Paul Gluckman

Garmin typifies virtually all tech companies that are facing “one of the most challenging supply chain environments in history,” said CEO Cliff Pemble on a Q3 call Wednesday. “Supplies are tight, and we expect freight costs to remain elevated.” Operating profit declined nearly 11% year over year to $283 million, due partly to “higher freight costs affecting gross margin,” he said. Garmin invested in a fourth production facility in Taiwan that's now operational and “will help us fill more orders,” he said. “We’ve been able to secure the kind of inventory that we feel we need to make for a successful year,” said Pemble. “Nobody would ever say they have too much in this environment, and with shipping delays that are taking place that we hear of every day in the news, definitely a higher level of inventory is required.” Garmin sees little to no supply chain improvement “in the near to intermediate term that really changes what’s happening right now, until there is really more capacity brought into the system and some of these bottlenecks get solved,” said the CEO. Pemble answered with a simple “yes,” when asked if he’s confident in Garmin’s ability to have products on shelves for the holiday season. The stock closed down 8.8% Wednesday at $146.21.

Corning used to think the inflationary pressures on its businesses were “transitory,” CEO Wendell Weeks said on a Q3 call Tuesday. Conversations with the supply chain and investors have led the company to conclude “this may last longer than we had thought,” he said. “This looks like we could continue to have challenged supply chains through the foreseeable future.” Price increases are “underway” in all Corning businesses to mitigate the impact of “supply chain challenges and inflationary headwinds” that reduced gross margins by 150 basis points year over year, said Chief Financial Officer Tony Tripeny. The stock closed 5.3% lower Tuesday at $36.58.

Snap Q3 rose 57% to just under $1.07 billion, $3 million below the lower end of July 22 guidance, said CEO Evan Spiegel on a call. The stock plunged 26.7% Friday, closing at $55.14. Thursday, Spiegel blamed the revenue shortfall in the quarter mostly on “disruptions” in Snap’s advertising business from “changes to iOS ad tracking that were broadly rolled out by Apple in June and July.” Though Snap previously anticipated “some degree of business disruption,” the new “Apple-provided measurement solution,” called SKAdNetwork (SKAN), did not “scale as we had expected, making it more difficult for our advertising partners to measure and manage their ad campaign for iOS,” he said. The SKAN rollout was a “frustrating setback for us,” he said. Apple defines SKAN as an application programming interface that helps advertisers measure the success of app ad campaigns on the iOS platform. Snap saw “meaningful adoption” of SKAN in June and July, “when Apple pushed all of its users to update to the new version of iOS,” said Chief Business Officer Jeremi Gorman. Initial results “were generally aligned with prior industry-standard solutions, and we were among the first platforms to lean into this solution and push for widespread industry adoption,” she said. But as advertisers began testing SKAN, they unearthed “a variety of concerns about its limitations,” she said. “Every advertiser has their own unique, fine-tuned perspective on their optimal parameters to measure” return on investment “for their business, but SKAN requires them to use Apple's fixed definitions of advertiser success.” Advertisers that use SKAN can't measure impact of their “unique campaigns,” based on metrics like the time consumers take between “viewing an ad and taking an action, or the time spent viewing an ad,” Gorman said. “Real-time campaign and creative management is hindered by extended reporting delays, and advertisers are unable to target advertising based on whether or not people have already installed their app.” Snap is responding by speeding development of its own proprietary “first-party privacy-safe solutions,” called Advanced Conversions, to help advertisers “measure their campaigns effectively,” she said. Apple didn’t respond Friday to emailed requests for comment.

Intel expects its plans to build new chip plants will “benefit from investments from governments" that understand that a "healthy semiconductor industry is vital to their economic well-being and national security,” said CEO Pat Gelsinger on a Q3 call Thursday. With bipartisan support, “we’re hopeful the Chips Act will be passed by the end of this year, allowing us to accelerate decisions for our next U.S. site,” he said. This will “enable a more level playing field with our competitors who enjoy significant support from their governments,” said Gelsinger. “We've also seen considerable interest in the EU with the European Chips Act, and the process to select our next site in Europe is proceeding rapidly. Intel remains the only global company committed to building a leading-edge foundry in the U.S. and Europe for customers around the world.” Demand for semiconductors remains strong, and Intel factories performed “exceptionally well” in Q3, despite “a highly dynamic environment,” said Gelsinger. “Overall industry supply remained very constrained.” The “digitization of everything” is driving “the sustained need for more semiconductors, and the market is expected to double to $1 trillion by 2030,” said Gelsinger. The company forecasts 51% to 53% in gross profit margins over the next two to three years “before moving upward,” said Chief Financial Officer George Davis, vs. 57% expected this year. The stock closed 11.7% lower Friday at $49.46.

The order backlog at Nordic Semiconductor “keeps increasing,” said CEO Svenn-Tore Larsen on a Q3 earnings call Thursday. It ended the quarter with a $1.3 billion backlog, “basically four times the backlog the same time last year,” he said. The chipmaker now worries its backlog will “stretch into '23,” he said. “The challenge we have at Nordic is to focus on the customer situation. We need to ensure we can give the Tier-1s the opportunity to grow the same as we keep our longtail customers happy.” The challenge is “very difficult with this constrained supply situation, but that's what we work on every day,” he said.

Government subsidies have nurtured tech growth, a Semiconductor Industry Association webinar heard Thursday. Speakers agreed lack of high-skilled U.S. talent tamps down growth, even if Congress ultimately funds the Chips Act (HR-1390). MediaTek USA “is in a race to hire” to boost U.S. semiconductor growth, but the “talent pool we have to draw from is not as big and as large as we’d like,” said James Chen, associate vice president-product marketing. Chips are “pervasive in everything you do,” said Mike Hogan, GlobalFoundries senior vice president-general manager, automotive, industrial and multi-market. They are “really the new oil in the economy,” he said. The U.S. industry is “investing a lot” in R&D, and funding the Chips Act “is not a handout," he said: “This is reinforcing an industry that was born in the U.S., that can become prominent and world-leading in the U.S. again.” Hogan arrived at Texas Instruments around when Morris Chang left to start Taiwan Semiconductor Manufacturing Co. in 1985, he said. TSMC is now the world’s largest chip foundry, but Chang wouldn’t have “gotten it off the ground” had the Taiwanese government “not sponsored that initiative,” Hogan said. Public policy “plays a really critical role” in nurturing growth in the U.S. semiconductor industry, said Susie Armstrong, Qualcomm senior vice president-engineering. “It’s not the case that you have a bunch of rich U.S. or Taiwanese companies” looking for congressional handouts, she said: Qualcomm typifies most U.S. chip companies that rechannel a quarter-plus revenue and profit into R&D.

There’s no “magic elixir” to fix the global chip shortage, which is an “urgent” crisis and a “huge problem” for American consumers and businesses, Commerce Secretary Gina Raimondo told a Washington Post virtual event Wednesday. Microchips “underpin everything we do in a day,” she said. The U.S. makes “zero percent of the most sophisticated chips on our shores,” and 70% of the “leading-edge” chips that Americans consume come from Taiwan, she said. “I find that to be an almost terrifying prospect,” amid the looming threat the island faces from China, she said. “We are exceedingly vulnerable, and getting even more so as our economy becomes more digital.”

A Microsoft shareholder proposal up for a vote at the Nov. 30 virtual annual meeting asks the board to “generally prohibit sales” of facial recognition technology to “government entities,” said a proxy statement Thursday. The board recommended voting no. Shareholders worry Microsoft’s facial recognition technology “poses risk to civil and human rights and shareholder value,” said the proposal. It cited a June report from investors representing more than $4.5 trillion in assets urging companies “to proactively assess, disclose, mitigate and remediate human rights risks related to the technology.” Microsoft committed in 2020 that it won’t sell facial ID technology to U.S. police departments before strong regulation, said the proposal: This “does not address potential sales to local, state or federal agencies, or to governments outside the U.S.” The company should align with its corporate peers on facial recognition sales, said the proposal: IBM announced in 2020 it won't offer general purpose facial ID. At least 23 U.S. municipalities since 2018 have adopted legal bans on facial ID, including King County, Washington, where Microsoft is headquartered, said the proposal. The board cited “extensive public commitments” to “restrict our sale of facial recognition technology based on human rights considerations.” The proposal “does not recognize those commitments and would impose a blunt prohibition that would deny public agencies the ability to deploy facial recognition technology in societally beneficial use cases,” said the proxy.

Chipmakers are challenged by “short-term imbalances due to interruptions in the supply chain brought on by COVID-19,” said Taiwan Semiconductor Manufacturing Co. CEO C.C. Wei on a quarterly call Thursday. “We also continue to observe the structural increase in long-term demand” fueled by the “industry megatrends” of 5G and high-performance computing (HPC), plus the “higher silicon content in many end devices,” he said. Quarterly revenue in TSMC’s largest end-market segment, smartphones, increased to account for 44% of the total. See here for Q3 materials.

Amazon supports “expanded government authority” for federal agencies to share “pre-seizure enforcement information with the private sector” to help reverse the explosive growth in e-commerce trafficking of counterfeit goods, Christa Brzozowski, senior manager-public policy, told a Center for Data Innovation webinar Thursday. She’s a former Department of Homeland Security senior official for trade and security policy before joining Amazon last year.