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Many countries are working hard to invest in owning more of the semiconductor industry stack. This will be easier and harder for some countries. Ben Bajarin and Jay Goldberg discuss challenges and opportunities and how regulations may lead to unintended consequences in a world where the semiconductor industry relies on global partnerships.
A podcast about the business and market of semiconductors
ben_bajarin:
well how do j yeah
jay_goldberg:
ben internet greetings
ben_bajarin:
internet somebody asked me they were like hey are you are you going to have like a standard opening you know for the circuit and i was like you know i think i'm just going to roll with whatever mood i'm in that day you know
jay_goldberg:
oh
ben_bajarin:
it's gone you like the the opening is like a box of chocolates you know you never know you never know what you're going to get
jay_goldberg:
i think we should have them music it should be a battle without honor or humanity
ben_bajarin:
for
jay_goldberg:
which is
ben_bajarin:
humanity
jay_goldberg:
the no it's battle without honor or
ben_bajarin:
without
jay_goldberg:
humanity
ben_bajarin:
honor nice nice
jay_goldberg:
it's yeah
ben_bajarin:
cheering sounds i could add cheering sounds
jay_goldberg:
oh
ben_bajarin:
i see that here on the left maybe an elephant whistle bull horn
jay_goldberg:
yeah
ben_bajarin:
and like
jay_goldberg:
yeah
ben_bajarin:
the creative juices can go when you're trying to produce something thanks everybody listeners for all the positive feedback that that you've given
jay_goldberg:
m
ben_bajarin:
me emails and messages on
jay_goldberg:
did
ben_bajarin:
twitter i also
jay_goldberg:
yes
ben_bajarin:
wanted to mention there is a youtube channel ja and i
jay_goldberg:
oh
ben_bajarin:
are staring at each other right now as we do this in real time um just pointing that out that there's a youtube channel in case you want to watch us maybe some day we'll get sophisticated
jay_goldberg:
yes
ben_bajarin:
enough to throw up some of the visuals that we talk through because i charts and other things that might be interesting so you know
jay_goldberg:
oh
ben_bajarin:
aspirations
jay_goldberg:
i
ben_bajarin:
abound but capitalizing on last week where we talked about what's going on in juries packaging in process
jay_goldberg:
it
ben_bajarin:
i had already been thinking about kind of this topic but a few people hit
jay_goldberg:
oh
ben_bajarin:
me up in a twitter dims and mentioned doing it on really the dglobalization trend you know j and i we've talked about this a little bit on what it looks like when you're trying to bring some some form of the semi industry back your nation there's a lot of implications for this
jay_goldberg:
oh
ben_bajarin:
there's
jay_goldberg:
oh
ben_bajarin:
obviously the geo political side which we sort of danced around and can weave into this and will also necessitate
jay_goldberg:
oh
ben_bajarin:
i think another series of
jay_goldberg:
oh
ben_bajarin:
podcasts but i want to talk sort of broadly about nowdeglobalization and i'll sort of throw my point out there j and then i'll let you let you chime in it's hard to
jay_goldberg:
oh
ben_bajarin:
not appreciate that the semi conductor industry is a global partnership um you know even with talks with senior executives that all the name companies out there you know and
jay_goldberg:
ah
ben_bajarin:
i
jay_goldberg:
oh
ben_bajarin:
talk about you like what when sanctions come down and governments are trying to get you to invest
jay_goldberg:
a
ben_bajarin:
in in in domestic
jay_goldberg:
oh
ben_bajarin:
foundaries or domestic technology you know they
jay_goldberg:
yeah
ben_bajarin:
always keep coming back to yes we're going to do that but you know remember the semi conductor industry
jay_goldberg:
oh
ben_bajarin:
is a global partnership and i think that's
jay_goldberg:
ah
ben_bajarin:
an important framework to remember
jay_goldberg:
ye
ben_bajarin:
we can dive into
jay_goldberg:
ye
ben_bajarin:
what regions have a share of what whether that's lithography or wafer
jay_goldberg:
oh
ben_bajarin:
or memory or foundry but the meta point
jay_goldberg:
yeah
ben_bajarin:
and let you just chime in is just we can't forget this
jay_goldberg:
yeah
ben_bajarin:
is a global partnership and more importantly to satisfy
jay_goldberg:
yeah
ben_bajarin:
the
jay_goldberg:
yeah
ben_bajarin:
needs of the semi conductor industry which is now a little over a trillion semi conductorship every year it will always be
jay_goldberg:
yeah
ben_bajarin:
a global global partnership
jay_goldberg:
yeah yeah
ben_bajarin:
oh
jay_goldberg:
there is so much complexity and there's so many little bits and pieces of it
ben_bajarin:
oh
jay_goldberg:
you know even what i've
ben_bajarin:
oh
jay_goldberg:
been doing this for twenty something years you've been in
ben_bajarin:
yes
jay_goldberg:
at least as long i am always finding some new company that i've never heard of that actually oh they have this critical role to play and mat tats or some random chemical
ben_bajarin:
oh
jay_goldberg:
that's incredibly important nd there's only one vendor for it
ben_bajarin:
eh
jay_goldberg:
there's just a lot going on and it's
ben_bajarin:
eh
jay_goldberg:
it's everywhere as much as the headlines are all about taiwan
ben_bajarin:
oh
jay_goldberg:
there's a whole lot upstream from that
ben_bajarin:
oh
jay_goldberg:
that goes into that all kinds of inputs and
ben_bajarin:
oh
jay_goldberg:
it's a pretty complicated i mean it's part of what makes it fun there's always something interesting to explore and discover in this space
ben_bajarin:
yeah yeah and i
jay_goldberg:
yeah
ben_bajarin:
think you know just just just doubling down on the points of every nation
jay_goldberg:
oh
ben_bajarin:
can be ambitious china can america can europe can
jay_goldberg:
yeah
ben_bajarin:
pan kara can et cetera everybody can be ambitious but they're just they're never going to own the whole stack and so i always just worry like how much if said
jay_goldberg:
oh
ben_bajarin:
nation brings down sanctions and
jay_goldberg:
so
ben_bajarin:
you can't end up and i think you're seeing this right now with some of the tension that's going between what the us is trying to say about a s m l and then europe saying like no we're not going to bide by that because
jay_goldberg:
oh
ben_bajarin:
we need this to be a
jay_goldberg:
oh
ben_bajarin:
global trade scenario is how much do sometimes those regulations may be hurt you more than help you
jay_goldberg:
yes
ben_bajarin:
even if your underlying intentions can be good if that makes sense
jay_goldberg:
there's there's a lot in there there's a lot in there to unpack right there's i don't
ben_bajarin:
oh
jay_goldberg:
not even sure where start i think
ben_bajarin:
yeah oh
jay_goldberg:
once you start talking about nations that levels it gets even
ben_bajarin:
oh
jay_goldberg:
more complicated layered on top of an already
ben_bajarin:
yeah
jay_goldberg:
complicated industry um but it cuts both ways right i mean there's
ben_bajarin:
my
jay_goldberg:
there's lots of reasons why the us put sanctions
ben_bajarin:
yeah
jay_goldberg:
on chimes
ben_bajarin:
a
jay_goldberg:
chip industry and there's some of that that resonates with other countries as well i really i really think
ben_bajarin:
yes
jay_goldberg:
the europeans there's large blocks in you know in europe who
ben_bajarin:
oh
jay_goldberg:
who feel pretty strongly were in line with what the us is doing even if their individual companies are ended is that
ben_bajarin:
oh m
jay_goldberg:
re gonna going to object to it like a m is going to feel a lot of pain from these sanctions all right
ben_bajarin:
yeah
jay_goldberg:
but but they're dutch company and the dutch government probably
ben_bajarin:
yeah
jay_goldberg:
feels a pretty different way
ben_bajarin:
sure
jay_goldberg:
and and so let's we'll tackle that as best as we can um i do want to take a step
ben_bajarin:
yeah
jay_goldberg:
back though and talk about how
ben_bajarin:
oh
jay_goldberg:
every country now seems to want to have a semecondctor fab domestic and i think that there is lots of good reasons why
ben_bajarin:
oh
jay_goldberg:
that's not going to happen why it hasn't happened historically in why it shouldn't shouldn't happen because i know like the
ben_bajarin:
yes
jay_goldberg:
big thing i've been earing a lot about recently is
ben_bajarin:
yeah
jay_goldberg:
mexico there's lots of interesting in building up mexico semicanuter
ben_bajarin:
oh
jay_goldberg:
industry
ben_bajarin:
right
jay_goldberg:
i talked to some people in the policy
ben_bajarin:
oh
jay_goldberg:
world about that recently and and they sent me a list of questions beforehand they said you know what are the best fabs in mexico
ben_bajarin:
oh
jay_goldberg:
i don't think mexico has any fabs um they have a couple they have a couple o sat facilities that are
ben_bajarin:
oh
jay_goldberg:
very good they don't have a fab and then i started looking up like if you're going to build
ben_bajarin:
yeah
jay_goldberg:
a center of semi conductor
ben_bajarin:
oh
jay_goldberg:
excellent in mexico were do you even start you like they have some very good universities
ben_bajarin:
yeah
jay_goldberg:
there but i don't think any of them
ben_bajarin:
yeah
jay_goldberg:
have really advanced
ben_bajarin:
yeah
jay_goldberg:
sam's content
ben_bajarin:
yeah
jay_goldberg:
in their electrical engineering department historically for whatever reason it hasn't been an area that specialized in in sonata you suddenly want to grow a whole industry in mexico
ben_bajarin:
oh
jay_goldberg:
from scratch absolutely that is possible there are lots of talented engineers in mexico um but is that really how the government wants to spend
ben_bajarin:
yeah
jay_goldberg:
its energies is it something feasible
ben_bajarin:
oh
jay_goldberg:
i mean it's possible it's going to take twenty years but it's possible so
ben_bajarin:
yeah
jay_goldberg:
i think i mean we sort of started off with this being really complicated and
ben_bajarin:
oh
jay_goldberg:
it is if you want to change that it's going to take a lot of time we didn't just sort of flip the switch and suddenly we're dependent on ty wan it took twenty thirty years
ben_bajarin:
yeah
jay_goldberg:
to get here reversing it is going to take just as long
ben_bajarin:
yeah
jay_goldberg:
oh
ben_bajarin:
and i think you know when
jay_goldberg:
ah
ben_bajarin:
we talked about you know even this this last time right we didn't go deep on um each
jay_goldberg:
yeah
ben_bajarin:
nation's efforts as a foundry and we talked a lot bit about how
jay_goldberg:
ah
ben_bajarin:
in tails trying to be competitive in foundry as
jay_goldberg:
oh
ben_bajarin:
is sam song sam songs
jay_goldberg:
oh
ben_bajarin:
most competitive foundaries in logic or least a good portion
jay_goldberg:
oh
ben_bajarin:
of them are actually here us
jay_goldberg:
oh
ben_bajarin:
right memory i think may may still be in in korea um but you know i think you look at we talked
jay_goldberg:
ah
ben_bajarin:
about t s m c only being able to do a small
jay_goldberg:
yeah
ben_bajarin:
small portion um you know estimates have far less than ten
jay_goldberg:
yes
ben_bajarin:
percent generally i think most analysts on the cell side er four to five per cent of their capacity
jay_goldberg:
yeah
ben_bajarin:
which really just says it's not even in the entirety of their us customers it's some small set i think you had pointed out like defense
jay_goldberg:
oh
ben_bajarin:
and and a few others right
jay_goldberg:
oh
ben_bajarin:
maybe apple lok if the government says you've got to have ex percent of
jay_goldberg:
yeah
ben_bajarin:
content to to to to import to the united states but i think just understanding to your point right
jay_goldberg:
yeah
ben_bajarin:
which is that
jay_goldberg:
yeah
ben_bajarin:
one logic foundaries are big expensive
jay_goldberg:
oh
ben_bajarin:
i mean as far as i know also you know as m l's sales
jay_goldberg:
the
ben_bajarin:
are locked up for
jay_goldberg:
yeah
ben_bajarin:
the next few years it's not like there's just machines coming on the table that somebody can just kind of bud to start a new foundry a limited a limited
jay_goldberg:
oh
ben_bajarin:
resource it is the challenge
jay_goldberg:
oh
ben_bajarin:
but i keep coming back to it's not
jay_goldberg:
yes
ben_bajarin:
just even lithography it's not just the foundry it's it's the wafers
jay_goldberg:
yah
ben_bajarin:
you know it's the
jay_goldberg:
ah
ben_bajarin:
you know it's
jay_goldberg:
yeah
ben_bajarin:
etching it's
jay_goldberg:
oh
ben_bajarin:
everything that becomes a part of that ecosystem that there's only small bits that reside in certain places and everybody relies on each other to get those done
jay_goldberg:
oh
ben_bajarin:
like it just doesn't it doesn't even exist in fact i'd be curious i don't know if such a stat exists
jay_goldberg:
oh
ben_bajarin:
but per the entire needs of the of the
jay_goldberg:
ah
ben_bajarin:
semi conductor ego system what country has
jay_goldberg:
yah
ben_bajarin:
all of all of x per cent
jay_goldberg:
oh
ben_bajarin:
of all of those things because i can't imagine it would be gigantic it would be they
jay_goldberg:
a
ben_bajarin:
have some percent of all of those
jay_goldberg:
oh
ben_bajarin:
things but like somebody doesn't have fifty percent foundry fifty percent way for
jay_goldberg:
oh
ben_bajarin:
fifty per cent lithography you know i mean like there's no majority
jay_goldberg:
oh
ben_bajarin:
in those key categories in any one country
jay_goldberg:
we could spend an hour just talking about the denominator of that fraction
ben_bajarin:
yeah
jay_goldberg:
like hat do you want
ben_bajarin:
for
jay_goldberg:
to put
ben_bajarin:
sure
jay_goldberg:
in there right
ben_bajarin:
right right
jay_goldberg:
i mean the us is probably closest
ben_bajarin:
oh
jay_goldberg:
closest furthest has the biggest
ben_bajarin:
a
jay_goldberg:
share of any of it the biggest share of every single part of that right
ben_bajarin:
yes
jay_goldberg:
but certainly weaken you know
ben_bajarin:
oh
jay_goldberg:
and device manufacture i think that's that's why the u s thinks we can get away with these sanctions is
ben_bajarin:
right
jay_goldberg:
ultimately even for pieces that aren't produced here there are going to be dependencies you can trace back to us companies in u s i p
ben_bajarin:
right
jay_goldberg:
it's certainly the case with a m l but i think it's true for everyone else every other part of it
ben_bajarin:
yeah yeah and and i wonder too i mean i think you're right i again i don't know i don't i've never seen such a stat i mean you know you look at obviously entails here applied materials
jay_goldberg:
oh
ben_bajarin:
lamb
jay_goldberg:
oh
ben_bajarin:
i just companies that have pieces of that it's not all made here but the there's a lot of american companies in in that
jay_goldberg:
okay
ben_bajarin:
mix
jay_goldberg:
oh
ben_bajarin:
obviously with the exception of lithography but it's interesting to your point like the investments that people are trying to make and i just keep coming back to again
jay_goldberg:
m
ben_bajarin:
the implications of this or the implications to the
jay_goldberg:
oh
ben_bajarin:
rest of the echo system like again just going back to
jay_goldberg:
oh
ben_bajarin:
you know your point about a smell like like
jay_goldberg:
yeah
ben_bajarin:
being possibly hurt by these things and then other countries getting frustrated is how much does this off often
jay_goldberg:
yeah
ben_bajarin:
hurt you hurt your overall ambition you know
jay_goldberg:
oh
ben_bajarin:
versus help it in other countries that might need to return the favor or put sanctions on us companies trying to do those things that's just kind of
jay_goldberg:
a
ben_bajarin:
where my my head keeps just bouncing around
jay_goldberg:
oh
ben_bajarin:
i guess the positive negative impact or or unintended circumstances
jay_goldberg:
yes
ben_bajarin:
of some of this attempt to to delobalize the semi conductor industry
jay_goldberg:
so i actually think there's a few a few things that come out one is i'm a big believer in
ben_bajarin:
i
jay_goldberg:
what do you call it multi lateral ism like working
ben_bajarin:
yeah
jay_goldberg:
with allies like working with partners and i think that's
ben_bajarin:
i had
jay_goldberg:
one of the great successes that the u s has had over the last seventy
ben_bajarin:
oh
jay_goldberg:
years has been its ability to work with allies closely and so in times of need like now when we have concerns about china's military capabilities
ben_bajarin:
yeah
jay_goldberg:
we can call on our allies and get their help and it's it's prettiualy important now because for the last like five
ben_bajarin:
yeah
jay_goldberg:
years china has been going down this really
ben_bajarin:
a
jay_goldberg:
sort of
ben_bajarin:
yeah
jay_goldberg:
very ultra nationalistic wolf warrior diplomacy track
ben_bajarin:
yeah
jay_goldberg:
where there were the almost rude to everybody
ben_bajarin:
yes
jay_goldberg:
else and it's a very very sharp aggressive diplomatic style
ben_bajarin:
oh
jay_goldberg:
and it's it's now coming back to haunt them and they've actually looks like they've sort of
ben_bajarin:
yes
jay_goldberg:
stepped away from it but
ben_bajarin:
ye
jay_goldberg:
they're now in a position where they can't go to the dutch government they can't go to the check government they can't get all the differet european governments because their in country
ben_bajarin:
a
jay_goldberg:
diplomats have been insulting those has countries for the last few years about whatever random things now suddenly the us is actually asking for a favor from those countries
ben_bajarin:
right
jay_goldberg:
i sing no no no don't do that we were kidding you know it's important to have allies and
ben_bajarin:
oh
jay_goldberg:
you know there are lots of people who are goin to argue oh maybe the u s is in such a good ally and we've done all these bad things
ben_bajarin:
oh
jay_goldberg:
okay
ben_bajarin:
yeah
jay_goldberg:
let's not not trying to debate all of history here but
ben_bajarin:
oh
jay_goldberg:
i think there are
ben_bajarin:
ah
jay_goldberg:
lots of countries that have benefited in some ways from being an ally
ben_bajarin:
ye
jay_goldberg:
in the us and we've tried to do right by them
ben_bajarin:
yep
jay_goldberg:
within bounds and
ben_bajarin:
yeah
jay_goldberg:
and so that's why i actually am pretty fairly high degree of confidence that these actions will take place and that we will have
ben_bajarin:
oh
jay_goldberg:
all of our allies sign up to participate in china is going
ben_bajarin:
a
jay_goldberg:
to be very isolated
ben_bajarin:
m
jay_goldberg:
there you know and
ben_bajarin:
m
jay_goldberg:
hopefully
ben_bajarin:
yeah
jay_goldberg:
what that leads to is
ben_bajarin:
yes
jay_goldberg:
its approach to the world and recognizing that there is a there's a better path a more diplomatic path towards being integrated and still being able to get what they want being able t satisfied their development goals without antagonizing the rest of the world picking a
ben_bajarin:
yeah
jay_goldberg:
fight with everybody else
ben_bajarin:
so
jay_goldberg:
oh
ben_bajarin:
i'm curious about this and you lead to a point that i have been thinking about and floated to again said said executives and a number of different sumicnutcomers like do you think that
jay_goldberg:
oh
ben_bajarin:
there would ever be
jay_goldberg:
yeah
ben_bajarin:
an official equivalent
jay_goldberg:
yes
ben_bajarin:
to what we're talking about allies and technology to like technado
jay_goldberg:
m
ben_bajarin:
where
jay_goldberg:
oh
ben_bajarin:
said countries are in agreement with each other against a call it
jay_goldberg:
oh
ben_bajarin:
i hate to say gin is a common enemy but but somebody in which they're they're trying to regulate
jay_goldberg:
oh
ben_bajarin:
and use their leverage with again this in this case components um as a part of i'm saying formally
jay_goldberg:
yeah
ben_bajarin:
obviously they could do this informally
jay_goldberg:
oh
ben_bajarin:
like we we handshake we talk but you never think something like
jay_goldberg:
yeah
ben_bajarin:
that would be possible where they're like hey we recognize we all need each other let's agree on said things but
jay_goldberg:
yeah
ben_bajarin:
this kind juris not in it and so we're going to monitor them in some degree right they're they're not in this this tech note i'm just curious if there's ever like a ever could show
jay_goldberg:
oh
ben_bajarin:
up like a formal partnership in this in this capacity
jay_goldberg:
yeah i mean my initial response is that question is way above my paid grade
ben_bajarin:
yeah
jay_goldberg:
i'm just a i'm
ben_bajarin:
yeah
jay_goldberg:
just a financial annalist
ben_bajarin:
h
jay_goldberg:
investor relations at teas international relations is beyond the
ben_bajarin:
m
jay_goldberg:
the other ir
ben_bajarin:
at the other
jay_goldberg:
um
ben_bajarin:
i re
jay_goldberg:
but
ben_bajarin:
oh
jay_goldberg:
from what i can tell there are attempts
ben_bajarin:
oh
jay_goldberg:
being made at
ben_bajarin:
oh
jay_goldberg:
doing just that right there's the group of four i fear wha it's called there's like us china
ben_bajarin:
yeah
jay_goldberg:
us tian south care of japan are
ben_bajarin:
m
jay_goldberg:
trying to put some something like that together umoenonsty're trying to
ben_bajarin:
yeah
jay_goldberg:
put it together there's been talk about that
ben_bajarin:
yeah
jay_goldberg:
and there
ben_bajarin:
oh
jay_goldberg:
you know there're other other locks the us is trying to do
ben_bajarin:
yeah
jay_goldberg:
put together sort of
ben_bajarin:
oh
jay_goldberg:
could not confront but to sort of deal with china with other allies
ben_bajarin:
yeah
jay_goldberg:
in other areas right bring india into some security arrangement with debt and i won't say never that's never
ben_bajarin:
m
jay_goldberg:
going to happen but it's hard to
ben_bajarin:
yeah
jay_goldberg:
do especially because
ben_bajarin:
very
jay_goldberg:
so much of wat we're talking about is commercial right we're talking about companies
ben_bajarin:
yeah
jay_goldberg:
and companies are all
ben_bajarin:
oh
jay_goldberg:
going to have interests in their
ben_bajarin:
oh
jay_goldberg:
own interests at heart which are going to conflict with the government and interest
ben_bajarin:
m
jay_goldberg:
right when it's when it's a military block that's fairly easy to governmen controls the military and the military does what you know everybody gets an get some gear
ben_bajarin:
oh
jay_goldberg:
but when it's commercial to you have entities that are capable of
ben_bajarin:
dame
jay_goldberg:
pushing back and resisting
ben_bajarin:
oh
jay_goldberg:
and i think that makes it much harder to coble one of those things together unless there's a clear
ben_bajarin:
oh
jay_goldberg:
i'm really really clear
ben_bajarin:
oh
jay_goldberg:
benefit to them which i think i think we were tarting to reach that point with china and semi right it's gotten so much harder for
ben_bajarin:
oh
jay_goldberg:
tech companies to do business in china over
ben_bajarin:
oh
jay_goldberg:
the last ten years that when the trump
ben_bajarin:
oh
jay_goldberg:
sanctions when the trump trade war started and now these later sanctions
ben_bajarin:
m
jay_goldberg:
there's some some push back from the from the ship companies but they're they're not fighting it
ben_bajarin:
oh
jay_goldberg:
at a broad policy level they're not local about it and not public about it
ben_bajarin:
yeah
jay_goldberg:
and yeah i mean i think it'd
ben_bajarin:
yeah
jay_goldberg:
be interesting to sort of flip it around and think about
ben_bajarin:
oh
jay_goldberg:
could chin of respond in some constructive way and
ben_bajarin:
right
jay_goldberg:
i've published on this like they don't actually have an easy response to the us
ben_bajarin:
oh
jay_goldberg:
actions
ben_bajarin:
right
jay_goldberg:
and you look at their their response since october
ben_bajarin:
oh
jay_goldberg:
to the china ships sanctions they've been very muted
ben_bajarin:
what
jay_goldberg:
because they don't ant to make a big deal about it because there's no obvious
ben_bajarin:
yeah
jay_goldberg:
counter for them
ben_bajarin:
oh
jay_goldberg:
and so i wonder if how that will
ben_bajarin:
oh
jay_goldberg:
change as time does economy continues to advance
ben_bajarin:
oh
jay_goldberg:
and develop are there going to be areas where they do find some leverage
ben_bajarin:
oh
jay_goldberg:
and and the one that sort of leaps to mind first and foremost is batteries like they had some really really big battery companies could they
ben_bajarin:
oh
jay_goldberg:
compel together i don't even know where other batters are made south korea
ben_bajarin:
south career
jay_goldberg:
japan like uh probably some minerals and
ben_bajarin:
no
jay_goldberg:
places where they actually have friends that they couple together and it's very hard for them to do that so
ben_bajarin:
so that was that was what i actually wanted to to get your perspective on to just to define because i know you you're much closer
jay_goldberg:
yeah
ben_bajarin:
to the to the chinese side um so just just for everybody listening looking at this and in logic
jay_goldberg:
yeah
ben_bajarin:
china is basically seventy seventeen percent of capacity and in memory twenty percent now the capacity the logic is mostly
jay_goldberg:
yeah
ben_bajarin:
mostly lagging
jay_goldberg:
oh
ben_bajarin:
and
jay_goldberg:
yeah
ben_bajarin:
far nowhere near leading edge basically super legacy clearly no no advantage or levers there in proprietary ip other than the fact that it's cost effective similar to memory
jay_goldberg:
oh
ben_bajarin:
you and i know a big company who is using some memory from them because it's cheap that may not always be the case if if the united states
jay_goldberg:
not
ben_bajarin:
doesn't want
jay_goldberg:
not
ben_bajarin:
you
jay_goldberg:
any
ben_bajarin:
to
jay_goldberg:
more they're not not any more they're not
ben_bajarin:
okay
jay_goldberg:
yeah
ben_bajarin:
dropped in said products but
jay_goldberg:
yes
ben_bajarin:
we're using said memory but again
jay_goldberg:
oh
ben_bajarin:
no no competitive advantage just kind of so i am curious again to your point on that so like you mentioned the levers
jay_goldberg:
that's
ben_bajarin:
maybe
jay_goldberg:
good
ben_bajarin:
is battery
jay_goldberg:
yeah
ben_bajarin:
um but does i don't think we
jay_goldberg:
m
ben_bajarin:
i think we need i think most companies still
jay_goldberg:
a
ben_bajarin:
need them for trailing
jay_goldberg:
oh
ben_bajarin:
edge like i'm not sure
jay_goldberg:
oh
ben_bajarin:
m that we other foundaries have enough capacity trailing edge to meet the man i kind of feel like that is
jay_goldberg:
oh
ben_bajarin:
there so again not that that's
jay_goldberg:
yea
ben_bajarin:
their advantage is they have a lot of capacity in trailing it not that there's anything unique there but i don't know global
jay_goldberg:
yes
ben_bajarin:
foundaries i don't think has enough to satisfy the needs of the industry until definitely doesn't i'm just curious to perspect like is
jay_goldberg:
oh
ben_bajarin:
it is it does it come back to that basic fundamental point well we've
jay_goldberg:
m
ben_bajarin:
got all the capacity nobody else does
jay_goldberg:
yea i think that argument
ben_bajarin:
oh
jay_goldberg:
has lost a lot of its team in the last six months because
ben_bajarin:
oh
jay_goldberg:
there aren't a lot of segments that are seeing tight capacity any more right even
ben_bajarin:
well
jay_goldberg:
in trailing
ben_bajarin:
in the
jay_goldberg:
edge like trailing she was going to be the last to come off and i think for
ben_bajarin:
yeah
jay_goldberg:
the most part we started to see a
ben_bajarin:
oh
jay_goldberg:
lot significant loosening in legacy capacity just in the last few months
ben_bajarin:
yes
jay_goldberg:
and
ben_bajarin:
yes
jay_goldberg:
the china fabsfelt
ben_bajarin:
yeah
jay_goldberg:
it two months before that
ben_bajarin:
yeah oh
jay_goldberg:
quotes quotes getting from china fas now for you know two hundred millimeter
ben_bajarin:
oh
jay_goldberg:
wafers and sixty whatever enemy sixty five the nemyrnup a hundred eighty nnimeter i mean those prices those prices are down fifty percent this year at least because they're just desperate
ben_bajarin:
yeah
jay_goldberg:
to fill fill their lines so yes they have capacity but i don't think that's a that's that's not a scarce resource and is certainly not a reliable one because i think there's a lot of still a lot of plans in the u s to add capacity
ben_bajarin:
oh
jay_goldberg:
and i think that's one of the big changes at stake places the u s industrial base especially automotive has woken up to the fact that
ben_bajarin:
yeah
jay_goldberg:
they're very dependent on china and that they're at the end of the q when it comes to capacity and they are very likely to take some steps in the next few years to address that and you know actually i'm more worried that the u s is going to have over capacity and trailing edge a year or two just based on some of the plans people has in place so
ben_bajarin:
m
jay_goldberg:
i don't think that
ben_bajarin:
m
jay_goldberg:
really that
ben_bajarin:
so
jay_goldberg:
capacity
ben_bajarin:
and then
jay_goldberg:
is long advantage
ben_bajarin:
so okay so that's a good point i think and i've sort of
jay_goldberg:
oh
ben_bajarin:
pointed this out to some things i've said on twitter like like the one area that i think it is constrained is
jay_goldberg:
yes
ben_bajarin:
is the lead edge and call that seven five ninimeter beyond obviously three dintimeteris going to be super constrained from t s m c um
jay_goldberg:
oh
ben_bajarin:
but before i make a broader
jay_goldberg:
yeah
ben_bajarin:
point about that everybody is also trying to you know call it on
jay_goldberg:
oh
ben_bajarin:
shore some manufacturing i again think this is going
jay_goldberg:
m
ben_bajarin:
to be really hard so so i guess the question is how much maybe
jay_goldberg:
yes
ben_bajarin:
leverage would china have on the manufacturing front where
jay_goldberg:
yeah
ben_bajarin:
enough companies still have to go there to have
jay_goldberg:
yeah
ben_bajarin:
some form of assembly um do you think that could still be an area maybe their lever is just going to be where we could still just pull on something that we have some leverage
jay_goldberg:
yes
ben_bajarin:
with assembly because you might not always be able to cut us out or at least everybody may not be able to cut them out
jay_goldberg:
so if i was a us company and i decided i want to stop any reliance on china
ben_bajarin:
yah
jay_goldberg:
today
ben_bajarin:
h
jay_goldberg:
where would where would i be stuck right and i think in semi it's it's maybe it's
ben_bajarin:
ye
jay_goldberg:
it's packaging and test i'm probably pretty relying on china for that at this point even if i'm getting
ben_bajarin:
yeah
jay_goldberg:
it from a us or a
ben_bajarin:
m
jay_goldberg:
south east egan company
ben_bajarin:
m
jay_goldberg:
chance our facilities in china then there's final assembly
ben_bajarin:
m oh
jay_goldberg:
um m
ben_bajarin:
ah yeah
jay_goldberg:
everything else i can probably source somewhere else but
ben_bajarin:
yeah
jay_goldberg:
that being said
ben_bajarin:
m
jay_goldberg:
those alone are a pretty significant piece of
ben_bajarin:
oh
jay_goldberg:
the pie hair right and
ben_bajarin:
yes
jay_goldberg:
it's not something it's easily easily fixed um i couldn't shut off my
ben_bajarin:
yah
jay_goldberg:
back end flows
ben_bajarin:
h
jay_goldberg:
quickly
ben_bajarin:
a
jay_goldberg:
i would be really really scary to do that
ben_bajarin:
yeah well
jay_goldberg:
so i
ben_bajarin:
and
jay_goldberg:
want
ben_bajarin:
i
jay_goldberg:
to
ben_bajarin:
think
jay_goldberg:
spend a few
ben_bajarin:
it
jay_goldberg:
years to move it
ben_bajarin:
i think it airs to
jay_goldberg:
oh
ben_bajarin:
at least where you're seeing some successful moving out of china for for those parts of assembly
jay_goldberg:
oh
ben_bajarin:
um
jay_goldberg:
oh
ben_bajarin:
is not terribly high volume areas you know p cs are doing this now every major p t o m is moving into some version of tion actually on that on that point i'm not sure if you
jay_goldberg:
yeah
ben_bajarin:
browsed the halls at c s
jay_goldberg:
yeah
ben_bajarin:
if you had time but it was in and you know i tweeted this you know years ago we should have hit you up when you were there because that would have been fun for the three of us to do this but years
jay_goldberg:
oh
ben_bajarin:
ago benedict evans and i would
jay_goldberg:
yeah
ben_bajarin:
just go in the shenzn halls and just look at like every that they were making at scale you know it went from like ea cigarettes
jay_goldberg:
yeah
ben_bajarin:
to vapors to self sticks like just stuff that was going on like all contract manufacturing
jay_goldberg:
oh
ben_bajarin:
and it was interesting because this year there was a lot less from shenzen but partially that was probably because a lot of covid i don't think they could all get out of the country but there was a lot more from you know mlasia
jay_goldberg:
yeah
ben_bajarin:
and vitnamumindia even france like other countries had shown up with contract manufacturing boots and again not that they can do that scale it was just several years ago those
jay_goldberg:
oh
ben_bajarin:
companies were never there showing contract manufacturing now they were and i just thought that was interesting
jay_goldberg:
yeah but i think that that scale part is the key right
ben_bajarin:
yeah
jay_goldberg:
you know you and you and
ben_bajarin:
yeah
jay_goldberg:
i could go out and mill up on an
ben_bajarin:
yes
jay_goldberg:
i phone and we could spend you know that could be our hobby take a year building
ben_bajarin:
well
jay_goldberg:
our own phone but that's you know that's not the hard part the hard part is doing you know four hundred million
ben_bajarin:
yeah
jay_goldberg:
of them a year
ben_bajarin:
right
jay_goldberg:
and there's no place else in the world that can do that in china so
ben_bajarin:
right
jay_goldberg:
i was working with a company two two years ago and
ben_bajarin:
oh
jay_goldberg:
it was the middle of
ben_bajarin:
oh
jay_goldberg:
covid so that was a little bit of a factor but we just couldn't get to china so we
ben_bajarin:
oh
jay_goldberg:
we wanted to manufacture our little io
ben_bajarin:
oh
jay_goldberg:
t device and we were trying to get it built
ben_bajarin:
m
jay_goldberg:
in the us and
ben_bajarin:
m oh
jay_goldberg:
it was so painful it was just so painful
ben_bajarin:
yep
jay_goldberg:
right every step of the way we had to we had
ben_bajarin:
yes
jay_goldberg:
a contract manufacturer but they could
ben_bajarin:
oh
jay_goldberg:
they just they didn't know how to do things right oh what's that we've never seen that machine before like we had
ben_bajarin:
ye
jay_goldberg:
to literally
ben_bajarin:
yes
jay_goldberg:
rent a machine for them ship
ben_bajarin:
oh
jay_goldberg:
it to their floor ourselves and then go out and train their employes how to use it and every every time there was a change it was a hassle like in shanjan none of that exists like oh you need a new machine all right i'm gonna call up the guide down the block he's got
ben_bajarin:
oh
jay_goldberg:
five at least them to me for three months it and he has a team of people who just do that just work on that machine and well you know we'll contract them out for that time
ben_bajarin:
yeah
jay_goldberg:
the depth of manufacturing experts in china
ben_bajarin:
yeah
jay_goldberg:
is immense and i think i mean i've
ben_bajarin:
ye
jay_goldberg:
been thinking about this a lot lately is just like manufacturing as a
ben_bajarin:
yes
jay_goldberg:
a competitive advantage manufacturing is a skill is something
ben_bajarin:
yep
jay_goldberg:
i don't wan to say we lost it in the us but certainly china has an immense immense advantage and we definitely don't have it for consumer lecronics
ben_bajarin:
yeah
jay_goldberg:
the way that china have
ben_bajarin:
not not
jay_goldberg:
yeah
ben_bajarin:
even close and it's tricky too
jay_goldberg:
yeah
ben_bajarin:
because a lot of organizations
jay_goldberg:
yeah yeah
ben_bajarin:
who did you know work with china for mass manufacturing at scale you know they imparted a lot
jay_goldberg:
right
ben_bajarin:
of their own proprietary
jay_goldberg:
ye
ben_bajarin:
manufacturing knowledge to aid in that efficient
jay_goldberg:
yeah
ben_bajarin:
efficiency um you know i think you ben thompson
jay_goldberg:
oh
ben_bajarin:
pointed this out in a note you know i go about
jay_goldberg:
oh
ben_bajarin:
how much apple has also invested in knowledge in to their foundaries and that collaboration has led to a situation they
jay_goldberg:
sure
ben_bajarin:
just can't get out of because they have created in some cases
jay_goldberg:
ah
ben_bajarin:
like manufacturing process that the said companies couldn't do on their own to help them scale their products and that's not going to get get moved out but apple is not the only one that done that and so you kind of again come back to this what can i do at scale what can i can't and that's why i again i start just come back to
jay_goldberg:
yeah
ben_bajarin:
what leverage could they
jay_goldberg:
oh
ben_bajarin:
could they pull in this again if
jay_goldberg:
oh
ben_bajarin:
something like an unofficial technado happened and tries to hit them with sanctions like what levers
jay_goldberg:
oh
ben_bajarin:
can they pull and i i still feel
jay_goldberg:
yeah
ben_bajarin:
like this element of manufacturing
jay_goldberg:
a
ben_bajarin:
could get really tricky
jay_goldberg:
oh
ben_bajarin:
if they wanted it i mean again they could just hoot themselves in the foot and so your argument could be well
jay_goldberg:
oh
ben_bajarin:
they won't do that there's
jay_goldberg:
yeah
ben_bajarin:
i on't know you've seen this stat but somebody gave this to me i
jay_goldberg:
yeah
ben_bajarin:
can't say who but that
jay_goldberg:
yeah
ben_bajarin:
in some regions apple is almost two percent of g d p so like if if they just were like hey we're not going to like they would shoot themselves economically in the foot to cut out cut apple off from something like that right so you could argue there's an
jay_goldberg:
yeah
ben_bajarin:
economic reason that they don't but i just keep coming back to if everything hits the fan
jay_goldberg:
yeah
ben_bajarin:
and it just gets really ugly what could they pull and i just you know at scale manufacturing is one of those things they could get really difficult with if they wanted to
jay_goldberg:
yeah i saw a staff that there
ben_bajarin:
oh
jay_goldberg:
are five million people five million people in china employed
ben_bajarin:
oh
jay_goldberg:
apple not directly but through moth players of contractors and sub contractors and so putting five million people out of work even you
ben_bajarin:
oh
jay_goldberg:
know even in china that's a big number
ben_bajarin:
yeah
jay_goldberg:
you just didn't want ess with that
ben_bajarin:
oh
jay_goldberg:
you know i've been watching i was watching this video on tik tok
ben_bajarin:
oh
jay_goldberg:
recently about this guy is a captain of a giant suez max containership he he he's in dry dock now somewhere
ben_bajarin:
yeah
jay_goldberg:
in east china
ben_bajarin:
oh
jay_goldberg:
it's just like this incredible it's basically a manufacturing there you know they're you know
ben_bajarin:
yes
jay_goldberg:
cleaning up the ship and overhauling it right so it's basically
ben_bajarin:
yeah
jay_goldberg:
a manufacturing process of refurbing a ship it's just like it's the staggeringly complicated like lasar guided everything and like hundreds
ben_bajarin:
yeah
jay_goldberg:
of people and just like just this year amount of capital invested in that and having all these skilled workers
ben_bajarin:
yea
jay_goldberg:
on site able to do the job it's you know
ben_bajarin:
yep
jay_goldberg:
and there's you know three ships
ben_bajarin:
yeah
jay_goldberg:
just like his sitting in the next and the next two dry docks over like
ben_bajarin:
yep
jay_goldberg:
that that scale of things and that's you know
ben_bajarin:
i
jay_goldberg:
that's not ships that's just very straight forward metal bending and
ben_bajarin:
yep yep
jay_goldberg:
right and you you see that too i mean wan to get really alarmed as we can look at production
ben_bajarin:
oh
jay_goldberg:
of naval ships trying to verse the u s it's just off the charts
ben_bajarin:
yeah
jay_goldberg:
ahead of us i mean our
ben_bajarin:
yeah
jay_goldberg:
speed is much bigger but there's is growing ridiculously fast because of huge huge
ben_bajarin:
yeah
jay_goldberg:
capacity to build ships in china
ben_bajarin:
yep
jay_goldberg:
so
ben_bajarin:
yep
jay_goldberg:
and so you
ben_bajarin:
well
jay_goldberg:
sort of apply the same logic applies to manufacturing
ben_bajarin:
oh
jay_goldberg:
of electronics like you know you think about it from hong kong
ben_bajarin:
oh
jay_goldberg:
to gang joe's about a hundred miles
ben_bajarin:
oh
jay_goldberg:
and there's thousands of companies and millions tens of millions of people employed and they're all doing some part of electronic manufacturing it's just
ben_bajarin:
yeah
jay_goldberg:
like it's so deep and so evolved complicated and
ben_bajarin:
yeah
jay_goldberg:
i do i just want to i want to give a shout out to patrick meg at the financial times
ben_bajarin:
yeah his
jay_goldberg:
actually
ben_bajarin:
article
jay_goldberg:
just
ben_bajarin:
is good
jay_goldberg:
published he just published on this and you know i did some he quoted me a couple times and i did some background work with him but like he really really dug into the subject an amazingly source piece just looking
ben_bajarin:
oh
jay_goldberg:
at like how china
ben_bajarin:
oh
jay_goldberg:
got so deep how apple got so deep into china and talking
ben_bajarin:
oh
jay_goldberg:
on those topics you were just mentioning like how they
ben_bajarin:
oh
jay_goldberg:
really helped
ben_bajarin:
yes
jay_goldberg:
fox
ben_bajarin:
oh
jay_goldberg:
can and it and it's some contractors
ben_bajarin:
oh
jay_goldberg:
learn how to do this
ben_bajarin:
oh
jay_goldberg:
um an apple apple special like they're clearly in a cast class of their own when it comes to these things but you think about all the other companies that aren't apple
ben_bajarin:
yeah
jay_goldberg:
who taught their chinese j v partner how to do these things and then said
ben_bajarin:
yeah
jay_goldberg:
all right you know we're
ben_bajarin:
exactly
jay_goldberg:
not do this at home we'll just let you
ben_bajarin:
yeah
jay_goldberg:
do it
ben_bajarin:
yeah now and there's plenty of
jay_goldberg:
oh
ben_bajarin:
those and you bring up this there's a other excellent point is that they're there economy at large
jay_goldberg:
oh
ben_bajarin:
relate to this is not just the manufacturing they're also very good at exporting those goods
jay_goldberg:
yeah
ben_bajarin:
from town to town on two ships on two packages at
jay_goldberg:
m
ben_bajarin:
a scale
jay_goldberg:
oh
ben_bajarin:
that no other country could do and i didn't know
jay_goldberg:
a
ben_bajarin:
this you probably know this
jay_goldberg:
eh
ben_bajarin:
but i bought you know one of those
jay_goldberg:
oh
ben_bajarin:
shipping containers for for storage in the backside of of my yard
jay_goldberg:
oh
ben_bajarin:
you know for people who don't no i have a small
jay_goldberg:
oh
ben_bajarin:
many farm and animals and i needed something to put like my tractor and a whole host of other stuff and i was like why how are we able to buy you know these
jay_goldberg:
m
ben_bajarin:
shipping
jay_goldberg:
oh
ben_bajarin:
containers for you know three s and dollars and they're
jay_goldberg:
yes
ben_bajarin:
like oh you know trying to just make some ship them over here and leave them they don't
jay_goldberg:
oh
ben_bajarin:
want them back because it just cost too much they just keep making new ones on their grounds new shipping containers on a regular basis like so there's people out just mask producing shipping containers
jay_goldberg:
yeah
ben_bajarin:
and
jay_goldberg:
oh
ben_bajarin:
all there there one time disposable usage
jay_goldberg:
oh
ben_bajarin:
i was like that's insane china doesn't want them back so we can sort
jay_goldberg:
oh
ben_bajarin:
of sell them because it just it's cheaper for them to make a new one and i was like that that's crazy
jay_goldberg:
yeah
ben_bajarin:
uh
jay_goldberg:
yeah
ben_bajarin:
h oh
jay_goldberg:
hopefully some of that will ease up now the shipping industry is rationalizing but
ben_bajarin:
m oh
jay_goldberg:
probably also means you can get them for even less now
ben_bajarin:
yeah
jay_goldberg:
yeah
ben_bajarin:
believe me there's there's there's there's there's the point is there's just so many parts of that
jay_goldberg:
right
ben_bajarin:
of their machine
jay_goldberg:
oh
ben_bajarin:
that you just you just can't do especially at the costs right i mean as long as they i would i would be curious to like this is absolute hypothetical but if china was to ever
jay_goldberg:
yeah
ben_bajarin:
become democratic would
jay_goldberg:
yeah
ben_bajarin:
that drastic but it would have to have some impact on econeconomics like they would start charging a little bit more
jay_goldberg:
let's take the politics
ben_bajarin:
oh
jay_goldberg:
out of it like a the issue of democracy or any kind
ben_bajarin:
yea
jay_goldberg:
of government change in china i think just the law of economics and demography are going to dictate
ben_bajarin:
yeah
jay_goldberg:
as in this model and we've already seen it china is no longer the low cost labor hot spot right
ben_bajarin:
ye
jay_goldberg:
china labor has gotten fairly expensive
ben_bajarin:
oh
jay_goldberg:
right certainly if you want to hire like a semi conductor engineer that's super expensive and
ben_bajarin:
yeah
jay_goldberg:
we saw that in over the last year there have been multiple
ben_bajarin:
oh
jay_goldberg:
uh labor actions strikes or what not at fox
ben_bajarin:
i
jay_goldberg:
and other plants
ben_bajarin:
yeah
jay_goldberg:
and that and that you know there's there's lots of reasons behind that but a big part
ben_bajarin:
yes
jay_goldberg:
of it is just your economics those
ben_bajarin:
yeah
jay_goldberg:
those employes want to get paid more
ben_bajarin:
oh
jay_goldberg:
and so and you
ben_bajarin:
oh
jay_goldberg:
you know add that to the fact that china's labor force is probably at the point it's shrinking now
ben_bajarin:
oh
jay_goldberg:
labor in china has gotten expensive but their advantage
ben_bajarin:
right
jay_goldberg:
is not low cost labor any more that's why
ben_bajarin:
yes
jay_goldberg:
textiles are moving to bung dash it in places like that
ben_bajarin:
right
jay_goldberg:
because it's lower it's much lower cost labor so
ben_bajarin:
oh
jay_goldberg:
i think we're heading to that point now where where yes china's i mean i think that's the root of all this is china is looking for its next
ben_bajarin:
oh
jay_goldberg:
leg in development
ben_bajarin:
oh
jay_goldberg:
they've done really well on thirty forty years being low cost labor
ben_bajarin:
uh
jay_goldberg:
they make that out and now
ben_bajarin:
oh
jay_goldberg:
they need to find new sources of fundamental
ben_bajarin:
yeah
jay_goldberg:
economic
ben_bajarin:
right
jay_goldberg:
growth and they have to move up the value chain let's sort of right but the problem once you get to a certain point in that it becomes much harder
ben_bajarin:
right
jay_goldberg:
and i think to some degree they're a little bit stuck
ben_bajarin:
yeah no i agree with that so i want to i want to end
jay_goldberg:
oh
ben_bajarin:
on this this topic because it's something i've thought about and i'm sort of curious your take um you know i wrote
jay_goldberg:
yeah
ben_bajarin:
this article a while back called
jay_goldberg:
yeah
ben_bajarin:
the great tech wall of china and it was really just me pointing out
jay_goldberg:
oh
ben_bajarin:
you know that they are continually
jay_goldberg:
yeah oh
ben_bajarin:
trying to keep themselves in a box
jay_goldberg:
oh
ben_bajarin:
or at lea do a lot of stuff locally keep people out
jay_goldberg:
she
ben_bajarin:
but to some degree
jay_goldberg:
oh oh
ben_bajarin:
they're having or just not having the same success taking their
jay_goldberg:
ye
ben_bajarin:
whatever they're i p is or product or solutions as global as possible
jay_goldberg:
oh
ben_bajarin:
and so i always thought about this so what what's the broad
jay_goldberg:
oh
ben_bajarin:
how dependent would the chinese ecosystem on like let's just assume
jay_goldberg:
m
ben_bajarin:
they figure out cenis
jay_goldberg:
yah
ben_bajarin:
they figure
jay_goldberg:
yes
ben_bajarin:
out you know
jay_goldberg:
oh
ben_bajarin:
more in memory and there's completely
jay_goldberg:
oh
ben_bajarin:
self sustainable well for from an economic standpoint how critical is it that they take those technologies have global success or are they totally fine just being self sufficient to their own their own content
jay_goldberg:
no their whole economic model is premised on
ben_bajarin:
yeah
jay_goldberg:
exports and so if
ben_bajarin:
oh
jay_goldberg:
they move to self
ben_bajarin:
yeah
jay_goldberg:
entire self sufficiency with assuming the other side of that trade agreement reacts to
ben_bajarin:
yeah
jay_goldberg:
that and cuts them off
ben_bajarin:
yeah
jay_goldberg:
china's
ben_bajarin:
hm
jay_goldberg:
economy would be a big mess like this is this is a very
ben_bajarin:
m
jay_goldberg:
serious problem
ben_bajarin:
oh
jay_goldberg:
with with chinese economy right now is incredibly
ben_bajarin:
oh
jay_goldberg:
export dependent
ben_bajarin:
m
jay_goldberg:
if you look at like the domestic
ben_bajarin:
m
jay_goldberg:
chinese economy is in some ways dominated
ben_bajarin:
yeah
jay_goldberg:
by the big state own firms even and the
ben_bajarin:
of course
jay_goldberg:
not so big ones too right
ben_bajarin:
sure
jay_goldberg:
but
ben_bajarin:
sure oh
jay_goldberg:
but they're they're all losing money hand
ben_bajarin:
oh
jay_goldberg:
over fist
ben_bajarin:
yeah oh
jay_goldberg:
none of them are profitable
ben_bajarin:
yeah
jay_goldberg:
and they make their they make their it's viable because they get cheap loans from the banks
ben_bajarin:
yeah oh
jay_goldberg:
and the banks are propped up because they have
ben_bajarin:
m
jay_goldberg:
huge pools of us ollers
ben_bajarin:
m
jay_goldberg:
but they've gotten from the export economy
ben_bajarin:
yeah
jay_goldberg:
and so if if china export engine stalls
ben_bajarin:
yeah
jay_goldberg:
they have to sort of re define their woe economy they're probably on a have to do it anyway
ben_bajarin:
i
jay_goldberg:
but as it stands now they're it's all about exports
ben_bajarin:
yeah
jay_goldberg:
yeah
ben_bajarin:
so so in this case like like so again come back to like semi so a part of for this investment to make sense
jay_goldberg:
yeah
ben_bajarin:
or for them to onshoresemis it can't just be for local prod they need other other people in the world buy those products which means they have
jay_goldberg:
ye
ben_bajarin:
to be competitive or
jay_goldberg:
oh
ben_bajarin:
or this this model is
jay_goldberg:
yeah
ben_bajarin:
not going to work
jay_goldberg:
yeah that's right that's right i mean i think
ben_bajarin:
you
jay_goldberg:
most economists in china and a lot of
ben_bajarin:
no
jay_goldberg:
serious economists outside china recognized
ben_bajarin:
eh
jay_goldberg:
that china has to shift its economy from a very investment driven place where it is
ben_bajarin:
m
jay_goldberg:
today to a consumer
ben_bajarin:
m
jay_goldberg:
driven one so i would argue china is better off not worrying about self self reliance on semi and
ben_bajarin:
yeah
jay_goldberg:
instead focus on growing its
ben_bajarin:
oh
jay_goldberg:
domestic demand growing in domestic assumption because because that ultimately we'll be the big the best way to save their domestic companies a prop up their domestic economy because once you once you start to see a big domestic market supporting local companies that will that will shift these all these trade equations
ben_bajarin:
yeah
jay_goldberg:
incredibly
ben_bajarin:
right
jay_goldberg:
and and you know there's some serious structural changes that that will entail but i think to make it
ben_bajarin:
yes
jay_goldberg:
again let's bring it back to sami's one place where starting to see that a little bit is around electric vehicles this is this is my big big topic of the year is
ben_bajarin:
m
jay_goldberg:
chinese electric vehicle makers are
ben_bajarin:
oh
jay_goldberg:
on fire they're all growing twenty
ben_bajarin:
oh
jay_goldberg:
fifty hundred per cent a
ben_bajarin:
yeah
jay_goldberg:
year
ben_bajarin:
oh
jay_goldberg:
um and they need a lot of semi and i think there's a lot of china semi industry today domestic parts are going into china's
ben_bajarin:
h
jay_goldberg:
auto industry
ben_bajarin:
m
jay_goldberg:
and if you know it's
ben_bajarin:
yes
jay_goldberg:
only eves are probably twenty percent of china's cars if they get to
ben_bajarin:
yeah
jay_goldberg:
eighty per cent and that's enough to support a pretty pretty healthy robust fantisimican fair industry
ben_bajarin:
that's a good point
jay_goldberg:
oh
ben_bajarin:
oh interesting so do you do you think there will ever come another scenario like we saw
jay_goldberg:
ah
ben_bajarin:
with with a where
jay_goldberg:
m oh
ben_bajarin:
are product companies there just get cut off from the rest of the world
jay_goldberg:
oh
ben_bajarin:
products because because i mean again
jay_goldberg:
a
ben_bajarin:
i intend to agree with you right if they don't don't worry about on sharing semi as long as
jay_goldberg:
oh
ben_bajarin:
you can get it from other places what happens
jay_goldberg:
oh
ben_bajarin:
if they can't get it from other places and that completely destroys their consumer lecture ex industry as a whole outside of a few pockets like you point out so that's why i kind of go back to how much of this is an attempt at a defensive you know we need to do this just in case versus the reality of could they truly get cut off from from from components from the rest of the world
jay_goldberg:
i think that's the big the big question i still have about the us government's intentions are they are they just try do cut off china's military and it's advanced compute capacities or are they trying to stifle the entire chinese economy
ben_bajarin:
right
jay_goldberg:
and if you talk to most us government people to say don't know it's just the milit but no one in china
ben_bajarin:
yeah
jay_goldberg:
believes that every one in china assumes that
ben_bajarin:
oh
jay_goldberg:
it's whole chinese economy and cars are one of those places where it's going to become very very clear very soon what's going to happen because you know the us
ben_bajarin:
oh
jay_goldberg:
government has this sanctions weapons and you listen to those policy people talk they're pretty excited about this shiny new toy they have and
ben_bajarin:
oh
jay_goldberg:
so i'm i
ben_bajarin:
oh
jay_goldberg:
think it's very reasonable to assume that here
ben_bajarin:
m
jay_goldberg:
on to be a lot more companies added to the energy
ben_bajarin:
m
jay_goldberg:
list or whatever stub list that you know leads into that and very
ben_bajarin:
yeah
jay_goldberg:
likely that some of those will you really
ben_bajarin:
ye
jay_goldberg:
crimp you do that enough times you can really crimp
ben_bajarin:
oh
jay_goldberg:
lots of other parts of china's economy not just
ben_bajarin:
exactly
jay_goldberg:
the export electronic stuff but the automotive stuff
ben_bajarin:
exactly
jay_goldberg:
i mean what if if the world has autonomy somebody
ben_bajarin:
yes
jay_goldberg:
really have autonomous vehicles in china
ben_bajarin:
yes
jay_goldberg:
cannot get access to advance semi conductors for any of
ben_bajarin:
exactly
jay_goldberg:
its autonomous vehicle companies that's it they're done
ben_bajarin:
yeah
jay_goldberg:
and so
ben_bajarin:
i mean and that's the thing is like you know us us companies who would have dependent on that revenue don't want that to happen but i agree with you that that's that's the risk this i'm sure is a topic will revisit multiple times
jay_goldberg:
yeah
ben_bajarin:
even though it it stresses me out and just makes me want to accelerate digging a bunker in my back yard
jay_goldberg:
really it's very stressful it really is stressful
ben_bajarin:
all right well good chat in this episode
jay_goldberg:
oh
ben_bajarin:
thanks everybody for listening and can continue to give us your thoughts and feedback and we'll talk to you next time
jay_goldberg:
oh by