This Is How the World Ended up with a Shortage of Semiconductors

Joe Weisenthal (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:16)

And I'm Tracy Alloway.

Joe Weisenthal (0:17)

So Tracy, a long time ago now, it feels like we had the joke about, well, should we just turn this into a semiconductor podcast?

Tracy Alloway (0:26)

Yes. Yes, and you've really run with that joke.

Joe Weisenthal (0:31)

Well, the thing is, is we can't escape it. We keep thinking, we first started talking about it, it's like, oh, this is an interesting topic for us.

But it turns out little did we know when we first started covering this story on the podcast, which I think was last October or last November, that actually it would blow up into this huge issue, semiconductor manufacturing, that became like essentially a topic of national news far outside the sort of like the niche audience.

Tracy Alloway (1:02)

Right, semiconductors secretly rule all our lives. And I'm joking, obviously, but nowadays everything is so high tech that there are a lot of appliances that you wouldn't necessarily think of that have chips in them. So smartphones, computers, things like that, obviously, but also lots of cars.

And I saw one headline float by, I haven't had a chance to read it yet, but something about aluminum producers warning of a downturn because of a chip shortage as well. So chips are everywhere. And I think we're really starting to realize how important they are, and also how important chip makers are. And of course, as we've been discussing, there's a limited number of those.

Joe Weisenthal (1:46)

Right. And so anyone who's sort of listened to our series, we started talking about the decline of Intel. We talked about why US manufacturing in general has sort of gone away. And we talked, of course, about the dominant role of Taiwan Semi.

And it's like almost like, again, it was not intentional, but now there's like this huge thing and everyone is waking up to how dependent we all are on Taiwan Semiconductor and a few other major fabs. And it's become a legit US national security question. And we know the Biden administration is looking at it and looking at different ways to reduce US dependence.

So we really can't get away from this story. And obviously we're gonna be talking about it again today.

And I bet it won't even be the last time we talk about it.

Tracy Alloway (2:34)

I think you might be right on that one.

Joe Weisenthal (2:36)

So, well, I'm really excited because actually we are going to be going back to our very first guest who gave a sort of great overview with some of the best clear English descriptions of the challenges of chip manufacturing.

And it was the first one, everyone should go back and listen to that one. We were then talking about the decline of Intel, but we're gonna zoom out a little bit and look at the acute shortage that the world is facing right now. Why are so many companies struggling with their ability to source chips? And then the longer term issue of this is scarce and capacity is scarce. And even if we get through this current phase, there is gonna be still this sort of perhaps a dangerous overreliance on a few manufacturers that are capacity limited. So very excited. We're gonna be speaking again, second time on the show, Stacy Rasgon, his managing director, senior analyst, US Semiconductors at Bernstein Research.

Stacy, thank you so much for coming back on Odd Lots.

Stacy Rasgon (3:39)

Thank you for having me again.

Joe Weisenthal (3:41)

What's it like? I mean, you're like a star now because at one point, semiconductors were just like this thing that maybe investors mostly cared about, but it really does feel like, correct me if I'm wrong, but it really does feel like in the last few months, everybody is now obsessed with this story.

Stacy Rasgon (3:57)

You know, I think I may have mentioned this last time I was on, but there's one reason I love this space. It's literally ground zero for everything that's been going on. And it's not just the last few months, it was all the trade and the tariffs, and then the burgeoning geopolitics, and now obviously the shortages and everything else.

And you have to remember, I mean, the global electronics enterprise, I mean, it's like a $4 or $5 trillion industry worldwide if you add up all the PCs and all of the consumer electronics and then all the services and software and everything that goes with it, trillions and trillions of dollars, and it all rests on semiconductors. Semi's are the fundament of all of that. Like we don't have any of that without semiconductors. And so I think it's a phenomenal place to spend time.