Chris’ note: The global computer chip shortage grinds on. Companies are waiting up to two years to get chips they’ve ordered. This is affecting everything from the auto industry… to healthcare… to the availability of the latest gaming consoles.
But where the mainstream sees doom and gloom, our tech expert, Jeff Brown, sees opportunity. As he revealed last night in a special online briefing, these shortages are leading to a renaissance in U.S. manufacturing. And this will kick off a boom in what he calls “smart automation” – a mix of 3D printing, artificial intelligence (AI), and robotics.
There’s still time to get all the details by watching the free replay of Jeff’s briefing here. Once you’re done with that, read on below for a Q&A with Jeff and his longtime managing editor, Van Bryan. They discuss why smart automation is one of the top profit opportunities for your radar right now.
Van: Jeff, you’ve been researching a lot on what you call the “tech shock” – the global chip shortage. Can you bring us up to speed?
Jeff: Chips – aka semiconductors – are the “brains” of modern electronics. So they’re critical to our daily lives. When we wash our clothes… turn on the AC… stream our favorite Netflix shows… or drive to work, semiconductors are to thank.
But starting last year, we couldn’t make enough semiconductors to meet demand. That’s why the newest gaming consoles – like Sony’s PlayStation 5 and Microsoft’s Xbox Series X – are so hard to buy.
The tech shock has also hit the auto industry. Last spring, we saw satellite photos of thousands of unfinished Ford pickup trucks at the Kentucky Speedway. These trucks were there because Ford (F) couldn’t get the chips it needed to finish making them.
I call this the “tech shock” because it’s like the “oil shock” in the 1970s. As you may recall, thanks to an embargo by oil cartel OPEC (Organization of the Petroleum Exporting Countries), Americans had to wait for hours to pay inflated prices for rationed gasoline. Today, we’re seeing something similar play out with semiconductors.
Van: How bad is it?
Jeff: The lead time for semiconductors is the time between ordering a chip and its delivery. Historically, this has been about 10 weeks. But according to Japanese newswire service Nikkei, the lead time today for general-purpose chips is about 44 weeks. For other chips, it can be up to two years.
Van: Where do you see things going this year?
Jeff: I worked as an executive in the semiconductor industry. I was at NXP Semiconductors (NXPI) and Qualcomm (QCOM). Folks outside the industry may not know that chip shortages have happened before. They usually play out in three phases…
Phase 1 is the shortage. The industry can’t produce enough chips to meet demand.
Phase 2 is building. This is when the semiconductor industry reacts. Companies build more fabrication facilities (fabs) to meet new demand.
Phase 3 is surplus. We overbuild manufacturing capacity. And supply starts to outpace demand.
We’ve now entered Phase 2. Taiwan Semiconductor Manufacturing Company (TSM) is the largest chipmaker in the world. It’s already committed to opening a major new plant in Arizona. GlobalFoundries (GFS) – another large chipmaker – is planning to break ground on a facility in Upstate New York.
And Intel (INTC) just bought Tower Semiconductor (TSEM) – a leading chip foundry – for $5.4 billion. Intel hopes this will allow it to catch up with, and even surpass, TSM in chipmaking capacity by 2025.
Meanwhile, the government is supporting this growth. Earlier this month, Congress passed the CHIPS for America Act. It greenlit $52 billion in spending to support U.S. semiconductor manufacturing.
I expect we’ll see U.S. chipmakers deploy these and other funds this year to help bring manufacturing capacity back onshore.
Van: You’ve described this buildout of domestic chipmaking capacity as an “American manufacturing renaissance.” Can you expand on that?
Jeff: The pandemic taught us an important lesson: Global supply chains are fragile. But we hardly notice when things are working well. So for decades, America shipped much of its manufacturing offshore.
Semiconductors are a perfect example. We’re now seeing the effects of that with rattled supply chains.
So we’re about to see this decades-long trend reverse. Manufacturing for virtually every good we need will come back onshore. And thanks to smart automation, manufacturing costs in the U.S. are comparable to those in mainland China.
Van: Will this also apply to semiconductors?
Jeff: Yes, chipmaking is coming back to the U.S.
Van: How would that work?
Jeff: Imagine you order a specialized part on Sunday. The company making it could 3D print it overnight… put it on an AI-powered self-driving truck… and deliver it to the front door of your factory on Monday.
It’s how we’ll make our economy “antifragile.” That’s a term from author and former options trader Nassim Taleb. A robust economy can withstand a shock. An economy that’s antifragile actually improves from a shock. That’s what we’re seeing now with the manufacturing renaissance.
Van: Will AI play a role beyond piloting self-driving trucks?
Jeff: Absolutely. Widespread AI deployment will be one of the most disruptive and exciting tech changes since the Industrial Revolution in the late 18th and early 19th centuries.
Back then, steam power and mechanization automated many of our repetitive physical tasks. This allowed machines to take over many grueling, menial jobs unsuitable for humans.
At the time, many claimed this would lead to mass unemployment. But the opposite happened. There was an explosion of productivity and economic growth. This created far more jobs and opportunities than it got rid of.
AI will automate many other parts of our modern lives – especially at work.
So it’ll lead to another leap in productivity and quality of life. In fact, it already has…
Anyone who’s bought something from Amazon.com (AMZN) has benefited from the use of AI in online shopping, warehouse management, and supply chain logistics. Amazon couldn’t promise to deliver such a vast array of products right to our doors in two days or less without AI.
My readers have grasped this for years. But folks in the mainstream press are starting to catch on, too. For instance, last summer consulting firm Deloitte published the report The AI Dossier.
It outlined the benefits of applying AI to everything from consumer experience… to energy and industrials… financial services… government… healthcare… and media and telecommunications.
Deloitte concluded that “AI is here to stay.” It also noted that AI is becoming a competitive necessity for nearly all types of businesses.
Van: What’s the best way for investors to profit from this trend this year?
Jeff: Readers of my Near Future Report tech investing advisory have done well by following my chipmaker recommendations. The top gainer in the model portfolio is Nvidia (NVDA). It’s up 478% since I recommended it in January 2019. But because it’s gone up so much in price already, it’s above the buy-up-to price I recommend.
Another option is Taiwan Semiconductor Manufacturing Company (TSM), which I mentioned earlier. It’s up 231% since I recommended it in March 2019. But it’s still under my buy-up-to price.
TSM makes about 90% of the world’s most advanced semiconductors and about 60% of the less advanced chips our cars need.
Its chips are in our smartphones, watches, laptops, game consoles, and much more. So it’s a great way to play our high-tech future.
But real money will come from investing in the companies involved in smart automation tech the American manufacturing renaissance will usher in. This includes 3D printing, AI, and robotics.
As I told folks at my special briefing last night, automation will open up a world of technologies that most people haven’t even dreamed of.
These are opportunities where as little as $1,000 in the right stock can really move the needle on your wealth.
So if readers are interested in learning more, I recommend checking out the replay of that briefing while it’s still online.
I give the name and ticker of another of my top recommendations. I also share more on why I’m excited for this smart manufacturing trend that’s just taking off.