D2D: Chinese EVs take on the world, foundry profits and our new Paid Newsletter
Chinese EV makers are shifting the Trade Balance
Paid Newsletter Announcement
We are launching a paid tier of service. Beyond the Dream of Substack Millions, there are a lot of projects we would like to work on and having a bit of revenue to defray the costs will help us add meaningfully to our content.
Going forward, we will continue to blog on Digits to Dollars. We will also send out one newsletter a month to all subscribers. We do not want to put everything behind the paywall because we enjoy all the conversations with you that stem from those.
The paid plan will include two other newsletters a month - one covering general topics like this one and one focussed solely on China Deep Tech. Both of those will include writing and analysis only available to paid members. And that is just to start. We will soon be adding other features such as audio replays of our blog posts, company-specific coverage and more content for paid subscribers.
We have also started a Premium plan for those who would like to schedule regular phone calls with us in addition.
We recognize that there are already a lot of newsletters out there, but valuable content is not easy and we want to be able spend more time creating it. We also have a lot planned for this year including a trip to China, a whole litany of conferences and more.
Thank you all for your support and we look forward to engaging with you all more.
Our Recent Blog Posts
How do you say Trade War in German? We think a new trade war is looming, with China capturing 50% of Europe’s EV market. In the past year, China has become a net auto exporter for the first time in its history. This has already sparked a big shift in the balance of payments with Europe and shows no sign of slowing down.
Semis companies say they want to sell software. They want recurring revenue and they want software company valuation multiples. But what they really need is sustainable sources of competitive advantage.
Where are the profits in foundry? Not surprisingly, TSMC captures the large majority of foundry profits, over 60% of the segment, and that includes a very rough estimate of what Intel’s foundry business would like.
Trailing edge semis manufacturing capacity is probably in surplus globally, with almost a quarter of the world’s mature processes nodes located in China, more than in the US.
Less than ten years ago, there were only two companies designing CPUs, with Intel in the lead by far. By our count today there are now over a dozen, and Intel is no longer quite so dominant.
As we head into earnings season we reflect on past semis cycles. This one is different largely in the way that we are progressing through the downturn sequentially by segment. Mobile and PC are almost recovering, while auto and industrial and just starting to show signs of turning down.
Ben Bajarin and I talk about Mediatek and Semis cycles on our Circuit podcast.
We joined the Chips Avengers again on the always engaging ChinaTalk podcast.
Other Items We Found Noteworthy
Semis and Hardware
In the most anticipated sequel of the season - Arm has filed confidentially to go public. Even without the writers’ strike, this is the script we are most looking forward to reading.
The team at Andreessen Horowitz put together a very handy guide to their estimates of the costs of running the latest AI software. The most valuable parts here are the background material and overall framework, because the detailed numbers keep changing too fast for anyone to really track.
A software benchmarking of Amazon’s Graviton 3, Apple’s M2 and a Qualcomm PC CPU shows some surprising results. Apple wins and Qualcomm is fairly competitive.
Important reminder that AI chips are not compute bound, they are memory bound. A lot of companies are only just now figuring this out and it has important implications for how these chips need to be designed.
Ericsson and Nokia are moving in different directions for Open RAN systems. The over-simplified version of this story is that Nokia is working with Arm chips, Ericsson still (publicly at least) favors Intel’s approach. We have seen this movie before and so our guess is that Ericsson will change direction on this soon. In a related topic, ORAN’s leading evangelizers at Rakuten sound like they are going to design their own chip.
Software and The Cloud
Dylan Patel has an incredible scoop with a memo leaked from Google raising alarm bells over their potential to fall behind in the AI race. The key takeaway in this is that open source models are rapidly outpacing the models of even the biggest AI model builders out there like Google and Open AI. The cost of deploying large models is dropping rapidly as the open source community works its magic with all sorts of innovation. This contrasts very sharply with Open AI’s CEO reportedly claiming he think they will have to raise $100 Billion over the next few years.
The economics of public cloud services is complex, keeping many CFOs up at night. There are some important changes in this market. Spot prices are increasing pretty sharply for EC2 instances. At the same time, Amazon Prime Video announced they saved 90% by moving off of AWS’s Lambda service. We probably need to do a complete post connecting all these dots because the dynamics behind data center feel like they are shifting in some important ways.
In the latest example of the “running software in the Cloud is more expensive than anyone realized” a crypto company (presumably Coinbase) spent $65 million on data wrangler DataDog’s service last quarter.
Wireless and Networking
If they launch a new generation of wireless standards and no one participates does it still count? The focus of 6G looks to be on higher frequency bands which are going to be really fast, but also require a massive way of new equipment and critically new sites for the base stations. Not coming soon.
More evidence that telecom and network spending are in decline this year, optical transceivers look set to decline in 2023.
The world’s electrical grid needs a major update to support all the electric vehicles coming to market. And there are not enough electricians to build those.
The world of enterprise networks is changing in some important ways. Gartner provides a good background, but forewarning there are a LOT of acronyms here.
A good overview of the rise of SDN’s.
Other Fun Things
The Pixies Where is My Mind is triggering Google home networking services in surprising ways. Try it for yourself.