Fantasy Thinking On A Saturday Night -- Nothing About the Bakken -- January 23, 2021

Updates

January 25, 2021: ahead of earnings, Wedbush analyst raises AAPL's price target to $175 from $160. 

Original Post 

The following is all fantasy / conjecture on my part. I'm doing this for the fun of it. It's not meant to be taken seriously.  [Less than 24 hours after posting this long note, this popped up over at Reuters.]

Four things on my mind: the Bakken, the economy, the semiconductors, Apple. But tonight, semiconductors. 

The Cloud. 

See this post, this post, this post, and this post. 

It was that last link that sent me down this rabbit hole, as they say. 

Years ago, it was obvious that Tesla was not a car company. It was a battery company. 

Likewise, years ago it was obvious that Apple was not a computer company. It was a fashion company, like Burberry or Gucci. Perhaps better said, it was a "fashion design" company. Over the years Apple has won some prestigious design awards.

Up until this past month I still considered Apple a "fashion design" company. And then I stumbled upon the 10-nm-, 7-nm-, 3-nm-chip story. 

Stumblin' In, Chris Norman and Suzi Quatro

If you go back to the Steve Jobs Apple story one can argue that the Apple story began when Steve Jobs stumbled upon the iPhone. At the time, the company was working on something else, when some of his guys came to Steve Jobs with the iPhone prototype. Jobs stopped everything else and pivoted to the iPhone, and the rest is history.

We're now seeing Apple pivot again. To some degree Tim Cook may have simply stumbled in but I think there is more to the story. 

First, Apple's culture. Get rid of moving parts. Get rid of needless components (simplify, simplify, simplify). Rely less and less on outside suppliers. Above all, security, security, security, security. That culture led Apple to the M1 chip, perhaps the first true Apple revolution since the iPhone. 

So, think about it. You are Tim Cook and you have the M1 chip project. But you also have the EV - autonomous vehicle project which has to be a lot farther down the road (no pun intended) than anyone thought to sign a deal with Hyundai to start producing smart cars as early as 2024. 

Connecting the dots. What have "we" learned in the past two months regarding autonomous vehicles and computer chips? Well, actually we've learned three things, all previously posted:

• autonomous automobiles use a lot of computer chips, way more than anyone realized (except those in the business);
• Apple has bought so many chips this past year, Toyota had to shut down production in China because of a lack of computer chips;
• there's really only a couple of companies making computer chips.

Wow, wow, wow!

I could stop here. I think the rest of the pieces fall together pretty nicely. In fact, I am going to stop here. It's obvious where we've ended up.

But we're going to switch gears. 

Let's go back to computer chips. It was this rambling post on November 22, 2020, that was the aha! moment. 

Then it was this post the next day when I realized I needed to know who was making computer chips. 

I knew nothing about computer chips when I wrote those two posts. After those two posts, I knew a little bit more about computer chips, but not much more. 

10-nm. 7-nm. 3-nm. 

Intel. Amazon. TSMC. Samsung. Apple. 

Okay that brings me up to where I want to be. Now, back to an article I linked the other day but didn't spend a lot of time on. 

From Bloomberg, "Samsung considers $10 billion Texas chipmaking plant." Austin, to be specific. Where else would it be?  LOL. Let's go through some data points in that article, see whether a few more dots connect.

• Samsung: a $10 billion investment: a major investment; goal: to catch up with industry leader Taiwan Semiconductor Manufacturing Co. (TMSC, for short);
• Samsung: the world's largest memory chip and smartphone maker (but not computer chips)
  
• construction could begin this year; operations could begin as early as 2023
• [with China-friendly CEO/CIC sworn in, in Washington, DC, timing could not be more fortuitous]
• the envisioned plant will be the first in the US to use extreme ultraviolet lithography, the standard for next-generation silicon;
• "if Samsung really wants to realize its goal to become the top chipmaker by 2040, it needs massive investment in the US to catch up with TSMC"
• "TSMC is likely to keep making progress in process nodes to 3 nm at its Arizona plant and Samsung may do the same"
• "One challenging task is to secure EUV equipment now, when Hynix and Micron are also seeking to purchase the machines"
• "if Samsung goes ahead, it would effectively go head-to-head on American soil with TSMC which is on track to build its own $12 billion chip plant in Arizona by 2024;
• Samsung is trying to catch TSMC in the so-called foundry business of making chips for the world's corporations -- a particularly pivotal capability given a deepening shortage of semiconductors in recent weeks;
• Samsung has said it wants to be the biggest player in the $400 billion chip industry; think about that;
• Samsung plans to invest $116 billion into its foundry and chip design businesses over the next decade, aiming to catch TSMC by offering chips made using 3-nanometer technology in 2022:

More at the linked article.

I'm going to stop here. We're going to digress a bit and look at another Samsung story. It looks like the Bloomberg folks got part of the story but not all of it. 

California Dreamin', The Mamas and the Papas