other end marketing, and I can mention graphics
Speaker 1: cards of them. I mean people you can't even buy
Speaker 1: a graphics card right and they're just selling everything they
Speaker 1: can make right now. Um, But yeah, I do think
Speaker 1: we're seeing some of that us anecdotally. Um, we are
Speaker 1: seeing it. How much is you know, obviously on top
Speaker 1: of everything else, one is seeing this incredible crypto boom.
Speaker 1: How much does that contribute at the margins too tightness
Speaker 1: in the semiconductor space, and how much as a professional
Speaker 1: semiconductor analyst does that force you to get to know
Speaker 1: this sort of new industry. Well, it's it's not that
Speaker 1: new anymore. And we've seen a number of crypto crypto
Speaker 1: booms and and and busts over over the earth fair enough,
Speaker 1: I don't think like so you can talk about like
Speaker 1: like the crypto impact on shortages in a couple of
Speaker 1: different they're just like, for example, of shortages of graphics
Speaker 1: cards and again go try to buy one. The other
Speaker 1: is like taking a capacity at the foundries. And I
Speaker 1: remember duringen you had a lot of the bitcoin minors,
Speaker 1: guys like bitmain that make custom chips to mind bitcoin.
Speaker 1: I think at one point they were a ten percent
Speaker 1: customer of t SMC, like for a heartbeat, right, So
Speaker 1: for that was like back during the bubble. I don't
Speaker 1: think we've seen anything nearer that much for for their
Speaker 1: for the the guys that make the custom mining chips
Speaker 1: this time. And I don't think t SMC has been
Speaker 1: prioritizing those guys nearly as much. But in general, I mean,
Speaker 1: we've just got tightness all around at the leading edge,
Speaker 1: and certainly that's been part of the problem with with
Speaker 1: graphics cards. It's been hard to get, and obviously the
Speaker 1: demand has been very strong. I'd also say like even
Speaker 1: beyond with for graphics are even beyond crypto. The gaming
Speaker 1: cycle this time is much stronger. Obviously we hit we
Speaker 1: had COVID, and people were trapped in their houses and
Speaker 1: they wanted to the video games were a good way
Speaker 1: to pass the time, so they wanted to buy the
Speaker 1: cards and the products from both in video and A
Speaker 1: and D this time were actually much better than the
Speaker 1: prior cycle, which was kind of like you know, second
Speaker 1: half of and so there's actually a lot more I
Speaker 1: think demand from gamers for the parts this time versus
Speaker 1: last time where I where I do think a lot
Speaker 1: of that incremental demand um was from the cryptomotis. And
Speaker 1: so what happened in nine when the miners stopped buying,
Speaker 1: the gamers didn't really want to step up and pick
Speaker 1: up the slack, and so obviously we saw some fairly
Speaker 1: big shortfalls, you know, the beginning of end of eighteen,
Speaker 1: beginning of nineteen for for guys like in video this
Speaker 1: time that their news cycle. It's called it's called amp
Speaker 1: here is is the code name for it. I do
Speaker 1: think actually gaming demand is quite strong for it. They
Speaker 1: can't get the parts. So one hope for in videos
Speaker 1: is if and when the miners stop buying that the
Speaker 1: gamers will start to pick up the slack okay, and
Speaker 1: we'll see like we're we're not there yet in terms
Speaker 1: of the demand is still like off the charts I
Speaker 1: think for for both the video and am D for
Speaker 1: for game for graphics cards. So let's talk about I
Speaker 1: think actually the first time we had you on who
Speaker 1: was about like the fall of Intel or Intel Stumble.
Speaker 1: That was like the first theme and of course it
Speaker 1: had a pretty rough and they had fallen behind. So
Speaker 1: that so then they bounced. Then they hired the new CEO,
Speaker 1: girl singer, and the stock rallied and people like this
Speaker 1: idea of like, oh they're gonna like reinvest in production
Speaker 1: because that's the core issue that we talked about, there's
Speaker 1: falling behind our productive capabilities. Now the stock has had
Speaker 1: a pretty rough year once again, So what is the
Speaker 1: current issue. What are the big concerns right now facing Intel?
Speaker 1: You bet it's a few things. So you're right with
Speaker 1: the day they hired Pat Elsoner, I think the stock
Speaker 1: was up and I get like, I like Pat Patt
Speaker 1: is the guy they probably should have hired two years ago, right,
Speaker 1: and so he's he's the right guy for the job.
Speaker 1: I think now that things that he's not a magician either,
Speaker 1: and he has to play the a hand that he's
Speaker 1: been dealt, and the hand that he was dealt is
Speaker 1: pretty tough. And I think I said this the first
Speaker 1: time it was on But the problems that Intel's having,
Speaker 1: they didn't just develop like over the last couple of quarters.
Speaker 1: These have been ten years in the making and they're
Speaker 1: not going to get fixed in a couple of course.
Speaker 1: They will probably take five or ten years to to
Speaker 1: to fix. And so they've done a few things. Actually
Speaker 1: since we chat, I think that was the last November
Speaker 1: when we chatted, and and so we've we've they've done
Speaker 1: a few things. Um number one, we talked a lot
Speaker 1: about their difficulties at seven animeters. So they're claiming that
Speaker 1: seven animeters is now fixed. They're claiming the issue was
Speaker 1: they didn't they weren't using eu V what's called extreme
Speaker 1: ultra Violet mothography, which is a very advanced type of
Speaker 1: patterning technology to make very small features. UM and I
Speaker 1: guess that that that is their their public stance on
Speaker 1: on what the solution was they're gonna use. They're gonna
Speaker 1: be much bigger using e V and that's going to
Speaker 1: fix the problem. It's also, by the way, clear probably
Speaker 1: why they didn't want to use it. It's very expensive.
Speaker 1: Their capex this year is gonna win up to something
Speaker 1: like twenty billion dollars and that's not foundry, that's their
Speaker 1: their own core business. But they don't really have a choice,
Speaker 1: so they they've claimed that's fixed. They've also now I
Speaker 1: don't know, a month maybe two months ago, they put
Speaker 1: out a roadmap and this road they did a few things.
Speaker 1: Number one is they adjusted their their nomin Remember we
Speaker 1: talked about the node nomenclature and how like Intel nodes
Speaker 1: didn't correspond to t SMC nodes in terms of process.
Speaker 1: So they've changed their nomenclature to ALIGNE. Okay, so what
Speaker 1: they were talking about seven naneties before that that is
Speaker 1: now Intel four for an Okay, fine, what whatever. I'm
Speaker 1: not going to knock them because they were they weren't
Speaker 1: gaining anything by being a pedantic about it, so I mean, okay, fine.
Speaker 1: But then the other thing is they said they're gonna
Speaker 1: do kind of like five evolutions in four years. They're
Speaker 1: gonna do they're doing ten now, and they're gonna go
Speaker 1: to I think I can't remember what it's called ten
Speaker 1: Enhanced super fin or something, and then they're gonna go
Speaker 1: to Intel four and then Intel three, which is like
Speaker 1: like an enhanced seven, and then they're gonna go to
Speaker 1: something called twenty and twenty A is like in back
Speaker 1: in and twenty A technology, We'll have a couple of
Speaker 1: new innovations. It's gonna have something called a gate all
Speaker 1: around transistor structure, which we could talk about what that is,
Speaker 1: but it's a new type of structure to on the
Speaker 1: transition to get higher performance and and everything. And so
Speaker 1: that's that's one thing. The industry, by the way, is
Speaker 1: wrestling with that technology. Samsung has at the roadmap intels
Speaker 1: now putting it on the roadmap, and they're gonna have
Speaker 1: something called back backside power, which again we can talk
Speaker 1: about without some innovations there. And what they're basically saying
Speaker 1: is by that time frame, by that sort of like
Speaker 1: five time frame, when we introduced this twenty A process
Speaker 1: using this you know, this gate all around orchanization, we
Speaker 1: will have we will have caught up and then surpassed
Speaker 1: t SMC at that point. So they put up this
Speaker 1: roadmap that says, in like four or four or five years,
Speaker 1: we think we can close the gap with t SMC
Speaker 1: and and and beyond we will surpass it. So a
Speaker 1: couple of things with that number one. Even even though
Speaker 1: it's it sounds good, it's a very aggressive roadmap. Like
Speaker 1: I said, it's sort of four iterations in five years
Speaker 1: and they're there, you know, trajectory and execution of the
Speaker 1: last decade. You know, this would be a big change.
Speaker 1: So more power to that they can do that. But
Speaker 1: the problem is that even if they can execute on it,
Speaker 1: and it's not a done deal, they basically came out
Speaker 1: and told everything, we're still gonna be behind for the
Speaker 1: next four years, right, So the window is still for
Speaker 1: everybody else to attack us is still open for at
Speaker 1: least like four years. So that was the was the
Speaker 1: dark side of what they were saying. So even if
Speaker 1: they execute on it perfectly, the windows still open for
Speaker 1: four years or more. And if they don't execute on it,
Speaker 1: they're screwed. But he had to come out and put
Speaker 1: a credible, like a semi credible like like statement out
Speaker 1: that this as we can close they got because his
Speaker 1: alternatives to laid out and die right, because if they
Speaker 1: can't catch up by that or whatever, they'll they'll ever
Speaker 1: catch up. That that's it, right. So that's that's one
Speaker 1: thing that they're doing. Um. The other thing they're doing
Speaker 1: is they're they're making more use of outsourcing. And again
Speaker 1: when they it's they're they're doing a lot of stuff
Speaker 1: in house. They're doing some more more stuff at t
Speaker 1: SMC and so they're booking capacity I guess three n
Speaker 1: animated capacity at t SMC and so we'll see what
Speaker 1: kind of products they make. They're actually doing some graphics
Speaker 1: stuff over there now, and they're gonna be doing some
Speaker 1: other things. And then thirdly they're gonna be focusing on
Speaker 1: on specialized packaging. What's what's what's called chiplets where I'm
Speaker 1: disaggregating the chip into various types of functionalities and making
Speaker 1: each of those smaller pieces potentially different places and then
Speaker 1: combining those together. And this is something we're intel things.
Speaker 1: They have an advantage and they've got very good. This
Speaker 1: is packaging and they've got very good packaging technology, but
Speaker 1: so do others. And so we'll see all this works out.
Speaker 1: So that that that's sort of the plan, right, and
Speaker 1: then and then and then and then they're gonna be
Speaker 1: building out all this foundry stuff and to do that,
Speaker 1: they're gonna be getting subsidies. Right, So this is the
Speaker 1: other the other things. So that in general that the strategy,
Speaker 1: like like some simplified, is to try to stabilize the roadmap,
Speaker 1: try to put out some sort of credible path to
Speaker 1: catching up, and and thirdly to beg for money from
Speaker 1: the government, which whether it's not a dumb idea, right
Speaker 1: if if anybody, if there's any time right now they
Speaker 1: to go get money from from governments to build out
Speaker 1: sending a capacity. Now is the time. So this is
Speaker 1: something that the Biden administration has been you know, specifically
Speaker 1: calling out and targeting, um the idea of making the
Speaker 1: US stronger in semiconductor manufacturing. Like how much of a
Speaker 1: difference could that make to future supply demand balance? Well,
Speaker 1: they probably I was right now. It's fifty two billion
Speaker 1: dollars I think is the number on the tip, which
Speaker 1: which frankly is a rounding error. Again, t SMC is
Speaker 1: talking about one single company. They're going to go spend
Speaker 1: fifty sorry a hundred billion dollars over three years one company.
Speaker 1: So the US right now is saying fifty two billion dollars,
Speaker 1: which is manufacturing and lady in a bunch of stuff
Speaker 1: over like a five year period for the entire US
Speaker 1: based industry. So, I mean, it's that kind of gives
Speaker 1: you an idea of the scale. Um, it's probably not
Speaker 1: gonna make much of a difference, but but it's a start.
Speaker 1: You gotta start somewhere. And then like I said, well
Speaker 1: we'll see like like how they get spread out between
Speaker 1: Intel and Samsung and TSMC. And it's funny, you know, Intel,
Speaker 1: like they did a paid article in police to Co
Speaker 1: a little while back where I mean gals was basically saying,
Speaker 1: don't give the money to foreign companies, give it to
Speaker 1: us because like TSMC, like they're gonna build it. They're
Speaker 1: building this factory Arizona. It's five nanimeters. By the time
Speaker 1: they bring it online, that's gonna be lagging edge and
Speaker 1: they're gonna leave all the leading edge I P off shore,
Speaker 1: And so you should give the money to loss effectively,
Speaker 1: it was saying that which which is? I personally think
Speaker 1: if we're really interested in building up the US like
Speaker 1: supply chain in semis, you need to make it resilient.
Speaker 1: I don't think he can bet on one company. I
Speaker 1: think you need to spread the wealth around and guys
Speaker 1: like TSMC and Sam's they already have customers, like really,
Speaker 1: and Intel's talked about they're gonna work with Qualcomm and
Speaker 1: some others like in like five years, like maybe we'll see, right,
Speaker 1: TSMC and these other guys have customers today, So I'm
Speaker 1: of the opinion it would probably be better to spread
Speaker 1: that wealth around um and and we'll see a fifty
Speaker 1: two billion dollars is where it stops? Like I don't know,
Speaker 1: Like I think if we really want to make a difference,
Speaker 1: we need more. But but it's a start, so we'll
Speaker 1: so we'll, you know, well we'll see. You know, there's
Speaker 1: some other issues with within tel. We talked about the stock.
Speaker 1: I mean, the strategy sounds credible, so you could ask
Speaker 1: this on wise of Stock been like such a dog.
Speaker 1: The problem is that he's you know, they've been running
Speaker 1: around like trying to draw up excitement for what this
Speaker 1: vision could look like and I get that, but I'm
Speaker 1: of the opinion they're about that they have to drop
Speaker 1: a hammer on us because you start thinking about this
Speaker 1: this stuff, like what what's gonna what's gonna happen in
Speaker 1: terms of capital and capital intensit is going up, free
Speaker 1: cash is going down, Gross margins next, you're way too high.
Speaker 1: They need to come down. Um. They're talking about they
Speaker 1: think PCs are gonna grow next year. I personally think
Speaker 1: that they're saying that because like they're screwed if PCs
Speaker 1: don't grow next year. Right, Um, I think numbers need
Speaker 1: to need a fairly sizeable reset. And we've got they've
Speaker 1: got an Animals Day coming up in November when everybody's
Speaker 1: sort of widely expecting them to give us like the model,
Speaker 1: like what is the vision for what this thing looks
Speaker 1: like during the transition as we go from where we
Speaker 1: are now to where maybe we're going in in five
Speaker 1: years or whatever. Um. And people are really hesitant to
Speaker 1: do anything with the stock in front of the anialyst
Speaker 1: day because we don't actually know how low things like
Speaker 1: gross margins and free cash flow and everything are gonna go.
Speaker 1: But you can make the case that they need to
Speaker 1: go that they need to go a lot lower than
Speaker 1: they're getting modeled right now. So so this sort of
Speaker 1: brings back you know, even prior to so okay, during
Speaker 1: the last eighteen months of COVID and so forth, chip
Speaker 1: industry demand has been extremely strong, and that's contributed to
Speaker 1: the tightness. And one of the themes that we that
Speaker 1: was discussed even prior to COVID was that the chip
Speaker 1: industry seemed to be getting less less cyclical overall. And so,
Speaker 1: you know, for years the eighties and nineties, I think
Speaker 1: chips were seeing as this classic boom bust industry and
Speaker 1: then for years going uh, you know, I don't know.
Speaker 1: The last decade there's just been the secular growth in
Speaker 1: semiconductors overall because they get put into like everything from
Speaker 1: cars to refrigerators to computers, bcs, two chairs and so forth.
Speaker 1: Is there any is that fundamental theme expected to continue
Speaker 1: that regardless of what happens, the secular growth of chips
Speaker 1: is going to continue, or are there concerns that at
Speaker 1: some point some of these boom bust cycles might return.
Speaker 1: I don't think that those two things are mutually exclusive,
Speaker 1: and so I'll give you my own just a number one.
Speaker 1: Let's let me put the near term cyclical concerns aside
Speaker 1: for a moment. Long term, I'm actually more positive on
Speaker 1: on Semi's coming out of COVID than I've been in
Speaker 1: a long time in terms of that secular growth theme.
Speaker 1: I am. And look, you know this, the sector I mean,
Speaker 1: like last year was four and forty billion dollars. And
Speaker 1: off the base, even if Semis just grew five percent
Speaker 1: a year over the cycle, you have a trillion dollar industry.
Speaker 1: By and by the way, this year, Semis are probably
Speaker 1: not gonna grow five percent. They they may grow twenty
Speaker 1: five percent this year off off of that four and
Speaker 1: if they did, we we get pretty close to five
Speaker 1: d and fifty billion dollars. And so well, we'll see
Speaker 1: what things do, right, but you're gonna have a lot
Speaker 1: of growth this year, and so like even if we
Speaker 1: go into a downturn next year, who knows, maybe we
Speaker 1: we could right sure, um, you think about like that runway,
Speaker 1: We're we're likely still be well over five billion dollars
Speaker 1: would be my guessing, even in a downturn scenario, which
Speaker 1: is much higher than we were. Um and and and
Speaker 1: long term, this idea of like, is the industry someday
Speaker 1: a trailion dollars? I think absolutely it will be a
Speaker 1: trailion dollar. And whether it's twenty thirty five or like
Speaker 1: what what have you. Um I think a lot of
Speaker 1: the trends were seeing a real this whole idea of
Speaker 1: of of of content increase and and and digitization and
Speaker 1: everything else. Some I'm a firm believer, and more so
Speaker 1: than I have been. UM So I'm pretty positive long
Speaker 1: term and semilies now the near term cyclical. This is
Speaker 1: kind of interesting because you kind of mentioned like semis
Speaker 1: used to be really really cyclical and then they got
Speaker 1: less cyclical. What we used to see we used to
Speaker 1: see these big supply cycles where like supply would exceed
Speaker 1: demand and pricing would would would follow when you get
Speaker 1: these really big swings. And the last really major supply
Speaker 1: cycle we had was was the tech bubble, like two thousand,
Speaker 1: two thousand one. Mostly since then we had what we
Speaker 1: are it called inventory cycles against semis are the back
Speaker 1: of the supply chain, and you get fluctuations in demand
Speaker 1: that can propagate backwards and you get bigger swings and
Speaker 1: and usually was inventory cycle happens when like the customers
Speaker 1: of the channel starts to bleed or build inventory, and
Speaker 1: so they they reduced purchases of semis for a little bit,
Speaker 1: and they bleed out inventory where they increased purchases, and
Speaker 1: they build inventory, and so semi's overship or undership demand,
Speaker 1: but it's much shorter. They tend to last a quarter
Speaker 1: two or three and and and they show up as
Speaker 1: kind of like resets, You sort of reset the base
Speaker 1: either up or down, rather than these big swings. You
Speaker 1: look what's going on right now. We're we're having a
Speaker 1: good old fashioned supply cycle right now. We haven't had
Speaker 1: one of these for a long long time. So I
Speaker 1: don't know how this is a ladin Like Historically, they
Speaker 1: tend to end badly, you know, And so we'll we'll see.
Speaker 1: Although I could also argue that, like I said, maybe
Speaker 1: some of the secular drivers of the industry are and
Speaker 1: they you know, they were if you go back to
Speaker 1: when we used to have big supply cycles, I would
Speaker 1: I would argue the secular growth in the US it
Speaker 1: was pretty strong back then too, so maybe you have
Speaker 1: that to try to offset it somewhat. But I mean,
Speaker 1: we we've we've got a supply cycle going on right now.
Speaker 1: We haven't had seen one of these outside of memory
Speaker 1: in a long long time. But you you can believe
Speaker 1: that and be be nervous about the neartive medium from
Speaker 1: cyclical and still have a positive long term view in
Speaker 1: terms of like secular growth of the industry. They're not
Speaker 1: mutually exclusive. Well, just stacy any other big sort of
Speaker 1: thoughts things that we should watch for next. I mean,
Speaker 1: you mentioned the Intel Analyst day, you know, like what
Speaker 1: else is on your radar? We we should do like
Speaker 1: a whole one of these calls somebody just probably on
Speaker 1: semicap on way for fabrication equipment. That's a whole other
Speaker 1: part of the industry, right, Yeah, and I want to
Speaker 1: do one on you know, the one that we never
Speaker 1: did in the original series was the SML uh and
Speaker 1: so maybe we got at some point we got to
Speaker 1: do that one too. That's like the one big company
Speaker 1: we've never really I would I would be thrilled, Yeah,
Speaker 1: I would be thrilled. I don't cover a SML. I
Speaker 1: have a colleague amend that is, but we can talk
Speaker 1: about it. And like the semiicap industry in general, again,
Speaker 1: it's it's even farther back than this supply since you
Speaker 1: do get you get cicklicality there. But again like that,
Speaker 1: that's another one of these areas like long term I'm
Speaker 1: I'm like that that long term secular story on semicap
Speaker 1: capital intensity going up, which has implications i'm across the
Speaker 1: value chain. Um, I think is hugely is hugely interesting.
Speaker 1: That'll be uh, that'll be the next one we do.
Speaker 1: You you let me know when I'll be there. We
Speaker 1: can talk about it. Sounds good, Stacy, Thank you so
Speaker 1: much for coming back on our lot. You met my
Speaker 1: pleasure anytime. That was great, Thanks Stacy, Tracy. I always
Speaker 1: like talking to Stacy obviously, you know, I think one
Speaker 1: of the interesting things that you know, he pointed out
Speaker 1: which I hadn't really thought of or appreciated before. He's like,
Speaker 1: just how far deep in the cycle the chipmakers are
Speaker 1: and how little visibility they have into and demand and
Speaker 1: so on top of everything else, you can really see
Speaker 1: why so deep into this crisis, things aren't really smoothed
Speaker 1: out yet. Yeah. Um, And also of course now you
Speaker 1: have this issue of double ordering and how much of
Speaker 1: the demand is real versus people stockpiling. It feels like
Speaker 1: that's just going to cloud it up and make it
Speaker 1: much more difficult in the future. And you know, it
Speaker 1: kind of reminded me of um, this is very like
Speaker 1: add lots stuff. But it reminded me a little bit
Speaker 1: of the corporate bond market, where when there's a big
Speaker 1: sale of like a bond that everyone wants to get,
Speaker 1: people normally put in like padded orders so that they
Speaker 1: can get quite a lot. So you know, they might
Speaker 1: not actually need five million or something like that, but
Speaker 1: they'll put in a massive order hoping that they get
Speaker 1: some of that. You know, I kind of wonder like
Speaker 1: maybe that started because there was one really hot deal
Speaker 1: and then it just became normal behavior in the corporate
Speaker 1: bond market. I kind of wonder if this is a
Speaker 1: permanent shift for customers who are ordering semiconductors. Yeah, you
Speaker 1: should write about that, Tracy. That's very like int essential
Speaker 1: Tracy analogy, the connection between the bowl whip effect and
Speaker 1: semiconductors and um book building in the big corporate concept
Speaker 1: you got you gotta I think that like I'm imagining
Speaker 1: the ven diagram of people who read about semi conductors
Speaker 1: and corporate contessential Tracy. But no, I mean I did
Speaker 1: think that was really interesting. Also, like this idea that
Speaker 1: like you know, there used to be UM free cancellations
Speaker 1: or the idea that you know, and also that the
Speaker 1: manufacturers then try to game it the other way, so
Speaker 1: that if you know, if a client makes a hundred
Speaker 1: million dollar order, they might only make fifty million on
Speaker 1: the assumption that this is really just a fifty million
Speaker 1: dollar order in disguise, And so yeah, you can see
Speaker 1: why that on top of everything else, and then of
Speaker 1: course the emergence of the delta variant, the fact that
Speaker 1: chips crossed so many borders during their manufacturing just for
Speaker 1: like the production itself and packaging and put in component.
Speaker 1: I'm not surprised or recording this septemb that we're still
Speaker 1: seeing so many issues. M I mean, one thing I
Speaker 1: will say is that I think the virus situation is
Speaker 1: improving in Malaysia, so maybe that will help and maybe
Speaker 1: at a minimum, as these sort of delta outbreaks start
Speaker 1: getting under control in Asia, hopefully that will allow people
Speaker 1: to see how much of the current tightness in the
Speaker 1: market is driven by COVID disruptions versus the bull whip
Speaker 1: effect UM that's been ongoing for like more than a
Speaker 1: year now. Yeah, exactly right, well, we definitely got to
Speaker 1: get Stacy back or for the semicap a SML episode,
Speaker 1: and um, you know this story is not over yet. No,
Speaker 1: it definitely isn't. All right, shall we leave it there?
Speaker 1: Let's leave it there. This has been another episode of
Speaker 1: the ad Thoughts Podcast. I'm Tracy Alloway. You can follow
Speaker 1: me on Twitter at Tracy Alloway. And I'm Joe Wiesenthal.
Speaker 1: You can follow me on Twitter at the Stalwart. Follow
Speaker 1: our guest on Twitter, Stacy Raskin. He's at s Raskin.
Speaker 1: Follow our producer Laura Carlson. She's at Laura M. Carlson.
Speaker 1: Follow the Bloomberg head of podcast, Francesca Levi at Francesca Today,
Speaker 1: and check out all of our podcasts at Bloomberg under
Speaker 1: the handle at podcasts. Thanks for listening.