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Cramer calls on U.S. to build factories to address chip shortage, unemployment!

Daniel Nenni

Admin
Staff member
  • “It’s time for our government to invest in building the biggest and best complex of semiconductor foundries … in the world,” CNBC’s Jim Cramer said in order to address a global chip shortage that’s affecting American businesses.

  • “Believe me, you’re going to start hearing about this shortage constantly, daily, because it’s wreaking havoc with all sorts of industries,” the “Mad Money” host said.

  • “Our companies can’t get enough chips because there’s not enough production worldwide, and that lack of chips is hurting all sorts of manufacturing,” he said.

 

prime007

Member
It seems like this is a trend...from Bloomberg:
EU Weighs Deal With TSMC, Samsung for Semiconductor Foundry

The key points:
1. EU is considering building an advanced fab to avoid relying on the US and Asia
2. EU is exploring how to produce semiconductors with features smaller than 10 nm and eventually down to 2 nm
3. The aim is to curtail dependence on countries like Taiwan and South Korea
4. The fab could be developed from an existing one or building a new one.
5. EU's outlined goal last year is to produce AT LEAST 20% of the world's chips/microprocessors by value
6. Europe, China, Japan and the US all are trying to increase/regain self-sufficiency in semiconductors. All are behind industry leaders Samsung and TSMC.
 

Arthur Hanson

Well-known member
It would be better to vastly expand the fabs we have. This would be far faster than trying to build expertise in construction, management and man power from scratch. TSM will rule no matter what, their lead in everything is just expanding fast with a huge capex budget with the deepest bench of expertise in all areas and vast economies of scale in literally everything. TSM's purchasing power also gives them additional leverage, let alone the depth and time frame of their criticaal relationships. Sadly, special interests rule in any US projects. I have worked in a national lab and silicon valley in data construction and maintenance.
 
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GloryDaze

New member
If the US govt was going to pour the hundreds of billions of dollars required to fund US onshore leading edge foundries they should have done it when GF desperately needed it and was asking for it...when GF still had a world class development team. Too late for that now, there is no US company left that can even dream of supporting leading edge except Intel and they are (1) not a foundry and (2) still struggling with leading edge it seems.

This is all too little too late for the US, they missed their chance. Sad. At this point just ask Samsung to keep investing in Texas and maybe add even more capacity there.
 

hist78

Active member
Or we could have better corporate leadership during a crisis period. But if mismanagement gets us US fabs I'm all for it. Go failed leadership go!

Cramer didn't touch one important issue: is US semiconductor industry really short of money to invest?

We can use the Intel as an example. During the recent earning conference call, Intel announced they will increase dividends by 5%.

But wait, I thought Intel is struggling in the leading edge nodes development and manufacturing. Why don't they put more money into action to solve those problems instead of paying more dividends to the shareholders?

Intel might argue that more money won't solve their R&D and manufacturing issues and they already have invested enough fund to solve the problems.

If that's the case, then why Intel needs taxpayers to inject more public money into their private business?

Yes, Intel does need a new CEO, but do they need a new board and a new chairman too?

There's a company who stupidly maintained nice dividends for several years until they found out they're fooling themselves.

That's the sorry story of IBM.
 
Or we could have better corporate leadership during a crisis period. But if mismanagement gets us US fabs I'm all for it. Go failed leadership go!
That's the sorry story of IBM.

My fave IBM fail story is how they took half of Intel's stock as payment for teaching them how to design logic chips, and after holding for a few years their leadership sold the stock riiight before Intel took off in the 90s.

Now those same cynics are doing trickle layoffs/forced retirements/outsourcing at GF to prepare for their IPO, in lieu of actual technological development.

It's almost like this has been the modus operandi for a certain generation of Americans and their supernational ownership groups, to sell off our social future for their immediate personal fortunes.
 

ChrisGar

Member
But wait, I thought Intel is struggling in the leading edge nodes development and manufacturing. Why don't they put more money into action to solve those problems instead of paying more dividends to the shareholders?
Good post. I don't think anyone believes that Intel failed at 10nm/7nm because of lack of funding.
 

lilo777

Member
Cramer didn't touch one important issue: is US semiconductor industry really short of money to invest?

We can use the Intel as an example. During the recent earning conference call, Intel announced they will increase dividends by 5%.

But wait, I thought Intel is struggling in the leading edge nodes development and manufacturing. Why don't they put more money into action to solve those problems instead of paying more dividends to the shareholders?

Intel might argue that more money won't solve their R&D and manufacturing issues and they already have invested enough fund to solve the problems.

If that's the case, then why Intel needs taxpayers to inject more public money into their private business?

Yes, Intel does need a new CEO, but do they need a new board and a new chairman too?

There's a company who stupidly maintained nice dividends for several years until they found out they're fooling themselves.

That's the sorry story of IBM.
Intel does not need taxpayers' money but US might need Intel to get back into semiconductor manufacturing game.
 

hist78

Active member
Intel does not need taxpayers' money but US might need Intel to get back into semiconductor manufacturing game.
Are we really sure Intel is the only one who can save US semi industry? I hope we can have some out of box thinking and new strategy instead of being forced to choose Intel. On the other hand, unless Intel comes back to the business to make chips for other companies and becomes very competitive, it won't satisfy the need from AMD, Nvidia, Qualcomm, IBM, and scores of DoD suppliers.
 

Daniel Nenni

Admin
Staff member
Are we really sure Intel is the only one who can save US semi industry? I hope we can have some out of box thinking and new strategy instead of being forced to choose Intel. On the other hand, unless Intel comes back to the business to make chips for other companies and becomes very competitive, it won't satisfy the need from AMD, Nvidia, Qualcomm, IBM, and scores of DoD suppliers.

I'm not convinced Intel fabs can make chips like TSMC does. TSMC has perfected their process recipes over the last 30 years working with a huge ecosystem of customers, partners, and suppliers. You can't download that and replicate it. UMC, GF, and SMIC have all stalled trying to FinFET it with TSMC. What makes you think Intel can do it and better?

And for those who think Intel can spin off their fabs like AMD did think again. That was a one time deal that involved a lot of back room dealing. And remember, IBM literally paid GF to take their fabs. If Intel wants to sell their fabs they should convert them into condos.
 

Snowman48

New member
I thought this investor perspective was particularly salient:


(1) What can Pres Biden really do to help reduce or eliminate semi supply chain bottlenecks that are slowing auto production? He (nor any amount of money) can just build new semi fab capacity overnight, or even in a matter of weeks and months).

(2) Semi companies are flush with cash, have high margins and strong balance sheets. They are paying pay investors with rich dividends and share buybacks. They are also spending aggressively on M&A. They do not need US govt incentives or money to compete against foreign players.

(3) INTC is one of the core problems in leading edge node semi production as it is the ONLY real US player. And more money or incentives is NOT GOING TO SOLVE INTC’S CURRENT PROBLEMS. INTC has some capacity constraints, but their problem is either process design or yield on these advanced process nodes (they won’t tell investors anything useful). Money and capacity is not the issue. They brought in a new CEO who is a grizzled INTC veteran to help solve the problem. He seems bullish it can be fixed internally. Just not sure what Biden can do to help.

(4) ASML is the only supplier of the critical production tools (called EUV) needed to shrink process node technology down below 10nm and 7nm to achieve competitive advantages in power consumption and performance. Without these tools, no country or semi fab will be able to effectively compete at smaller and smaller process nodes. But ASML EUV tool production output is limited per year and they are SOLD OUT through ’22. So no matter how much the EU or China or US help incentivize or loan money, EUV tools will not just magically appear out of the ether. TSM and Samsung seem to have pre-bought the large majority of ASML’s advanced EUV tools production output as both are farthest along in the ability to insert EUV into their process node. So not until after ’22 or later (at the earliest) would US and EU players be able to even purchase these EUV tools in any meaningful amount. ASML is expanding annual EUV tool output, but that is more an evolutionary process.

(5) Why do hedge funds think all of this talk of US govt involvement is 100% positive for INTC (stock up 3.1% yesterday) and bad for AMD (down most of day and up a mere 0.3%)? AMD was part of the group writing letter to Pres Biden. Any investment or support would still likely include AMD. View is that AMD outsources all production to TSM in Taiwan who would not get any of Biden’s money or support like INTC. I get that point, but this INTC long vs AMD short pair trade feels SO CROWDED and myopic that I continue to see a pain trade down the road for players. The US govt CANNOT really solve INTC’s 7nm yield issues. In fact, they may never be fully solved and INTC may have to push more leading edge node output to the hands of TSM. Since AMD is already a big existing customer, they get first dibs on TSM’s expanding capacity over INTC. And the AMD process technology on TSM is proven to work and currently generates good yields. TSM is spending upwards of $26-28B in annual capex in ’21 and onward to facilitate customers like AMD where demand is likely exceeding supply as they ramp next gen GPU and server chips.
 

lilo777

Member
I thought this investor perspective was particularly salient:


(1) What can Pres Biden really do to help reduce or eliminate semi supply chain bottlenecks that are slowing auto production? He (nor any amount of money) can just build new semi fab capacity overnight, or even in a matter of weeks and months).

(2) Semi companies are flush with cash, have high margins and strong balance sheets. They are paying pay investors with rich dividends and share buybacks. They are also spending aggressively on M&A. They do not need US govt incentives or money to compete against foreign players.

(3) INTC is one of the core problems in leading edge node semi production as it is the ONLY real US player. And more money or incentives is NOT GOING TO SOLVE INTC’S CURRENT PROBLEMS. INTC has some capacity constraints, but their problem is either process design or yield on these advanced process nodes (they won’t tell investors anything useful). Money and capacity is not the issue. They brought in a new CEO who is a grizzled INTC veteran to help solve the problem. He seems bullish it can be fixed internally. Just not sure what Biden can do to help.

(4) ASML is the only supplier of the critical production tools (called EUV) needed to shrink process node technology down below 10nm and 7nm to achieve competitive advantages in power consumption and performance. Without these tools, no country or semi fab will be able to effectively compete at smaller and smaller process nodes. But ASML EUV tool production output is limited per year and they are SOLD OUT through ’22. So no matter how much the EU or China or US help incentivize or loan money, EUV tools will not just magically appear out of the ether. TSM and Samsung seem to have pre-bought the large majority of ASML’s advanced EUV tools production output as both are farthest along in the ability to insert EUV into their process node. So not until after ’22 or later (at the earliest) would US and EU players be able to even purchase these EUV tools in any meaningful amount. ASML is expanding annual EUV tool output, but that is more an evolutionary process.

(5) Why do hedge funds think all of this talk of US govt involvement is 100% positive for INTC (stock up 3.1% yesterday) and bad for AMD (down most of day and up a mere 0.3%)? AMD was part of the group writing letter to Pres Biden. Any investment or support would still likely include AMD. View is that AMD outsources all production to TSM in Taiwan who would not get any of Biden’s money or support like INTC. I get that point, but this INTC long vs AMD short pair trade feels SO CROWDED and myopic that I continue to see a pain trade down the road for players. The US govt CANNOT really solve INTC’s 7nm yield issues. In fact, they may never be fully solved and INTC may have to push more leading edge node output to the hands of TSM. Since AMD is already a big existing customer, they get first dibs on TSM’s expanding capacity over INTC. And the AMD process technology on TSM is proven to work and currently generates good yields. TSM is spending upwards of $26-28B in annual capex in ’21 and onward to facilitate customers like AMD where demand is likely exceeding supply as they ramp next gen GPU and server chips.
Your investor perspective definitely has very little in common with US government perspective. For US, it's a strategic issue and not a short term problem. They have to fix it in a long term and not in 2021 or 2022. And as far as who gets what in terms of wafer allocations, I am not sure we get a good understanding of the process. Obviously, Intel may become a bigger customer than AMD overnight. Also, check this article: Financial analyst Dan Nysted revealed that the Taiwanese media is hinting at a change of course at TSMC to increase operating margins. To achieve this, TSMC would cut wafer allocations to its major customers to allow new companies to increase their wafer prices.
 

lilo777

Member
Unrelated but still interesting: DIY PC builder PowerGPU is reporting suspiciously high failure rate of AMD Ryzen 5000 series CPUs.

The failure on the new AMD CPUs are still too high.
AMD Ryzen 5950x x50 units 8 doa
AMD Ryzen 5900x x50 units 4 doa
AMD Ryzen 5800x x100 units 4 doa
AMD Ryzen 5600x x120 units 3 doa

We had only 1 dead Intel CPU it was a 9700k in our time of business
Doa: Dead on arrival


These numbers look unreal.
 

kg5q

New member
OK I have lived this insanity for the last 25 or so+ years. the MBAs and "professional managers" were brought in about then with spreadsheets and metrics everywhere along about 1995 or so. We must move everything especially our best technology as fast as possible to China" - but ahh. wait, you high paid guys want to send our best manufacturing and process technology to communist China maybe that's not a good idea are you sure?. - "don't be racist, you technical guys are always that way and really negative too, and yes we have to do it. You technical guys just don't understand the big picture - China doesn't require all the paperwork and nonsense EPA stuff - effluent out a hose to the river - no problem, permits nahhh - pay off the right people it gets done - substandard concrete - look the other way. "but I thought our company was the most green and ethical company on earth" - that's for the shareholders to read. Besides the children in China all have PhDs when they come out of the womb and speak 5 languages fluently, only require 2 dollars a month and they work 24 x 7 and can bend metal utensils with their mind powers. Plus we get government incentives to shut it down just like the steel industry in the 80s - has to go we don't need that here non-strategic operations - not our core competency - we must focus Danielson.. We make money now by moving paper and data around - tangible stuff was cool in the late 1800s and early 1900s but now... yuck dirty, messy... Lets lay off all the expensive experienced people here in NA they are old, fat, overpaid and stupid plus HR risk is high they want benefits and stuff like that... - China is so cool and hip and trendy and all the neato kid CEOs are doing it so we must too - its all for shareholder value and the investors and plus my multimillion dollar bonus is predicated on doing all this so everyone out of the way or you are all roadkill.

so... fast forward 30 years or so go by... we wake up and - "how did all our technology and dependence on China happen? my goodness. everyone.. defcon 2! ideas... people...start thinking and brainstorming... can we hire any of those smart old technical people back we threw off the ship? Now the government is involved (they always have a great track record of improving things its so great, what could go wrong?) - and the marching cry is "how could this have happened? lets fix it in a quarter we are Americans after all we put a man on the moon and won WW2 (with smart people in NA BTW) - how can China be ahead of us? automotive lines are shut down... what has to be done!" we need more VPs and MBAs thrown at the problem... KPI's MBO's, spread sheets for everyone - more online zoom meetings must be held. - was it Archimedes who said "give me a spreadsheet large enough and I can move the world?" - with the track record of our executive myopic "its for the shareholders this quarter- nothing personal" finance background talent we now have in the industry with all the technology grounded entrepreneurial visionary risk takers long gone and the MBA spread sheet finance people solidly in charge who is going to do the work? when it cant be simulated or PR department "sanitized for the investors" when stuff has to actually be achieved successfully and work - who is going to do the real stuff - whoopsies Harvard didn't cover that part in MBA -CFO school? besides the "leadership is only around long enough to punch their ticket enhance the resume, make bank- aggrandize themselves and poof.. off to the next company maybe in a different industry -(unless they are doing some grabby grabby touchy lady chasing or something then they just go poof anyways when it cant be covered up and (the interim person is put in) its not about building something that works and lasts for the long haul. Irreparable damage has been done violating Steven Coveys "law of the farm" - make the quarter - make the quarter - make it look good for wall street… every quarter for the last 25-30 years got us to where we are. now we want another quick fix out of it - it took a long time to get here and now of course we want an immediate solution or soundbite our way out of it... I have no words after 25+ years of "not getting it-and seeing the big picture". Mom and Dad both said "Timmy you better not steal the keys to the Ferrari and take a case of whisky and some girls out for a spin" its not a good idea.... now the police have called and the Ferrari is wrecked and the girls parents are furious.. now Mom and Dad are trying to not say "we told you so".
 

benb

Member
Quite a post kg5q! I especially liked “we need more VPs and MBAs thrown at the problem!”

I worked at a fab where they threw McKinsey at the problem. This was in 2006 and 2007, in 2009 the fab shut down for good.

I think it must be a shock for software-oriented management, when they encounter the manufacturing sides of businesses like Intel, or Infineon. In manufacturing, so much depends on regularity, predictability. Software is the opposite—you sprint, get into a market and sprint to the next thing. It’s true that software is eating the world, and scales better than hardware. So I don’t think there was any big conspiracy, over the last 25-30 years. Intel is part software, and that’s the part that sustains them now. Same at AMD. It was just the obvious move.

To build fabs in the US, you need more of everything we don’t have anymore. You need more chemicals, concrete, skilled trades, machine shops, electrical grid upgrades, road upgrades, and most of all predictability. In Asia, somehow, they get predictability. Here, things can be predictable, in a bad way, and unpredictable in a bad way. Just discussing government involvement in an industry, which we think of as fine in the US, doesn’t sound fine in Asia. It sounds like a big change. Unpredictable.

I feel like there is a role for government, in getting infrastructure in place, making it possible to permit new global scale chemical production, and the rest. It would help semiconductors, and other chemical-oriented industries. Its an uncomfortable fact that fabs rely on reliable supplies of chemicals, more than anything else, and we’re constrained in the US. We import a lot, and it’s crazy; expensive, takes 6-8 weeks, and you have to keep a 40 day supply. In Asia, they can operate lean and mean and bank the cost savings. The US supply chain has holes everywhere though, from PPE (my god, we have to be able to make N95 and surgical masks in the USA!!), to production of certain grades of steel, to high spec high volume machine shops. A million little holes.

It’s a lot of little things, little cuts and efficiencies, that got us in the helpless position we are today, begging for Lithium, rare earths, high purity chemicals, PPE, etc. It can be reversed, but, the strategy is still the same, slow decline. I think all of us would notice if the US strategy truly changed. But it hasn’t yet.
 

kg5q

New member
Quite a post kg5q! I especially liked “we need more VPs and MBAs thrown at the problem!”

I worked at a fab where they threw McKinsey at the problem. This was in 2006 and 2007, in 2009 the fab shut down for good.

I think it must be a shock for software-oriented management, when they encounter the manufacturing sides of businesses like Intel, or Infineon. In manufacturing, so much depends on regularity, predictability. Software is the opposite—you sprint, get into a market and sprint to the next thing. It’s true that software is eating the world, and scales better than hardware. So I don’t think there was any big conspiracy, over the last 25-30 years. Intel is part software, and that’s the part that sustains them now. Same at AMD. It was just the obvious move.

To build fabs in the US, you need more of everything we don’t have anymore. You need more chemicals, concrete, skilled trades, machine shops, electrical grid upgrades, road upgrades, and most of all predictability. In Asia, somehow, they get predictability. Here, things can be predictable, in a bad way, and unpredictable in a bad way. Just discussing government involvement in an industry, which we think of as fine in the US, doesn’t sound fine in Asia. It sounds like a big change. Unpredictable.

I feel like there is a role for government, in getting infrastructure in place, making it possible to permit new global scale chemical production, and the rest. It would help semiconductors, and other chemical-oriented industries. Its an uncomfortable fact that fabs rely on reliable supplies of chemicals, more than anything else, and we’re constrained in the US. We import a lot, and it’s crazy; expensive, takes 6-8 weeks, and you have to keep a 40 day supply. In Asia, they can operate lean and mean and bank the cost savings. The US supply chain has holes everywhere though, from PPE (my god, we have to be able to make N95 and surgical masks in the USA!!), to production of certain grades of steel, to high spec high volume machine shops. A million little holes.

It’s a lot of little things, little cuts and efficiencies, that got us in the helpless position we are today, begging for Lithium, rare earths, high purity chemicals, PPE, etc. It can be reversed, but, the strategy is still the same, slow decline. I think all of us would notice if the US strategy truly changed. But it hasn’t yet.
thanks, I am a recovering wise ^@! and they keep taking my chip away at the meetings. You are right we not only gave away the leadership in the core thing the little we gave up the many little things needed to make the core thing - willingly. "Not strategic, not our core competency." Look at GE, the leadership there was a what to do playbook in the day, well retrospectively maybe not.... I guess it turns out making hard things to make might be important to somebody someday. The Government could help for goodness sake we are facing down gov sponsored competition from others. My concern is that other than where they are needed they will try to "help" - sometimes you have to say - for goodness sake please stop helping... sometimes. - Semis are a strategic initiative gov sponsored now in Taiwan, Korea, China, Europe so... hey maybe we might be interested too.. Where i worked once we were in love with Boston Consulting group - that worked out swell. As Daniel said it was not for lack of money - it was the money was used to appease "the investors" vs spending on getting ahead in technology. What I saw was our customers were no longer the customers, wall street were the customers. Big difference... you can only sell your seed corn so many times and then... uh ohhh... turns out all that stuff and technical talent are important after all - "lets just get it back, it can't be that hard" says the finance guy who knows the price of everything but the value of nothing. Remember one of Dilbert's pointy haired bosses key management principles -"anything I don't understand must be easy."
 
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