Tag Archives: Capital

How to Build a Better Chiplet Packaging to Extend Moore’s Law

Packaging approaches like chiplet tech can extend Moore’s Law. But what does that mean for chip design product developers and fabs?
By John Blyler – Moore’s Law may not be dead, but it certainly has been challenged significantly beyond the 28nm process node. Fortunately, there are ways to extend Moore’s Law’s cost, feature, and size benefits. One way is to use chiplets – or modular dies – that effectively bypass Moore’s Law by replacing single silicon die with multiple smaller dies that work together in a unified packaged solution.

This approach provides much more silicon to add transistors compared to a monolithic microchip. As a result, chiplets are expected to return to the two-year doubling cycle that has been the cornerstone economics of the semiconductor business since 1965.

The global market for processor microchips that utilize chiplets in their manufacturing process is set to expand to $5.8 billion in 2024, rising by a factor of nine from $645 million in 2018, according to Omdia(Image Source: IEDM 2017, AMD Dr. Lisa Su keynote) more>

Wall Street to Mission Control: Can space tourism pay off?

With the COVID-19 pandemic curtailing earthly travel, space tourism may seem like a far-fetched dream—but some companies are betting on high demand.
By Chris Daehnick and Jess Harrington – The space industry saw record-breaking growth in 2020 as investors, undeterred by the COVID-19 pandemic, poured almost $9 billion into private companies. While some of these businesses are simply providing parts and services to government agencies like NASA, others want to venture into space with their own crew and rockets. One ambitious goal, which several companies are now pursuing, involves space tourism for any private citizen willing to pay a hefty fee.

Having private companies lead space exploration ventures was the stuff of science fiction when the human spaceflight era dawned 60 years ago in April 1961. But such companies have now demonstrated the safety and performance of their systems for a full spectrum of operations. Plans to offer private flights are becoming reality, so what does the future hold? To answer this question, we look at industry trends, investment patterns, and the obstacles ahead.

Governments monopolized space exploration in its early days because of the staggering investment and high risks involved. Exhibit 1 shows some of the early milestones of space flight, as well as other important developments through 2000. National pride and the desire to be “first” were also powerful motivators, although many countries now appreciate the value of collaboration, as seen with the International Space Station. Private companies, with vastly fewer resources, had little reason to investigate crewed missions because the likelihood of getting government approval and seeing decent returns was dim. more>

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Updates from Chicago Booth

Who is right about inflation?
The US Fed and consumers have very different expectations about the future
By Brian Wallheimer – Inflation chatter started heating up this spring, along with inflation itself. In April 2021, the US Consumer Price Index, which measures how fast prices change, rose at a 4.2 percent annual rate, more than double the usual target rate. Then in May, the inflation rate soared to 5 percent. With the worst of the pandemic seemingly easing, US consumers were apparently venturing out again and spending at a fast clip.

The figures took inflation watchers off guard. The Wall Street Journal’s editorial page noted that Federal Reserve chairman Jerome Powell had wanted some inflation but would likely be surprised by the force of April’s numbers, saying, “Powell’s inflation ship has come in, albeit more rudely than he probably wanted.”

Financial journalists and investors, always looking for signs of how the central bank will react to signs of inflation or deflation, kicked into high gear, trying to anticipate the timing of any Fed actions.

But consumers—who actually drive inflation—seemed unfazed, apparently already operating with the understanding that prices were rising fast, and would continue to do so. Homeowners remodeling their homes during the pandemic were aware of historically high lumber prices. Home cooks felt the impact on food prices. Buyers of both new and used cars saw prices surge due to a shortage of computer chips. more>

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Is the U.S. Market Due for a Breather?

Why two critical factors could serve as catalysts for a near-term pullback in stock indices, and how investors can play it.
By Lisa Shalett – Major U.S. stock indices charged higher in August, regularly setting new highs, but more out of “climbing the wall of worry”—as in, the market’s tendency to move up even against a host of negative factors—than based on any economic or profit fundamentals.

This means that stock-price resilience likely reflects an overpriced market. Indeed, many investors seemed to have ignored numerous risk factors, including the resurgence of COVID-19 hospitalizations in the U.S.falling consumer confidence, higher interest rates and significant shifts in geopolitics in China and the Middle East.

Why has the market been so complacent? We believe that today’s market dynamics are increasingly responsive to nuanced communications from the Federal Reserve, which seems to have successfully convinced investors that central bankers can thread the policy needle without mistakes. At its recent annual Jackson Hole Economic Symposium, for instance, the Fed reiterated its view that inflation will likely prove transitory, meaning it’s in no rush to raise interest rates. more>

Updates from McKinsey

Japan offshore wind: The ideal moment to build a vibrant industry
As construction starts on Japan’s first large commercial offshore wind farm in the coastal waters of Akita, the country is heralding a future of energy independence.
By Sven Heiligtag, Katsuhiro Sato, Benjamin Sauer, and Koji Toyama – With the passage in late 2019 of a law that allows offshore turbines to operate for 30 years, Japan has begun in earnest its journey away from fossil fuels and nuclear energy.

The two wind farms of the ¥100 billion Akita project will generate with a capacity of 140 MW, enough electricity to power at least 150,000 of Japan’s 52 million homes. By 2030 Japan plans to have installed a total of 10 GW, and the country’s possibilities are even greater. The International Energy Agency estimates Japan has enough technical potential to satisfy its entire power needs nine times over.

Japan can take advantage of the technology advances and cost improvements the offshore wind industry has made since its early days in Denmark in the 1990s. Today, it can learn from the experiences of other countries, not only in creating the turbines and wind farms but also in building markets, setting offtake prices, and designing regulation and financial incentives.

In only a handful of decades, offshore wind has become one of the core power-generation technologies of Europe, with installed capacity of 22 GW2 and about 100 GW planned by 2030.3 Taiwan and the United States have already commissioned the first small projects and plan for more than 10 and 25 GW by 2030, respectively.4 During the industry’s 30-year evolution, costs have fallen so sharply that offshore wind now compares favorably with competing energy sources.

But that does not mean Japan’s journey will be simple. It will require multiple players, including regulators, utilities, and investors, to do their part in a country where the public remains skeptical about offshore wind’s cost competitiveness with other power sources. more>

Vaccine Greed: Capitalism Without Competition Isn’t Capitalism, It’s Exploitation

Among the pandemic’s many lessons, however, is that greed can easily work against the common good
By Jag Bhalla – DID GREED JUST save the day? That’s what British Prime Minister Boris Johnson claimed recently. “The reason we have the vaccine success,” he said in a private call to Conservative members of Parliament, “is because of capitalism, because of greed.

Despite later backpedaling, Johnson’s remark reflects a widely influential but wildly incoherent view of innovation: that greed — the unfettered pursuit of profit above all else — is a necessary driver of technological progress. Call it the need-greed theory.

Among the pandemic’s many lessons, however, is that greed can easily work against the common good. We rightly celebrate the near-miraculous development of effective vaccines, which have been widely deployed in rich nations. But the global picture reveals not even a semblance of justice: As of May, low-income nations received just 0.3 percent of the global vaccine supply. At this rate it would take 57 years for them to achieve full vaccination.

This disparity has been dubbed “vaccine apartheid,” and it’s exacerbated by greed. A year after the launch of the World Health Organization’s Covid-19 Technology Access Pool — a program aimed at encouraging the collaborative exchange of intellectual property, knowledge, and data — “not a single company has donated its technical knowhow,” wrote politicians from India, Kenya, and Bolivia in a June essay for The Guardian. As of that month, the U.N.-backed COVAX initiative, a vaccine sharing scheme established to provide developing countries equitable access, had delivered only about 90 million out of a promised 2 billion doses. Currently, pharmaceutical companies, lobbyists, and conservative lawmakers continue to oppose proposals for patent waivers that would allow local drug makers to manufacture the vaccines without legal jeopardy. They claim the waivers would slow down existing production, “foster the proliferation of counterfeit vaccines,” and, as North Carolina Republican Sen. Richard Burr said, “undermine the very innovation we are relying on to bring this pandemic to an end.” more>

Why Elon Musk Isn’t Superman

The Betting Economy vs. The Operating Economy
By Tim O’Reilly – At one point early this year, Elon Musk briefly became the richest person in the world. After a 750% increase in Tesla’s stock market value added over $180 billion to his fortune, he briefly had a net worth of over $200 billion. It’s now back down to “only” $155 billion.

Understanding how our economy produced a result like this—what is good about it and what is dangerous—is crucial to any effort to address the wild inequality that threatens to tear our society apart.

In response to the news of Musk’s surging fortune, Bernie Sanders tweeted:

Bernie was right that a $7.25 minimum wage is an outrage to human decency. If the minimum wage had kept up with increases in productivity since 1979, it would be over $24 by now, putting a two-worker family into the middle class. But Bernie was wrong to imply that Musk’s wealth increase was at the expense of Tesla’s workers. The median Tesla worker makes considerably more than the median American worker.

Elon Musk’s wealth doesn’t come from him hoarding Tesla’s extractive profits, like a robber baron of old. For most of its existence, Tesla had no profits at all. It became profitable only last year. But even in 2020, Tesla’s profits of $721 million on $31.5 billion in revenue were small—only slightly more than 2% of sales, a bit less than those of the average grocery chain, the least profitable major industry segment in America.

No, Musk won the lottery, or more precisely, the stock market beauty contest. In theory, the price of a stock reflects a company’s value as an ongoing source of profit and cash flow. In practice, it is subject to wild booms and busts that are unrelated to the underlying economics of the businesses that shares of stock are meant to represent. more>

Germany is the freest country in Europe; Norway, Lithuania, and Finland are the worst on the 2021 Nanny State Index

By Christopher Snowdon – Today sees the publication of the Nanny State Index, now in its fourth edition. Launched in 2016, it looks at the over-regulation of food, soft drinks, vaping, tobacco and alcohol in thirty European countries. Since the last edition was published in 2019, the COVID-19 pandemic has led governments around the world to impose coercive controls on an almost unprecedented scale.

The index does not include anti-Covid policies that are expected to be a genuinely temporary response to the pandemic, but the outlook is bleak nonetheless. Almost without exception, governments across Europe are adopting higher sin taxes and more prohibitions.

Norway tops the league table, although that could change once it legalises e-cigarettes. Lithuania, with its heavy temperance legislation, is again in second place while Finland drops to third. The top of the table is dominated by Scandinavia and Eastern Europe. Greece is the only country from southern Europe in the top half, largely thanks to its very high sin taxes on alcohol and tobacco. At the more liberal end of the table, the best countries are a mixed bag. Germany has performed the extraordinary feat of having the lowest score in all four categories of the index. more>

Updates from Chicago Booth

The cycle behind sovereign debt disasters
By Michael Maiello – In theory, sovereign debt can be a healthy part of a growing economy. Governments can borrow from creditors to fund trade deficits, importing goods from other countries so their citizens can buy the products and enjoy the benefits.

While that may be the idea, the results of such borrowing are generally disastrous, warns research by Stanford’s Peter M. DeMarzo, Chicago Booth’s Zhiguo He, and Copenhagen Business School’s Fabrice Tourre. There is no default plan for a sovereign borrower the way there is for, say, a corporate one—and borrower countries have proven unable or unwilling to commit to anything like one. Without the disciplining force of covenants, which are common in private-sector borrowing, the system doesn’t wholly account for the risks associated with economic booms and busts, which works against strategic, responsible borrowing.

The trio’s work on sovereign debt risks rests on a foundation of work by DeMarzo and He on private-sector debt, in which they describe the tendencies of corporations to borrow without restraint when they do not pledge collateral to specific lenders. As uncollateralized borrowers tend to issue debt in good times and bad, lenders demand ever-higher borrowing costs over time, erasing the benefits to the borrower company and increasing default risk. Collateral adds discipline to the process. In another study, DeMarzo argues that sovereign borrowers should pledge assets to creditors as collateral in the event of default. This latest research, with He and Tourre, suggests that such collateralization could crystallize the consequences of default and break the debt cycle that is so costly to so many citizens. more>

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Updates from McKinsey

Post-close excellence in large-deal M&A
The most successful large-deal transactions follow four key practices during integration execution.
By Brian Dinneen, Christine Johnson, and Alex Liu – You cannot judge a deal by the market’s response to its announcement. Neither can you predict its success based on investor reaction at closing. It is only after the first 12 to 18 months of integration and after companies have reported the performance of their first year that the markets can reliably predict the success of the deal.

This finding is based on our recent review of 248 large deals over the last ten years. We found that 79 percent of those whose total return to shareholders outperformed their market index in the first 18 months were still above the index three years after close.

What did CEOs do differently in those successful deals? To better understand what made those deals successful, we surveyed experienced integration practitioners at the twice-annual Merger Integration Conference, and we also surveyed a broader population of 305 public company leaders, conducted in-depth reviews of investor transcripts and public financials in 29 of the Global 2000’s 1 large deals, and spoke with individuals who led some of those deals. We observed that companies going through successful large deals follow four key practices that help their total returns to shareholders (TRS) outpace the market index, their synergy achievement to exceed public commitments, and organic growth to continue unabated (Exhibit 1). In this article, we detail these practices.

Protect business momentum

While integration creates value from synergies, this should not come at the cost of disruption to the existing business. Successful acquirers are able to keep growing revenue on a pro forma basis within the first year, whereas unsuccessful deals see a decline or “dip” in revenue. 2 This dip is almost always due to a failure to protect the business momentum. more>