April 12, 2022

479: What Does the Senate’s $52 Billion Bill Mean For U.S. Microchip Manufacturing? (with Lewis Black)

"A normal regular gasoline vehicle has somewhere in the region of 800 to 1000 semiconductors. An EV has more than double that."


On today's episode of The Brian Nichols Show, Lewis Black (CEO of Almonty Industries) returns to the program to discuss inflation, supply chain issues, and semiconductor shortage:

 

"The demand for semiconductors through the COVID lockdown was quite unexpected. Obviously, there was an enormous demand for consumer goods, phones, computers, so we put a huge sort of drag on the sector.

 

Then we couple that with increasing demand across the board, as we've reopened, we've got a lack of raw materials to actually produce them. And then, just to really put the icing on the cake, this push towards a greener future has put a dramatic effect on the supply chain for semiconductors.

 

So for instance, a normal regular gasoline vehicle has somewhere in the region of 800 to 1000 semiconductors. An EV has more than double that. So if you're looking to ultimately replace gasoline vehicles with EVs, you'll know where you're gonna need double the number of semiconductors to make that happen.

 

And this just doesn't exist - that capacity... that outputs - does not exist currently."

 

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Transcript

Unknown Speaker  
Instead of focusing on

Brian Nichols  
winning arguments, we're teaching the basic fundamentals of sales and marketing and how we can use them to win in the world of politics, teaching you how to meet people where they're at on the issues they care about. Welcome to The Brian Nichols Show. Well, happy Tuesday there, folks, Brian Nichols there on The Brian Nichols Show. And thank you for joining us on a CT, another unfilled episode of The Brian Nichols Show i n as always, your humble host, and today we have our returning guest. He is the CEO of El Monte industries, Louis black. Welcome back to The Brian Nichols Show.

Lewis Black  
I Brian, how are you? Doing? Well, Louis, thank

Brian Nichols  
you so much for joining us once again, here on the program. I know we had you back. I think it was right there in the beginning of COVID. It was everything was kind of on hold. I know supply chains were just completely in disarray. And you, as the CEO of El Monte Industries gave us some insight into how that was impacting your ability to get tungsten out there across the world. So today, we're seeing now the the after effects of what's happened over the past two years, specifically, not just in regards to the supply chain issues, but also in regards to our economy's monetary policy is going just completely out of whack. So now we're seeing the big pain, the inflation, it's hitting hard. And it's really, really having a direct impact not just on those consumers, but also the producers. So, Louis, let's reintroduce yourself to the audience kind of dig into what's been going on in amante. But also, what's been going on in terms of the inflation, how has it impacted you? Well, I

Lewis Black  
mean, we're obviously the civil largest producer of concentrate tanks, it's concentrated outside of China. And although China is still the very dominant player here, Russia being number two, inflation of cause has created a number of problems, you know, for all companies, including ourselves, shipping costs are up raw material costs, consumables are all up. Wages have no chance of keeping, you know, keeping up. But I mean, obviously, we have unions throughout our company. And I think, unbelievably, there's quite a bit of common sense going around, I think that the union's acknowledged that this situation is way beyond anyone's control, we've, we've done some pay raises, you know, a fraction of I think 4.7%, which was considered to be more, you know, the high side compared to some of our colleagues. But it was the best that we could throw in, I think, you know, we're just going to have to all sort of muddy in and get through this together. But it's not going to be an easy ride. You know, I think 20 Next year, you'll probably see a little Tama bots, hang on to your hats for the next 12 months, at least,

Brian Nichols  
to say the least. And we're also seeing it impacted in regards to what's happening in the car market, when you go out to buy a brand new car, I mean, you're seeing up charges of 10s of 1000s of dollars in some cases, and a lot of it has to do with the semiconductor shortage. Now, let's talk about that. There's there's so much to dig into. And obviously Tungsten is one of the main components of the semiconductors. But let's talk about that on a grand scale. What's the issue where why are we having such a hard time getting these semiconductors?

Lewis Black  
Well, I mean, in semiconductors, obviously, the demand for semiconductors through the COVID lockdown was was quite unexpected. Obviously, there was an enormous demand for consumer goods, phones, computers, so we put a huge sort of drag on the sector, then we couple that with increasing demand across the board, as we've reopened, we've got a lack of raw materials to actually produce them. And then just to to really put the icing on the cake. This push towards a greener future has put a dramatic effect on the supply chain for for semiconductors. So for instance, a normal regular gasoline vehicle has somewhere in the region of 800 to 1000 semiconductors. And Evie has more than double that. So if you're looking to ultimately replace gasoline vehicles with with EVs, you'll know where you're gonna need double the number of semiconductors to make that happen. And this just doesn't exist that capacity that outputs does not exist currently.

Brian Nichols  
Wow. So right now we're seeing in the US, we just had the US Senate passed this bill, it was a fifth with a $52 billion. The numbers just sound made up at this point $52 billion to bring semiconductor manufacturing back home and subsidies to some different corporations. So obviously, you know, this is going to have a big impact on the marketplace. What are you seeing as being the direct implications of that?

Lewis Black  
Well, I think firstly, that the bill has only gone through the Senate, it started in the house, then it got completely sort of changed around in the Senate and now it's gone back to the house. So I don't think we'll really understand exactly what it's going to be until it finally passes, and they're saying that sometime in the summer. So I think at that point, you'll know what the moneys for and how it's to be used. But I hasten to add that there are a number of, you know, there's a number of things you need to remember, the US, historically was the dominant producer of semiconductors. And over the years, it's migrated to Taiwan and South Korea, these are now the two largest producers of semiconductors, the semiconductor have now is very different from the semiconductor before, these things are at the cutting edge of what we can do with technology. I mean, they're an extraordinary piece of work. Absolutely incredible. And to build once a manufacturer when I believe it takes nine weeks from soup to nuts to produce one semiconductor through a plant, such as the intricacy of it. So these plants firstly will take a number of years to construct, this is the first thing because they're not just you know, making widgets, just putting up some, you know, some steel bar and some sheeting and you've got a factory, you this is really, you know, these are highly automated, highly technically advanced, and also the technology to make them is not liberally shared around. I mean, Taiwan and South Korea have very much dominated this sector. And I don't think it's going to change anytime soon. But then we also coupled that with Well, you've still got to produce them, that requires raw materials. And that you don't have I mean, to give an example, Tungsten is used in tungsten gas to produce semiconductor 40% of all the world's tungsten gases that's produced is consumed in South Korea, to give you an idea, but ultimately, they're just there's not enough raw materials to accommodate not just the semiconductors, but what they're being used for. So, you know, I think the car delays you're seeing now in the US and all around the world, semiconductor shortages, electrical loom shortages, they're finding in Europe, because most of them were assembled in Ukraine. You know, you don't need one, you need one thing that's out of sync, and the whole car market with a whole chain of vote, the production of a car comes to comes from it.

Brian Nichols  
So what does that look like? I mean, we're getting to a point now to your point where the actual raw materials for semiconductors is starting to get scarce. So what does that look like in terms of finding alternatives? Is there something beyond semiconductors we can look to in terms of technological innovations? Or are we kind of Sol?

Lewis Black  
Well, I mean, I think, no, you don't see the question bluntly, no, you can't replace semiconductor, are they? They, they're the brains. It's the brain of an Eevee. For instance, the reason why an Eevee is an efficient use of a battery and the energy and the transport, transporting that around the vehicle to the wheels, all of these things are controlled by semiconductors. So every kind of thought process to use a sort of archaic expression within your technology comes from a semiconductor, so it's irreplaceable. Ultimately, the push towards a greener future has put a larger demand on that supply chain, that's going to take some time to catch up. But But I think you shouldn't look at this in a horrendously negative way. Firstly, the free market is very inventive. And yes, supply chains, raw materials, were going through a bit of a moment, democracies generally don't want mines in their backyards. That means it but they at the same time, they want transparency of those raw materials. So So then they they look at me, Russia has been a great example, where sometimes countries that you have to work with perhaps don't behave to the same values that you have. And then there's not much you can do about it when they don't behave. Russia, as I said, is a great example. The sanctions have been very kind of focused on individuals. But in terms of their raw materials, they've been pretty much left alone, because you can't live without them at this time. Does that change in the future? I don't know, I would have liked to have seen in this bill, perhaps a little bit more focus on the supply chain in its entirety, rather than just going for the glamour end, which is we're going to make a semiconductor. So I think hopefully, it goes back to the house. And you know, some common sense will approach it so well. Okay. But how we go into we still have to buy all the raw materials for the semiconductors from perhaps places that we don't want to take a vacation.

Brian Nichols  
Yep. And one thing, Louis, that you brought up, I wanted to go back to his addressing the supply chain, how would that look when you're actually going through? And and you're seeing the bill revised? How would that addressing the bill help in terms of actually getting more of the raw materials from the supply chain to alleviate the issues?

Lewis Black  
Well, I think we've seen certain countries that you know, South Korea, Japan, even Australia now. They're looking at direct investment into raw materials, supplies, sources. I'm not a big fan of that man. mainly because, you know, a mine is a very specialized business. And and many of Fortune has been made and lost in mining it unless you actually really know what you're doing, it's not or you have a team that you can really rely on governments tend not to have the attention to detail to ensure that sometimes what they're putting money into is a great idea. I'm a great believer that government should play to their strengths. And I believe their strengths come with, well, they have a checkbook. And they have essentially the ability to accumulate raw materials through stockpiles, which they've done historically, for wealth generations. Not now. But during the Cold War, for instance, in the United States, they had the DLA and Defense Logistics Agency, and that was their primary focus was to in fact, ensure that the United States had access to ample raw materials for their manufacturing, in the event of a war breaking out. I'm not saying you return to that type of war footing. But it was a very efficient tool that worked very well. And it doesn't mean that you give these raw materials to American manufacturers, you just basically accumulate them and then sell them. Now, you're obviously taking a punt in that sense, as a taxpayer, on whether prices move up or down. But ultimately, it's surely better to know that that system actually works. Because it's it's tried and tested, then going down a road of, say, loosening regulations, which I don't agree with, even as an operator wouldn't regulation is driving me crazy. I don't think you should loosen regulations, they're there for a very specific reason, and they must be left in place. Or you go down a road of investing into mines, which, you know, may or may not work, which is another, it's fraught with all kinds of risk. And of course, takes much longer to put together, then going out and saying, you know, what we are now going to put off takes out to various suppliers in territories that we like, or even some that we don't like, in order to accumulate enough raw materials to ensure that what we're going to build in terms of the supply chain going basically, downstream, we have at least that's reliance on the supply chain. So let's go to

Brian Nichols  
El Monte, what are you guys doing right now internally to help address things and maybe adapt? As you've seen the supply chain issues, you've seen the demand increase? And yet, it's still difficult to be able to answer that demand? So how are you answering the call right now and maybe adapting on the fly?

Lewis Black  
Well, I mean, to be honest, we've always been part of that supply chain, because you know, 83% of tungsten is produced in China and nearly 7% is produced in Russia. So we all of our customers have been very happy with the fact that we have a transparency of our supply chain, we're reopening now the world's largest tungsten mine in South Korea. And that you South Korea is the largest consumer per capita in the world of tungsten. So I suppose in our small, little way, in our very small corner of the whole equation, we're doing what is technically possible. But I think, to be honest, it's I think people have to understand this supply chain issue is not going to go away. anytime soon, it took China 30 years to get to the to this place, they executed incredibly, but they it took them 30 years. I'm not saying it's gonna take that long for us. But it's, it's something which we have to know how to adapt to. And I think from a Monty's point of view, we will continue to look for projects that are in what we consider to be safe jurisdictions with nice legal systems. And that's what our customers expect us to continue to do.

Brian Nichols  
So when you're talking about the future, and it's difficult to paint the picture, because I think if we were to go back, you know, let's say three years ago, and say, there's gonna be a global pandemic, it's gonna basically shut down the entire world and society, everybody would just laughed and said, okay, but it happened. And it's still, you know, in some places still happening. So where do you see things going? Now? Let's ignore right now, just pretend the Senate bill doesn't exist for a little bit. And let's just say where things are going right now not being changed whatsoever? Where would you see things in five years, let's ballpark and then in the event that you're able to see the supply chain, in fact, get corrected some but still need some time to get a little bit of its legs back up? Where do you see five years from now, if we do have a positive outlook forward? What would that look like?

Lewis Black  
Well, I think it really depends on our appetite for hard work. I think that's really what it comes down to. Ultimately, I think the Russian episode in Ukraine is great example. 90% of all the raw materials produced in Russia is exported, and yet the supply of those raw materials has not been affected one out by the sanctions away this war. It's just business as usual. Yes. The route to market is now rather than go via Europe, it now goes by China, but it's still very much there. And, you know, the outrage that we have about what's going on in Ukraine, you know, politically it hasn't really, you know, spread to these wrong materials because ultimately you can't live without them. So then it comes down to the fact, we are all inherently lazy, every single one of us and buying from some of these countries is very easy. And it's very simple. And it means that the mines and the legacy of these mines, these raw material sources is someone else's problem. It's not us. And so do we just literally just, you know, Ukraine is the whole thing is resolved, pieces brought back, China COVID sort of disappears. So we stopped thinking about, you know, where did it all come from? We start, we start getting comfortable again, to how we were pre COVID. And we go back to just essentially looking well, we can always buy whatever we need from, okay, we know it's not great when it's not a great place, but But you know, they sell to us. And this time next year, I'm going to work something else. That was the temptation, or do we say, you know, what, we had a problem in 2008, the financial crisis, with all contracts out of China being cancelled under a force majeure, because they were considered to be important to the state, we've now had another problem. With COVID, we've got this war in Ukraine, we're really going to have to address this. And we're gonna have to roll our sleeves up. And we're gonna say, You know what, we have to make some tough decisions. Yes, I know, there are some people who are going to be upset about this concept of break, bringing raw materials supplies into democracies, but ultimately, we don't have a choice. In less, we're going to choose to keep working with countries that quite frankly, you know, aren't the greatest.

Brian Nichols  
So let's talk about I'd say, this is probably the biggest bugaboo I've heard, I'm in the world of sales in greater telecommunications bandwidth and cybersecurity world and I'm hearing right now cyber attacks are on the rise, and it's been disrupting the supply chain. Are you seeing that right now at amante, where you've seen an uptick in cyber attacks.

Unknown Speaker  
Um,

Lewis Black  
we actually, we took a view we got we got attacked about four years ago was bizarre, but we got it, we had a, we got a mind in Portugal, and somebody did the, you know, they ring you up, and they say, if you don't give us x, in whatever, it wasn't Bitcoin, it was something else that we're using. Now we're going to delete all your files. And, of course, we were fifth generation mining guys, you know, we kind of responded as you would expect us to, and, and they really did actually seize our server. Now, we back everything up. So in fact, we didn't have any impact. So we took the decision, you know, what, we're going to keep every mind kind of, you know, off the grid. So, you know, we, if we need to send things around to the other sites, we'll do it independently, not not on a on a big network. So we've essentially taken that approach, because it's, it's, you know, it's everywhere. I mean, it's, it's, it's, there's nothing you can do. So, yeah, we're getting a bit old fashioned, I mean, haven't got guys running around with, you know, pieces of paper, you know, we're not using carrier pigeon, but we've just essentially ring fenced the mines. So nothing gets in, nothing gets out. And if you want to take something out, you have to move whatever data it is to like a Dropbox that's not so not connected to our, to our server there. And then it's sent out that way. And that way, we kind of isolate, access, and I hope by saying this, I'm not laying down a challenge to the hacking community to see if they can kick the door. And so So, you know, please, we're only a poor tungsten company. There are plenty of other people you can go after.

Brian Nichols  
Well, it's got they're gonna for everybody, it's a sad part. Like I've seen the uptick, you know, just in the past two years in the day job, it's been just exponential growth. And one of the providers that my company works with, you know, he says, you know, if you have a provider in a security world who says that you're, you're 100% protected, they're flat out liars run, run as fast as you can, because to your point, it's happening to everybody. And the best thing you can do is prepare, you can get the policies procedures in place, you can go through the tabletop exercises, and map out what could happen in the event, but at the end of the day, and this is the sad part, the biggest threat that companies have is unfortunately, there are people internally because you still have the social engineering where you know little Suzy and Secretary gets the email and it says, you know, hey, the CEO is looking for some gift cards can you please go ahead and scratch those off and send that to her and all sudden she just clicks a link and goes ahead and does that and now all sudden boom, to your point they can jump right in and it happens more often than not which is sad Louis was awesome. It is it is and it's it has in many cases crippled supply chains, it's crippled organizations if locked down entire I just saw a school up where I'm from in Northern New York originally, they got hit with ransomware $797,000 For a little tiny public school so Now granted, I say a little tiny Public School is a little tongue in cheek here in America but that's another conversation for a different day. But anyways, with that being said, Louis, obviously there's a lot here to to unpack from, from the audience perspective, a lot we went through today, but what would you say are the number one One things that you'd want the audience to take away and really, you know, digest as they walk away today from the episode.

Lewis Black  
Well, I think is Douglas Adams would say, don't panic, that's the most important thing. The market is a very resilience, enterprise solutions are being found on almost daily basis, try and sort of ignore all the noise. And know that, in fact, a lot of the end consumers, the apples, the Boeing's, even the Tesla's, they are in their way driving this diversification. To increase the transparency of the supply chain, it's gonna take a little time, it's going to be a bit disruptive to consumers generally, but ultimately, I believe, quite honestly, we're gonna get there.

Brian Nichols  
All right, Louis, black, El Monte industries. If folks want to learn more, we're going ahead

Lewis Black  
and do that. Oh, our website wwe.mit.com.

Brian Nichols  
Perfect. All right, folks. There you go. If you want to go ahead and learn more, I'll include that link in the show notes, as well as Louis's bio plus the entire transcripts from today's episode. Oh, and on top of that, all 470 Plus episodes as well over at Brian Nichols show.com. If you enjoy the episode, folks, please do me a favor, go ahead and give it a share. And when you do give yours truly a tag at B nickels liberty. But with that being said, it's Brian Nichols signing off. You're on The Brian Nichols Show for Louis black.

We'll see you tomorrow for listening to The Brian Nichols Show. Find more episodes at the Brian Nichols show.com.

Transcribed by https://otter.ai

Lewis Black Profile Photo

Lewis Black

Director, President and Chief Executive Officer

Lewis Black is CEO of Almonty Industries, a leading global company involved in the mining, processing, and shipping of tungsten concentrate and has over 15 years of experience in the tungsten mining industry. From June 2005 to December 2007, he was Chairman and CEO of Primary Metals Inc. (“PMI”), a former TSX-V listed tungsten mining company. Black also formerly served as head of sales and marketing for SC Mining Tungsten, Thailand. In addition, Black is well-versed in the global rare earths market, the current supply chain for those rare earths and what’s to come in diversifying the supply chain as demand continues to increase.

About Almonty:

Almonty specializes in acquiring distressed and underperforming operations and assets in tungsten markets. These then benefit from the company’s in-house operational experience and unrivalled expertise in the tungsten market. Highly regarded as a hands-on, turnaround investor-operator, Almonty is an expert at overseeing projects regarded as too complex or difficult for the average, pure “financial investor”. To date, the results of its acquisitions have been fast and very profitable turnarounds. Almonty is actively pursuing other growth opportunities via acquisitions where it can apply its tungsten expertise to create additional value for all stakeholders.