What do you do when you confront two national emergencies, a critical shortage of manufacturing and an horrendously high unemployment rate at the same time?
You figure out how to fix it without fear or rancor or pettiness and party lines.
After summoning tremendous resources to help successfully create vaccines in record time, something that no one company could do, now it is time for the new government to address something that has to be done with tremendous speed and tons of capital and yet no real champion in Washington.
It's time to build the biggest and best complex of semiconductor foundries in the world and we can do it because it's just so good for so many people, states, companies, and the United States of America.
As you will hear today from still one more company, General Motors (GM) , the company, a gigantic employer here, has all of these new in-demand vehicles that simply can't be made because the company does not have enough semiconductors for all the requirements of the modern day car and truck. We heard that a similar shortage bedeviled some of their competitors, including Ford (F) which may lose as much as $1 billion to $2 billion this year -hopefully just pushing back and not banging down one of the great industrial recoveries of the ages.
Some of the shortage is natural. We outstripped supply when we as a nation went hybrid: you basically build a second set of work spaces in a year and to do that you needed more electronics than anyone ever thought. Going from a selfie to a zoomie generation is a real chip hog. We are eating these chips like Doritos at half time.
But some of the chip shortage is geopolitical, part of the great, thoughtless, headlong, profit-mongering just-in-time mindset where the customers decided that they were agnostic where chips were made, the semiconductor companies decided to go "foundry lite" and for the most part we ceded the actual manufacturing of chips to a couple of huge Asian companies, mostly Taiwan Semi (TSM) and Samsung.
These are incredible companies. But they are international in origin and work to fulfill orders from all countries, especially the U.S. and China. Our chip clients pride themselves on "just in time" ordering, so they can just have the chips in at the pace they need them: smart, until it's not, like when everyone needs them.
The Chinese? They operate on a "just in case" model: order and order just in case there is a shortage and then stock 'em like double and triple order them like toilet paper at Costco (COST) .
And that's where we find ourselves. Our companies are ordering chips from the companies we know and like and trade, and those companies can't get the chips they need to meet the demands of the Fords and GMs.
Now, there are two ways to approach this. We can bemoan the Chinese and beg or cajole the Koreans and the Taiwanese to build plants here. Or we can roll up our sleeves, Warp Speed like, and get the job done ourselves. I spent a considerable amount of time reporting on how the previous administration dealt with these problems and they tended to wrap them into defense issues and the need to protect Taiwan. Loser way to go. Forget the geopolitics, because it will sound like special-pleading the way that Intel (INTC) did less than a year ago when it asked for the Defense Department's help. Intel spent more buying back stock and less building foundries and ceded its once invincible lead to Taiwan Semi in the field.
So let me tell you what must be done. You may not know it but our best tech industry is the semiconductor capital equipment industry, the companies that make the materials we need: Lam (LRCX) , KLA (KLAC) , Applied Materials (AMAT) , and a handful of other treasure. Building gigantic foundries can put more people to work than any other infrastructure product.
The U.S., perhaps championed by our fabulous new Commerce Secretary, Gina Raimondo, a venture capitalist and former governor of Rhode Island, needs to put forward a 50-year low interest semiconductor savings bond to raise the money needed for a consortium to build new chips of all kinds - auto chips aren't very high tech but defense chips and make it emblematic of everything we realized from Warp Speed we can still do.
Taiwan Semi's spending $28 billion to increase its output and its monster good at doing so. It's pretty easy to see we need about $100 billion to make ourselves more independent over the next few years. But we have to start now to alleviate the shortage. People intensive, national imperative, blue print ready, with customers dying for the product and suppliers ready to help.
Secretary Raimondo, you have been on the show, let's get the low-interest chip bond going, and put an end to a shortage that will cost tens of thousands of American jobs and eliminate the choke hold that other countries can now have over us because of it.
(Ford and Costco are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)
