General

#181. Funnel of bottomless scarcity

Table of Contents

  • Samaritan on Amazon Prime
  • Everything is harder and harder
  • Apple and Samsung Quarter Results</ p>
    • Apple results
    • Samsung results
  • Apple, electric cars and precise timing
  • Funnel of bottomless scarcity</ p>
    • Laying down the stairs
    • Semiconductor nationalism
    • Conclusion

Samaritan on Amazon Prime

Recently released a selection of new films andseries to watch in August. Here's an added bonus, as Amazon Prime unexpectedly decided to release a superhero series on August 26 that grudgingly helps the world. It's called Samaritan. I decided to mention it for only one reason. Starring Sylvester Stallone. Grandfather is already 76 years old, and everything is fine! I also want to be in such shape at this age. By comparison, Biden is only 3 years older and looks like he's about to fall apart.

What to watch in August: 2 blockbuster films and 2 series

And also a parody of Tim Cook from Universal Pictures, the new "Predator" and just good science fiction.

Everything is harder and harder

It is impossible not to mention that in Indonesia (273 million people, 191 million are Internet users), Yahoo, Steam, PayPal, Epic Games and many other services were blocked.

The authorities of the country obliged foreign platformsregister in the country, obtain a license and comply with the proposed rules. For example, companies are required to remove content within a 4-hour window if the case is urgent. If not urgent, then the period is extended to 24 hours. That is, consider, an instant reaction is required.

Google and extremist according to lawsIn Russia, organizations like Facebook*, Instagram* and WhatsApp managed to register at the last moment. None of them wants to lose a very important market.

Well, many platforms and services did not have time.

Typical news today. Around the world, the screws are being tightened, forcing companies to either play by the proposed rules or leave the market.

It is likely that in 10-15 years the period from 2000 to 2020 will be remembered as the “golden era” of the global Internet, when the trees were large and information was not censored.

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Apple and Samsung Quarter Results

Both companies published quarterly reports. There is nothing special there, so we will only briefly go over the curious moments.

Apple results

  • Tim Cook was extremely careful in his statements.He never mentioned military action or a special military operation. According to Tim Cook, "there are those in Ukraine who are experiencing a protracted humanitarian crisis." So, there are those who are not worried. Basically logical.

There were no specifics about Russia either, only a few times they mentioned that the situation in Russia has an impact on sales. Curious, what is the situation in Russia? It seems that in Russia the sale of the iPhone was not banned.

Tim Cook did not condemn the hostilities in any way, notspoke in support of Ukraine (and Cook always likes to talk on phone calls about how Apple supports everyone he can) and did not say that Apple stopped sales in Russia. This is a direct confirmation that Apple is sleeping and sees how to return to Russia, or at least maintain sales.

Given such mild statements, what kind of intermediary would “twist” it so that Apple Pay would work again. There was a feeling that Apple would go forward.

  • The second curious moment.Tim Cook mentioned another record number of "switchers", that is, those who switched from Android to iOS. An analyst from UBS asked a logical question: “There is news that some customers of operators (mobile) cannot cope with paying bills, but at the same time you say that the number of “switchers” has increased, how is this possible? Tim Cook cheerfully replied that the sales figures did not show any approaching recession. Like, there are always those who have problems, and the majority are fine.

But it seems to me that the interpretation is somewhatis wrong. There is a suspicion that people, on the contrary, anticipate a recession and want to buy an iPhone as a smartphone with which they will survive it. It's no secret that Apple supports its devices for 6 years, and that Apple devices are better quoted in the secondary market.

Samsung results

  • Samsung indirectly confirmed the start of a recession.Decreased not only sales of TVs, but orders for memory for smartphones and computers. The latter say that manufacturers are cutting sales plans.
  • But memory sales for servers and data centers are forecast to be stable. This is a positive thing.
  • But Samsung did not hesitate to explain the drop in demand for solid state drives caused by the deterioration in consumer sentiment due to the "Russian-Ukrainian *****1 and the lockdown in major cities in China." 1according to Roskomnadzor, it is correct to say “special military operation” or, as Apple says even more tactfully, “humanitarian crisis in Ukraine.”
  • The Screens division rejoices at the stabledemand, and expects demand to only pick up as more "laptops and handheld gaming devices" move to OLED screens, moving away from IPS. First, it's great that OLED screens are on their way to becoming mainstream laptop screens. Secondly, Samsung has been saying for several quarters that portable game consoles based on Qualcomm chipsets are about to enter the market. This is very curious, but so far there are still no heaps of game consoles.
  • The Galaxy S22 Ultra is a phenomenal success. The company also expects foldable devices to outsell the Galaxy Note line in the near future.
  • The company expects that demand will decline, but demand for premium smartphones will remain at the same level. In principle, everything is also logical. The poor get poorer, the wealthy get richer.

Apple, electric cars and precise timing

Apple has been working on a car project for a long timeyears. From time to time, new rumors break through to the market, either about moving forward, or about curtailing the project. It was rumored that the Apple mobile project was called "Titan". And in 2018, a team of 5,000 people worked on it.

Launch dates are constantly being pushed back.So in 2020, Reuters wrote that the launch was scheduled for 2024. And analyst Ming-Chi Kuo, who specializes in Apple forecasts, said that a realistic launch date is something in the region of 2025-2028.

After the last WWDC, which showedupdated Apple CarPlay, which, in fact, replaced the entire familiar dashboard in the car, I was even sure that Apple would not launch its own car at all. Why make life so difficult for yourself when you can just be a shell supplier to every manufacturer in the world? Become a kind of Android car market.

However, after thinking about it over time, I realized that Apple, of course, needs its own car.

Yes, and the news of the last days directly to thishints. Apple has hired Luigi Taraborrelli, who has worked at Lamborghini for more than two decades. Mr. Taraborrelli was head of the "chassis and dynamics" department, specializing in suspension, braking, steering response. And if Apple focused solely on the interior and dashboard, it would hardly have hired a specialist responsible for the appearance and dynamics.

Also in the Apple team there is a specialist who was responsible at Tesla for the development of the autopilot system, and there is also Ulrich Krantz, who oversaw electric vehicles at BMW.

Along the way, you can speculate on howwill be Apple's first car. So Taraborelli took an active part in the design of the Lamborghini Urus SUV - a luxury SUV. “SUV” is a good option, given that the market for electric vehicles is dominated by classic sedans.

Obviously, the company is just waiting for the right moment. Question: under what conditions will this moment come?

The need for an electric car is quite simple to explain: new products are needed for the company to confidently continue its development.

In the American media, Apple is increasingly called"a company of obsolete products". Journalists and columnists like to ask the rhetorical question: “What iPhone feature that didn’t exist 5 years ago do you regularly use now?”. If you think about it, then in response you can call FaceID and wireless charging.

Apple really hasn't had one for quite some time.revolutionary products comparable in scale to at least the iPad. The recent launch of the MacBook on the ARM chipset showed that there is still gunpowder in the powder flasks. However, laptops are more of a gift for professionals who are stunned by the ability to edit 8K video on a finger-thin 13-inch laptop. The average user rejoiced at the maximum improved battery life, before complaining about compatibility problems that arise from time to time.

It is imperceptible to the layman, but Apple is underpowerful pressure from competitors and shorts. For those who do not understand why someone needs this, I will explain. At the end of 2021, Apple took 75% of the total profit from the smartphone market, and this despite the fact that the company has a market share of around 13%. Conventionally, the smartphone market is 1.5 billion units, and 1.3 billion smartphones account for only 25% of all profits. Here you can also add that Samsung accounts for about 15%, that is, the remaining 12 companies, totaling more than 1 billion devices, account for only 10% of the profit. So the whole market is sleeping to see when Apple will fall, and they will finally have a golden rain.

For example, I found a chart for the second quarter of 2021, who takes how much profit from the market.

Apple has never been an innovative company inin the sense that technologists put into this concept. The company did not invent, but competently applied available innovations, implementing them in simple and understandable products.

A small digression.By the way, the secret to the simplicity of products lies in Apple's marketing. Pay attention at least to the presentation of the company. Regular companies say, look how many megapixels are in our cameras, gigahertz in chipsets, check out our steel cooling system. Apple says, look at the user, how cool you are, what endless possibilities you have, look at what heights you can reach. All you! And he adds in brackets: iPhone will help you with this.

Accordingly, the right moment to launch an Apple mobile will be at the moment when the technology is tested and reliable.

There are always many companies on the marketstriving to be first. It is believed that this will add a flair of innovation. But, for example, do you remember the first company to show flexible screens? Or the first smartphone with an under-screen fingerprint scanner? Perhaps you remember the first smartphone with a capacitive screen?

LG Prada, introduced even before the announcement of the iPhone, was the first smartphone with capacitive screen technology. But who remembers this?

In the case of electric vehicles, which are noware considered hot topics, such as Xiaomi and BBK Electronics. Xiaomi generally says that the first car will roll on the roads as early as 2024. Companies are trying to stake out the market for themselves, but de facto their role is reduced to the work of treading paths - that is, creating and debugging common processes, setting up logistics, stuffing cones.

Well, then, relatively speaking, Apple will come to everything ready, which will present a finished product, devoid of most children's sores, plus a stylish design, high-quality CarPlay and you can go!

Funnel of bottomless scarcity

To journalists of the city of Taipei, the capital of the islandTaiwan, where the largest semiconductor manufacturers (TSMC, MediaTek, ASE Technology and others) are based, managed to collect a good insight about the shortage in the chipset market, as they say, from the inside for Asia Nikkei. The material is interesting, so I want to retell some points.

What is happening is especially interesting in the context of the fact that domestic microelectronics plans to replace everything on its own.

So, when we are told about the deficitcomponents, they justify it by the complication of supply chains, cite as an example the situation with inert gases due to the humanitarian crisis in Ukraine, which are used as the working body of lasers.

However, it turns out that there are moreprosaic reasons. So in mid-June, Taiwan Semiconductor Manufacturing Co (TSMC), the world's largest semiconductor manufacturer, sent a mini-troop to Japan to visit a number of key suppliers, including Screen Semiconductor Solutions.

Screen Semiconductor Solutions, according tosources, constantly shifts delivery dates. At the same time, Screen Semiconductor Solutions is not a semiconductor manufacturer, but one of the few companies in the world that creates cleaning equipment, which is vital for all semiconductor factories in the world.

Screen Semiconductor Solutions is testingdifficulties in providing their own needs with such seemingly insignificant nonsense as valves, pipes, containers, parts of pumps. All these components are made of special plastic. It is ridiculous that the world's largest company (I'm talking about TSMC) is forced to cut semiconductor production due to a shortage of plastic valves.

As an example, a comment from one top manager of TSMC is given:

"I am not kidding! We are still receiving the valves and tubes we ordered over a year ago. When opening a box, we are often very shocked. There can only be 10 pieces in a box from an order of 100 pieces.”

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Laying down the stairs

The problem is that in productionSemiconductors are indirectly involved in several dozen countries that supply various related components needed in the production process.

Let's look inside the process to understand how one clings to the other.

If you're wondering what kind of specialplastic in question, then you need a fluoropolymer plastic that is able to withstand corrosive substances and many years of exposure to powerful ultraviolet radiation. The stable composition of such plastic allows us to eliminate the use of antioxidants or other stabilizers before working with "ultra-pure" water, which is used in production. Simply put, it is a superplastic that does not emit anything, does not absorb anything, and does not need to be washed before being put through the so-called ultrapure water. All this is necessary, as the factories are struggling with any potential pollution. Any microscopic speck of dust can disrupt the process when it comes to 5nm manufacturing. By the way, it turns out that the size of the COVID virus is as much as 100 nm. And if he gets into a clean zone, he will immediately ruin everything.

To summarize, all the necessaryChipset production parts are of high purity and resistance to contamination. That is, it is impossible to put an ordinary metal cabinet in a clean zone at the production site, since some microscopic piece of metal can break off from it and ruin the microcircuit. We need a special cabinet, special tweezers, the same requirements for all handles, screws, cylinders and even screwdrivers that are used in the process of servicing equipment. If we talk about other consumables, then the purity of gases must be at least 99.9999%, and the purity of liquids is 1 particle of pollution per 1 trillion drops.

By the way, the right quality plastic, by the way, inRussia makes HaloPolymer. And in the world it is also produced by Japanese Daikin, Belgian Solvay, 3M in the USA and Indian Gujarat Fluorochemicals. They emphasize that without Russia everyone is bored.

For the production of fluoropolymer plastic, it is necessary toturn to recycle a mineral called fluorite. It is also called fluorspar. 60% of the deposits (41 million tons) of this mineral are in China. There is also fluorite in Russia (12 million tons). It is mined in Primorye. I searched for details, experts say that “domestic ores are generally of low quality. In terms of fluorite content (average 37.9% CaF2), they are noticeably poorer than the exploited foreign ones. In addition, there are very few reserves that can ensure the production of natural lumpy concentrate of metallurgical grades. The domestic production of fluorspar concentrates does not exceed several thousand tons per year, they are obtained mainly by manual sorting.

This is what fluorite, or fluorspar, looks like.

Another example of a shortage is inert gases,supplies of which are disrupted from the conflict between Russia and Ukraine. But there is another angle as well. For the supply of gases, special gas cylinders are needed, equipped with special valves of high purity. 80% of this valve market is controlled by Rotarex from Luxembourg. And the company agrees to produce valves only in Luxembourg. By the way, cylinders and valves are sold separately (this is even cooler than the lack of charging in the box with a smartphone).

Ultra-clean valves look like this. The site has a catalog with cylinders and other ultra-clean equipment.

All this stuff is made of special steelalloys. According to experts, it will take 10 to 20 years for a new player to set up production and go through all the bureaucratic standardization procedures, after which the product will be listed on the market.

Another example of international cooperation inin the field of semiconductors is the ASML company from the Netherlands. This is almost the only manufacturer of EUV lithographs (deep ultraviolet photolithography) in the world, which are necessary for production on a 7 nm process technology and less.

This is what an EUV system looks like.This hulk costs more than 150 million dollars. And I don't think you'd be surprised to hear that the company is literally getting wads of money thrown at the company as demand in this market outstrips supply. Customers have to wait at least 2 years for their order.

However, ASML does not work alone.So in creating a vacuum chamber in an EUV lithograph, the Dutch ASML relies on the German company Trumpf, responsible for lasers (and here we are back to the shortage of inert gases) and the Zeiss Group, responsible for optics and a mirror system. The director of the Zeiss Group boasts that their mirrors are so accurate that you can hit a ping-pong ball on the moon by being reflected by a laser.

Companies have been cooperating with each otherdecades. Both the companies themselves and competitors note that it will not work to replace one supplier with another. So a representative of one Japanese company specializing in high-precision lenses and mirrors (apparently Nikon, and maybe Canon) said that it would take 5-10 years of working with ASML to give them a product of the desired quality.

Illustration from the ASML annual report.The company provides a list of partners that are important in the production of lithographs. So buyers say exactly what they need, academics try to figure out how it is scientifically feasible, component suppliers help to realize it, and other equipment manufacturers help develop the concept of how to fit everything into a single process. ASML is very leaning on the fact that the production of lithographs is an ecosystem process.

Semiconductor nationalism

In developed countries (USA, Japan, Europe) all thesecomplexities are understood and are working to eliminate them, trying to build sustainable supply chains. Both Japan and the US are trying to pull the blanket over to their side.

So in the USA they have been waving in front ofthe nose of semiconductor giants (Intel, Samsung, TSMC) with a bill about 52 billion subsidies for those who build factories in the United States. Japan came specifically to TSMC with the same proposal, promising to subsidize $3.5 billion.

However, all countries are good, and each triesdevelop the semiconductor industry in their own land. Thus, Europe allocates a total of 46 billion euros to the development of semiconductors. And even India is in the game. The country provided $30 billion in subsidies, promising to pay up to 50% of the project cost. The Koreans are not far behind either. They want to attract a total of 450 billion private investments by 2030 with the help of tax incentives. It looks significant if you don't know that Samsung wants to invest $356 billion in semiconductors over the next 5 years, and the total investment should exceed $650 billion by 2030.

However, the main point is thatit is not enough just to build a plant capable of producing semiconductors according to a specific technical process. It is necessary to build the entire chain, starting from the same plastic and valves and ending with chemicals and equipment that uses components from different countries.

As always, China goes its own way.The state and private investors sent a total of $221 billion in an attempt to build the entire scheme necessary for the production of semiconductors within the country (that is, conditional cleaning equipment for semiconductor factories should be produced domestically, and plastic valves are also going to be made domestically).

All other countries look to China's efforts withundisguised curiosity and a greater share of skepticism. So the semiconductor division of the Boston Consulting Group commented on China's efforts in the spirit that it would be extremely difficult to achieve self-sufficiency at least at the level of 70-80%, even if we are talking about an entire region (and not one country).

Conclusion

Summing up, the costs are amazing,which are pledged by both countries and individual companies for the modernization of production facilities. Another important point is that semiconductors is an industry where money is certainly very important, but well-established supplies, connections, and, most importantly, experience are equally important. For example, ASML showed the first prototypes of EUV lithographs back in 2009. 5 years before that, the prototype was developed, and then 10 years later it was completed.

Finally, let me remind you that, asKommersant, in April of this year, the Russian Ministry of Industry and Trade sent Mr. Mishustin (this is our prime minister) a new project, according to which by 2030 it is necessary to produce chips using the 28 nm process technology. It is indicated that “in 2022 the authorities will launch a program to reengineer foreign solutions and transfer their production to the Russian Federation and China”, “already this year in Russia they will launch the production of microelectronics according to the topology of 90 nm, and by 2030 they will enter the serial production of electronics according to the topology 28 nm".

However, most likely ordinary citizens do notin the know, but the Ministry of Industry and Trade knows where they will get the equipment, as well as the required purity and accuracy of mirrors, valves and valves. The only point that is slightly embarrassing is the size of the investment. Thus, it is planned to spend approximately 1.5 trillion rubles, or $21.5 billion, on reengineering and design centers for the development of semiconductors until 2030. On the one hand, it seems like a solid investment. On the other hand, countries that already have competencies in this area attract 2-15 times more investments. In short, there are many questions and few answers. But it will certainly be interesting!

*Meta Platforms, which includes the social networks Facebook and Instagram, has been recognized as an extremist organization and banned in the Russian Federation.