You want to know why we have a semiconductor shortage? I will tell you. It's because of "doneness."
Don't know doneness? That's the word people use at Weber (WEBR) , the grill maker that came public today, when they are describing if your steak's done or undercooked. It's all part of the new portfolio of products that go with Weber grills, which now use Wi-Fi and Bluetooth to keep you from burning your steak and ruining the party.
I gleaned this information and so much more when I met with the management team of the iconic grill company, when it rang the opening bell for its successful offering, one that was reduced in size rather dramatically because of the IPO fatigue that we have been describing of late. And while the information is terrific when you are picking a grill, it is even more informative when you think how the world has changed and how we are in an endless race to catch up with chip demand. New devices like a grill that stops a steak from burning to a crisp requires a ton of semis to work. Weber's got to keep bird-dog of the suppliers to be sure there are enough chips to meet the demand of what I think will be a big hit of a product.
Weber's just the latest company I have seen in an endless parade of new devices that need full function chips, ones that aren't for hyper performance computing, the kind you need in the data center. Many of the best semiconductor companies, like Advanced Micro Devices (AMD) and Nvidia (NVDA) , are chasing much more dynamic, fast, and expensive specialized chips that are at the cutting edge of technology.
You don't need those kinds of chips to measure doneness.
You also don't need that many of these for many other uses, either. Sure Nvidia and Intel's (INTL) Mobileye are in a battle for autonomous driving supremacy, but most of the technology that goes into an electronic vehicle is more of the full-functioned variety. I cringed today when I heard about President Joe Biden meeting with the big automakers about going more electric vehicle in a faster fashion. That's going to require a level of semiconductor manufacturing that's well beyond what we can make. It's bad enough that on Wednesday the stock of GM (GM) got clobbered because it couldn't meet demand for some of its best-selling models, because they use chips from Malaysia and there's been an outbreak of COVID that's shutting down production. Forget 50% of cars going EV. What happens when electric cars make up 4% from the current 2%? I think it can't happen because of the chip shortage.
It's actually even worse than I am making it out to be. If we are going to be able to provide enough chips to make these devices, we are going to have to have every big foundry company, like Global, Samsung and, most important Taiwan Semi (TSM) . Our major semiconductor companies rely heavily on Taiwan Semi.
The Chinese know this. They want to make foundries that can match Taiwan Semi. But they need powerful semiconductor manufacturing equipment to do so, especially $150 million ultra violet lithography machines made by ASML (ASML) , a Dutch company, that is currently being pressured by the U.S. not to sell them to the Chinese.
The more we ratchet up the pressure against the Chinese with actions like this, the more the Chinese may get desperate enough to squeeze the Taiwanese.
As long as there are issues throughout the semiconductor supply chain, many companies -- even our whole country -- are vulnerable to outside forces that are beyond our ken.
Innovations that need semis are not going to stop. Weber's CEO Chris Scherzinger pointed out to me that the next big innovation will be something that's going to save a lot of marriages -- a device that tells you whether your grill is about to run out of propane. That's worth its weight in gold. Or, going forward, perhaps we should say, worth its weight in semis. That's how precious and priceless they've become to both our country, and, more important the People's Republic of China, which may not tolerate our squeezing their semiconductor companies for long before they feel compelled to take action against us.
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