Note From Charles Sizemore, Senior Editor: The same month we launched The Banyan Edge, Ian King brought you an idea so big … it fired up your fellow Edge readers in a way we’ve never seen.Ian believes the U.S. will soon opt out of the globalization game and stop relying on Asia to make the semiconductors that power everything in our lives. It was a bold claim … and you had a lot to say about it (be sure to read all the way to the end of today’s essay to see what your fellow readers wrote in). I bring this to your attention today for good reason. Ian’s about to release his first piece of research on this huge theme … including his top semiconductor recommendation to take advantage of what he sees as a fourth convergence for the chipmaking industry. I’ve probably said too much already … but I’d rather beg for forgiveness than permission. Just be sure to tune in this Tuesday, February 28, for all the details straight from Ian. And read on to catch up on the latest with his big idea…
We’re Putting China Out of Business
By Ian KingEditor, Strategic Fortunes
Michael,guest on Fox Business, I commented: “The bigger story here that people have to think about is […] what is the impact of the coronavirus? I really don’t think we’ve seen this fully play out yet.” Less than two months later, my words (unfortunately) proved all too true. The U.S. shut down. The stock market tanked in one of the fastest crashes ever. The global supply chain ground to a halt. And everyone was suddenly cooped up in their homes, afraid to even shop for groceries. Now almost three years later, we’d all like to think that the worst effects of the COVID pandemic are behind us. But the truth is, it will remain with us for a long time to come. One of the biggest casualties was the global supply chain. The disruption was so severe, we’re now starting to see a silent war take shape. It’s between two of the biggest countries in the world — and they’re fighting it out over a new “commodity” that I consider more valuable than gold, oi or any other hard asset class on the planet. In fact, one major world power exports more of this product than oil — the #1 global exporting industry — even though it barely existed just four decades ago… But that’s about to change, and early investors stand to make a fortune as this plays out…Back in January 2020, “coronavirus” was nothing but a word for most Americans. It dominated the headlines, but it hadn’t yet hit the market or our everyday lives. A lot of people didn’t understand that there was more to the pandemic than we were hearing. But I knew there was more lurking beneath the surface. As a
Doomed by Globalization
The new top commodity I’m talking about is semiconductors chips.“Ian,” you might be thinking, “There’s no way that semiconductor chips are more important to the economy than oil.” That might have been the case 20 years ago. But it’s not true anymore. Chips are in everything. I’m sure you know they’re in your smartphone and laptop… But these days, they’ve become essential components of vehicles, home appliances, thermostats … almost anything that uses electricity. It’s not just in America. The entire world is addicted to technology — and the semiconductors that power it. That’s why, when the pandemic happened, semiconductor manufacturing got devastated … and prices for electronics got out of whack. Remember when you could sell your used car back to the dealer for more than you bought it? That wasn’t just because of supply chain issues. It was also because the semiconductor in your car became its most important component. It’s no wonder when you consider how chips are made… Chips are not a one-stop shop of manufacturing. It takes a lot of companies, controlling specific tools, working together to create a single semiconductor. It’s amazing we haven’t seen this crisis before, frankly. All told, there are 50 different points of failure for semiconductors! And if just one part shuts down, it all grinds to a halt. That’s why, in late 2021, lead times had buyers waiting 17 weeks for orders. By April of this year, that wait time jumped another 50%. These delays cost businesses billions in lost profits… And the worst part? This all could’ve been avoided. Had the pandemic hit back in the ‘90s, when the U.S. and Europe accounted for 80% of semiconductor production, we would have been in much better shape. But right now? Taiwan is making 92% of the world’s chips. That’s because we spent decades offshoring production, as the world became more globalized. It was cheaper to produce goods in remote areas of the world than at home. The biggest beneficiary, though, was China. Because Chinese labor was so cheap and the government subsidized production by building new plants, it could manufacture everything from consumer goods to tech devices. Right now, China is one of the biggest semiconductor manufacturers in the world.
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Talk about a dangerous dependency.But America is finally getting fed up with this … and the pendulum is starting to swing away from globalization. Uncle Sam is racing to put China out of business, and become the center of semiconductor manufacturing once again…
The Age of Globalization Is Over
Throughout the past four decades, the U.S. has had a cooperative relationship with China. But now the tide is turning.In August 2022, President Biden signed the CHIPS Act into law. It pledged $52 billion in capital to build semiconductor foundries in the U.S. Other major semiconductor companies are fast-tracking projects around the U.S.:
- Intel is set to spend $20 billion building a “mega” foundry in Licking County, Ohio.
- Samsung’s new $18 billion foundry near Austin, Texas, should be online by late 2023.
- And GlobalFoundries is spending $1 billion on a new factory in New York.
This trend isn’t just in America.Even Taiwan is looking to diversify its chip production. (Just in case China should get any ideas about invading…) As a result, the Taiwan Semiconductor Manufacturing Company (TSMC) is increasing its investment from one $12 billion plant in Arizona to $40 billion (with plans to add a second factory later.) Since TSMC is worth about $400 billion, this is a sizable chunk of change. The chips are expected to begin production in 2024. Little by little, countries are looking to get some of their eggs out of China’s basket. It’s a trend known, fittingly, as “deglobalization.” And it’s set to gain steam, since we all know what happens when a crisis hits and our supply chain rests in the hands of another country…
- Shipping delays…
- Billions lost in profits…
Companies around the world are doing everything they can to prevent this from happening again.And with China’s current “Zero COVID” policy disrupting its manufacturing, it’s a no-brainer to pull manufacturing back home. We’re already seeing early evidence of this trend. The “Factory of the World” has lost market share in consumer goods in several top categories for the past six years.
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Supply chain leaders around the world are starting to look for alternatives, too.McKinsey & Company surveyed 113 supply chain leaders worldwide, who represented organizations from a broad range of industries. In the results, 44% of respondents — up from 25% last year — say they are developing regional line supply networks.
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Now, deglobalization won’t happen overnight. In fact, I expect it will be at least 10 years before our “made in America” chips catch up with those made in China and Taiwan.But it’s a start. And it’s kicking off an investor’s dream opportunity in microchips…
The Fourth Convergence
You see, there’s a major event beginning to take shape in the semiconductor chip sector. I’m calling it the “Fourth Convergence.”I’ve seen these “convergences” happen before. Perhaps the most notable example is the shale fracking boom about 15 years ago, when three factors perfectly aligned to deliver some of the biggest profits of the decade. Pioneer National Resources soared 1,700%… CVR Energy exploded 3,000%… And Cheniere Energy ran up 4,500%. Now, the same thing is about to happen in semiconductors. We’ve been building toward this moment for the last 70 years. And if you position yourself right, you could have the chance to see gains of 1,000% or more over the next five years. I can’t dive into everything today, which is why I’m releasing a brand-new presentation on Tuesday, February 28, which will show you everything I’ve been working on. Make sure to check out my Banyan Edge article on Tuesday for the full details. Regards, Ian King Editor, Strategic Fortunes
P.S. Like Charles said, your fellow Banyan Edge readers had a strong response the first time I brought you this idea.BanyanEdge@BanyanHill.com agreed. Some disagreed. But all of it was fascinating to read. Here’s just some of what they had to say… (Please note, feedback has been edited for content and clarity.)Many who wrote in to
This movement is the smartest thing our country has done for a long time and unfortunately is way overdue! For the last several years I have become more and more concerned about our reliance on Chinese goods and components, mostly the later due to the detrimental impact on our supply chains.It seems that whenever I buy something on the internet that is not easily found here in the states, I have little choice to purchase a Chinese product. Not only are these products typically of inferior quality, but the advertising and instructions are so poorly written that it irritates me immensely. I and many of my friends are like minded and we always try to buy products that are NOT made in China. I am very willing to buy a product made in the U.S.A. at a higher cost just to keep the profits in our country. So yes, I am whole heartedly in favor of firing China and believe that many other Americans feel the same way! — Dave
Thank you for the article on firing China. Since you asked for opinions from your subscribers, here is my two cents.All is good with what the US is trying to do (by firing China). I am just concerned that many chip industry companies around the world may become discontent about the US preventing theirs from being sold to China. A prime example is the Dutch company ASML. This may backfire in the end. Does the US still have the political and economic capacity to pursue such extensive pressure on so many countries and companies? I hope so. Time will tell. — Brian
Yes, fire them. Why would we ever want to knowingly rely on a foreign country for anything we don’t have to. We are efficient, innovative and can be competitive when we want to.Re-shore the manufacturing of goods once again. With our technology, robots and innovations we should be able to far surpass the entire globe competitively. — (Name not given)
Absolutely must be done. Strong conservatives like myself were singing this song when they were taking all this to China in the first place. Now China has built a huge military that will be used against us and we are getting weaker by the day.I am very afraid that 10 years will not be soon enough. Every effort should be expended to cut that timeline down. — Steve
I like your optimism, and I too hope the current initiatives (including the Chips Act) make a difference in our domestic production of computer chips.Unfortunately, most of what I see can only have a very minor impact on the factors that drove most manufacturing overseas in the first place. Nearly all manufacturing is done by large international firms whose profitability is largely dependent upon supplies, labor costs, and distribution, and they will do their operations or out-source portions of their supply chains based on long-term economics not short-term incentives thrown at them by the current administration — that, with the other hand, is giving unions everything they demand while also inflating distribution costs. This is a far bigger animal to tame than simply chips. Keep up the good work. — Gary
Every country on earth has to deal with supply and demand, imports vs exports, manufacturing/service industries, and the list goes on. When a crisis occurs such as a pandemic, all of these challenging areas become critical.The only way that countries can get through these times of crisis is to have cooperation set up between the major players, for example the 15 or 20 largest economies in the world. That means a huge economy like California needs to be represented at the planning/negotiating table. And politics needs to take a back seat to getting a cooperative plan in place. After all, we’re talking about economic survival. If a major player sinks, every other country suffers. Nonpartisan, politics-free solutions are the only means that make sense. — Lance
Let’s take into account all of the American companies that fired all their workers for cheap labor in China and other Asian countries. They deserve no support from our government. Let them pay their own way back.— Robert
Yes indeed, it is high time the U.S. reestablished its position as the leader in Chip Technology and manufacturing for a number of reasons, not just economically but strategically as well.We also need to get back in the forefront of energy research and development, especially nuclear. We’ve almost completely abandoned the one source of energy that is at once the most efficient but also the one that will need to greatly expand in order to offset the reduction of fossil fuel-based energy and enable the renewable and “green” energy sectors to become dominant. The U.S. has so little involvement in nuclear energy that we have abdicated the future research and development to China, Russia and to some degree India in favor of premature and unsustainable reliance on wind and solar. Undoubtedly those will improve over time but not quickly enough to satisfy the energy needs we currently have let alone allow for normal growth. — Stephen
I’ve long been in the habit of checking labels for point of origin — clothes, groceries, everything.As a baby boomer I have seen our world go from NO television (we got one when I was 7 in 1957) to the amazing technology we have today. My father, a World War II vet, always said that China would become the quiet menace in the background, undermining everything the U.S. did in its rapacious desire to dominate. WE have let that happen. I read an article the other day that said if you removed everything in your house that was made in China your house would be empty. I am ALL IN on any plan to make whatever we need in America no matter the increase in cost. In our current financial and political situation we are weakened, and like a wolf stalking its prey, don’t think China doesn’t know it. I currently have three semiconductor stocks in my portfolio and will buy more. It’s the future and American-made must rule! — Phyllis
It’s about time that we wake up and stop feeding our sworn enemy. Long overdue!— Robert
I have to comment on this subject.Many years ago when I saw the move of the US buying everything from China I thought it was a mistake and I’m not a highly intelligent person at all. It made no sense to me and can’t understand how unwise that was and is. Especially since China is a Communist country! Why? Finally something dramatic had to happen to shake some sense into that poor decision-making. Hopefully we can buy made in America products sooner than 10 years. Good investment knowledge for the future! — Therese
We should have done this long before COVID, not only from a financial point of view, but also from a strategic point of view. We outsourced to an undeclared enemy of the state and put ourselves behind the financial 8 ball not to mention the loans we took from China. Not only with chips but a wide variety of products.This was a very short-sighted approach to profit making. When dealing with a country whose political theory is the polar opposite to your own you cannot put yourself in such a vulnerable position. If it wasn’t COVID they could have interrupted the supply chain for any semi legitimate reason. Unfortunately CEOs do not think this way. THUMP. Sound of me jumping off my soap box. 🤣 — Joe
What do you think about this idea? Do you see any issues with U.S. companies taking the power and profits back from China?BanyanEdge@BanyanHill.com and let us know!Write us at