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Chris Miller, Professor at Tufts University and Author of Chip War: The Fight for the World's Most Critical Technology, shares his thoughts on the semiconductor industry under the Trump administration.
Hosts: Carol Massar and Tim Stenovec. Producer: Paul Brennan.
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You're listening to Bloomberg Business Week with krol Messer and Tim Stenebek on Bloomberg Radio. We've got with us The guy who wrote the book on chips, Chris Miller is Associate Professor of International history at Tufts University. He's the author of the New York Times bestseller Chip War, The Fight for the World's Most Critical Technology. That book, a geopolitical history of the computer chip, also a winner of the FT Business Book of the Year Award. Chris also advises semiconductor companies and tech startups and investors. He joins us from Naples, Florida.
Oh my god, Chris, Like, where to start? You wrote this in twenty twenty two. A lot has happened in the last two years. How are you thinking about what you wrote and kind of where we are today in the chip space?
Like, there are two big shifts happening simultaneously right now. One is the surge of spending on AI infrastructure, which means lots of very expensive AI accelerator in high powered data centers. And two is the ratcheting up of tension around the US and China with the new administration in the US coming into office in just a month's time, planning to increase tariffs and controls on China's semiconductor industry. So those two trends are intersecting in ways that impact pretty much every company in the sector.
Chris, I'm curious, you know what we're hearing about the Trump transition team and their plans when the Trump administration takes office on January twentieth, they're ramping up into full gear. No question, have you heard from anyone on the transition team.
Well, I think the transition is in the process of sketching out who will be the officials who will be responsible for chip policy. We know the cabinet secretaries Marco Rubio at State, Howard Lutnik at Commerce, but a lot of the key decisions we will be shaped by the mid level officials will be responsible for implementing the Chips Act or implementing the export controls on chip technology, and those are names that we just don't know yet, But I think it'll be really worth following who gets a pointed to those roles because they'll have a pretty big influence on the shape of policy.
What would you advise in terms of names in terms of people, in terms of expertise and policy, if you were speaking with the transition team.
What we've seen thus far is that Trump has opted for a range of officials with different views. Some folks very close to financial markets who want a very stable US China economic and financial relationship. Others like Marco Rubio, Secretary of State nominee and noted China hawk, who's advocated more decoupling not just of the supply chain and technology relationship, but also the financial relationship too. And I think this is similar in a lot of ways to what we saw in the first trumpdministration, where there really was a broad spectrum of views among Trump's advisors and ultimately up to Trump to make the final decision.
Hey, listen, I do think about the struggle between policy and government a new administration versus the realities of big tech companies who want to sell their stuff to everyone. They're thinking about their top and bottom line. The New York Times out with the story today and they get into how the US firms, so with these big tech firms battles with that government contract to keep tech sales to China, to kind of keep that crack down going. Where are we going to see that kind of line in the sand when it comes to selling technology to China, and then the big tech companies saying, but wait a minute, this starts to impact our business because China is a massive market. Does the battle continue? I don't know thoughts about that constructive thoughts, because I'm assuming, as we said in the introduction, that you talk to some of these major players in the you know, our consult in the semi industry, and I'm curious what you are hearing about them about the pressure they are putting on government when it comes to policy.
I think you talked to any CEO or executive off the record, and they'll say that my biggest problem is that China is both my largest customer and my number one competitor in most cases, and that I think structures how the industry deals with this issue and tries to lobby the US government. They all sort of understand the logic of the US government, understand that chips are key for AI, understand that AI is key to national security as well as economic prosperity. But they all also realize that they have really substantial markets in China, and so wherever you look in the supply chain, of the makers of the tools that make chips, the manufacturers of chips themselves, they're all going to lobby, and they all have lobbied very successfully to keep their ability to sell to China open. And the National Security Apparatus, the Pentagon, the Commerce Department, of the intelligence agencies are pushing for more restrictions than companies themselves want, and that a balancing act that any president of got a balance. I think we've seen the Biden administration end up with a more lapse approach than one might have expected given their early tough rhetoric on this issue, and it'll be interesting to watch how the Trump administration addresses this balance. There will certainly be voices of administration saying, let's focus on continue to export to China of technology. It's important economically. But there will also be voices of the opposite side saying, if you export advanced technology to China, you're only giving China the capability to learn how to manufacture high end SIPs domestically and eventually replace US firms in the Chinese market.
Chris, with your understanding and knowledge of this world, are we right us, the United States right to be concerned about exporting technology to China. We've certainly seen this play out where things get exported the technology and China becomes really good at doing things. We're seeing it kind of play out in the EV market as we speak. So I'm curious, how concerned should we that we will export our expertise, our knowledge and lose control of another industry.
You know. I think it's worth noting that China only imports a couple of types of manufactured goods semiconductors semiconductor manufacturing equipment. Those are the two largest categories of China's manufacture good imports, because China can produce everything else that needs domestically when it comes to manufactured goods, and I think that speaks to China's capabilities in this sphere, which means that the more capabilities you give to China, the more they can be able to use those to replace Western firms. And they're desired to replace Western firms, and I think eminently well documented. It's evidence in the fact that they don't buy anything abroad unless they absolutely have to. And I think some connector companies are all worried that their market share is going to decline over time, and I think they all realize that the more chip making tools that are auld to China accelerates that process.
Hey, listen, we want to get to Broadcom because they are out with their earnings and the stock is up about two and a half percent here in the market. Actually now it's down about one percent. It's bouncing around here to be fair, but we did see a quick rally. So let's get to some of the headlines, and let's go to the outlook. Company sees first quarter revenue of about fourteen point six billion. That's spot on in terms of what analysts we're expecting fourth quarter just at EPs, so looking backward at the last quarter, a dollar forty two. That's three cents better than what the street was expecting. Fourth titter, justin net revenue was fourteen point zero five billion, pretty much in line a little bit light a hair light the yes have been on the street was fourteen point zero eight billion.
Chris Miller. We're going to be speaking in just a few minutes with kun John Sabani, Bloomberg Intelligence senior semiconductor analysts, who's going to give us the details on this report. But just remind everybody sort of in the chip ecosystem and the world of chip ecosystems where broadcomplays.
Broad Comes one of the biggest designers of semiconductors. They don't manufacture, but they do the design process, and they've been focusing in particular on designing AI chips for other companies some of the big hyperscalers that are investing in their own ship designs. Those are often done in partnership today with Broadcom.
So report such as this now shares up two percent postmarket after results. The company sees first quarter revenue about fourteen point six billion dollars. Looking across the ecosystem, who does Broadcom have to be most worried about? Because we got that report yesterday from the information about Apple working with Broadcom, and we're reminded Ian King a little earlier today that these two companies have sort of done this dance of scorpions where they sting each other. But also then well he was saying, it was like, what mating scorpions? Is that right?
Yes, two scorpions mating. Yeah, we know it's not easy. I want a little complicated.
I won't describe it, but let's just use the term forrenemies instead perfect.
You know, I think that's that's a great analogy broad companies is a really wide range of products, and so they simultaneously cooperate and compete with a bunch of different companies in the technology space. I think if you focus on the AI portion of their portfolio, in some ways they're competing with in Nvidio because a lot of the in house designed processors that the hyperscalers are designing right now are intended to be replacements for invidious products, at least to a certain degree. And so I think investor is going to look at this result and ask what does this mean for the process of bringing more chip design in house at some of the big hyph for scalers.
Hey, Chris, can I have to leave it there? I always love it when you take the time to join us. Do appreciate that very much. Chris Miller Associate professor of International history at Tufts University. He's the author of the New York Times best selling book Chip War, The Fight for the World's most critical technology