The Trillion-Dollar Chip War - Why Apple Is Worried About China?

**SPEAKER_1** (0:00)
Because, yeah, the China chip market surge, we've been talking about chips for a long time, and we've seen a pullback. So, what's the deal with the China chip market surge? And is this something that really be concerned about? If your portfolio has SMH heavy, or you're in the chip sector heavy, is it time to start being concerned?

**SPEAKER_2** (0:19)
It's time. I mean, you always, I wouldn't say concerned, but you should definitely be aware of what's happening. I think a few things happened over the past couple of days, and you might have missed them. We'll go over them strategically.
SK Hynix signed a $500 billion deal with NVIDIA.
Why is that important? SK Hynix is the leader in high bandwidth memory. They control 60 percent of that market. NVIDIA, obviously, the leader when it comes to GPUs, and obviously, one of the top customers. What does that do from a strategic standpoint? It makes them say, hey, we're not just a customer anymore. We're going to have to partner on infrastructure going forward. What does that do for the bottom line for NVIDIA? It brings down that cost and it now has a strategic partner that they can build out in to the future. I think it's a brilliant idea.
Second piece, and this is important, not Micron, Samsung signed a deal, a $200 billion deal with Broadcom. And why is that important? Well, again, number two in the high band with the memory sector is Samsung. But part of this deal is not just the memory piece. They've signed it for packaging and manufacturing. So we talked about TSM earlier, but packaging and manufacturing, that is what they do. They're the world leader, it's not even a close second. The fact that Samsung is saying, hey, we want to do our own, number one, loosens the reliance on TSM, but allows Broadcom to have a strategic partner because they are making the custom ASIC silicone for Google when we're talking about TPUs, right? Companies are now saying, hey, NVIDIA, the GPU is great, we can't afford it. We want to do this internally and have our AI stack right here within our company. Broadcom sits right in that market. So if you're trying to do custom, it can help with the custom pieces. That's a strategic partnership. I love it. What does it say for Micron? Micron has to have a very, very calculated next move. And I'll be interested to see what that partnership is. Does it mean the end for them? Absolutely not. They are still one of NVIDIA's biggest customers because the bandwidth memory demand is very high. So I think overall, has the demand changed? No. Has the story changed? No. There are strategic moves that are happening inside of the book though. Now, this is why I got a little bit of intellectual smoke for Apple.
Because they did something.
There's a report allegedly, it was in the journal yesterday. It was saying that there's a fight between Micron and Apple. And the reason was Apple was saying, hey, we have to raise our prices on our next age of devices because the memory shortage and the fact that they've scaled pricing is going to affect our bottom line. And I said, okay, that's interesting, right? The company that used to dictate to people, hey, whoever has the lowest price, that's who we're going with. So you were the bully for 10 years. You chose, I'm going to use SK Hainan, so I'm going to use Samsung, I'm going to use Micron, and whoever gives me the best deal I'm going with. The tables have now flipped. Now they create the price, and now they're saying, hey, well, how come you're charging that much? In fact, you're charging so much now we have to charge our customers more. That was the first piece. The next piece was that, again, allegedly, Tim Cook and the Apple officials have gone to the White House to say, look, we either need to figure out what they're spending this money on because their profit margins are so high, either they're keeping it or they're price gouging. This is what their claim is on Micron. Because of that, they've asked now the president's team to allow American companies to buy Chinese memory chips. Why is that important? Well, if Americans are allowed, companies are allowed to buy a cheaper chip, right, which now becomes a quote unquote national security issue is the reason why NVIDIA couldn't sell there, right? And now China said, we're not allowing you to sell, we're not even going to buy. That changes the dynamics. So either the White House is going to have to decide, allow Apple to buy and allow other American companies to buy at the cost of an American company like Micron.