 Welcome to the RF Elements Unlicensed Podcast. I am Caleb Nour and this is Tasos Alexopoulos. What's going on, man? Hey, what's up, Caleb? How's it going, man? Good, good. That's a legit name. I actually did look it up, so. It is. It actually sounds more authentic Greek than probably my last name does to most people, actually. So we're good. We're good. Cool. So tell people where they can find us in the call to action that you're supposed to do in the beginning of a podcast. Absolutely. Make sure you guys like, listen, or subscribe to this podcast on YouTube, Spotify, Google, or Apple. You choose your favorite platform. Any feedback you guys will give is greatly appreciated too. We want to know what you guys want to hear about. So we're easy to find, let us know, and we will get after it. So speaking of getting after it, we're going to make like a brisket and get to the point. But so today, actually, we're talking about a little bit of a bummer topic. What we're going to talk about today is shortages, mainly chip set shortages, the chip again that we're in that's kind of leading to the equipment shortages in our industry. Price increases and some of those sort of painful yet, you know, can't get around it kind of things that are going on right now in the industry. So we're trying not to be a bummer, but we think it's important because we've got a lot of manufacturing insight, obviously, from who we are, but we also our personal backgrounds lead a lot to give some insight. And we think it's really important that folks get a deeper understanding that it's not just our industry. It's everyone and, you know, where these negative things are coming from. So we talk about chip shortages. Tell us, you've got some semiconductor history back a long, long, long time ago, right? Yeah, definitely, definitely. So I worked in the semiconductor industry for a good almost 15 years, leading up into jumping into a wireless and stuff like that. And yeah, a lot of the semiconductor factories are having issues. You know, there's a huge demand for actually smaller discrete components that is affecting the availability of the lines to produce, you know, some of the higher end chip sets that are out there. You know, in Taiwan, there's major droughts in southern Taiwan, which is causing again, water shortages, which factories consume about 50% of the city's water supply. A lot of people don't know that in order to keep those fabs running and stuff like that. So yeah, the chip shortages isn't just from demand. There's a lot of, you know, nature involved in some of this stuff. And then you have your standard, you know, supply and demand issues. Yeah, you know, I'm no economist, but the supply and demand concept is a really simple concept, but it's kind of wild how it really plays out on the global scale, especially what we're facing now, you know, and everyone wants to blame this on the COVID. And yeah, the COVID and the lockdowns and everything did have an effect, but it's not just that, you know, there was a huge run up in demand before. There were things like, you know, 5G, your favorite topic. But you've got to think, you know, there's all the infrastructure that was needed to be built out for that new devices getting ready for 5G and everything. There's a lot of political things that really messed up the demand curve. So SMIC or like the states were like, no, can't buy from there anymore. Huawei got blocked from buying stuff from our fabric. So that caused some issues. The 200 millimeter, the small wafer size, you know, things like that. And there's just a lot of uncertain demand. And, you know, these industries are, you know, you can't just ramp this stuff up. So people were getting nervous. So there was a lot of stockpiling and uncertainty before. And then, yeah, I mean, definitely. So it's just kind of like the perfect storm, you know, really when you think about it, right? So, you know, we kind of had the shortages from COVID. So everybody was falling behind and they're deliverable. So everybody ramped up to 2, 3, sometimes 4x what they normally would. So this really stressed the line. And then we had this kind of like demand on top of that, right? You talk about all this government funding, right? All of a sudden all this money went out and everybody's like, hey, I could buy 10x what I used to be able to buy. So the order is even, you know, doubled and tripled on top of that, right? So you really have all these things happening on top of each other that's just creating this really paradigm shift, right? In how industries as a whole, you know, plan and distribute their products globally. I mean, then that, you know, trickles down to shipping, right? So there's not enough containers, the lines are all congested. And then, you know, we go into customs brokerage and storage. I mean, man, it's just crazy, crazy how everything just came together and started just piling on top of each other and creating all the problems we're seeing right now. For sure. You know, they're like, oh, the factory shut down, but they're back open. So we should be able to crank. We're like, well, they were at capacity and they continue to be at capacity. I mean, they're still putting out additional capacity what they could before. They're on a full board now, but there's just so much catch up. And you think about the consumer demand, you know, everyone working from home. So you got your little nuclear family and trying to work from home and little Bobby and little Timmy won't shut the hell up unless you buy them a brand new iPad so they can play their games or go to school, wink, wink or whatever that is. So you've got people that have money because they're not going on vacation. So the consumer demand blew up and there's just so many chips that shifted that even work from home stuff where it feels webcam. So we couldn't get webcams for months. I remember that it took us forever. I mean, I had to wait like three months in order to get a 720p webcam. And you know, that's the best you can get. It was a logitech for like 50 bucks, you know, crazy. So yeah, the the Covey definitely has some bad effects. There was a lot of bad luck and stuff. I mean, some really kind of crappy things happened last year. It got a little chilly in Texas and the whole state kind of shut down. Yeah, we had our winter storm which, you know, went and shut down our power grids and we had all sorts of problems which now makes, you know, government agencies municipalities looking into their infrastructure and they need to upgrade things. I mean, it's again, it's just it's crazy how piles up. And I mean, we're kind of barely recovered from that. It seemed for like a little while the past few months things seem to be somewhat normal again. But now we have Christmas coming around. The holidays is here, right? So, you know, the consumer products are going to go through the roof to demand for that stuff. And it's just, you know, I don't know how we get out of it. I think it's just time is all we need. I mean, I know it will smoothen out over time. It's just really hard to tell like when, when that's going to happen. I mean, I don't think anybody knows now. But I mean, we could be seeing stuff like this for the next year or two, at least I think 18 months easily at least. So I mean, people don't realize. So you shut down the fabbers in Texas. I mean, Texas is sort of, you know, where most of our semiconductor fab in the states happen. So they're like, well, they were only shut down three days because they didn't have power. I'm like, well, that's still 1%. And when you when your demand is 120%, you can't get one. It doesn't work out. Yeah, absolutely. And then you get the rolling blackouts in California, right? A lot of the factories are still there as well, right? A lot of design. I mean, you know, this also pushed back, you know, a lot of companies, even including ourselves, right? As far as development and release of new products, right? So it's, it's hard enough to try and maintain and get the output from the company back to normal for your existing product line. But you know, we're always thinking two, three years out and we have products that need to roll out. If, if the contract manufacturers can't build your current product line, how are they going to fire up and, you know, build the, build the inventory and get your new products out to market? So again, there's, there's a lot of that involved with, I'm sure, you know, pretty much every company that's out there, you know, new products are, are a thing, you know, and they need to be able to, you know, ramp that up while they continue to continue producing their legacy product line. For sure. So, you know, you talk about the capacity and you talk about the planning. So I was doing a little research on actually a really cool Bloomberg article that if we remember, we'll put it in the description somewhere. It's got some cool infographics showing how, you know, 91 some odd percent of chips at manufacturing happens in Asia. And a big chunk of that is in Taiwan with TSMC and then Samsung in South Korea, obviously. So poking around, you know, they're at max capacity. I found some really interesting numbers, though. So Apple is something like 25% of the end product that TSMC is making. Now, TSMC is making, you know, chips for things like Qualcomm, right? Who are making the wireless chips that's Broadcom making ethernet chips and, you know, Zamy and like all these others, right? But if you add it all up, Apple is like 25%. And they've got, you know, some $300 billion laying around that they can afford to sort of lock down that production. So now let's contrast that or you look at something. So like Qualcomm, right? Chips at manufacture. Apple is roughly 11% of Qualcomm's output, right? Or revenue, excuse me. They actually showed ubiquity in the list. Ubiquity is 0.1%. So if you've got Apple, who's 10%, and Samsung was another 10% and Zamy was another 10%. You've got those huge numbers versus a relatively big player in our industry for sure. With 0.1%, you can see, well, there's the Delta and we can't sling our weight around that an Apple could or a Samsung or something like that. Yeah, I think sometimes people, you know, you kind of get locked into your particular market, right? So when we're, you know, we're thinking through the wisps mind, right? So we think, you know, Cambium, Ubiquity and so on, you know, they're the big boys, right? They've got, you know, billion dollars and, you know, they could push their weight around. But really, when you think about the grand scheme of things, I mean, it's really peons compared to the really huge monsters that are out there. And you have, you know, companies now who weren't really equipment manufacturers. I mean, look at Amazon, right? Amazon putting out those ring cameras and all the other electronic gadgets now that they're building demand for, for things that really weren't a thing just a few years ago. Cars, right? Yeah, everybody thinks about the cars, they think, oh, the ECU, right? You think about the brain, that's like as far as it really goes. But you think of the, you know, infotainment systems that they have in there, all the other gadgets that go with it now, you know, to give them, you know, 360 degree view around the vehicle and proximity. You've got all these, all these different things. I mean, every part of your life is getting dominated now with more and more technology and they all require chips. And yeah, there's really a limited supply of factories to make them. And it takes years. It takes at least a year and a half to two years to build a new semiconductor factory. So again, with them ramping up now and breaking ground, like Samsung is talking about now building another factory in Taylor, Texas now, right? But maybe two years before that thing's up, you know, qualified and actually pushing product out the door, man. So, yeah, it's a lot. There's a lot behind that stuff. Yeah, there's a lot of political pressure right now to onshore, which is the cool new term that's going around right now. But yeah, you know, Intel's got a plan where they're going to start doing their own third party manufacturing for folks and everything. But they're like, well, it'll be ready in 2024. And then you're also gotten this concern too, because they're like, okay, let's say this all flattens out in a couple of years. I've just spent $20 billion with a new fab plant. And if I can't run it at capacity, then this is going to kill us. So, you know, those whipsaw effects of supply and demand, whether it's with the fabbers themselves, the contract manufacturers, like you talk about, you know, the contract manufacturers are making a huge majority of the equipment in our field. Not everyone has their own factory. And they have to get in line. Well, if their chips aren't there to do one part of it, they can't run the product. You have to have it all. So now you're like, well, we're bumping you. Oh, your stuff finally came in. Well, I can't build this for you tomorrow. We're going to schedule you in three weeks because we can crank stuff we've got in our hands right now. And these delays in this whipsaw effect of this supply and demand jerking around like this is really causing these cascading delays in what's available. So it's a murky, muddy mess to watch happen. Yeah. And it's that offshoring that happened over a decade ago. I mean, that's why I'm in the wireless business now, right? It was, you know, almost 15 years ago, I was working for Applied Materials. And I was, you know, one of the equipment manufacturers, right? For the semiconductor factories. And I did a lot of travel in Asia at GSMC, which was in China and Shanghai. Their, you know, government subsidized, you know, foundries basically at TSMC as well. And it's basically, I saw at that time that our industry was shrinking here because everything was getting offshored to Asia basically. And all the factories here in the US were slowing down. I was just like, no bueno, you know, I got to do something else because it's not going to be around. So I jumped ship, you know, I jumped into wireless and here I am 15 years later. And it's funny to see it now shifting people are like, Oh, that was a bad idea. I mean, we knew that was a bad idea back then. But, you know, again, you know, we weren't the ones, you know, paying the shareholders. So we had no say, you know, and, you know, it's good. It's good to see it coming back. And it's good to see, unfortunately, maybe a little short that, you know, people are seeing the short-sightedness that they had back then as far as national security and stuff like that. Because I remember we were talking about it's like, you know, we're going to have, you know, some Chinese factory or some Taiwanese factory make, you know, these, you know, kind of super secret chips for, you know, our fighter jets and stuff like that. I mean, we have to keep something here in the US. And I mean, the factories are here, obviously, but I mean, the majority of the stuff just went offshore and just totally disrupted it. Now you have to re-educate and rebuild the workforce for it, right? Because a lot of those guys, like myself, have moved on to other things, you know what I mean? So we really had a good system 10, 15 years ago. You know, the semiconductor industry as a whole was, you know, well-educated. The, you know, the people, the workforce, right, was, you know, thinking about this could be my future. This is what I want to do. And we've stopped that now. They moved on to other things. And so it's going to take some time to build that up as well. So I suspect when the factories come online, hey, all of a sudden, you know, employee shortage is going to be a problem because they're not going to have qualified people to demand them all. So it'll take time for that as well. Yeah, it's definitely a 10-20 year plan. And like you said, it is a huge national security issue as well. So, you know, with TMC putting out so much stuff and, you know, the potential of China reaching over there and going, yoink, this is ours now. It's kind of terrifying. But we'll see. It could be a Gold Rush show. Any of you kids out there that are about 10 now, 10, 12, thinking about your long-term plans, think about that fab life. So it could be a very lucrative career growing up. So it is. It really is. But like I said, it's painful. And we see these things on the list all the time. One important thing to note though, it's not that they can't make anything. Like the manufacturers on our field are still making a ton of products. And you can see ubiquity and cambium and airspan, avi-ion, these are public companies. And you can look and see what their sales are, what their revenues are. So from our perspective, it looks like they can't make anything. They're making 5, 10% of what they can normally make. But then when you look at the revenue numbers and the output, you're like, no, they're running record numbers pretty much every quarter. It's just that the demand is higher than the supply and that butter gets spread a little thin. And when it does, we all feel a lot of pain from that for sure. Yep, definitely, definitely. And then you have to wonder, it's like, at some point, they kind of overordered, right? Because they saw the demand building. And then once they start seeing the demand kind of taper off, maybe they pull back. And maybe they pull back too far, right? And things could get thrown off as well. So it's a slippery slope. It's a thing you have to juggle and you have to learn through. I mean, I don't think this industry has been through anything like this before, right? Or the world when it really comes down to it. But we'll figure it out, I'm sure. And in the end, like I said, things will be OK. But it's still going to be another year or two. I mean, I'm going to talk about pricing and stuff like that. There's a whole other bag to talk about, right? Yeah. So again, a lot of it comes down to supply and demand. And that drives pricing. So that's one of the core tenants of international economics or economics in general. So nobody wants to raise prices. Unfortunately, we did. We put out the announcement a couple of months ago. And this was a decision that was very, very tough to make. But in the end, these short-term hikes and stuff, we can get through that. That's fine. But when you're talking about long-term multi-year cycle where your prices are hiked and might not come back down, that's not sustainable in the long term, unfortunately. Yeah. And I knew, obviously, I can only speak for ourselves, right? So I mean, we watched the price go up and up and up. And we thought, OK, it's going to plateau. And actually, it did during COVID back in mid-2020. It kind of plateaued. We're like, all right, cool. We're at a stable price now. Things will probably start pulling back and get cheaper. And then all of a sudden, boom, for some reason, the end of the year came. Right around kind of the election cycle, like October, November or something, and stuff started going up again. And it really still hasn't stopped. I mean, jeez, container prices are just ridiculous. What used to cost $2,000 to ship is now close to $20,000. That's a lot of money. And it really depends on kind of, because it's all about weight and volume and stuff. So if you are shipping a container that can only fit 200 pieces of something in there at $20,000, that's a lot when you do the math on that. If you can stuff that container with 10,000 items, yeah, maybe it's only $2 a piece. But either way, it all adds up at some point. It really does. And that's the shipping cross hike that is hitting the end product. I mean, that's a huge number. But it applies to a lot of things too, right? So shipping costs are so high that China can't import a lot of the wood and paper and stuff or recyclables. They used to buy all of our recycle cardboard, would recycle it, and then use it to print stuff like instruction manuals, right? The little pamphlets we throw in there. Don't get me started on that. Dude, the price of that went through the roof. You're like, okay, well, it's a couple of bucks. Well, a couple of bucks at manufacturer level, then it goes to what they're charging us to manufacture, then we've got to charge. And these sort of cost increases at beginning cascade out, because that's how the math of this works. So, you know, it's one thing to be like, well, plastic resin is higher cost. Aluminum is higher cost just because of demand and the supply. Well, now how many container loads of box site have to be moved around so that you can take it to the smelter and then pump up to make the aluminum. And just it really cascades. I think people see things on the news. Oh, the price of steel is up 50% or 100% or something, but don't realize how that cascades across the entire product line. Not just us, but everybody and where that jumps up. So it's painful for sure. Yeah. And if you think, I mean, like sometimes, you know, people could be short-sighted too. You look at the price of steel as you mentioned, right? So it goes up X percent, whatever it is. You think, OK, well, you know, that means that the raw material of my product that's made of metal should only go up. But you have to think, you know, all the machines that make your product are made out of steel, right? And, you know, you can't really keep up with all this demand with the current factory that you have, right? I mean, so these contract manufacturers have to build new factories which take steel. They have to buy new machines that are made out of steel, right? So all these prices, you know, start to compound on top of each other. And it's not, you know, it's not like, hey, so the raw material cost is up 50%. But, you know, the guy who makes this, you know, the product for the contract manufacturer has to make a profit, which goes into it. You know, the guy who sells the steel for the factory that you're building has to make a profit. So that goes on top of it and all trickles down. So by the time you're talking about the cost of the steel for your particular product, you got to put all the cost of building those new factories into it as well. So it really goes up a lot more than just what you see as that, you know, stamp, yeah, 10% up this month, you know, it really doesn't work that way. It compounds because of everything else that's involved in getting you that product. I mean, even the molds, right? The die-cast molds, you know, they're made out of metal, you know? So it's crazy, there's a lot involved. And then let's say you actually get a product made and you can afford it and you ship it and you pay out the nose for shipping. The delays are really killing us too because it used to be, you know, you call up, hey, I need a container from China to wherever, you know, Savannah or whatever. Okay, cool. You know, we'll come pick it up next week, but now we're having to schedule four to six weeks out for pickup for literally for them to come pick up. They're like, well, we can bump you ahead, but it's going to cost this much more than to get on the ships and it gets to the port. The demand is hiked and we're having workflow shortages and stuff. So now you can't get stuff through the port and you get it through the port and there's no truckers because that industry is all jacked up. So we eventually get everything here and the downside is it's taken a lot longer, it's gotten a lot more expensive and it drives to the shortage and this ends up being a snake eating its tail at some point because you're paying more to ship stuff by air freight. Well, now the air freight is all full. So what do you do there? This is why Amazon has decided they're building their own airline now, right, because they're like, we can't afford to move stuff on ground. So we're going to move a lot more by air. So it's fascinating. They can't afford to pay the middleman, right? They can't afford to pay even though they got great rates through UPS because all the volume that they were doing and they tried to subsidize some of that using USPS for some of those short ship or local delivery type things. I mean, again, that all goes to the bottom line and what it costs the consumer and they're going to try and trim that as much as they can. For sure. For sure. So this is kind of a painful thing and this confluence of factors coming together. Everyone again keeps blaming COVID, but it's not. That was the last slap. But I mean, there were a lot of slaps before that. So we end up with this sort of perfect storm of shenanigans and pain. But what do you do? You can wish it away, but that's not going to work, obviously. I tried. I tried. It didn't work. It didn't work. You tried drinking a lot, yelling at the sky. I don't know. It hadn't really seemed to help, but I feel a lot better. But, you know, so what do you do? Realistically, what it comes down to is long term planning, right? You know, a lot of folks, especially on industry, you know, it's hard for them to plan long term. They don't have the capital or they're growing too hard or too fast and it's hard to plan for that and everything. I mean, I totally give it, you know, so the manufacturers can ramp their production and they can move as much product as they can. But in the end, the end users, the lists and the integrators and stuff have got to work on a long term plan and understand these issues are not going away. They're probably not going away for the next year or two. Who knows, right? So you've got to think about strategy and your deployments. You've got to think about relationships. You know, this is all business, but so much of business is tied to relationships. So things like, you know, you're not going to be able to go, oh, I need some APs. Well, let me, who's got some, right? Like these APs, so much of the equipment now is already spoken for. So this is where it's really important to form solid relationships with the channel. You know, your distributors, your vendors, your resellers, whoever you're working with, and get a plan. You know, get your name in there, get some things on back order. Even your fellow Wisps, even your fellow Wisps. I mean, I've seen talk, you know, on different chat, you know, chat groups that I'm in or on the actual Facebook groups and stuff and people calling out, hey, I have this. I need this. And, you know, somebody's like, well, I overordered. And so I have some I could share with you some of the stuff. And also to look at what are your kind of, you know, technology options as well. I mean, we've talked about this before on the show, right? You know, you may, you know, you may want, you know, X product, right? But, you know, why is kind of available? Why kind of works? You know, something is better than nothing. For a lot of this stuff, you have to look at what your other options are because there are products out there that are, let's say, less desirable than other ones, but they may fit the bill for a little while to try and get you through, right? I mean, this is not a long-term fix, but it's really about, you know, getting your business going and keeping it running, you know, and getting, you know, new subscribers added to your network and trying to build out, you know, whatever new infrastructure you can when things do return to kind of normal again, you'll be ready for it, you know, so you have to look at things like that. Yeah, for sure. You know, have secondary tertiary deployment plans and, you know, try to avoid vendor lock where you can, except for your antennas, antennas definitely are of elements. We do have the benefit of not being an active device. And, you know, when the big spike hit last year, I wasn't here, but, you know, I saw it from my side in the distribution channel. The big spike when COVID hit and everyone went to work from home and everyone ramped up internet service, you know, that took a lot of people off bike. We're like, oh my God, what do we do? So, but everyone thought it would just be a spike and then drop back down, but that's not really the case. Like, it's spiked and then stayed high and it's high now. It's high everywhere. So, especially with so much investment from tax dollars and everything going into these networks, like the demand is not going to go down anytime soon. And the supply is somewhat inelastic. So you've got to make plans and, you know, come on with some alternatives, but, you know, it's part of it, part of doing business. And if we all work hard and work together, we're going to get through this. Absolutely. 100%. 100%. Totally on board with that. So anyways, try not to be too much of a bummer on a Friday, but like I said, we want to throw a little color on it. And just, you know, this is what we see. We hear, we feel your pains too. If there's any way we can help out, let us know. But in the meantime, I've got a Dennis appointment coming up here shortly, which is definitely how I want to spend my Friday afternoon. So, woo! Yeah. You think you're interested in going on? No, nothing, nothing really going on. You know, this is my birthday today. So, to me. You're 34, right? Yeah. Exactly. Yes. I'm 34 again. So other than I'm sure some kind of surprise dinner or something like that, that's going to happen today. I'm really planning for my birthday weekend to be chill. I actually haven't cooked a brisket in months, believe it or not. It's been a while and I actually have, I don't know if I should say this on the air or not, but I have this brisket that I bought like during COVID, you know, when brisket shortages were there. So it's been sitting in the freezer out of the ranch for pretty much almost a year, you know. And I'm just like, I got to throw that thing out. We got to cook it soon, you know. So yeah, I think I'll be doing my first brisket this weekend. So I'm kind of excited about that. So definitely hanging out by the pool, drinking some beers, cooking some barbecue. That's my weekend plan or my birthday weekend plan. Very awesome. It's an excellent way to spend it. I have very similar plans. My wife's birthday is coming up. We're working on her big, her big meal. So she likes his giant snow or a king crab legs and stuff. So we'll do those on the smoker. I'm very excited about that. Our little splurge layers. Yeah. Our wives would get along. She loves, you know, crab legs and stuff like that as well. So good. Well, she used to not. But then she was like, oh, let me try yours. And now she always steals from us. I'm like, nah, you got to get your own woman. So be gone. It's just too much work for me. It's too much work for me, you know. It's kind of like, you know, eating crawfish and stuff like that. It's like all that work to kind of, you know, break it open and get this little piece of meat out of there. It's like, why? It's like, you know, give me a steak. I just want to pick it up and just take a big bite. That's why I like lobster. Lobster is like, you get this big tail. You get that big chunk of meat out of there. You're good to go. But I'm about to crack every leg and dig in there and get all that stuff out. I'm just not interested, man. Now, if you want to do it for me and just give me a big old plate of crab meat and some butter, I'm down. I don't know. I'm big enough I could eat almost infinite supply of crab if it was being fed to me. So it slows me down. Eventually I get full and bored and I'm not broke. So. All right, guys. Well, we appreciate you taking the time to listen to us. You can find us on the same places. You can always find us RF elements, Facebook groups. We're on with talk a lot. Caleb at RF elements.com tosses at RF elements.com. Reach out, like, share, subscribe, download, please. And let us know what you guys want to hear us talk about. So until next time, we will haul it y'all later. Stay horny everybody. All right. Stay horny y'all.