Semiconductor reshoring drives structural inflation
The guest argued that deglobalization and the national security mandate to reshore semiconductor manufacturing to the US will structurally raise production costs and drive inflation.
The argument
While offshoring to China and Taiwan historically provided disinflationary benefits, building advanced fabrication plants in places like Phoenix is significantly more expensive, reversing those cost savings.
The thesis, stress-tested
✓ What validates it
- ✓Higher per-unit production costs reported at US-based fab plants
- ✓Continued geopolitical friction in the Taiwan Strait
▸ Risks discussed
- ▸Government subsidies fully offsetting higher domestic operating costs
- ▸Automation significantly lowering US manufacturing labor costs
Hear it yourself
"And if you lose faith in the Fed's ability to bring it down, you get this, you know, de anchoring of inflation expectations, which people like Neel Kashkari, Minneapolis Fed are starting to really worry about because that's where you get an inflationary mindset among consumers and businesses, and they start behaving in different ways in anticipation of higher prices, which creates kind of a feedback loop of inflation. So I think we're gonna start to see more and more talk of rate hikes to deal with this, you know, simply due to the understanding that it's it's much more than than oil situation."
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