US chip production really needs its SpaceX moment, but it seems like it will never happen, and we're left with the crumbling empire of Intel.
By "SpaceX moment", I mean a startup entering an impossible market, where the barrier to entry is billions of dollars of research and manufacturing, a market dominated by industry giants from the 60s, and yet still coming out on top somehow.
> a market dominated by industry giants from the 60s
The thing is, the SpaceX moment occurred because of a rare opportunity where the industry incumbents were insulated from any competition or need for innovation for ~30 years. Some domestic industries still operate in an environment somewhat like this (e.g. the steel industry), but still face modernized global competition (albeit whose effects are kept at bay via import tariffs reaching as high as 266%).
The semiconductor industry... while there are magnificent barriers to entry and not "enough" competition, they have absolutely not been wholly insulated from innovation or competition. And innovation in fabrication is driven at a very rapid pace! So there aren't huge outsized profits to be found like there was for SpaceX. And even SpaceX needed to invent what was almost an entirely new industry (Starlink) to become truly profitable.
And even trying to pull a "SpaceX" on domestic steel manufacturing would fall flat because you wouldn't capture the global market, and would still be dependent on some (potentially much lower) tariffs to compete against the very modernized factories in China, which are innovative/competitive/efficient, unlike our domestic industry.
SpaceX took advantage of a very rare situation where there truly was no competition or innovation anywhere on the planet for a very long period. I'm not aware of any other industries which are quite as far "behind" today as space launch systems were in 2010. But if anyone else is, please mention those industries here!
Nice analysis on competitive dynamics of semiconductor industry vs. space industry in the 2000s.
> I'm not aware of any other industries which are quite as far "behind" today as space launch systems were in 2010. But if anyone else is, please mention those industries here!
Digital payments may be in a similar situation. Visa's 2% fee may seem low but from a scale and competitive standpoint it is fairly absurd - they are making 80% gross margins on $30b of revenue to do what boils down to a few API calls and some fraud repayment. I doubt that they need to do much innovation to keep that moat either (in contrast to say Apple and their 30% cut of App Store revenues - they need to constantly stay ahead of Android and Windows).
Curious to hear your take on what other industries at least come close to the space dynamics in 2010.
From what i can see as an admitted outsider, payment rails are more complicated than they look, and most of the crypto partisans arguments to "replace" functionality are a mix of 'ignoring that part', or 'we don't want that part anyway' + a few API calls.
Problem is, the world consuming these things mostly seems to want those parts, and can't ignore those other parts. Which seems to explain relatively low uptake.
Those rails involve an amazing amount of complexity that boils down to the entire system being nonsensical.
Payments are pulled instead of pushed; the underlying credit card numbers lack even a semblance of security; there is all kinds of mis-design due to the way that restaurant tips work; it all started when credit card imprints/readers were all assumed to be offline; etc.
One of my earliest memories is my mum paying for groceries using her credit card in the 90/00s, where the machine used was completely mechanical/manual. It copied the card number (that was embossed on the plastic) by literally taking a carbon paper rubbing of the card. The system was designed to be offline, because back then there was no "online".
You could argue the problem was that it took a system that more-or-less worked offline, and tried to hammer it into working online.
A "built for online first" payment paradigm would look different, but it would have an enormous chicken-egg or installed-base problem, unless you had something with government-level muscle enforcing it.
Most Czech banks offer free domestic instant payments, and many small businesses who were previously cash-only now take them as an option. I heard there's also a SEPA equivalent.
If the electronic retail payment industry hadn't already been captured by VISA and MasterCard, I could very well see something like this, a much cheaper and simpler system, being what everybody uses. There's countries (India?) where debit/credit card adoption was slow and now these simpler solutions have significant market share.
It takes (at least) two people to want to adopt a payment system. The reason American customers use credit cards is that they like them; they're very safe for customers and they have reward points.
You could pay with cash or debit if you wanted to, but then you can't chargeback the business.
>Visa's 2% fee may seem low but from a scale and competitive standpoint it is fairly absurd - they are making 80% gross margins on $30b of revenue to do what boils down to a few API calls and some fraud repayment.
The banks issuing Visa cards do fraud repayment. Visa gets paid for their network, and specifically their network of higher income spenders who want to play the rewards game. Also, note that Visa does not earn 2% of transaction totals. A signification portion of total card processing fees goes to the card issuing banks to pay for rewards and fraud repayment.
Exactly, the interchange fee is split between the issuing bank(largest cut), acquiring bank, and the network(smallest cut). Yet everybody acts like visa is just skimming 2% from every transaction without them getting anything in return while they have created entire lifestyles and communities around hacking credit card offers.
Maybe one of the e-beam startups can pull it off. Aside from scaling issues, direct electron beam lithography ought to outperform optical lithography by many metrics, not to mention that there would never be costs associated with mask revisions.
I remember touring a little research fab, maybe around 2000, that could achieve feature sizes comparable to what TSMC can do today. But they were very, very, very slow.
(Fast-moving electrons are easy to make, easy to aim, and have teeny tiny wavelengths that entirely sidestep most the issues that people have with photons having obnoxiously large wavelengths. But electrons have all manner of downsides that explain why fabs spend many billions of dollars on optical lithography, one of which is that they repel each other, which makes shining a lot of them at a wafer at once quite problematic.)
>By "SpaceX moment", I mean a startup entering an impossible market,
I think semiconductors is a difficult space for a SpaceX. SpaceX was relatively cheap - the company itself only raised 2 billion dollars, and according to Musk, the cost to develop Falcoln Heavy was "only" $500M. I think the "thesis" behind SpaceX is moreso that the technology to develop rockets had come down massively, but the market had gotten fat and lazy on government contracts. The market only seemed impossible because everyone just assumed so.
On the other hand ASML's EUV machine costs $300M and that's only a small part of what you need build your own Fab and barring some massive research breakthrough that isn't coming down any time soon.
20 years for a hardware startup to get really going isn't unusual. One of the other reasons VC likes SAAS. Hardware startups are cash intensive and slow boils, typically.
They weren't a startup for 20 years, they were a huge company with billion dollar fabs, thousands of workers, and they were exchanging technology lead with other silicon manufacturing companies many times (back before 2020s, mid/late 2010s, TSMC was not undisputed leader).
UMC was a Taiwan foundry that started even before TSMC and it eventually folded.
TSMC has been spending $15 - $50 billion per year for years to stay on top.
Estimates are it would take $200 - $300 billion just to catch up with them and little to no profitability for a decade while burning $10s of billions every year.
I think the federal govt is the only entity that has that kind of money.
I think the issue is that TSMC exists, which takes up a lot of oxygen and opportunity. Whereas in space, there wasn't a high quality opportunity, so SpaceX had a lower hurdle to being the best (even though that still wasn't easy!).
Chip production seems another order of magnitude more expensive than space travel, when you look at tens of billions for a fab, but also several orders of magnitude more productive.
I think rockets are insanely simple compared to silicon. The amount of research and development it takes to build a light source (hot tin plasma[1]) is extraordinary, and fabs are also probably the most complicated manufacturing facilities in the world. Tesla struggled mightily with integrating disparate auto parts manufacturers some years ago.
SpaceX and Tesla benefited from being helmed by a crazy person (in their nascent stages), who pushed to break norms in the conventional thinking, either "rockets can't be reused/we must spend $10B on a test campaign[2] before any part leaves the ground" and "EVs aren't cool". I don't think if Musk could design a rocket engine from scratch is relevant, but the strategic design patterns of 1) reduce requirements, 2) remove unused things, 3) simplify/optimize, 4) accelerate cycle times, 5) automate. Those points aren't revolutionary, just a more expanded "go fast and break things."
The computers that came out of Silicon Valley in the late 70s-into the 80s were a disruption to the old stalwarts like IBM. Though for silicon maybe I'm just trapped in that pre-SpaceX thinking.
There's another light source that isn't nearly as hard and actually delivers better quality light at far higher electrical efficiency... It's just large and most of the cost is in the large machine that's kept under vacuum. GloFo was working on doing EUV with that (they gave up on EUV), and Japan was or is recently working on a small demonstrator fab with iirc about 10 steppers, starting with the light source machine.
That machine btw is called "free electron laser", and utilizes relativistic electrons to match their velocity to free-space photons instead of the slowed-down-by-metal-helix traveling-wave-tube-amplifiers that power most TV satellites. Those work at about 10 GHz or 30mm wavelength, much larger than the 13nm band used for EUV lithography.
FELs can have efficiencies in the double digit % if built with energy recovery, btw.
> The computers that came out of Silicon Valley in the late 70s-into the 80s were a disruption to the old stalwarts like IBM. Though for silicon maybe I'm just trapped in that pre-SpaceX thinking.
another good example of this is how VLSI in particular disrupted the mini-computer/mainframe market and made CPU's cheap enough to put them into smaller and far cheaper machines.
This really shook up the old guys who where used to being total system vendors. (IBM, DEC etc).
Suddenly, you could get a computer for much cheaper compared to the decade prior, and by the early to mid nineties you had guys like sun eating their lunch completely.
IBM pivoted to being a services company and DEC just imploded.
I think lack of focus on US domestic chip capability is semi-intentional and is an eventuality. Semiconductor industry, and many other manufacturing industries too, seem to flourish at very outer edges of the free world.
It could be simple as the free world not wanting manufacturing capability at home. It could be wanting only grain farms and money printers.
Manufacturing in the west is expensive compared to cheaper developing countries.
Also, manufacturing has a massive impact on the environment, this includes semiconductor manufacturing. It has politically been impopular for a while now.
Because of the resource curse - everything that isn't the best cost/benefit ratio to a country tends to become unworkably expensive. The USA's cursed resource is money - literally - it prints the world reserve currency.
> By "SpaceX moment", I mean a startup entering an impossible market, where the barrier to entry is billions of dollars of research and manufacturing, a market dominated by industry giants from the 60s, and yet still coming out on top somehow.
This already happened and the startup was TSMC. Unfortunately for the U.S., it's in Taiwan.
> By "SpaceX moment", I mean a startup entering an impossible market
SpaceX entered a market with hardly any competition (due to little demand) and is/was extremely reliant on government funding anyway.
Semiconductors are highly competitive and you can't rely on government agencies buying most of what you manufacture.
I'd argue Tesla might be much more closer to "startup entering an (somewhat)impossible market" considering how entrenched non Chinese car makers it was and how hard it was to survive in and especially start from scratch as a small company.
TSMC would likely never let itself be bought by a Western company. It's too vital to Taiwan's (and China's interest). The best that can be hoped is its ethical engagement with US chip players in decline.
But surely it wouldn't be impossible, with enough capital and initiative, to start a US-side TSMC clone on US soil? Just like the Valley successes of the 70s and 80s prompted savvy Taiwanese investors to found TSMC. We might need to start copying back some of their playbook to chart our own course to success, as they did with ours, then exceeded it with their out strategy and ingenuity, currently.
Existential depends on perspective, but TSMC is a strategic asset. Any loss of it would lead to TW losing significant leverage and being more vulnerable to external pressures.
I'll gladly take another Elon for siliconX. Hell I'd take 10. The good Elon has done in terms of his companies vastly outweigh the few bad tweets he slings into the world once in a while.
I don't get how some people struggle with the idea that he may simultaneously be a gifted businessman (in certain sectors, obviously Twitter was a disaster) and also simultaneously be a raging asshole.
Bill Gates was a raging asshole. Steve Jobs was a raging asshole. Larry Ellison was a raging asshole. It's not ideal, but it also doesn't preclude success.
I think that it's actually helpful to a degree to be an asshole to be disruptive in a field. I expect you need a certain resolve of going against the flow. Something which is easier if you are an asshole.
> I don't get how some people struggle with the idea that he may simultaneously be a gifted businessman
For me it's the Cybertruck. If find it hard to reconcile that a person with his track record could come up with that absurd abomination (makes me think that there is small small chance that all his other achievements were just extreme luck and random chance. Well in reality it's probably it due to lack of pressure/constraints that forced him to focus on making rational cars previously).
It's about propaganda, if they keep saying Musk didn't found SpaceX(real comments on Reddit) and keep upvoting those comments, and downvoting anyone saying he did with sources, then eventually new folks will believe that he didn't found SpaceX.
On Reddit, mods of large subreddits like /r/news are permabanning people that just post an official SpaceX response and are censoring the comments. It's wild out there.
It isn't required for success, either. If Elon Musk was never born, it is likely we'd still have SpaceX and Tesla equivalents, but with a better human being at the helm. A parallel universe also exists where Microsoft, Apple, and Oracle were not founded by raging assholes. The fact that these companies are all run by jerks is a terrible coincidence, but it does not necessarily need to be so.
So, out of the seven billion people on the planet, only Elon Musk could have made these companies what they are? No other person on Earth (given access to equivalent capital) could do it?
That's not remotely saying the same thing. Just because someone could do it doesn't mean it will happen. These things require MUCH more then just the possibility of it happening. For example I could go out right now and murder someone. Doesn't mean I will do it. I'm certainly capable of it. In fact most people are in this exact situation yet there are only a tiny amount of murders happening each day compared to the people capable of it.
So the real question is. Is there someone else with a similar or better drive then Musk, that is as smart as Musk, that has as much discipline, has the right personality and at the right time. The answer is much more likely to be no then yes in my opinion. Because if the answer is yes we would have another Musk or close to it.
I don't know. I happen to believe that many, many people are capable of running and growing a successful business, and that the limiting factor (and the reason they haven't already) is access to capital, not some special personality trait or pedigree or family background or really any particular expertise. Definitely millions, probably tens of millions, and maybe even hundreds of millions of people are capable of starting the next SpaceX-like enterprise, and the lack of access to $100M is the only thing stopping them.
We'll never know, though, because no bank or investor just hands out start-up capital to nobodies.
(I also happen to believe, and HN is going to hate this, that the high percentage of businesses that fail is a testament to how thoroughly misallocated capital is. So much capital goes to people who end up demonstrating they are incapable of deploying it. The trick that hasn't been solved yet is consistently finding who those many capable people are beforehand.)
Have you had any ideas that would move the world forward a bit, but never acted on it? Did any of them still not end up existing after a few years? That's the difference between an individual acting. Those things could've moved the world forward, only by you, but you didn't, so they didn't.
Thiel is right about the indeterminate optimism and determinate optimism outlined in Zero to One. Many people just expect things will naturally get better, no need to actually do it yourself, that it will happen anyway. So it's funny that the things that need doing only get done by people that believe they need to do it. (practically all of the tech and company builders believe the Zero to One thesis)
Without Musk, what space industry would there have been? Blue Origin was a me-too a decade later. Virgin was a me-too failure. Boeing can't get their astronauts back right now. If you remove Musk, everything that's bad right now is delayed another decade.
> businesses that fail is a testament to how thoroughly misallocated capital is. So much capital goes to people who end up demonstrating they are incapable of deploying it.
Doesn't that disprove you previous hypothesis? Unless you think that the people who are handing out the money and the ones they are handing it to are somehow exceptionally incompetent? Why would that be the case?
I am saying I think it's possible that investors use terrible and backward signals for who to invest in, and that might be an alternate explanation of the 90+% miss rate (and 1-5% unicorn rate) of a cohort of invested companies. To the point where their investment choices might be even worse than random chance. Almost like they are investing based on the inverse of what they should be. We'll never know because there is no counterfactual fund that invests in the companies nobody else invested in, to test whether they were false negatives.
To some extent building and running a business is a zero sum game, you don't have to be good at it you [just] have have to better at it than other people.
Tech is also special in that it's often a winner takes all (to varying extents) market. A bunch of small/medium companies selling similar products usually can't survive long-term since geographic barriers aren't really a thing anymore.
So I simple don't think it's possible for 50-90% of all the companies were talking about to survive and grow at a pace that's fast enough for VCs. If they can't grow they'll will be outcompeted/bought out by companies that can't. Even if they can survive and grow at a modest pace long-term there is no point for VCs to invest into them.
I don't see how picking more competent people could significantly change this situation. They are all still competing for slices of the same even if that pie is constantly growing entrenched player with a lot of resources have a much better shot at capturing that growth than any newcomer.
> We'll never know because there is no counterfactual fund that invests in the companies nobody else invested in, to test whether they were false negatives.
I don't see how could that work unless VCs reduce the number of companies that they invest in by a magnitude or two.
> businesses that fail is a testament to how thoroughly misallocated capital is. So much capital goes to people who end up demonstrating they are incapable of deploying it.
Doesn't that disprove you previous hypothesis? Unless you think that the people who are handing out the money and the ones they are handing it to are somehow exceptionally incompetent?
Yes many people are capable of running and growing a succesful. business. That's not Elon though. Elon has grown and is running multiple industry leading at the same time.
Sort of. Because a lot of what Musk was doing didn't make much sense at the time. Basically you needed a person who was already very successful and had a lot of clout and was willing to bet all that on a boondoggle (certainly not in hindsight). There aren't that many people who are in that position and are willing to go all in on something like (while having the vision, skills and lucky to pull it off and prove everyone wrong).
His pseudo-fascist political views, love of eugenics and other fringe stuff might have played a part.
Also you can't really expect a person narcissistic/unhinged enough to name his child "X AE A-XII" to be even remotely likeable (considering he also did it as a joke and possibly forgot about it doesn't make it much better).
By "SpaceX moment", I mean a startup entering an impossible market, where the barrier to entry is billions of dollars of research and manufacturing, a market dominated by industry giants from the 60s, and yet still coming out on top somehow.