338: U.S. vs China's Semiconductors, Deglobalization, Google + Intel DPU, Facebook vs Nvidia, Honda & LG, Tiktok US Logistics, ARM vs Qualcomm, and Tombstone

"a bologna sandwich and a small glass of milk"

History cannot give us a program for the future, but it can give us a fuller understanding of ourselves, and of our common humanity, so that we can better face the future. –Robert Penn Warren

🚢 Hey friend. I gotta admit, I’m feeling a little blue about this steamboat. A little discouraged.

For a long time, it felt very win-win around here.

Over the past 2+ years I’ve worked hard, mostly 7 days a week. A growing number of subs seemed to dig the crap I was typing in the computer, and an increasing number of people paid a few bucks each month to help me to pay my bills and feed my kids.

But for many months now, that last part has been kinda MIA.

We used to have 95% free subs to 5% paid supporters, and that felt like a decent ratio (20:1). But that’s now 97.3% to 2.7% and not moving in the right direction. What’s the endgame? 99:1?

It’s great to double the number of total subs and reach our first Hobart (12k), but if the percentage of paid supporters halves during that time, there’s a Zeno’s Paradox kind of thing going on.

Am I getting the message?

What I’m hearing is the work I’m spending most of my lifeforce on (all we have is time + energy, and a limited amount of both) isn’t worth the price of a bologna sandwich and a small glass of milk, so who am I to argue? Maybe I should be doing something else? Is that what you’re telling me? 🤔

It would certainly free up a lot of time to try more things, have more adventures, and read more books.

Don’t get me wrong. I *love* writing the newsletter, but it’s also a business, with an opportunity cost, and there’s a market signal here.

Anyway, I’ve not made a decision on anything.

I try to be a patient person. I’ll see what happens — maybe I’m writing this at the bottom of a cycle and supporter momentum is about to turn around. But I wanted to share that things aren’t feeling great on my end of the fiber optic cable right now...

💚 🥃 🐿

My mother’s raspberry pie for Canadian Thanksgiving 🍁 My favorite dessert.

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Business & Investing

🇺🇸🇨🇳 U.S. Semiconductors Restrictions on China, Deglobalization, etc 🌏

I’m sure you’ve seen the news about the US further strangling China’s access to the most advanced capital equipment and software to make cutting-edge chips:

The Biden administration published a sweeping set of export controls on Friday, including a measure to cut China off from certain semiconductor chips made anywhere in the world with U.S. equipment, vastly expanding its reach in its bid to slow Beijing's technological and military advances.

The rules, some of which take immediate effect, build on restrictions sent in letters this year to top toolmakers KLA Corp, Lam Research Corp and Applied Materials Inc, effectively requiring them to halt shipments of equipment to wholly Chinese-owned factories producing advanced logic chips.

Without EDA, without ASML, without all the other necessary doodads from KLA, Lam, Applied Materials, etc. Good luck!

Ben Thompson (💚 🥃 🎩) has a good piece about some of the ramifications of all this, the possible second and third-order effects:

• The China Chip Ban; The Logic of the Ban; Chinese Retaliation, or Not (sub $ required)

Many very important questions: How fast can China develop its own stuff? How much IP has already been extracted/reverse-engineered from Western companies as they operated in China or through industrial espionage anyway?

It’s always faster to re-produce something that already exists, and that you can use as a template even if you don’t know everything that goes in the secret sauce, than it is to come up with it de novo, out of thin air in the first place.

So I doubt China will take as long as it took the Western companies to invent the stuff… But that’s still a long while with a moving target.

Gavin Baker theorizes that maybe, in the meantime, China could ease rules preventing Chinese companies from using US-based hyperscalers for compute. I’m not sure how likely that is, but it could happen.

Another big Q: Will China retaliate?

Will the lose-lose game become even *more* lose-lose?

Any retaliation on Western companies operating in China also hurts China — especially since they already don’t allow the pure ‘bits’ companies to operate in the country, so those that remain tend to do a lot of manufacturing and employ a lot of people there.

All very important branches of the decision tree. 🌳

But what I can’t help but think about — in a kind of naive, why can’t we just get along, hold hands and sing Kumbaya way — is how sad it is that humanity is playing so many zero-sum, lose-lose games in the first place.

I wish more of us could pull in the same direction and work together to improve everyone’s lot.

That was the beauty of a lot of the global trade and cooperation of recent decades — there were winners and losers, but it was generally win-win. I wish we could’ve worked on fixing the problems with the system that we had, but were able to *keep the good parts* and just add more good stuff.

The world progresses faster when Chinese scientists, engineers, and entrepreneurs can collaborate with their global peers, exchange ideas, iterate on each other’s stuff, invent new tools that everyone can use to make breakthroughs that will cure some disease or whatever.

I’m afraid of the real long-term cost to humanity — in suffering, lower standards of living, and slower scientific and technological progress — if we create more silos, walls, and barriers to cooperation.

I mean, I get it. I know why this is all happening, and I certainly wish China was moving in a freer direction rather than in a more authoritarian one — but I can still mourn the path not taken, the missed opportunity.

The reality is what it is, I just sometimes feel sad thinking about how much better humanity could be if we could get out of our own way ¯\_(ツ)_/¯ TSM 0.00%↑ AMAT 0.00%↑ KLAC 0.00%↑ LRCX 0.00%↑

🔋🔋🔋🔋🔋 Honda + LG Energy to build $3.5bn battery factory in Ohio

Construction of the new facility – located about 40 miles southwest of Columbus – is expected to begin in early 2023, followed by mass production of lithium-ion batteries by the end of 2025.

The battery plant is expected to cost $3.5 billion, with overall investment by the unnamed joint venture eventually reaching $4.4 billion, the companies said.

The facility is expected to employ about 2,200 people.

Honda has been such a laggard when it comes to EVs, I hope this means they’re finally getting serious:

In addition to the new battery plant, Honda on Tuesday said it plans to invest $700 million to retool several of its existing auto and powertrain plants for production of EVs. The Japanese automaker expects to begin production and sales of EVs in North America in 2026. (Source)

Let’s also hope all these big investments are taking into account the lithium supply situation — North America and Europe need to build their own mines and refining plants. Can’t leave a crucial part of their transportation supply chain fully outsourced forever…

I remember when hybrids first came out, the Honda Insight was right there at the cutting edge with Toyota’s first Prius (which came out in Japan in 1997!).

Both automakers were building a lead for knowledge of electric drivetrains that could’ve allowed them to stay ahead of the pack — but instead, they took a bunch of wrong turns, got lost in the hydrogen fuel cell forest, and wandered into a local maxima with hybrids, taking a long time to make the jump to fully electric vehicles, allowing others to pass them... And now they have to play catch up.

If there’s a truth in this life, it’s that you can never rest on your laurels! 🏛🗿

📲 🛒 🚚 📦 📫 Tiktok building e-commerce logistics in the US?! 🤔

Axios:

TikTok is planning to build its own product fulfillment centers in the U.S., creating an e-commerce supply chain system that could directly challenge Amazon, as indicated by more than a dozen new job openings posted in the past two weeks to LinkedIn.

According to the job postings, TikTok is looking to build an "international e-commerce fulfillment system" that will include international warehousing, customs clearings and supply chain systems that support domestic e-commerce efforts in the U.S. and cross-border e-commerce efforts. The systems will eventually perform parcel consolidation, along with transporting goods from one stage to the next and managing free returns.

The idea that Tiktok is going to compete with Amazon in the US any time soon is pretty funny.

If Facebook and Shopify are constantly hitting walls trying to get into this kind of capex quagmire, how is a Chinese advertising company going to do better?

This is probably some experiment they’re running to dip a toe in the water. If I was Jassy, I wouldn’t be too worried yet.

⚖️ ARM vs Qualcomm lawsuit 👩🏻‍⚖️

Friend-of-the-show Dylan Patel gives his highlights from Qualcomm’s recent counter-suit against ARM in their ongoing legal battle:

• Is Arm Desperate? Qualcomm Claps Back At Arm’s Potentially Frivolous Lawsuit

When I think about it, ARM is so much less interesting to me as a standalone company than it would’ve been inside of Nvidia…

Their IP is ubiquitous and tremendously valuable, but the most interesting things made with it come from third parties using architectural licenses to design their own chips (like Apple’s A and M series, for example — did you know that Apple was one of the companies that helped created ARM through a joint venture in 1990?), not from ARM itself.

I hope I’m wrong on this, but they just don’t seem to have what it takes to be the driver of innovation in their ecosystem, and it seems probable that they’ll have trouble capturing a lot of the value created with the building blocks that they make. QCOM 0.00%↑

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Science & Technology

Google partners with Intel to design DPU chip

The acceleration of networking and the increasing security logic required in this world of saas applications running all around the cloud with zero trust security marches on thanks to custom-made chips to offload all this from CPUs and onto dedicated smartNICs, giving the double benefit of having better network performance, and freeing up CPU cycles for higher-value uses.

It’s necessary partly because there’s a lot more layers of encryption and authentication than with the old castle & moat model, and the amounts of data moving in every direction keeps exploding.

The latest comes from Intel, in partnership with Google (but we’ll likely see these chips used by non-Google players in the not-too-distant-future):

The E2000 chip, code named Mount Evans, takes over the work of packaging data for networking from the expensive central processing units (CPU) that do the main computing. It also offers better security between different customers that may be sharing CPUs in the cloud [...]

Google Cloud is starting to offer the E2000 in a new product called C3 VM which will be powered by Intel's fourth-generation Xeon processors

Note that the E2000 uses ARM cores (that’s the top right corner on the rendering of the die above).

“Mount Evans will combine P4 packet processing logic along with Arm cores and accelerators that are based on some of the QuickAssist IP. This is Intel’s offering to counter NVIDIA BlueField-3 and AMD Pensando cards directly.” INTC 0.00%↑ GOOG 0.00%↑

Facebook Meta releases AITemplate software to abstract away GPUs for inference 🤖🤖🤖🤖

From the Meta AI blog:

Currently, AI practitioners have very limited flexibility when choosing a high-performance GPU inference solution because these are concentrated in platform-specific, and closed black box runtimes. A machine learning system designed for one technology provider’s GPU must be completely reimplemented in order to work on a different provider’s hardware. [...]

Meta AI has developed and is open-sourcing AITemplate (AIT), a unified inference system with separate acceleration back ends for both AMD and NVIDIA GPU hardware. It delivers close to hardware-native Tensor Core (NVIDIA GPU) and Matrix Core (AMD GPU) performance on a variety of widely used AI models such as convolutional neural networks, transformers, and diffusers.

This will no doubt help large GPU buyers like Meta to better negotiate pricing by pitting Nvidia and AMD against each other by reducing lock-in (which mostly works in favor of Nvidia, thanks to its dominant CUDA software platform).

I’ll be curious to see if Nvidia does anything to mess with it by changing its own software… META 0.00%↑

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The Arts & History

🐴 Tombstone (1993) 🤠 🤒 😵

I was recently talking to my friend David Senra (🎙📚) and he mentioned this film, and how much he loved the character of Doc Holliday (played by Val Kilmer in his prime).

I think I had seen it — or at least part of it — as a kid, but I didn’t remember much about it, so it was like a first watch for me.

I gotta say, the first thing that struck me was a few Deadwood actors (Powers Boothe as the leader of the bad guys and Paula Malcomson as Allie Earp). Lots of good actors too, with Sam Eliott doing a classic, big-mustache cowboy, basically the same one that he later reprised as the narrator of The Big Lebowski.

Michael Biehn is very good as bad guy Johnny Ringo — hard to see him as the same guy who played Kyle Reese in The Terminator.

Some of the film has aged — the gunplay tactics make no sense — but what sold me on it was the tin cup scene with Doc Holliday (you’ll know what I mean when you see it, and if you’ve seen it, you know exactly what I mean). After that, I was all in just for that character.

My fave moment is probably when one of the guys looks at how far Doc is willing to go to help Wyatt despite being sick with tuberculosis (“lunger!”), constantly risking his life.

Doc simply replies:

“Wyatt is my friend.”

The other guy:

“Hell, I got lots of friends…”

Doc:

“I don’t.”

True friendship. Something worth pondering, and savoring.

If you’ve seen the film and want an interesting discussion about it and the backstory to making it (apparently Kurt Russell ghost-directed it), I recommend this podcast episode:

• 🎧 Rewatchables: ‘Tombstone’ With Bill Simmons, Sean Fennessey, and Chris Ryan

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