Yesterday we got a ton of questions about another full-throated pitch for a high-end Stansberry newsletter, this time Dave Lashmet’s Stansberry Venture Technology, which they say has a list price of $5,500 and is typically offered in promotions, as is the case today, for $2,500/yr, no refunds (as with most publishers, Stansberry offers a brief “if you don’t like it, you can have a credit for one of our other letters” guarantee, in this case for 30 days).
The ad doesn’t actually include Lashmet, but is one of those slickly produced “infomercials” with a hired actor reading the spiel and making the offer, and the basic pitch is that the world is over a barrel when it comes to semiconductors, thanks to our extreme reliance on Taiwan and, particularly on Taiwan Semiconductor (TSM) for the most advanced chips in the world. Over the years, the outsourcing of US chip designers has led to essentially all high-end chip fabrication (for Apple, NVIDIA, AMD, whoever else you want to name) being done on that island nation, along with a huge share of lower-end chip production… but the challenge, of course, is that after putting the boot down on Hong Kong’s throat a little bit more, it seems like China is further amplifying its threatening behavior toward Taiwan, making it one of the more likely flashpoints for future global conflict.
We don’t know if historians will write about the 2020s setting the stage for the Taiwan Chip Wars, or if the tension will ease before something ugly happens, but we do know that chip designers and technology companies around the world, and the governments who rely on them, are sounding the alarm about our overwhelming dependence on Taiwan’s semiconductor industry. Which has led, here in the US at least, to a meaningful boost of government interest in fixing that problem — primarily by incentivizing or funding a ramp-up in US semiconductor manufacturing. A lot of chip design still happens in the US, and a lot of the equipment for building semiconductors is made either in the US or in Europe still, but the actual foundries where chips are formed are very thin on the ground here. The revolution in outsourcing has brought massive advantages, with huge foundries in Taiwan that can take new designs for chips and build them faster and better than anyone else, but it has also built up our dependence on a island nation whose big brother still considers it a bratty runaway province who should come home.
That’s probably not news to you, the story gets a lot of attention in the business press, and I’ve written about Taiwan a bunch of times as a meaningful risk for all kinds of technology companies… and, of course, for global peace if it turns into a shooting war. It takes a couple years to build a semiconductor fab, and longer still to build up the expertise and experience to run one with precision, but, in the worst case scenario, it might only take a day to turn more than 60% of global chip manufacturing off and stop shipments, and put essentially all global manufacturing on hold. I don’t think that will happen, China has to measure it’s coveted role as the world’s factory and leading trade partner against its desire to reunify Taiwan with the PRC against its will, and outdo the US in global influence, but I don’t know that it won’t happen, either. And on the other side, for 50 years Taiwan’s biggest ally and supporter has been the United States, in a careful dance over Taiwan’s status that made headlines under Nixon and continues to be a major part of the dysfunctional US-China relationship today… and the US military industrial complex is, coincidentally enough, currently at a bit of a loss as we pull out of our longest war in history in Afghanistan, and looking around for the next profitable enemy… you can certainly set the stage for a possible showdown that could spiral out of control.
So anyway, that’s the story — the US has a limited amount of semiconductor manufacturing capacity, which has been highlighted because of chip shortages brought on by the COVID pandemic and the uneven restart of manufacturing and trade, and is becoming, beyond that immediate supply/demand imbalance, a strategic problem for US companies and the government.
Or I should say, I guess, that the US has a limited amount of non-controlled semiconductor fabrication capacity that’s available for “on demand” production like many of Taiwan’s fabs are. Not every chipmaker’s production has been outsourced to Taiwan — there are still a lot of chipmaking facilities in the US, even though the market share has fallen, but most of the chip foundries in the US are run by big companies like Intel, Analog Devices, Qorvo, Micron, NXP Semiconductors, Infineon, Texas Instruments and others, making their own chips, not necessarily competing on the high end for the most advanced processes and not available for contract manufacturing for other designers.
A lot of the backlog recently is not just from the shutdown of all chipmaking in general, or from soaring demand, it’s from global interdependence, the rise of “just in time” supply chains, inspired by Toyota, that led to carmakers and other manufacturers holding essentially no inventory, and probably from hyper-specialization — an auto assembly line might be shut down, or the design of a car changed on the fly, because one specific chip can’t be sourced for a month, and for some chips there might be only one source at any given time (here’s the Detroit Free Press take on that, just FYI).
Part of the solution, we’re told in this latest presentation from the Stansberry folks, is in a recommendation they call “Venture Opportunity #73” — which I guess means it’s the 73rd recommendation made by Stansberry Venture Technology, which makes me feel kind of old. Seems like just yesterday I was writing about Lashmet launching this newsletter with “Venture #1,” not long after Stansberry parted ways with Frank Curzio and turned his old Phase 1 newsletter into a couple Venture letters.
OK, sheesh, I just checked, and that was 2014… where does the time go? Sometimes those babies grow up so fast!
But anyway… what you want to know is, what’s this opportunity that they pitch as “The Pentagon’s Chipmaker?”
Here’s the marketing language from the ad:
“One of our top analysts is recommending you take action on a small American company that could be the solution to an escalating economic and political crisis.
“In the last six years alone, he’s spotted 25 different ways you could have doubled your money or better.
“His next opportunity – Venture #73 – could be the biggest of his career.”
And here are the clues I pulled out of the presentation — no transcript on this one, sadly, so I’m paraphrasing in some spots…
It’s a small American company (they think it could soar 500%)
Things might move quickly, and “You could look like a genius by Christmas.”
And it went public “just recently,” trades only a few hundred thousand shares a day, is a tenth the size of direct competitors and 1/100th the size of Apple, and it’s not in any index funds yet.
Plus, it already works with the Pentagon to supply chips, and with the government more broadly, including getting a sweet deal recently for a plant, leasing it for only $1 a month… and they’ve had officials from the government touring their facilities as this talk about investing in chip manufacturing in the US has heated up.
And that’s about it by way of clues. So what’s the stock?
Well, the first name that typically comes to mind when people talk up US foundries is the largest US foundry company, GlobalFoundries, which was spun out of AMD (AMD) years ago, when AMD decided to go “fabless” and outsource fabrication of chips (they do contract manufacturing for fabless chip companies, the same basic business model as Taiwan Semiconductor — they aren’t as advanced, but they do have foundries in the US, as well as in Germany and Singapore). There have been rumors for a while that Intel (INTC) might buy GlobalFoundries, but they’ve consistently said that their plan is to go public in 2022, and last week they filed their first confidential S-1 with the SEC to start the process moving, so it could happen sooner.
GlobalFoundries isn’t a tiny little company, though, it’s likely to go public with a valuation in the $25+ billion range (the Intel rumors were for a ~$30 billion buyout), and, of course, we can’t invest in it — so nobody would tease it. That’s not our stock today. What might match the actual clues?
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