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let me look on each one's window spawns and dawson with i. the shipping and logistics are 2 industries that have been booming. ever since the pandemic as the supply chain broke down and none have been more effective than the semiconductor chip industry. the small chips aren't everything these days from planes and national defense systems to your smartphone, your car, all the way down to your coffee maker. but it looks like relief is just around the corner as analysts believe the chip cycle downturn is nearing. i'm chris vi and you're watching the cost of everything where today we're breaking down how global supply chain disruptions and changes in the chip industry are costing you in a big way. most

people don't talk about semi conductors in their everyday life. but these little chips, power everything around you, your phone, your computer, your car, without them. technology comes to homes, which is why the semi conductor value chain is one of the most complex and geographically dispersed processes. what is the cost of supplying semiconductors to the market? while the typical cycle take more than a $100.00 days with the chip crossing international border 70 or more times and ultimately making the equivalent of 3 full trips around the world to fabricate. as many will recall headlines of chip shore just fill the news in 2020 due to supply chain disruptions caused by us trying to trade war and subsequently cove. it billions were invested into expanding the chip industry and building out foundries . taiwan semiconductor manufacturing and samsung electronics announced 3 year

global capital expenditure plans and 2021 of approximately a $100000000000.00 each. but building a chip boundary is a far cry from an apartment complex. you watch rise over the summer. these factories are build these chips. that cost between $10.00 to $20000000000.00 and can take 3 to 5 years to build. this is due to the hundreds of steps and the necessity for air, time clean room and strict temperature controlled as robots transport the way 1st from machine to machine. so optimistically, these new foundry investments would likely begin producing shifts and late 2023 or early 2024. but well, there still be demand for all these chips done when we still be experiencing a chip shortage by 2024. well, that's hard to say, as the world becomes increasingly reliant on technology, these chips which are basically the brains behind all the modern electronics, will become increasingly more valuable. but with production rising so dramatically

from all of these investments around the world into new foundries. does the industry risk over supply and to break this down further, lead to bring in i q, liz, lead a founder and ceo of our wealth management. now how is the chip industry now? and are we still seeing constraints in the chip industry today? yeah, absolutely. we're seeing the constraints due to supply chain issues. we're also seeing inflation affecting it, the capital expenditures that these companies are making are all part and parcel. these are 5 to 10 year plans for these companies. so that's absolutely nothing to that. you know, samsung, i want semi conductor leaders in the fields, tend to be putting more money right now, as you said, between 10 to 20000000000. and that's going to see, we're going to see if that's going to pay off within the next 510 years. it's not

an overnight, as we talked about before, but the state of the industry in flux inflation of but affecting the prices at the same time. how much of those price going to be going up? and can they get the products to market? you know, chips or anything to, to brushes, to washing machines, cars and trucks and the like. they're so used in our life. yes. it's going to be affected by what's going on with inflation. and yes, we're going to see some slow downs, but we only think here that it's going to go out to 2020. and now we have recent checks with the industry contracts reflecting an accelerating and broadening trend of order cancellations that actually started in april of this year. so it seems like the vice makers are increasingly reluctant to take inventory of chips since they can't complete products amid supply chain constraints for other components. so

well, all this heavy cap ex investments into foundries pay off or is the industry in for a slump? well, the capital expenditures they, these companies knew that they were going to have to do what they're doing these type of investments. they're trying to do forward thinking, going forward anywhere between 3 and 10 years. corporations are looking at, i personally believe that there is, or the or room and plenty of products, even though some companies may hold off. what i see end up happening is that they're going to actually pay more for later. because i want semi conductor intel samsung, they're all saying they're going to raise the prices. so these companies, either you spend now, or if you're holding off your kind of later and it's going to cost you quite a bit more. the semi industry seems to be moving from global collaboration to a more self sufficient strategy with 3 emerging centers of influence. if you will,

you have the west of china and japan and korea. so is that a net positive or a net negative for the industry? now that it's become so segregated, well, i can't see this as a net positive at this particular point. would i like to see more countries and more regions get involved in it? yes, but that's not going to happen at this particular point. we have dominant players. we're going to continue to dominate, like you're taiwan, china, and the west. the funny thing is if you're looking at the united states, united states really doesn't have anywhere where we're met your factory chips. a lot of these countries have subsidies as high as 70 percent to build those factories there. so that's why you're starting to see a lot more code countries in the east be the job many years like your

china and taiwan. so the world low with korea as well, and i don't see that changing at this particular point. so i can't say it's neutral . i actually thinks a little more negative at this point. and high inflation is also driving the semi conductor industry and reverse. so how exactly does in inflation affect the chips industry? yeah, well inflation affects everything. if you think about it, just look at what we've seen recently with gasoline prices going up more than 60 percent in some countries. and although we're seeing that inflation has gone up 9 percent, this particular much the highest, it's ever been in a particular short period of time. we're actually starting to see, we're thinking that that's actually the piece that we're going to start the see the move downward as we had until august inflation, one of the big indicators, inflation is gasoline prices. and those prices for the last 20 days have gone

down. every single day. so from the high point that we saw just 20 days ago, it's gone down. we see the same thing happening with the chip and conductors. yes, people are going to have to pay more for those products. in some cases, it's gone as high as 40 percent, but at the same time as inflation starts to bait and things start to go down, we're going to see the similar back in the semiconductor area. and things will start to reverting back to normal by 1st quarter. 2023. we're also thinking that the computers are going to be less affected than other areas where chips are a big part of their industry. a kayla layer founder and ceo of laura wealth management. thank you so much for joining us today.

now the real cost of semiconductor chips is found in the complexity and their design and manufacturing process, as they're so often made using raw materials like silicon and germanium. along with other pure elements, the production involves adding impurities to the base elements in a process called doping. computer memory integrated circuits and transistors are all built to using semi conductors during production. semiconductors are fabricated on single crystal materials. and during this process, molten poly crystal lean semiconductor material is combined with a dope and, and then a seed crystal is introduced. the crystal is then pull polish and dice into wafers that are polished into a point of being almost completely flat at an atomic level. next is a process known as photo lithography, which uses light to transfer geometric patterns from a photo mask to

a photos sensitive chemical. by doing this, the process coats the surface all the way for with a mask that walks everything not meant to be exposed to u. v. light. once completed, the exposed portion is dissolved which leaves part of the surface, protected, and other portions exposed for etching, which traces the shape of wiring and other components. the entire process establishes a single layer of a circuit. and depending on the complexity of the manufacturing process, there can be up to $1400.00 process steps in the overall manufacturing of the semiconductor way for alone. once fabrication is complete, the semi conductors on the silicon way for must go through assembly testing and packaging. also known as a t p stages of production which can take an additional 6 weeks to complete past the $14.00 to $20.00 weeks. it takes to manufacture the way for the 1st place. in short, the costs of semi conductor chad is found in its complexity. it's time consuming

process and in the very controlled environment in which it is created. when we come back, port congestion is generating again a higher cost for manufacturing and eventually to you will have more after the break. ah a nozzle you while you busy while furnace us. ah young boys in one slide. yes, self thrashing with

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what i see, the steamy bosses know. ruth, you medation says diesel, you don't both . ah, despite the slow down or congestion is growing again as a result of labor and equipment and efficiencies, especially as we enter into peak season for logistic managers. shanghai, the largest c port in the world, is still in the process of reopening manufacturing plants and shanghai have been shut down for $75.00 days. due to 0, coven restrictions, and even operating at 247 capacity, they still will not be caught up until at least the end of july. meanwhile, in europe, port congestion is worsening as the availability of empty containers to be filled

with trade. the situation is compounded with the persistent shortage of truck drivers as well as a labor strife between trade unions and the c port. despite the historic values of containers, a pullback is expected as feature or as a chinese manufacturing have dropped one t to 30 percent with more on the state of the port, let's bring in doctor jack rasmus, professor of economics and politics at st. mary's college. so jack, what is the root cause of all the back like in these ports? is that simply kelvin? well, i sir, partly called it, but it's, it's more than just covered. of course, sir. you know, during during coven, what happened on the porch says that the, you know, a lot of workers, a got laid off the same with the shipping. and then when they tried to reopen, they had a supply chain problem, not just in the porch, but in the,

in the shipping lanes and so forth, and unloading to ports, et cetera. so, you know, it was covered and to some extent it still is covered in china because of the shut down going on there. but it's not just a totally corridor. we've got other problems now with the inflation and energy shortages are delivery of energy shortages because of what's going on in europe and ukraine and other places in the sanctions, the so forth. so the supply chain problems and still exist, but the supply chain means not just what's going from port to port over the oceans . it's also do you have sufficient skilled workers at the ports to be able to unload in all the goods. and you know, d, d, you have available truck truckers to carry the goods from the ports to the you know, inner warehouses. now you're warehouses from those warehouses to the local

warehouses. well, we've had a shortage of, of labor here in the u. s. particularly in a row delivery trucks, 18 wheeler. so that's partly because so darn expensive now for these a, these truck drivers to wait at these ports and idle there, you know, they're, they're trucks in order to pick things up. so a lot of them haven't come back to work in other words, and then you have problems are in the warehouses the same thing. so the labor markets have been seriously disrupted, not just the, the goods markets, as we would say in economics. and that's part of the problem as, as well, railroad, the employment, the skilled employment and so forth. so it's all that's covered related, but you know, when you, when you get the shortages are engineered because of the sanctions and that adds to

the problems a, another layer on. and what that means is that there's not as much demand for imports, or companies can't afford the, and put off for, you know, their purchases of a, some i finished goods a for imports in our consumers because of the inflation. i can't afford to buy as many good, so you don't have as much delivered into the ports that's exacerbated most in the case of europe, for example, a. so there's different problems in different parts of the country. you know, whether you're in china, where they are in the u. s, where they are in europe. but in all cases, it means we have a multiple set of problems in the supply chains that still exist. now good. all one of the biggest tech power houses is moving aggressively to support logistics and supply chain operations with its google cloud platform. what do you think of this move and how can google help fix these logistics issues?

well, google can help are making, you know, the movement of goods, the predicting of the movement of goods more efficient. but that really doesn't resolve the problem on the for example, in the u. s. u, you've got this tremendous or you know, increase in gasoline and fuel prices. that's not going to solve the problem. the truckers can't afford to wait at the ports for 4 hours with their engines idling and pay that extra cost. the gas are nothing good can do about that. that's an inflation problem. that's an energy cost, energy price problem, and that has a bigger causes than, than just the ports. how do these port congestion and delays affect the consumer? well, the effect that the consumer is, you know, in significant ways. first of all, if you have fewer goods coming into the country than the price of those goods are going to go up. and that means inflation is going to go up, import inflation, goes up, drives the whole consumer price index up. and that's contributing to what's going

on as well in the u. s. and you know, and if businesses can't get their goods, they're so my finished goods in are on materials and so forth. and they're not going to invest and expand, you know, they're going to wait and see and not taking aggressive. know, increasing their output and hiring more people on so forth. or they're going to start laying people off, which is their, you know, just beginning to, to occur here. so it has a big impact on employment on business, on g d, p, and has an impact on consumers and spending on, you know, it's part of the general problem we have with, you know, accelerating inflation. the problem is, you know, with the ports and supply chains, it's really 2 sides of the same coin here. you know, the problem of the points is the problem with, with supply chains. and but that, that supply chain problem has been exacerbated by what's going on in global

commodities markets. as a result largely the sanctions and what's, what's happening in europe and elsewhere. thank you so much dr. jack rasmus, for your insights i when i come to the cost of semi conductors with all of the supply chain disruptions around the world, there are very few winners besides the transport companies that are able to charge for those services. companies now have to reject their operations and it's forcing them to question long held beliefs about justin time or traditionally chit production jet works well when there are no disruptions and all the goods arrive just in time. i scheduled. but now, many companies are forced to pivot to just in case or chick production where it is forced to move or use cash on hand to purchase excess inventory. this leads to other costs associated with jack, such as more effective products, ways to space,

extra equipment over time, and simply more storage costs. so how long are we supposed to live with these supply chain disruptions? and will it ever be resolved or fixed? unfortunately, a lot of the problems that we have with the supply chain are deeply rooted points of congestion that will take its significant amount of capital expenditure and investment in order to modernize issues like labor shortages, that the dos and lack of truck drivers are going to continue to play the local economies. i think global for congestion is set to continue until at least early 2023, where the spot right rates continuing to be elevated. that's our show for today. i'm christy i and i'll see you next time for the cost of everything. the

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