WEBVTT - Kirk Yang on China (Radio)

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<v Speaker 1>Let's get to our guest, Kirk Young, chairman and CEO

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<v Speaker 1>at Kirkland Capital. Kirt, great to have you on the program.

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<v Speaker 1>Some interesting little tidbits in your notes. I would put

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<v Speaker 1>one of the comments into this adage of a little

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<v Speaker 1>bit of knowledge can be a dangerous thing, where you

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<v Speaker 1>say that national leaders in the U S And China

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<v Speaker 1>really didn't know anything about high tech, certainly quantum computing

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<v Speaker 1>and AI and and the semiconductors that went into it,

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<v Speaker 1>and now that they know a little bit about it,

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<v Speaker 1>they're all ginned up over national security. Explain your thoughts

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<v Speaker 1>to us, sure, uh, I would say that for the

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<v Speaker 1>last several years, many people, especially national leaders, believe technology

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<v Speaker 1>are things like Internet or Google or Amazon or Facebook.

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<v Speaker 1>Let me now know that to keep everything was semi conductors.

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<v Speaker 1>So about two years ago when US had the trade

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<v Speaker 1>war was China, when they found out that Huawei and

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<v Speaker 1>Cite presents a threat to US, they started to focus

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<v Speaker 1>on technology. They kind of found out semi conductor was

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<v Speaker 1>the chock point, almost by accident, because they realized that

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<v Speaker 1>US have control and influenced a lot of semiconductor manufacturing

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<v Speaker 1>process from software to semi canal equipment, to chemicals. That's

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<v Speaker 1>why it's seeing that US have all the leverage for

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<v Speaker 1>last year or two putting all the restrictions on China. Unfortunately,

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<v Speaker 1>the manufacturing process quite complicated that there's not much China

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<v Speaker 1>can do to resolve the choke points. They have probably

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<v Speaker 1>over a hundred chock points. So I would say that

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<v Speaker 1>to your point that maybe a little knowledge is dangerous,

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<v Speaker 1>but US definitely found a way to limit China's um

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<v Speaker 1>um investment or trying to progress on semi conductors, especially

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<v Speaker 1>now semi conductor is becoming more national security issues rather

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<v Speaker 1>than business issues. We talk about semic a doutors can

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<v Speaker 1>make things like a like super computers, like missiles, airplanes

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<v Speaker 1>for example. So that's why US is even putting more

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<v Speaker 1>pressure to limit the highest civic co doctors to China.

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<v Speaker 1>So cook, if there's not much that China can do,

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<v Speaker 1>does that mean that the US kind of wins this

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<v Speaker 1>chip warring? And then how investable is China? Take sure?

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<v Speaker 1>I would say that for the next fact to ten years,

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<v Speaker 1>there's not much China can do. Obviously, China now realize

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<v Speaker 1>its shortcomings, so trying to trying very hard to catch up.

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<v Speaker 1>There are a lot of you know, smart people, PhD, etcetera.

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<v Speaker 1>In China, so gifvely in five to ten years there

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<v Speaker 1>might be a possibility for them to catch up, but

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<v Speaker 1>in the near term it's almost impossible. So for investment opportunity,

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<v Speaker 1>one theory ahead is called one world two systems, which

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<v Speaker 1>means you're going to see one standard for China, one

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<v Speaker 1>standard for non China. So for trying to specific investment opportunities,

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<v Speaker 1>you have to look at domestic opportunities copy like bi do,

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<v Speaker 1>like Ali Baba, et cetera, only focused on china domestic market. Unfortunately,

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<v Speaker 1>it will be difficult for them to go outside China. Well.

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<v Speaker 1>A good example of how US officials were caught off

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<v Speaker 1>guard as well, uh is the the Huawei and um

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<v Speaker 1>you know, basically had a big lead in five G

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<v Speaker 1>right that that that um, what they were doing with

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<v Speaker 1>five G was more advanced than what the US was doing.

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<v Speaker 1>That's correct. I would say for many years, China's been

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<v Speaker 1>making cheap products to seal into US, like you know,

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<v Speaker 1>toys and phones because those were not related to national security,

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<v Speaker 1>So is it US did not pay too much attention.

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<v Speaker 1>I would say Huawei also Zte are the first time

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<v Speaker 1>US realized that the communications could be national security issues

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<v Speaker 1>because all the conversation or the secret goes into telecommunications. Huawei,

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<v Speaker 1>because we're so cost competitive, seeing start in many phone companies,

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<v Speaker 1>especially as you mentioned, they were leading leader in five G.

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<v Speaker 1>That's why US became really worry and cautious on China attack.

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<v Speaker 1>So that's why they were able to find semi choke point.

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<v Speaker 1>As you know that after US put a restriction on Huawei,

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<v Speaker 1>Whabi is a phone business pretty much gone, is facing

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<v Speaker 1>business almost putty much gone because everything without semi conductors.

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<v Speaker 1>So US was able to find the choke point to

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<v Speaker 1>limit China's technology investment. What's the outlook for some of

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<v Speaker 1>these phone suppliers. I mean, we saw Apple saying it's

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<v Speaker 1>going to make fewer of the new iPhones, and that's

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<v Speaker 1>due to the lockdowns in China. But you've also got

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<v Speaker 1>to argue whether or not people want to continue to

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<v Speaker 1>upgrade amidst all the concerns about to slow down. Do

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<v Speaker 1>you need a new iPhone if you're potentially going to

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<v Speaker 1>lose your job or have a decrease in living conditions

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<v Speaker 1>due to higher costs. Yeah, that's actually a very good point.

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<v Speaker 1>My concerns more demand than supply demand. As you mentioned

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<v Speaker 1>that right now, because higher interest rate people have less

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<v Speaker 1>discretional spending, they have to spend money on like more gage,

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<v Speaker 1>like rent, you know, higher gasoline, higher food cost. So

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<v Speaker 1>the last thing they want to buy is a new phone,

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<v Speaker 1>especially in the last two years during the COVID shutdown

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<v Speaker 1>when people work at home, many people bought new phones

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<v Speaker 1>and new PCs computer in the last two years. So

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<v Speaker 1>right now there's really no reason to buy new consumer

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<v Speaker 1>electronic So I think the man you hit the nail

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<v Speaker 1>on the head. That is the biggest concern fund supply perspective.

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<v Speaker 1>The zero China COVID policy UH is actually a big

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<v Speaker 1>issue for China. Company like fast Com, even Quantact that

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<v Speaker 1>make iMac. I'm sure you heard that. Even disney Land

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<v Speaker 1>shut down the Shan High operation, Macail, Casino and g

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<v Speaker 1>also shut down for a day. So zero COVID policy

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<v Speaker 1>is making things very difficult in China. But if you

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<v Speaker 1>look at Apple, Apple's UH press announcement like cutting about

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<v Speaker 1>three million phones out of ninety MILLIONI so the show

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<v Speaker 1>fall is probably around five percent, maybe ten percent. I

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<v Speaker 1>don't think it's it's high. Thirty percent is some other

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<v Speaker 1>media reported but still show for is my smaller concert

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<v Speaker 1>My biggest concerts actually demand I do not expect and

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<v Speaker 1>to be strong this year even next. Let's talk a

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<v Speaker 1>little bit about areas that you look at that offer

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<v Speaker 1>a lot of opportunity for investors. Let me give you,

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<v Speaker 1>uh would you rather kind of question in terms of

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<v Speaker 1>opportunity to you like autonomous driving more or the metaverse.

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<v Speaker 1>I was say a ton about driving for sure, because

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<v Speaker 1>EV is something you can see electrly. Vehicle is something

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<v Speaker 1>we are using today. Just look at Tesla. So from

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<v Speaker 1>the electric vehicle perspective, the important functions like battery, like

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<v Speaker 1>charging stations. Of course a ton of driving there will

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<v Speaker 1>be the key going forward. Metaverse is a next concept,

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<v Speaker 1>but I think we might be years away from really

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<v Speaker 1>looking for applications if a revenue for metaverse, so I

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<v Speaker 1>think something might happen, but as years away. But EV

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<v Speaker 1>you can see today we're using today, so to be

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<v Speaker 1>autonomous driving that is actually the biggest opportunity in the

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<v Speaker 1>next three to five years, especially given that we have

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<v Speaker 1>seen the slowdown for PCs for phones, et cetera. Industry,

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<v Speaker 1>vehicle and related industry. UH companies should be the investment

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<v Speaker 1>opportunity to focus on. So yeah, who, Yeah, we want

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<v Speaker 1>to know names. Okay, if you like autonomous driving, who

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<v Speaker 1>makes the money? Sure? Uh? The company in Japan, uh

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<v Speaker 1>give example called Tier four. It makes the software to

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<v Speaker 1>control cars. Also, we have company that makes sensors, sensors

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<v Speaker 1>like a company in Taiwan. Um it's called Ability. For example,

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<v Speaker 1>they make like the sensors in the car. If you

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<v Speaker 1>look your cars today, they are about night to ten

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<v Speaker 1>cameras around the car that sense. So okay, Kirk, you

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<v Speaker 1>teached us very nicely. They're certain to get an invite back.

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<v Speaker 1>We want to hear more. Kirk, thanks very much for

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<v Speaker 1>joining us. Kirk Young, Chairman and CEO at Kirkland Capital