As supply constraints and labor shortages continue, it's becoming increasingly apparent that some companies are fundamentally changing the ways in which they do business to combat this challenging business environment. In this segment of Backstage Pass, recorded on Jan. 21, Fool contributors Toby Bordelon, Jason Hall, and Jose Najarro discuss.
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Toby Bordelon: You know, who else has been saving money, Jason, companies. Companies have been saving money and apparently now is the season for massive CapEx spending.
Jason Hall: Well, they still have the money. Because that's who the consumers are giving it to.
Toby Bordelon: We've been giving them our money. They built up these hordes and now they want the party to go on. What are they doing? They are investing as much they can. Intel for one is building not one, not just one, but two new chip factories in Ohio guys they are creating a new center for high tech chipmaking. Right here in the heartland of America.
Twenty billion dollars in construction is what these factories are going to cost. Plus another $100 million for partners with educational institutions. But it's nice to see, but $100 million versus $20 billion, you can see where the bulk of this is going. Here's my question. We're seeing a lot more of this now.
Peloton, we're going to get to them more in a second, but Peloton built its new U.S. factory in Ohio I believe. We've seen automakers, GM, Ford building new vehicle plants and battery plants right here in America. We've seen companies thinking about bringing back some of the manufacturing to deal with supply chain disruptions we've seen over the past year.
Is American manufacturing back? Are all of our children like Jason's adorable young son going to be working in factories much like our forebears in the near future.
What does this new era manufacturing look like? Also, what is up with Ohio and why is it so popular with these new facilities? Take any or all those questions, guys, Jason, what do you think?
Jason Hall: It's really compelling because you think about Intel in particular, they've been the poster corporation of this over the past years because they're putting a lot of capital. Pat Gelsinger, since he's come back on as CEO, they're going to spend a ton of money, and they're prioritizing a ton of that over the next five or six years here in the U.S. I think the company said that they're going to spend, and he says over the next 10 years, they're going to spend a quarter of a billion dollars to expand their manufacturing. That's just the Intel. A lot of it is going to be here.
There's political motivations. There is a lot of political will behind this, and there's legitimate reasons especially when you think about the semiconductor industry. Jose, I know you'll be able to talk about this too. From a geopolitical perspective Taiwan Semiconductor, we think about Taiwan and China. There's so much of it that's manufactured there. Then you have Samsung.
Between the two, Samsung and Taiwan Semi, Samsung's manufacturing is mostly Korea. The plurality of the world's semiconductors are made in that region. There's concern there, I get it. But dude, come on.
You know what, there's a lot less blacksmiths in the U.S. today than there were in 1895, but we make a lot more nails in the US [laughs] now than we did, because of automation. That's the thing. Automation isn't some new thing that we've just figured out, how to automate factories and how to reduce manual labor.
The first time somebody figured out how to make a plow and hang it behind an ox, thousands of years ago was the first time somebody with a low skill set lost the job. [laughs] This is the reality.
We think about these factories like the semiconductor industry in particular, this is high-skilled labor, but you just don't need a lot of it compared to those old fabric mills, the textile mills that were all over the Northeast and the Southeast, even up to 30 years ago that NAFTA pushed away.
Automation, I guarantee we're going to make a lot more stuff here in 10 or 20 years than we do now, but I'm not going to send my kid out the door at 18 to go work with the local factory. His mom might, but I won't. [laughs]
Toby Bordelon: Fair enough, Jason. Jose, what do you got for us?
Jose Najarro: I think this goes really well with how we're just talking about the market crash how Jason said, how we're always fighting the last war. I think it goes to the same way with the manufacturing.
For example, we've seen the trade war, we've seen this tensions between Taiwan and China. The United States is starting to say, "Hey, maybe we shouldn't be too dependent in certain technology outside of these things, maybe we should bring them back."
I do believe manufacturing will come back to USA, but pretty much on products that are crucial for technological innovation for defense industry. Obviously, one of those is the overall semiconductor industry.
I want to show a quick slide, let me share first, a quick slide on ASML. This is a company that creates equipments for the semiconductor industry. Their customers are like the TSM, for example. One thing we can see for 2021, United States only made up about 5% of their total revenue.
Jason Hall: The key is that their equipment is what's used to make the most advanced semiconductors in the world. That's the differentiator, right?
Jose Najarro: Companies like Intel, which has now plants in Ohio, I believe in Arizona as well, they're going to go to ASML because they are buying the equipment from them. I thought this was pretty interesting.
We're hearing all this news about manufacturing coming back, but still at the end of the day for 2021, United States only represented 5% of the sale. Who knows, maybe 2022, they might boost spending a little bit more, how they're saying it's going to take numerous years.
Maybe USA might increase dramatically in form of yearly sales, but I just wanted to share that slide real quick. First off, our kids, I still don't have kids, but when and if I ever have kids, for them working at a manufacturing plant, I think it might be different.
I think due to automation, especially, I want to say in the next 10, 15 years, it'll probably be some form of job or career of making sure whatever robot is not breaking down, making sure either algorithms, testing, electrical work is being done.
I don't think it's going to be the form of hard labor that was seen in the past. It's going to be more of some form of like STEM or robotics job that will be available in these manufacturing jobs.