- The Great Recalibration continues…
- Protecting our data in a quantum world…
- The resurrection of Napster…
The world’s largest contract manufacturer of semiconductors, Taiwan Semiconductor Manufacturing (TSMC), is currently in discussions to build a multibillion-dollar manufacturing plant in Singapore.
This might not seem that interesting. After all, semiconductors have been produced in Singapore for decades. I’ve even been on the manufacturing floors myself when I was living and working in the region.
But there is a far bigger story that underlies this development.
The most obvious one is, of course, the chip shortage. TSMC’s plans aren’t to build bleeding edge manufacturing facilities to make the latest and greatest chips that power things like smartphones… Its plan is to build a 28-nanometer manufacturing plant.
That might not mean much; for perspective, that technology is more than a decade old. TSMC started manufacturing at 28 nanometers back in 2011. So why bother?
The reason is that this mature technology is widely in use. And that’s the point.
The chip shortage that we’re experiencing right now isn’t really caused by a shortage of the most advanced chips that run our newest computers, servers, and iPhones.
The real production shortages are happening with the more mature technologies, like 28 nanometers, that are used widely in the automotive industry, appliances, industrial equipment, and a wide range of other products powered by semiconductors.
But why not build a new plant in Taiwan? Or in China, where the labor will certainly be cheaper than in Singapore? This is where things get really interesting.
TSMC is acting out of self-preservation. It is prudent that it builds manufacturing facilities in stable countries that are allies to Taiwan, in order to reduce operating risk in the event that China occupies Taiwan.
I’ve already predicted that China will make its move within a year. And, at a minimum, it will take administrative control over Taiwan.
Taiwan’s strategic importance at a global level has never been more obvious. Possessing Taiwan would give China the ability to place a chokehold on the global production of just about any kind of electronics. It will impart tremendous geopolitical power.
Given the chaos that has unfolded between Russia and Ukraine, and the state of the current U.S. administration, I have argued that China couldn’t have asked for a better time to make a move.
Last year alone, China’s military sorties flying into Taiwan’s air defense buffer zone more than doubled to 950. China’s military posturing is obvious, and it would be easy to take Taiwan by force, given the sheer scale of its resources.
Even more hairs have been raised recently by the ban put in place by Xi Jinping prohibiting members of China’s communist party from owning any significant assets overseas. That includes financial assets, real estate, businesses, and equity – whether held directly or indirectly.
The move is obviously in preparation for expected sanctions and seizures after seeing how the U.S. and Europe dealt with Russian assets.
The western world has an image of an impending war between China and Taiwan, but that common opinion misses the most critical fact: China has been building a presence in Taiwan for decades. It has already “invaded” Taiwan.
It’s now just a matter of time until it asserts control. Any military presence will largely be just for show, but it will make for flashy headlines in the media.
Which is why building a new multibillion-dollar plant in Singapore is an absolute necessity. It’s the same reason TSMC has already started building a $12 billion semiconductor plant in Arizona, and why it’s also going to build a new multibillion-dollar manufacturing location in Japan, of all places.
China can’t confiscate or control those assets, which protects TSMC’s business as a publicly-traded company. We can expect that more announcements like these will follow.
It’s no longer about finding the absolute lowest cost manufacturing jurisdiction for production. Cost of production will be secondary to the stability and safety of the location, proximity to key end markets, access to a capable workforce, and security of supply chains.
This is all part of what I refer to as “The Great Recalibration.” After decades of centralization and injection of systemic risk in the world’s global trade and manufacturing infrastructure, the world is snapping back in the other direction.
The world is now racing to reduce risk in supply chains, decentralize manufacturing, and build resiliency into global production. Ironically, the fallacy of the last two years revealed systemic weaknesses, and for many countries, recalibrating has become a matter of national security.
The Great Recalibration can’t happen fast enough.
This next-generation battery is ready for prime time…
Mercedes-Benz just made a surprising announcement… The luxury carmaker revealed that it will use silicon anode batteries in its G-Class electric vehicle (EV) models starting in 2025.
This will be the first time an EV uses anything other than a graphite-based lithium-ion battery. Talk about a milestone. Many in the industry didn’t think that this would happen for many more years.
And readers may recognize the name of the company that produces these silicon anode batteries: It’s Sila Nanotechnologies.
I’ve written about Sila in The Bleeding Edge before and most recently highlighted Sila at the 2022 Legacy Investment Summit back in March. I told attendees that this was one of the most interesting private battery technology companies on my radar. And sure enough, here it is making a major move.
Sila found a way to use silicon for its battery anode. This is no small feat.
The advantages of silicon are well known in the industry, but the problem has always been how much silicon expands when used in batteries.
But the allure of using silicon is that it is capable of much higher energy density. This can mean both smaller and lighter batteries, and/or much longer range. Sila’s new silicon anode technology, applied to EVs, will enable somewhere between a 20–40% increase in energy density compared to traditional lithium-ion batteries.
To put this in context, if lithium-ion batteries improve 2% a year in energy density, we consider that great progress. So a 20%-plus jump in energy density is remarkable.
This is a big deal, and it’s happening far faster than most industry experts believed possible. So I’m very excited about this development. Clearly, Mercedes thinks that Sila’s next-generation battery will be a competitive advantage in the EV space.
And the story gets even better…
Sila plans to manufacture its batteries right here in the United States. In fact, Sila will make the batteries using 100% renewable energy at a new facility in Washington state. This is all part of The Great Recalibration.
Of course, Sila will need to raise additional capital to build out enough manufacturing capacity to support Mercedes’ G-Class launch.
And that raises the question – will the company entertain another venture capital (VC) round? Or will Sila go public? It needs to raise at least $1 billion, probably more, to build the production capacity necessary to meet its deal with Mercedes-Benz.
There’s one thing I’m certain of… we’re going to find out which direction Sila will take within the next few months. Sila needs to start building capacity this year. And if Sila does go public, the stock could make a great investment target at the right valuation.
Needless to say, I’ll be watching this one very closely. Let’s keep Sila Nanotechnologies on our early stage watchlist.
A front-runner for quantum-proof encryption…
As we have discussed before, the cybersecurity industry is scrambling right now. The big problem is how to protect data in a world where quantum computers can break traditional encryption systems.
This is a topic that I discussed recently with Glenn Beck on his radio show. I predicted that quantum computers will have advanced enough within the next 18 months that it will be able to easily crack our current data encryption standards no later than the end of next year.
The implications are immense… Hackers and nation-states that have stolen sensitive data over the years will have the ability to finally decrypt that data and view the contents. Clearly, this represents a massive security risk.
There isn’t much we can do to stop this from unfolding, but a private company called Cornami just emerged as a front-runner in the race for quantum-proof encryption. Cornami is developing semiconductors and software that enable something called fully homomorphic encryption (FHE).
How FHE works gets incredibly technical. But at a high level, it enables computers to process encrypted data without needing to decrypt the data first.
Here’s why this is so important…
The world has largely shifted to cloud-based computing. That means we process most of the world’s data “in the cloud” at massive off-site data centers located around the world. And most companies use third-party data centers to process and store their data.
Let’s think of this in the context of something sensitive like health care data. Right now, we encrypt that data on the front end. Then our health care providers send it to the cloud, where it must be decrypted before it can be processed.
However, if the data center gets hacked, bad actors can steal the decrypted data and have a field day with it.
So the idea behind FHE is that sensitive data should never be decrypted in the first place. That way, even if hackers get access to the data, there’s nothing they can do with it.
Fully homomorphic encryption enables the processing of information while it is still encrypted. It protects the data from theft, while at the same time allowing the data to be used in the same way as if it were unencrypted.
That said, there is a downside. FHE requires an immense amount of computing power – far more than traditional data processing applications.
That makes it more expensive to deploy, and it also means that it requires a heck of a lot more electricity.
Still, companies may find that the added security is worth the extra cost when it comes to our most sensitive data. That makes FHE an attractive solution for quantum-proof encryption.
And Cornami is one of the very few “pure plays” on this trend. The rapid advancements of quantum computing technology have caught many off-guard. The industry and government organizations have been scrambling to develop new encryption standards and methodologies to deal with this eventuality.
We’re going to be investing in this trend this decade, and Cornami is one of the companies that we’ll be keeping a close eye on.
Napster is making a comeback…
Big news – we’re resurrecting Napster.
As I’m sure many readers remember, Napster was the original peer-to-peer file-sharing platform. It is one of those epic brands that flew too close to the sun and eventually crashed and burned.
It allowed users to share songs for free. And it was as easy as searching for a song and downloading it. That had never been possible before.
Napster had a great run from 1999 to 2001. But then it lost a copyright lawsuit with the Recording Industry Association of America (RIAA) and had to shut down.
A small VC firm called Hivemind is teaming up with blockchain company Algorand to buy Napster. They plan to repurpose it as a “Web 3.0” marketplace for music-related non-fungible tokens (NFTs).
If this sounds eerily familiar, that’s because it is. In March, we had a look at another big name that competed with Napster back in the day – LimeWire – which is being repurposed in the same way.
And these moves come as the music industry is rapidly shifting to a Web 3.0 model that features NFTs. Popular bands Kings of Leon and The Chainsmokers each are launching NFTs tied to their new album releases.
This is going to become a major trend in the industry. NFTs allow bands to drive even more engagement with their fans. Those who use them will have a big competitive advantage over those who don’t.
For example, NFTs can enable fans to share a small portion of a band’s revenue from an album or song. They can also allow bands to offer tickets, artwork, and even access to exclusive events.
These special attributes are what make the NFTs valuable. And they help fans feel even more connected to the band.
And, of course, these NFTs will trade in a marketplace. That’s what the moves to repurpose Napster and LimeWire are all about. This is a burgeoning industry, and it’s going to be a mad race to capture market share.
So I’m very excited to see how this space shapes up. There are going to be some incredible investment opportunities in the NFT space.
And I’ll continue to help my subscribers find the best projects working in the NFT space. To learn more about how that works, simply go right here.
Editor, The Bleeding Edge
P.S. My next “crypto placement” is a private company that’s doing incredible work in the NFT space. In fact, this company’s technology very well may power future NFT marketplaces like Napster and LimeWire.
I expect my recommendation to go live in the first week or two of June… which means there is still a little time for readers who want to learn how to invest in exciting private offerings to get set up. This isn’t a deal you want to miss, so please don’t wait.
For more information on these private investments, just go right here.
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