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Here’s a fundamental but inconvenient truth about the silicon chips that make the magic possible in our iPhones, Thinkpads, Xboxes, and even Teslas: It’s gotten so wildly expensive and difficult to build a factory to make cutting-edge chips that almost no one can do it. We’ve gone from hundreds of chip makers to dozens to two years ago when we dropped to just three: Intel, Samsung, and Taiwan Semiconductor Manufacturing.
That’s not to say it’s not a vibrant industry. When one of those three advances in cramming ever more transistors onto the same size chip, the benefits flow across the tech ecosystem. Nvidia’s unbelievably fast graphics chips unveiled on Thursday are made possible by TSMC’s new 7-nanometer chip manufacturing process, for instance.
But the lack of competition at times stifles innovation or pushes up chip prices. And if just one of those companies stumbles, as Intel has over the past five to 10 years, that can hold back performance across whole sectors of the tech landscape.
The pandemic, in particular, ignited some discussion of tech’s global supply chain vulnerabilities, which sort of made sense when the outbreak was concentrated in one region, but became moot as the virus shut down factories worldwide.
Now, the issue that has risen to the headlines is the fact that two of the three companies, TSMC and Samsung, have most of their chip factories near China.
The Trump administration’s fear-mongering around all things China, which wreaked havoc on global trade before the pandemic, has now turned to that fact, though each already has a plant in the United States as well.
It seems like less of a concern in reality. If China moved to cut off chip supplies, presumably in an unlikely act of war, could not production shift to factories in the U.S., Ireland, Israel, or any other countries? Ironically, the Chinese also believe they are deeply at risk because the leading companies that make the machines that make the chips are all based in the U.S. and Europe.
No matter. Under a deal announced on Thursday, the administration will help TSMC build its next cutting-edge plant in Arizona, at a cost of $12 billion over eight years. We don’t know much yet about what our government is paying, with TSMC saying only it has “mutual understanding and commitment to support” from the federal and state governments. Hopefully, the tax breaks and subsidies will work out better than the plan to bring a Foxconn factory to Wisconsin, but I’m not optimistic.
Aaron Pressman
NEWSWORTHY
Not just a flickering, black-and-white myth on a screen. As speculation heats up about Apple's plans to release an augmented- and virtual-reality wearable device, the company made another acquisition in the field. Apple said on Thursday it bought VR content producer NextVR for an undisclosed price. And in other M&A news, Microsoft is furthering its ambitions to cozy up to the telecom industry by acquiring telecom software developer Metaswitch Networks, also for an undisclosed price.
Keeps going and going. Good news for your laptop battery from Google today. The company says it will update the Chrome browser app to start blocking web ads that use too much processing power or require excessively large data downloads.
End of an era. One of the oldest names in wireless is headed for the gallows. T-Mobile says it will begin unifying customers and stores from its just acquired Sprint unit under its own name starting this summer, with rumors pegging August 2 for the brand merger.
FOOD FOR THOUGHT
We are barely comprehending the permanent changes that will emerge from our current time. Bloomberg reporter Sarah Frier takes a deep dive into the scenario of tech workers in Silicon Valley moving to more affordable parts of the country.
Christy Lake, chief people officer at San Francisco-based Twilio Inc., says several employees have already approached their managers and HR representatives to discuss plans to relocate. The cloud communications company expects more than 20% of its office-based employees will transition to working remotely in the long term. “It’s percolating big-time,” Lake says. She expects the company will have to come up with formal policies and maybe offer a relocation bonus to employees who decide to make the jump.
But the trend raises complicated questions. If employees move to a less expensive location, should Twilio adjust their salaries accordingly? “It’s probably not great business practice to pay Bay Area comps in Michigan,” Lake says. And when it comes time to promote, would those employees have the same opportunity to advance as everybody else? “We need to think proactively,” she says.
FOR YOUR WEEKEND READING PLEASURE
A few long reads that I came across this week:
Inside HBO Max, the $4 Billion Bet to Stand Out in the Streaming Wars (Variety)
A starry group came together for a meeting at Courteney Cox’s Malibu beach house on Oct. 5, 2019. Had the paparazzi gotten wind, pandemonium would have surely ensued. Cox invited her five “Friends” co-stars — Jennifer Aniston, Lisa Kudrow, Matt LeBlanc, Matthew Perry and David Schwimmer — for a rare reunion dinner.
How Albert Einstein's Son Tamed the Mississippi River (Wired)
Multiple structures now keep the river from roaring into the Atchafalaya—but they may be inadequate against climate change.
Thirty-six Thousand Feet Under the Sea (The New Yorker)
The explorers who set one of the last meaningful records on earth.
America’s ‘fried chicken war’ (BBC)
How immigration, ingenuity and the American spirit shaped a US fried chicken “war” that’s been simmering for four generations.
IN CASE YOU MISSED IT
How Syndio’s CEO raised $7.5 million for pay equity software with 6 kids at home By Emma Hinchliffe
How selling $133 million worth of face masks in April helps Etsy long term By Phil Wahba
Peacock announces original programming tied to its national launch in July By Radhika Marya
Takeaways from the Seattle business community’s Back to Work toolkit By Erika Fry
Review: How great are Apple’s new keyboards? By Aaron Pressman
As probe into Senate stock sales heats up, Richard Burr steps down as Senate Intel Committee chair By Rey Mashayekhi
Congress is ignoring the best solution for troubled companies: bankruptcy By Jared A. Ellias and George Triantis
(Some of these stories require a subscription to access. There is a 50% discount for our loyal readers if you use this link to sign up. Thank you for supporting our journalism.)
BEFORE YOU GO
Software developer Daniel Luu has an interesting side gig. He created a site called Nookazon as a place for people who play Nintendo's Animal Crossing to trade the various items they need or want to further their village ambitions. The game's own currency of bells is too common for Nookazon, where most players now use more rare items such as gold nuggets and star fragments as currency. I'll be spending the weekend collecting them, I guess, to save up for that Lily of the Valley that someone around here wants. See you back here on Monday.
Aaron Pressman
