Speaker 1: Hello, and welcome to another episode of the Odd Lots podcast.
Speaker 2: I'm Joe Wisenthal and I'm Tracy Alloway.
Speaker 1: Tracy, it's been too long since we've done a semiconductor episode.
Speaker 3: I know, I actually feel really behind on what's been
Speaker 3: happening in the industry. I've seen some headlines. I mean,
Speaker 3: obviously we talked about in Video earlier in the year
Speaker 3: in that stock just exploded, and recently they released their earnings.
Speaker 3: I've seen some news about additional export restrictions and things
Speaker 3: like that. But I haven't been paying close enough attention,
Speaker 3: and I feel really bad about that.
Speaker 1: Do you ever read, Tracy, or have you ever ever read, Yes, Joe,
Speaker 1: you read. Have you ever tried to read those like
Speaker 1: really technical semiconductor publications that talk about, oh, the new
Speaker 1: in video chip is four different cores and a thing here,
Speaker 1: And have you ever seen those sites?
Speaker 4: I have?
Speaker 2: Sometimes people drop.
Speaker 1: The links at our discord and I try to catch
Speaker 1: up to speed on what the hot new chip is,
Speaker 1: and I just I always give up one third of
Speaker 1: the way through the post.
Speaker 3: It's really difficult. I mean, even the ones where they
Speaker 3: talk about like wafer thinness and stuff like like, I
Speaker 3: can kind of understand it, but there's so much within
Speaker 3: this specific subject. There's sort of the big picture things
Speaker 3: like geopolitical tensions and trade tensions and things like that,
Speaker 3: and then you can really cut into I don't want
Speaker 3: to say the nuts and bolts of the specific technology,
Speaker 3: but you know, I don't know the wafers and pins
Speaker 3: of specific technology.
Speaker 1: So the one thing is it seems like the lower
Speaker 1: nanometer number the better, Yes, right, But even there, and
Speaker 1: I know we've done some episodes in the past with
Speaker 1: us Stacy Rasken, etcetera. Even there, that only tells you
Speaker 1: so much about a chip's performance, and there are all
Speaker 1: different kinds of architectures and yields. We've talked about that too.
Speaker 1: Or in theory, you could have a really powerful chip,
Speaker 1: but maybe it's not economical because you lose so many
Speaker 1: chips in the process, et cetera. So wrapping one's head
Speaker 1: around chips is tough.
Speaker 3: Yes, agreed, But what will we be doing on this
Speaker 3: episode China wrap our heads around chips.
Speaker 2: Yeah.
Speaker 1: So, you know, there's been some news particularly related to China,
Speaker 1: and I think Huawei came out with a phone fairly
Speaker 1: recently in the last couple of months, and what claued
Speaker 1: people's attention was it seemed to have performance that people
Speaker 1: didn't assume it could have given what was known about
Speaker 1: the state of domestic Chinese semiconductor compress seven.
Speaker 3: Nanometers, Yeah, seven nanometers. I shouldn't whisper on a podcast.
Speaker 3: I don't know why I did that. It's not a secret.
Speaker 3: So supposedly it had a chip made by SMI C,
Speaker 3: a Chinese chip maker, that was seven nanometers and something
Speaker 3: that people thought China wasn't able to produce just yet.
Speaker 3: And yet here we are talking about the seven and
Speaker 3: M in these phones.
Speaker 1: And I guess the question is, is this represent a
Speaker 1: major domestic breakthrough for China's semiconductor into Does it mean
Speaker 1: that some technology which wasn't supposed to get into the
Speaker 1: country somehow got in? So there's some sort of US
Speaker 1: national security implications.
Speaker 2: But it's a good time. You know, we've talked about this.
Speaker 1: For years, you know, with people like Dan Wong, like
Speaker 1: what is the state of Chinese semiconductor? Are they catching up?
Speaker 1: So I think it's a good time to take stock
Speaker 1: of the situation.
Speaker 5: I agree.
Speaker 3: And also, you didn't mention the biggest thing that people
Speaker 3: are talking about now, which is the idea that have
Speaker 3: the restrictions basically created the exact opposite result intended and
Speaker 3: maybe accelerated China's semiconductor technology.
Speaker 1: Which is something people have warned about that ultimately, sure,
Speaker 1: maybe you set the country back a few years in
Speaker 1: its development, but if you restrict its capacity to get
Speaker 1: international technology, then it just builds faster its own homegrown
Speaker 1: and all kinds of questions related to chips right now
Speaker 1: that we need to do, we need to catch up on.
Speaker 3: Yes, And also, can I just say that I blame
Speaker 3: the semiconductor restriction on me having to read the Three
Speaker 3: Body Problem?
Speaker 5: Did you ever read that?
Speaker 3: And now these visions. I don't know how many people
Speaker 3: have read it, but it's a lot of people used
Speaker 3: it as an analogy for China's technological development. But now
Speaker 3: I have nightmares about like little shriveled up dead people.
Speaker 3: And if you've read the book, if you've read the book,
Speaker 3: this makes sense.
Speaker 2: Okay, Well, let's talk chips.
Speaker 1: And we really do have two perfect guests, one of
Speaker 1: whom we've had on the show before, Doug O'Laughlin. He
Speaker 1: is the chief analyst and Fabricated Knowledge, a semiconductor research
Speaker 1: service and Dylan Fitzel, chief analyst. It's Semi Analysis, a
Speaker 1: boutique semiconductor and AI research firms. So we are going
Speaker 1: to pick their brands about the state of Chinese chips. So,
Speaker 1: Doug and Dylan, thank you so much for coming on,
Speaker 1: odd Laws.
Speaker 5: Thank you for having us, Thanks for having me again.
Speaker 2: Let's just start. What was it?
Speaker 1: What's the deal with this Huawei phone that caught everyone
Speaker 1: by surprise?
Speaker 4: So Huawei has historically been a leader in technology. That
Speaker 4: wasn't a surprise anyone. And a few years ago, of course,
Speaker 4: they got banned from, you know, many aspects of the
Speaker 4: US and Western semi conductor supply chain. They got banned
Speaker 4: from utilizing TSMC, the world's largest chip maker, and all
Speaker 4: of a sudden they come out with their own phone, right,
Speaker 4: their new phone that has their own chip made in China.
Speaker 4: The expectations, of course when they first announced it were whatever.
Speaker 4: But then once people got their hands on the phone,
Speaker 4: it was like, oh my god, this is actually very good.
Speaker 4: You know, when you compare to foreign phones right with
Speaker 4: wou'd say, Qualcom chips from like say, Samsung, it is
Speaker 4: only you know, a year and a half behind, right,
Speaker 4: And in some respects. It's actually just as good in
Speaker 4: certain specifications. It depends on how how nitty gritty you
Speaker 4: want to get into it. But at worst one point
Speaker 4: five years behind at best on part right. And so
Speaker 4: that was a big, big shocker for everyone, just.
Speaker 1: Real quickly on those specifications. Like when you say the
Speaker 1: phone is really good, because I don't know, all phones
Speaker 1: sort of seem pretty good and I don't really notice
Speaker 1: advances and phone. So when you say that the phone
Speaker 1: surprised people by capacity, could you just be specific about
Speaker 1: what shocked people?
Speaker 2: And they picked up this device?
Speaker 4: Sure? So stage one is sort of the network performance, right,
Speaker 4: so it can download and upload data just as fast
Speaker 4: as any foreign phone, okay, which is the sort of
Speaker 4: on par thing right. In fact, it was better than
Speaker 4: the current iPhone. It was on par with the current
Speaker 4: Qualcom based phones. And so then that's like one specification.
Speaker 4: Other specification is your CPUs and GPUs and AI aspects
Speaker 4: of the phone. Right. And there they were not only
Speaker 4: using you know, they're again using domestic manufacturing capabilities, they
Speaker 4: were also using domestic design capabilities and were able to
Speaker 4: match again what folks had done a year and a
Speaker 4: half ago or in some cases even sooner more or
Speaker 4: more recently. Right, So this is sort of on on
Speaker 4: a performance basis, whether it's in gaming, whether it's in
Speaker 4: you know, uploading and downloading videos, whether it's in camera.
Speaker 4: Every every aspect of this phone was on par, if
Speaker 4: you will.
Speaker 5: I think that people just probably don't appreciate how impressive
Speaker 5: that is, given the fact that how little technology they
Speaker 5: have access to. So this they did this without EV
Speaker 5: which was the big October restrictions in twenty twenty two.
Speaker 5: And I think the thing that's most impressive about this is,
Speaker 5: like it's a really good chip with both hands tied
Speaker 5: behind their back. And I think that like, if the
Speaker 5: restrictions weren't there, the implication is that SMC could probably
Speaker 5: ship a leading edge phone as good as TSMC and
Speaker 5: maybe even better than Intel or domestic production. And I
Speaker 5: think that that's probably the biggest takeaway that I think
Speaker 5: people need to understand, you know, and there's definitely some
Speaker 5: DV tools that snuck in, and we can talk about
Speaker 5: the you know, all the mechanics of the cross. You know,
Speaker 5: how slippery the restrictions have been and how maybe poorly
Speaker 5: enforced it's been. But like they did an amazing phone
Speaker 5: with both hands tied behind their back. And I think
Speaker 5: that in the conversation that we've been having about semicuctors
Speaker 5: in China for a long time, it's always been like, well,
Speaker 5: they're really far behind, they'll never catch up. And I
Speaker 5: think that this is the first time where you can say, like,
Speaker 5: if they had what we had, they've caught up. Like
Speaker 5: I think that's Dylan. Do you agree or disagree with that?
Speaker 4: I would say, you know, if if you compare just
Speaker 4: what's shipping in the market, Yeah, of course TSMC shipping better,
Speaker 4: Samsung is shipped better. But and everyone talks about this
Speaker 4: Intel turnaround that may or may not happen. Intel's best
Speaker 4: chips that they ship today are seven animeter, the same
Speaker 4: as what China has today, right, so it's it's on
Speaker 4: par now. Of course, Intel's close to releasing their four
Speaker 4: N animeter, and you could you could caveat that in
Speaker 4: a hundred ways. But if you look at what's in
Speaker 4: the market today, the dentist right again, as you mentioned earlier,
Speaker 4: lower nanimeter ship that you can buy today from an
Speaker 4: American manufacturer is from Intel, and the dentist is from
Speaker 4: Smick and Huawei, and it's the same, right, It's it's
Speaker 4: a similar capability.
Speaker 3: Okay, so not since the invention of pringles have people
Speaker 3: been so excited about a single chip. But you sort
Speaker 3: of alluded to this, Doug, But can you maybe walk
Speaker 3: us through what is needed to produce a seven and
Speaker 3: M and what to your point about China basically doing
Speaker 3: this with a hand or two tied behind its back,
Speaker 3: what was actually available to them?
Speaker 5: So this is this is a really hard question answer.
Speaker 5: I'm gonna have to ask Dylan a lot about this
Speaker 5: as well. But the thing that I think probably differentiates
Speaker 5: it from let's say TSMC's process is that they did
Speaker 5: not have access to EV. That's clearly the big delineation.
Speaker 5: But if you remember the original the extreme yes EV
Speaker 5: Extreme Ultraviolet that's the latest and greatest from ASML, and
Speaker 5: they cost like, you know, three hundred million plus a
Speaker 5: pop their extremely advanced technology to make tiny, tiny wavelengths
Speaker 5: of light. But they managed to get around this with
Speaker 5: something called quad patterning self a line quad patterning, which
Speaker 5: is like we're not going to go into the details
Speaker 5: of that, extremely technical but an extremely hard thing that
Speaker 5: Intel got caught up on. So they managed to ship
Speaker 5: the seven animeter Chip much quicker than Intel managed to
Speaker 5: get through all of their problems doing the same quad
Speaker 5: patterning DV process. And I think that that's a big deal,
Speaker 5: Like it shows that there's a lot of technological umph
Speaker 5: underneath the restrictions alone. And then on top of that,
Speaker 5: the restrictions have been extremely poorly enforced. That's why they
Speaker 5: had some, you know, some restatements this year about specificities.
Speaker 5: But what happens is, like a good example is SMIC
Speaker 5: has a leading edge and a lagging edge factory, right,
Speaker 5: and they're both related entities. But my understanding is the
Speaker 5: lagging edge entity can go by extremely advanced deposition and
Speaker 5: etched tools, ones that are on the restrictions for the
Speaker 5: October twenty twenty two, and then they can just kind
Speaker 5: of shuttle those tools into the fab of the leading
Speaker 5: edge and then effectively be able to use it.
Speaker 3: That doesn't seem like it's doing you know, the restriction
Speaker 3: is doing what it was intended to do in.
Speaker 5: That case, Yeah, not at all so far. Pretty much
Speaker 5: what's happened, and this has happened every single time we've
Speaker 5: had restrictions on American semicap companies, is that the restrictions
Speaker 5: come out all the companies say, oh, this is going
Speaker 5: to impact us, and then they slowly find ways for
Speaker 5: loopholes to be pushed through. An example is Applied material
Speaker 5: how to South Korean factory that probably had I think
Speaker 5: they are right now under investigation, and I think the
Speaker 5: thing is it's pretty clear that some of the leading
Speaker 5: edge tools X THEEV stuff is getting into China and
Speaker 5: they're able to use clever engine hearing to make a
Speaker 5: better chip than we thought was possible. Yeah.
Speaker 4: I would say that while in spirit the regulations pretty
Speaker 4: much said hey, you can't have less than fourteen nanimeters,
Speaker 4: the specifics of what was actually banned were quite a
Speaker 4: bit more varied. Right. The tool that you can use
Speaker 4: for twenty eight and nanimeter, well you just use many
Speaker 4: more of them for seven, right. I mean obviously there's
Speaker 4: a lot more complications there, and so the government sort
Speaker 4: of handed out export licenses like candy to companies like Smick,
Speaker 4: saying hey, yeah, you can expand your twenty eight nanimeter
Speaker 4: all you want. Right, that's not the spirit of the regulation.
Speaker 4: Applied Materials, go ahead and ship whatever tools you want
Speaker 4: to the twenty eight nanimeter fab in Beijing for Smick,
Speaker 4: and then Smick then gets those tools ship to Shading
Speaker 4: High right where they are making fourteen nanaimeter, where they're
Speaker 4: making seven nanimeter. And this applies not only to you know,
Speaker 4: applied Materials, but also applies to ASML and every other
Speaker 4: equipment company. Right, So when you say, like, hey, yes,
Speaker 4: they're banned from having less than fourteen ananimeter on one hand.
Speaker 4: On the other hand, every single tool that they used
Speaker 4: for their seven nanimeter was the equivalent of what TSMC
Speaker 4: had when they made their seven animeter, or an upgraded
Speaker 4: version of it, right, So it's not like any specific
Speaker 4: tools were banned that were required for seven nanimeter. And
Speaker 4: so it's kind of like, you know, the regulation and
Speaker 4: the implementation were so far away from each other, and
Speaker 4: that's sort of what these recent regulations hopefully are going
Speaker 4: to try and help. But there's still maybe some holes there.
Speaker 1: So actually explain this in an abstract sense, why is
Speaker 1: it hard to align the implementation of the law with
Speaker 1: the letter of the law or the spirit of the law.
Speaker 4: I think it has a lot to do with the
Speaker 4: fact that the US doesn't want to wholesale band chip
Speaker 4: production in China. Pyriice right, while China's automotive you know
Speaker 4: sort of chip manufacturing is exploding bids of vertically integrated
Speaker 4: monster that is like really taking over the world with
Speaker 4: amazing vehicles and chips for those vehicles. I don't think
Speaker 4: the US has really an intention to block those, but
Speaker 4: the tools that are required there. It turns out all
Speaker 4: the advances and tools that have happened over the last decade,
Speaker 4: many of them would still also be applied to that say,
Speaker 4: twenty eight animeter chip, just the same as it would
Speaker 4: be applied to that seven animeter chip. It's just the differences,
Speaker 4: you know, throughput versus you know, accuracy, if you will, right,
Speaker 4: in a simplified sense. And then the other problem is
Speaker 4: this is so incredibly technical, right like Doug basically told
Speaker 4: me ten times, don't say, you know, like a list
Speaker 4: of words that are too complicated for audience because it's
Speaker 4: It's like, the problem is the government is mostly talking
Speaker 4: to hey, like, who's a lithography expert? Well, they all
Speaker 4: work at ASML, and what is their incentive, right, it
Speaker 4: is to ship as many tools period as possible, and
Speaker 4: including to China, Right, Like what is ASML care that
Speaker 4: you know, XYZ is happening. They want to be the
Speaker 4: monopoly and lithography and continue to ship, and if they
Speaker 4: don't ship, then you know, there will be a Chinese
Speaker 4: company eventually one day. Right, So their incentive is for
Speaker 4: the government to have as week of a control around
Speaker 4: lithography as possible, and they want to be like, well, hey,
Speaker 4: like this tool's used heavily here, you can't just blanket
Speaker 4: ban it. No no, no, no, just ban it for
Speaker 4: that fab and we promise we'll make sure that we
Speaker 4: won't ship it to that fab. But if the customer
Speaker 4: decides to move it from Fab A to Fab B,
Speaker 4: then you know, oh no.
Speaker 5: And also I think there's like an implication that China's
Speaker 5: going to play extremely fair with the regulations, and that's
Speaker 5: just clearly like I feel like we keep making these
Speaker 5: regulations and they're really cute and it's like, well the
Speaker 5: spirit of the law and stuff. And then like, meanwhile,
Speaker 5: you look at what China is doing for their domestic
Speaker 5: semicucter production and they're like they don't care, Like they
Speaker 5: do not care. And what they're doing is probably one
Speaker 5: of the most aggressive industrial policies ever to ramp their
Speaker 5: leading edge semicuacter production.
Speaker 4: Like I think it looks like the US in the
Speaker 4: nineteen thirties.
Speaker 5: Yeah, it's totally different. Like, you know, the Chips Act.
Speaker 5: I'm sure everyone is like heard of and understand the
Speaker 5: Chips Act. Right, it's like fifty two billion dollars and
Speaker 5: then plus like another twenty something in tax credits. That's peanuts.
Speaker 5: Like we are talking a completely different game, and how
Speaker 5: meaningful the incentives are there. We could go on about
Speaker 5: this forever, but like essentially every step along the way
Speaker 5: has massive cost and taxes and R and D credits
Speaker 5: and rent reductions and you know, the big fun one,
Speaker 5: two and subsequently three are about to launch and all
Speaker 5: of these things together is probably putting hundreds of billions
Speaker 5: of dollars in subsidies to encourage the semiconductor industry to
Speaker 5: figure it out. And I think that, you know, with
Speaker 5: that much push from the top, you know who cares
Speaker 5: if a tool is not being used in the spirit
Speaker 5: of the wall, right, Like, like China's government isn't going
Speaker 5: to be like, well, darn you for using this for
Speaker 5: this using this deposition tool for not its intended purpose.
Speaker 5: It's pretty clear that they're weaponizing the split in the
Speaker 5: East and West semicopter supply chains, and they're trying to
Speaker 5: do it as fast as possible. And I think that
Speaker 5: that's something that the West just continues to underestimate. How
Speaker 5: much gump should they have toward that?
Speaker 3: Yeah, I remember Dan Wong, another one of our favorite
Speaker 3: Odd Lots guests. He called it China's Sputnik moment when
Speaker 3: the tech restrictions started coming into play, because like, basically
Speaker 3: it was a huge wake up call for China that
Speaker 3: it could no longer count on the US to supply
Speaker 3: its technology and that it would have to basically encourage
Speaker 3: its own domestic alternatives. So on that note, I take
Speaker 3: the point about industrial policy and the scale of the
Speaker 3: way China is doing it here, and certainly China has
Speaker 3: a lot of experience in both industrial policy and just
Speaker 3: generally a centrally planned economy. But what sense do we
Speaker 3: have of how efficient their semiconductor manufacturing process is so far.
Speaker 3: I've seen bits and pieces about this, you know, I've
Speaker 3: seen people talk about there is a huge profit drop
Speaker 3: in SMIC earnings for the third quarter, I think something
Speaker 3: like eighty percent. So a lot of people are going like, yeah, Okay,
Speaker 3: they're producing these new chips. The seven nanometers, but maybe
Speaker 3: they're spending an insane amount of money to do it.
Speaker 3: And also I think there was an inventory shortage of
Speaker 3: the phones, so maybe there's a sense that they're not
Speaker 3: able to produce these at scales just yet.
Speaker 4: So the thing about the manufacturing here is that, you know, yeah,
Speaker 4: their volumes are limited, right, only about seven million phones
Speaker 4: will ship this year, looking like they're going to ship
Speaker 4: maybe forty million next year. Versus the you know one
Speaker 4: point four billion or now one point two billion phones
Speaker 4: that ship a year. This is, you know, kind of
Speaker 4: like an initial drop in the bucket, but the scale
Speaker 4: of the ramp is huge. And what's more important, I
Speaker 4: think that's hard to recognize for most people is that
Speaker 4: semi conductor manufacturing is literally the most complex manufacturing supply
Speaker 4: chain in the world, bar none. There's more processed steps,
Speaker 4: there's more complex there's more R and D in this
Speaker 4: field than any other field. It is the most complex
Speaker 4: supply chain, period and so when you're talking about thousands
Speaker 4: and thousands of processed steps, each step has one hundred
Speaker 4: different knobs that you could turn on each tool getting
Speaker 4: good yield, right, getting the number of chips you try
Speaker 4: to make for how many actually work in the end
Speaker 4: is very very difficult. But the way you learn is
Speaker 4: by ramping right by by producing and then hey, if
Speaker 4: I'm running a thousand experiments in flight, and each one
Speaker 4: has one knob slightly turned differently, and then I see, oh,
Speaker 4: which one work?
Speaker 5: Awesome?
Speaker 4: Now I know that I leave that knob turned, and
Speaker 4: now I move on to another piece. Right, sort of,
Speaker 4: there's this like complex like you know, constant tweaking of
Speaker 4: the process, right, this is what's made TSMC, you know,
Speaker 4: so amazing, versus say a company like Intel. Is that TSMC,
Speaker 4: their engineers are constantly doing this even on fifteen year
Speaker 4: old process technology, still getting they old better, still getting
Speaker 4: the performance better on say ninety to animeter, whereas Intel
Speaker 4: would move on to work on the newest technology every
Speaker 4: single generation. And so Smick by you know, yes, they
Speaker 4: are not profitable, especially if you strip away the subsidies, right,
Speaker 4: the Smick Shanghai joint venture, the subsidies are getting from Beijing.
Speaker 4: These are massive. If you were stripped those out, they'd
Speaker 4: be losing billions a year, right, But you know that's
Speaker 4: that's the thing is like, hey, let's skip forward now,
Speaker 4: is there twenty eight animeter profitable probably, Yeah, it's their
Speaker 4: seven animeter that's not okay. But we skip forward a
Speaker 4: couple of years and it's like seven animeter will be
Speaker 4: very profitable. And guess what, over eighty five percent of
Speaker 4: the world's chip value is not under seven animeter today, right,
Speaker 4: And so like there is a long tail of like, hey,
Speaker 4: my car has zero seven animeter chips, right, But there
Speaker 4: are a ton of chips that are made by Texas
Speaker 4: Instruments and analog devices and microchip and you go down
Speaker 4: the list and it's like, well, China's going to compete
Speaker 4: with these companies and they're going to compete with them
Speaker 4: very strongly.
Speaker 2: Yeah.
Speaker 5: And I think that also just looking at as in
Speaker 5: a pure profitability perspective maybe loses some of the context
Speaker 5: of history. Taiwan Korea did this exact same thing, where
Speaker 5: you can look at the early days of TSMC, and
Speaker 5: they lost a lot of money along the way. But
Speaker 5: the important thing is that by pushing their self sufficiency,
Speaker 5: what they're going to be able to do is they're
Speaker 5: going to be able to ride up the experience curves
Speaker 5: on every single technology as they're pushing for full self sufficiency.
Speaker 5: And I think that this story continues to evolve, and
Speaker 5: I think that, like that's one of the reasons why
Speaker 5: we're here to be excited to talk about it. Is
Speaker 5: like CXMT today actually I think is literally today or yesterday.
Speaker 5: Which company c x MT. It's their d RAM company.
Speaker 5: So they have a nand company which is YMTC, which
Speaker 5: for context, is shipping the most dense memory in the world.
Speaker 5: I think that's correct, Dylan, like.
Speaker 4: Most dense memory. Maybe the yields aren't great, but they've
Speaker 4: they've been effectively banned from tooling like properly, like no loopholes,
Speaker 4: and so they've been they've been stumbling. But six MT
Speaker 4: company found it in twenty sixteen, Yeah, and they are.
Speaker 4: They're looking to spend about seven to eight billion dollars
Speaker 4: on equipment next year. Yeah, which is more than Micron
Speaker 4: by the way.
Speaker 5: Yeah. And so so like they're shipping these memories that
Speaker 5: are like maybe two to four years old. But like
Speaker 5: this conversation, if we had this five years ago, it
Speaker 5: would seem insane, Like truly, I think the rate of
Speaker 5: change is something that people continue to miss and I
Speaker 5: think that as this continues, it's going to be you know,
Speaker 5: after they have their own domestic phone or domestic five
Speaker 5: G modem, the domestic CPU for the phone or like whatever,
Speaker 5: the NPU. Then they have their own domestic nand then
Speaker 5: they have their own domestic DRAM. Then all of a sudden,
Speaker 5: you just like look at it, and that's the entire
Speaker 5: semicapter tool chain, Like you know, so this is this
Speaker 5: is and so yeah, is it capital efficient? Hell no,
Speaker 5: Like Big fun two, for example, has allegations of massive
Speaker 5: amounts of and that definitely is happening. And there's hundreds
Speaker 5: and hundreds of companies that have started probably this year
Speaker 5: to take advantage of the subsidies for semicopters. And yes,
Speaker 5: there are lots of misses, but in terms of being
Speaker 5: able to get the talent there and then also bring
Speaker 5: them all up the learning experience, I think that that's
Speaker 5: a huge thing. And I think that's also a conversation
Speaker 5: that is completely missed about this as well, is that
Speaker 5: like Dylan and I we go to you know, trade
Speaker 5: shows in Japan or Taiwan or Korea, and like the
Speaker 5: amount of young people there versus the amount of young
Speaker 5: people in the West that are making chips is just
Speaker 5: drastically different. And I think that you fast forward that
Speaker 5: same equation, and yes, maybe they don't have ev tools,
Speaker 5: but there are a lot of ways to make better
Speaker 5: phones using packaging or other clever engineering tricks. And so
Speaker 5: what's going to happen is that not only do they
Speaker 5: have the technological know how, they also have the talent too.
Speaker 5: And we could be talking about in you know, ten
Speaker 5: twenty years that America's chip dominance is very you know,
Speaker 5: backwards looking, and I think people need to watch this closer.
Speaker 5: The rate of change has just constantly shocked me at least,
Speaker 5: and I'm sure Dylan, but like the progress is staggering.
Speaker 3: This kind of gets me to I don't know if
Speaker 3: it's a strange question or theoretical question, but when it
Speaker 3: comes to semiconductors, you hear a lot about the importance
Speaker 3: of the overall supply chain. So, you know, people will
Speaker 3: say that in Video is really good at managing its
Speaker 3: own supply chain and that's been part of its success story.
Speaker 3: If China is now manufacturing more and more of its
Speaker 3: own chips on a domestic basis, I guess like maybe
Speaker 3: it'll take them longer to develop some things, But does
Speaker 3: that in the end kind of lead to a more
Speaker 3: resilient or reliable supply chain for that technology. How do
Speaker 3: you see those two things interacting?
Speaker 4: You know, it depends. In capital intensive industries, what you
Speaker 4: tend to see is a very big sort of winner
Speaker 4: takes all vibe, which is why in prior you know
Speaker 4: sort of technologies, if you will, right solar for example, Hey,
Speaker 4: Germany in the US invented all of it, and they
Speaker 4: were great until China dumped way more capital in a
Speaker 4: very capital inefficient way, put way more people at work
Speaker 4: at it, right, smart engineers working on it, and all
Speaker 4: of a sudden, you know, hey, ninety plus percent of
Speaker 4: solar cells come from China. Right. And likewise, you know,
Speaker 4: US companies were the first to do electric vehicles, right,
Speaker 4: like GM initially than Tesla. But hey, China makes like
Speaker 4: three times as many electric vehicles as the West does now,
Speaker 4: and so you know, sort of you see these technology
Speaker 4: curves and there's a significant amount of winner takes all, right.
Speaker 4: You know, if you look at Latin American markets, I
Speaker 4: mean even even Europe had to put up tariffs recently,
Speaker 4: Chinese evs are killing it, right. The US has had
Speaker 4: to put up massive tariffs and then has had the
Speaker 4: sort of the flat reduction act with the huge subsidies
Speaker 4: for battery production and cathodes and anodes and all these
Speaker 4: sorts of things. There is a big winner takes all
Speaker 4: sort of element of capital intensive industries, and the semi
Speaker 4: conductor industry is not different. In fact, it is even
Speaker 4: more salted that way. Every single vertical you look in,
Speaker 4: and there's hundreds of verticals, people think, oh, it's such
Speaker 4: a complex supply chain. Well, every single spot where you
Speaker 4: zone in, there's two, maybe three competitors right in any
Speaker 4: specific technology and any specific chip, and many times one
Speaker 4: and everyone makes a good profit. And it's very like,
Speaker 4: you know, strong industry. But what happens when someone comes
Speaker 4: with breakthrough innovation and now all of a sudden, you know,
Speaker 4: it's capital intensive, and those players start to fall off
Speaker 4: or they exit markets. That's something that happens, right, and
Speaker 4: the winner does take all. And so it's not just
Speaker 4: necessarily a hey, it's a it's a domestic supply chain.
Speaker 4: It's hey, well what about all of the vehicles that
Speaker 4: are being shipped out of China into Latin Southeast Asia
Speaker 4: and you know, maybe even Europe if they don't have
Speaker 4: tariffs or you know, the US already blocks Chinese vehicles mostly,
Speaker 4: or or how about you know solar right, like battery,
Speaker 4: you know, solar inverters to convert the power from sort
Speaker 4: of the solar panels to what's acceptable for your home
Speaker 4: or for the grid. That's going to become a Chinese
Speaker 4: supply chain. Why wouldn't it, Right, they already have the
Speaker 4: solar panels, So it's not just like hey, domestic versus not.
Speaker 4: It's actually there's a very strong element of hey, this
Speaker 4: is going to be a Chinese supply chain, or this
Speaker 4: is going to be a Japanese supply chain, or this
Speaker 4: is going to be a Korean supply chain, which is
Speaker 4: already the case in sort of semiconductors, right, or a
Speaker 4: US supply chain.
Speaker 5: Yeah, and I think there's also like an important thing
Speaker 5: to note there. At least I don't think this will
Speaker 5: happen in the United States, but Europe is where this
Speaker 5: is happening. The hardest is so we've been talking about
Speaker 5: the leading edge which they put out this new Huawei phone,
Speaker 5: really amazing technology, but there's problems with ramping, there's problems
Speaker 5: with yield. We have some cutoffs. But like you know,
Speaker 5: China at the same time is also pressing their foots
Speaker 5: of the gas in the lagging edge. And we've been
Speaker 5: talking about automotive, and I think that that's probably where
Speaker 5: it's scariest. Frankly. So, if you are a European automotive
Speaker 5: OEM and you are trying to sell more ebs as
Speaker 5: everyone is, and you're buying your semicopters from other semicapter companies,
Speaker 5: and then you're buying the battery and then you're you're
Speaker 5: putting it all together and you're trying to have this margin.
Speaker 5: You know, it's like a it's a single digit or
Speaker 5: you know, maybe double digit margin. It's it's a very
Speaker 5: low dollar value added industry, and then you're trying to
Speaker 5: compete against bid who and BYD in this conversation is
Speaker 5: making their own batteries. They're buying their own ships to
Speaker 5: ship the cars from China to Wow. Yeah they are.
Speaker 4: They have their own fab.
Speaker 5: Yeah, they have their own fab They make all the semicopters,
Speaker 5: and like the semiconductors are because they're becoming larger and
Speaker 5: larger parts of cars, and they are the most profitable.
Speaker 5: They are the largest gross dollar profit pool within cars.
Speaker 5: And so if you just do it, talk.
Speaker 1: Called about batteries all the time. But the real profits
Speaker 1: are in the chips.
Speaker 5: Well well batteries as well, batteries and batteries and semicopters,
Speaker 5: and they're doing both completely vertically integrated. So what they're
Speaker 5: gonna do is they're going to collapse all that margin
Speaker 5: that the suppliers make and then they're going to take
Speaker 5: it out of the price of the car and they'll
Speaker 5: make the full stack margin. But if you're a European
Speaker 5: or American company competing against this, you will never compete
Speaker 5: on price. And I think that this is and you see.
Speaker 4: It with Tesla, right, Tesla has the highest gross margins
Speaker 4: in the industry. You can say what you want about
Speaker 4: their cars, right, but they have the highest gross margins,
Speaker 4: and especially after the like the seventh price cuts this year,
Speaker 4: they're cheap, yeah, right. And Bidea is the same, except
Speaker 4: even better in many regards it even more vertically and integrated.
Speaker 2: Yep.
Speaker 5: And it's happening a lot quicker than people realize, and
Speaker 5: I think that that's something that it's another example of
Speaker 5: where the industrial policy is just going as fast as
Speaker 5: possible with this hundreds of billions of dollars to subsidies,
Speaker 5: and people are not really paying attention to the story
Speaker 5: that's happening right in front of us.
Speaker 1: I'm glad you brought up the car chips because it
Speaker 1: does seem as though the disruptions to car chips that
Speaker 1: we saw in twenty twenty is sort of what brought
Speaker 1: the semiconductor supply chain to the forefront. It's what sort
Speaker 1: of got everyone's consciousness. So we can't make cars because
Speaker 1: we can't get the chips. But those are, you know,
Speaker 1: the lagging edge chips, So we sort of it feels
Speaker 1: like there is this sort of incoherence that we maybe
Speaker 1: tell about the story here where it says, okay, we
Speaker 1: need to invest in chips, but then we talk about
Speaker 1: we need to invest in the leading age, whereas actually
Speaker 1: the real disruption was at.
Speaker 2: The lagging edge.
Speaker 1: Can you talk a little bit more what you said
Speaker 1: about how the US companies gave up on the lagging edge,
Speaker 1: Whereas you say TSMC and others continue to improve their
Speaker 1: yields on the lagging edge.
Speaker 2: We don't have that here with say Intel.
Speaker 4: So in some cases, right with companies like Analog Devices,
Speaker 4: who used to vertically manufacture all their chips, they're moving
Speaker 4: more and more to having TSMC make for them, but
Speaker 4: in other cases, Texas Instruments, right, both of these companies
Speaker 4: are over one hundred million dollar companies, but Texas Instruments,
Speaker 4: they are actually investing hugely in making more fabs and
Speaker 4: having more than eighty percent of their chips manufactured by themselves.
Speaker 4: And you know, I think, you know, just a little
Speaker 4: bit of a chime in on the whole term lagging
Speaker 4: edge is that it take a bit of a misnomer
Speaker 4: because it's not like they're selling the same chip that
Speaker 4: the designed in the nineteen eight in nineties, right, well,
Speaker 4: they are, but they're also selling many, many specialized chips
Speaker 4: that just aren't low nanimeters, but they have some material
Speaker 4: innovations or you know, they have some different properties with
Speaker 4: them that aren't necessarily the smallest post but definitely specialized.
Speaker 4: And there's a humongous variety of these chips, right, So
Speaker 4: it's not like, oh, there's one chip, right, it's it's
Speaker 4: you know, phone chips are quite easy to understand, and
Speaker 4: it's a it's a single chip that it has a
Speaker 4: tens of billions of dollars market, right. AI chips same thing,
Speaker 4: tens of billions of dollars of market, right, so we
Speaker 4: can point to that one in video chip and be like, wow,
Speaker 4: look at it. But when you look at Texas Instruments catalogs,
Speaker 4: the catalog is like so thick. It's like it's incredible
Speaker 4: of how many different chips they sell.
Speaker 5: It's thousands of products. It's thousands and thousands of products.
Speaker 5: And I think Texas Instruments will say this that like
Speaker 5: half of their products have been from nineteen ninety in earlier.
Speaker 5: So there there's a lot of lagging edge chips. But
Speaker 5: the difference here is that Texas Instruments is making like
Speaker 5: a sixty five seventy percent gross margin. The business is
Speaker 5: managed extremely like a mature semicopter company, it is. But
Speaker 5: then you have the new entrants in China that are
Speaker 5: just saying, let's like completely screw up the industry structure,
Speaker 5: and that's that's something that's very new MCUs micro controller
Speaker 5: units and China on that is like the hottest topic
Speaker 5: of disruption and what people are trying to do. And MCUs, Yeah,
Speaker 5: it might be a twenty eight animeter chip or maybe
Speaker 5: it's like a you know, fourteen animeter chip or something
Speaker 5: like that. It's not the sexiest thing, but that is
Speaker 5: a you know, that's a tens of billions of dollar
Speaker 5: market there. And I think for the reason why it's
Speaker 5: maybe not as viewed as strategically important is, let's put
Speaker 5: this in the context of AI. Right, it is not
Speaker 5: a leading edge AI chip that you know, and the
Speaker 5: original restrictions that we put on China was to stop
Speaker 5: AI progress, right, So that's not exactly you know, strategically
Speaker 5: quote unquote important, but in terms of for the businesses,
Speaker 5: for economics, it's it's a big deal. So what they've
Speaker 5: done is they've kind of refocused on the lagging edge
Speaker 5: where they can, and they're throwing as much money into there,
Speaker 5: and it's going to probably create crazy price.
Speaker 4: Going back to this this sort of idea of that, hey,
Speaker 4: this catalog is thousands of chips. This is why no
Speaker 4: one competes with each other, right, Like Texas instruments, they're
Speaker 4: the only player in many markets, right, or analog devices,
Speaker 4: And maybe the chip is only eight cents to sell,
Speaker 4: but it maybe it only cost them two cents to
Speaker 4: me manufacturer. The thing about China is they've they've literally
Speaker 4: sighoped their entire generation into wanting to work in semiconductors.
Speaker 4: It's literally the coolest job. There are two different dramas
Speaker 4: that I know of.
Speaker 3: I was about to ask, like, are there any TV
Speaker 3: characters that are working in semiconductors, because that's when you know.
Speaker 4: Yeah, there's there's one of like this kid who's in
Speaker 4: college and he's laying but then he like goes and
Speaker 4: works in the semiconductor industry and now he's super cool.
Speaker 4: And then there's another one where it's like a love
Speaker 4: story and they both work in a fab and they
Speaker 4: like fall in love and that's it's like a drama, right,
Speaker 4: It's it's.
Speaker 3: They're like gazing at each other through the glass and
Speaker 3: stuff like that. That'd be pretty funny.
Speaker 5: Yeah, both wearing bunny suits.
Speaker 3: But I don't know if anyone heard, but I think
Speaker 3: the sound earlier was both Joe and I scrambling to
Speaker 3: pull up the Texas Instruments.
Speaker 2: A literally we both how did you know what? I
Speaker 2: was typing?
Speaker 3: That?
Speaker 2: We both googled Texas Instruments catalog.
Speaker 3: But I can tell you I'm looking at the page
Speaker 3: just for MCUs and it looks like it's more than
Speaker 3: a thousand, two hundred that was just one category product.
Speaker 1: Yeah, yeah, twelve hundred and thirty eight micro controllers and processors.
Speaker 2: Can we just order them online?
Speaker 3: I guess you can. I mean, click the box, see
Speaker 3: what happens.
Speaker 4: Each of those has a hundred couple hundred pages of
Speaker 4: PDFs associated with how to design them into a product.
Speaker 4: And it's like, there's a reason no one redesigns this stuff.
Speaker 4: But well, now when you have thousands, hundreds of thousands
Speaker 4: of people coming into the supply chain and like, hey,
Speaker 4: we can't order this from TXN anymore. We need to
Speaker 4: order this, we need to get do this domestically, it's
Speaker 4: like and then and then you also have subsidies that say, hey,
Speaker 4: if every time you design a chip of you know,
Speaker 4: certain ages, you get pure tax credits.
Speaker 5: You get you get you get just straight up a
Speaker 5: payout local governments. Essentially, each tape out will give you
Speaker 5: like a million.
Speaker 4: Bucks tape out as a design of it.
Speaker 5: Yeah, yeah, a tape out all the way to design.
Speaker 5: So if you make one of these, it doesn't matter
Speaker 5: what it is, you just get money. And you know,
Speaker 5: if you're engaged in doing anything related to a semicopter,
Speaker 5: you have five years for every company, ten years for
Speaker 5: leading edge companies tax free like two hundred percent R
Speaker 5: and D credits, meaning that like for every ten dollars
Speaker 5: you spend or let's saye hundred dollars you spend in
Speaker 5: R and D, you get two hundred and twenty dollars
Speaker 5: back for certain leading edge categories, like the subsidies here,
Speaker 5: you know, they want you to work in it. They
Speaker 5: want to give you as much money as possible to
Speaker 5: you know, be moderately successful. You don't have to be
Speaker 5: that great at it. Honestly, if you if you're just
Speaker 5: taping out bad chips, you can probably make a living
Speaker 5: doing this. Now that that probably creates some pretty messed
Speaker 5: up IT incentives there, but the focus and the desire
Speaker 5: to you know, to get to Chinese domestic by twenty
Speaker 5: thirty or whatever, and that number, they're meaningfully below that.
Speaker 5: But this is a long journey, and it's pretty clear
Speaker 5: how they feel about it, right like this is this
Speaker 5: is like splitting the interest.
Speaker 4: One of the most interesting like observations of this sort
Speaker 4: of like warped incentive structure is that the company that
Speaker 4: makes railcars in China has made it their like national
Speaker 4: goal to like because they make profit from that.
Speaker 2: Right which company a cr RC Yeah, yeah.
Speaker 4: Cr r C Yeah, So one interesting thing about this
Speaker 4: warped incentive structure is that stayed on enterprises or very
Speaker 4: successful companies that are doing really well and some some
Speaker 4: market are expanding to places that make no sense like
Speaker 4: you know, logically, right, because they have profits and they're like,
Speaker 4: as Doug mentioned, right, you don't have taxes for a
Speaker 4: certain amount of time. So hey, let me take all
Speaker 4: the profits from this business and throw them into another sector.
Speaker 4: And so CRRC is a national railway car company, and
Speaker 4: they're plowing all of their money into making their national
Speaker 4: goal to basically disrupt Infinian, which is Germany's largest chip maker, right,
Speaker 4: who makes chips for power? Nothing sexy, right, but hey,
Speaker 4: converting from one form of power to another is is
Speaker 4: very important job for chips, and that's what that's what
Speaker 4: Infinian's chips do, right, And this is what crr c's
Speaker 4: sort of goal is to do, is to do that,
Speaker 4: which is nothing at all related to railway cars. But hey,
Speaker 4: I might as well do it because now if I
Speaker 4: make any money on the semiconductor business, I don't get taxed.
Speaker 4: And what I was getting taxed on my profitable, stable
Speaker 4: business is now being funneled into this new business.
Speaker 3: This is the irony of Shesh and Ping's crackdown on
Speaker 3: disorderly capital in like e commerce and consumer tech, and
Speaker 3: now there's just like money kind of flowing indiscriminately in
Speaker 3: other sectors.
Speaker 5: You know.
Speaker 3: Joe mentioned in the intro that it's been a while
Speaker 3: since we've done a semiconductor episode, and I think the
Speaker 3: last one that we did was actually on in video.
Speaker 3: Is that right?
Speaker 2: Yeah?
Speaker 3: I think I think that's right. And since then the
Speaker 3: stock has absolutely exploded and there's been this frenzy over AI.
Speaker 1: In video is just the absolute leader here. Obviously, China
Speaker 1: wants to develop its own AI models. It has its
Speaker 1: own AM models, its own large language models, its own
Speaker 1: open AI competitor, et cetera. Where is it in terms
Speaker 1: of its own access to the quality of chips that
Speaker 1: it needs to make cutting edge AM models?
Speaker 4: So that's probably the most effectively enforced part of the
Speaker 4: China restrictions so far, right in twenty twenty two now
Speaker 4: twenty twenty three, is is cutting back on Hey, you
Speaker 4: can't get the chips that in video makes has been
Speaker 4: the most successful part basically, and in Videos tried to
Speaker 4: circumvent this by you know, releasing new China specific versions
Speaker 4: and China's able to get some. But really this is
Speaker 4: this is where China's ecosystem looks the most interesting for
Speaker 4: breakthrough innovation, right, which is, hey, you know, you guys
Speaker 4: are going in this route, which was awesome. You know,
Speaker 4: we can't really go that route, but we have more
Speaker 4: people working on this, so why don't we try and
Speaker 4: do different things that will actually generate outcomes that are
Speaker 4: in the same vein but not on the same path. Right.
Speaker 4: So Huawei of course is making chips. They're making this
Speaker 4: mobile chip on seven nanimeter, but they also have this
Speaker 4: AI chip on seven nanimeter domestically made in videos. AI
Speaker 4: chips are on seven nanimeters, only one generation behind non
Speaker 4: processed technology. But more importantly, what Huawei and Smicker are
Speaker 4: doing is that they're investing heavily in technologies that are
Speaker 4: sort of a few generations out for everyone else because
Speaker 4: they're sort of not necessary.
Speaker 3: Right.
Speaker 4: So things like bringing optical fibers directly to the AI chip, right,
Speaker 4: so it's called copackage optics is the technology. Other things
Speaker 4: are called like hybrid bonding, just like stacking chips on
Speaker 4: top of each other. They're doing really interesting things there
Speaker 4: to enable breakthrough innovation to enable performance that is on
Speaker 4: par with the US chips like from in Video or
Speaker 4: AMD right, and they aren't there yet, but they're going
Speaker 4: to be there. And one interesting like sort of phenomenon
Speaker 4: is that, like you know, because they can't order all
Speaker 4: these Invidia chips, there's really only two places in the
Speaker 4: world that will let you build data centers and have
Speaker 4: cheap power. Right. East Asia can't do it because they
Speaker 4: have to import all their power europates, you know, natural gas,
Speaker 4: and natural gas is basically how you have to power
Speaker 4: data centers. And so the US and China are really
Speaker 4: the only place that can build data centers, and China
Speaker 4: has been blocked off. So now China has like these
Speaker 4: companies flooding into Malaysia and Indonesia trying to build data
Speaker 4: centers that they can install foreign chips in. And meanwhile
Speaker 4: they're also building these chips trying to do this breakthrough
Speaker 4: innovation domestically.
Speaker 5: Yeah, and I believe there is also a loophole that
Speaker 5: might have been priorily closed talking about how you can
Speaker 5: essentially rent a chip. So for example, a Chinese company
Speaker 5: could rent something you know, in AWS, you can rent
Speaker 5: a GPU that's in a cloud and say Signapore or
Speaker 5: something like that. But I think that the conversation about
Speaker 5: hybrid bonding and co package optics is really interesting and
Speaker 5: kind of where we you know, at the beginning, we
Speaker 5: were talking about how by cutting them off we would
Speaker 5: effectively force them on their own roadmap, and that's kind
Speaker 5: of what's already happened. The Smick roadmap is completely different
Speaker 5: than what is sort of the industry standard roadmap for
Speaker 5: leading edge, and as we continue to cut them off,
Speaker 5: they're going to have to kind of create a new
Speaker 5: roadmap for semicupters going forward, and the especially co package optics,
Speaker 5: which is always five years ahead. And the reason why
Speaker 5: it's never adopted in the United States or in the
Speaker 5: western semicopter world is because it's just too expensive. But
Speaker 5: if you don't have an option and this is your
Speaker 5: only option for scaling out chips, they'll pursue the expensive option.
Speaker 5: So there's going to be no how created because of
Speaker 5: the necessity.
Speaker 2: Of this Tracy.
Speaker 1: I think when we released this episode, we should publish
Speaker 1: a glossary too in all these terms, with like little
Speaker 1: like definitions. I think that'd be very helpful.
Speaker 3: Okay, I have fun doing that. Jo. We actually speaking
Speaker 3: of new terms that will no doubt need to be
Speaker 3: added to the glossary. Who makes the best chips for
Speaker 3: q Star that's been in the news. We don't know
Speaker 3: what it is yet, but I'm going to go ahead
Speaker 3: and ask.
Speaker 2: Trying to kind of explain it to me last night.
Speaker 5: Actually, I don't even know what. My favorite take on this,
Speaker 5: and this is Dylan's take, is that q Star is
Speaker 5: a sieop. It's oh, yeah, So I'm in the bay
Speaker 5: a lot.
Speaker 4: A lot of my friends are researchers, and we sort
Speaker 4: of have this idea that anytime Opening Eye tweets about
Speaker 4: something that's related to research, they're actually just trying to
Speaker 4: siop everyone into wasting their time on a path of
Speaker 4: mL research that is actually not like, yeah, not going
Speaker 4: to result in a better model because there's limited amounts
Speaker 4: of GPU, limited amounts of time. So if you're wasting
Speaker 4: your time doing that instead of actually working on, you know,
Speaker 4: what's the correct path at least what they think. Because
Speaker 4: they've done all the experiments as sort of ahead of
Speaker 4: everyone else, it's easier to innovate what's already been innovated
Speaker 4: than it is to innovate something completely new, and so
Speaker 4: sort of the thought is, hey, they're doing these syops
Speaker 4: and Q Star is one of those.
Speaker 5: We'll see.
Speaker 2: There's a million more questions we could probably ask me.
Speaker 2: We gotta wrap up, so we'll have to have you back.
Speaker 1: Doga Laughlin and Dylan Patel, thank you so much for
Speaker 1: coming on odd Law.
Speaker 2: It's amazing conversation.
Speaker 5: Thanks for having us. Always love to chat with you guys,
Speaker 5: and always loves the chat chips for sure.
Speaker 4: Yeah, yeah, this was a blast. I didn't realize you
Speaker 4: two were even more funny when you're sitting in the same.
Speaker 3: Room when we're pointing at each other and making faces. Yeah,
Speaker 3: all right, thank you.
Speaker 2: That was so much fun. That was amazing.
Speaker 1: Thank you so much, Tracy. I thought that was an
Speaker 1: amazing conversation. I guess it freaked me out a little bit.
Speaker 5: Yeah, you know.
Speaker 3: You know what's bothering me enormously now is I've realized
Speaker 3: if you step away from semiconductors for like a month,
Speaker 3: there's some new breakthrough. Yeah, and there's like five new
Speaker 3: technologies and probably like but there are more companies with
Speaker 3: like four letter acronyms. Yeah involved somehow is that like
Speaker 3: a rule?
Speaker 1: I remember having the same thought about stepping away, Like
Speaker 1: every time I would ignore crypto for six months, there
Speaker 1: would be some new scheme, except in the end, none
Speaker 1: of that mattered because it was all it didn't matter
Speaker 1: any This stuff actually matters.
Speaker 2: And so you do.
Speaker 1: It does feel like you really have to pay attention
Speaker 1: constantly to know what's going on.
Speaker 2: There was so much in there, you know what.
Speaker 1: One thing just that struck me when I was thinking
Speaker 1: about US first China industrial policy and here we freak
Speaker 1: out politically do it to a waste. So we're still
Speaker 1: talking about say Cylindra, so one company that was doing
Speaker 1: tech and it ended up being scandal that for years
Speaker 1: cast dispersions on the idea of the government investing. And
Speaker 1: it sounds like listening to Dylan and Doug that yeah,
Speaker 1: they probably have their equivalent of plenty of Cylindras in China.
Speaker 1: There's probably plenty of fraud, plenty of ways, plenty of disasters,
Speaker 1: plenty of endeavors that don't have the chance. It just
Speaker 1: seems that they have the appetite to continue you investing
Speaker 1: in those areas, even with some level of fraud.
Speaker 3: But also like they are so explicit about what they're doing,
Speaker 3: and I can't remember I'm gonna have to go back
Speaker 3: and look who said this, but someone was basically like
Speaker 3: the equivalent of follow the money, like China is telling
Speaker 3: you where they're going to put the money in semiconductors.
Speaker 3: This would have been around twenty twenty one, when they
Speaker 3: first started cracking down on like for profit education and
Speaker 3: the e commerce platforms and things like that. And this
Speaker 3: person I remember them saying, like, China's telling you what
Speaker 3: it wants you to do. As a domestic investor or
Speaker 3: someone who's working in tech. They don't want you building,
Speaker 3: you know, video games or something like that. They want
Speaker 3: you to make chips that might power those video games
Speaker 3: or something much more important. And here it's like, yes,
Speaker 3: we have messaging, but it's never it's never quite that
Speaker 3: way for obvious reasons. I think there's like still a
Speaker 3: lot of discomfort here about industrial policy in general. But
Speaker 3: of course since COVID that seems to be changing a
Speaker 3: little bit.
Speaker 1: So many other details I want to we need to
Speaker 1: find one of those shows the love story of the
Speaker 1: two people who meet in this semiconductor fab. I also
Speaker 1: think it's just really interesting this idea of a railcar company,
Speaker 1: yeah building, say hey, here's an opportunity to build a
Speaker 1: chip that we have to buy from a German company,
Speaker 1: and because of the tax structure, it makes sense for
Speaker 1: us to invest and see if we can build it domestically.
Speaker 1: This idea that you know we talked about bid before
Speaker 1: on the show a couple months ago with Corey Kanter,
Speaker 1: but that it's also a chip powerhouse, and that there's
Speaker 1: a lot of a lot of mergin. There so many,
Speaker 1: there's too many interesting things to go over.
Speaker 3: Yeah, I gotta say. I went on one of crrcs,
Speaker 3: the high speed trains. I think it must have been
Speaker 3: done them between Beijing and Hong Kong. That's a nice train.
Speaker 3: I really enjoyed that those so I look forward to
Speaker 3: seeing the semiconductors too. I'm sure they'll also be nice.
Speaker 3: Maybe shall we leave it there, Let's leave it there.
Speaker 1: Okay.
Speaker 3: This has been another episode of the Odd Thoughts podcast.
Speaker 3: I'm Tracy Alloway. You can follow me at Tracy Alloway and.
Speaker 1: I'm Joe Wisenthal. You can follow me at The Stalwart.
Speaker 1: Follow Dylan Patel He's at Dylan five to two to
Speaker 1: two p. Follow Doug o Laughlin at Underscore fab Knowledge Underscore.
Speaker 1: Follow our producers Carmen Rodriguez at Carman Arman, dash Ol
Speaker 1: Bennett at Dashbot and kel Brooks at kel Brooks. And
Speaker 1: thank you to our producer Moses Ondam. For more odd
Speaker 1: Lots content, go to Bloomberg dot com slash odd lots,
Speaker 1: where we have transcripts, a blog, and a newsletter and
Speaker 1: you can chat twenty four to seven with fellow listeners
Speaker 1: in the discord discord dot gg slash odd lots. There's
Speaker 1: even a room there just for semiconductors where people are
Speaker 1: posting links to highly technical things that I don't understand
Speaker 1: but seem very fascinating.
Speaker 2: Go check it out.
Speaker 3: And if you enjoy odd Lots, if you want us
Speaker 3: to get back into semiconductors on a regular basis, then
Speaker 3: please leave us a positive review on your favorite podcast platform.
Speaker 3: Thanks for listening
Speaker 1: It