Aaron Conant 0:18

Happy Thursday everybody. My name is Aaron Conant. I'm the Co-founder Managing Director here at BWG Connect. We're a networking and knowledge sharing group with 1000s of organizations, we're approaching 10,000 now. And we're all individuals that are working in organizations that are looking for that opportunity to network and knowledge share on a routine basis. And so I talk individually with 30 to 40 organizations each week around different things that are affecting their organization as a whole. And, you know, just kind of networking knowledge share when the same topics come up over and over again, we hosted this, so I don't think anybody's surprised that this, you know, that this topic has come up as a whole. And so I'm gonna, just a couple of housekeeping items. Before we get started here. Number one, we're starting three to four minutes after the hour, just so you know, we're gonna wrap up with three to four minutes to go on the hour as well. So if you just want to make sure that you know, we're not gonna make you late for your next meeting, you're probably gonna have enough time to grab a cup of coffee along the way. The next thing is you want this to be as educational and informational as possible. So at any point in time, if you have questions, drop them in the question section of the GoToWebinar panel. Or you can always email me questions anytime at Aaron, aaron@bwgconnect.com. And we'll we'll try to tackle as many questions as we can today. And with that, I want to kick it off. So like I noted, you know, 30 to 40 organizations every week supply chain, and I'd love the title of this one that you know, the supply chain storm, right and navigating through the disruptions as a whole because almost every portion of every industry is being affected right now. And so we've got some great friends, great partners and supporters of the network that have agreed to kind of jump on the line today from a variety of organizations and kind of network now with share as a whole and then answer as many questions that we can throw at them. So I want to kind of do a roundtable really quick, but just you know, give us enough time to make sure we have enough time to get through all the material just you know, do I throw out your name, roll in organization. We're going to kind of go round table here really quick and we'll jump into then jump into some of the information but you know, David, I'll take it over to you if we want to go David, Walter, Maria, Jim, Frank, that would be great. So David, you want to jump in quick.

David Loftus 2:21

Super, thanks, Aaron. Glad to be here. My name is David Loftus, I'm the president and CEO of ECIA, the Electronic Components Industry Association.

Walter Tobin 2:32

I think again, Aaron thanks, everybody, for allowing me I'm Walter Tobin. I'm the CEO of the Electronic Representatives Association, based in Boston. Happy to be here. Good morning.

Jim Althoff 2:46

Good morning, everybody. I'm Jim Althoff, Micross' business development and sustainment solutions lead, and I appreciate the invitation to join today's discussion.

Maria Gillespie 2:56

Yes, good morning. Good afternoon, everyone. My name is Maria Gillespie with Micross. I'm the Director of Product Marketing here, and I look forward to chatting with all of you today.

Frank Ferrante 3:04

Hi, everyone. Frank Ferrante. I'm responsible for the military, aerospace and government division of Intel PSG and I'm also involved with the US government on bringing foundry back to the United States.

Aaron Conant 3:16

Awesome. So I want to go ahead and kick it off. And David, we've got some slides here. And I think there's there's a variety people have some slides to go through. But just a quick reminder, if you have questions along the way, drop into the question section there and we'll get them answered. But your David, if you want to. If you want to kick us off here, that'd be great. I'll kind of man the slide deck here because there's a variety of presenters, but if you want to jump in, that'd be awesome.

David Loftus 3:37

Great. Thanks, Aaron. And good morning again, everyone. I guess I was asked to be able to frame the discussion just a little bit this morning and just give you a little bit of background on myself. I spent 30 years leading sales and marketing teams and business units for for leading Silicon Valley semiconductor companies after retiring from worldwide roles in 2019. I took the reigns of ECIA last year. And just a quick note about ECIA if you want to advance to that slide. So ECIA, we're nearly 100 year old Association made up of manufacturers, the leading distributors and independent manufacturers reps and our tagline is connect, influence and optimize it's really about bringing leaders of the industry together. They're taught to solve tough challenges. And a lot of that is around efficiency and effectiveness of our industry. The key thing that we stand for is for the authorized channel with a strong focus on blunting counterfeits and gray market of which, you know, that's actually accelerating right now in today's shortage situation. We do a lot of activities around events, global industry practices, we have a site for that. That's free for for customers to use to be able to ensure that you're getting only authorized product from distributors, we also do a lot of original market research. And we'll talk a little bit about that today. And other services. And we also manage a lot of standards for the industry. So that's enough about ECA, let me just talk for a second about how did we get here, there's been a lot of discussion about this, and I don't want to beat a dead horse. But I will make a couple of comments here about the fact that, you know, to listen to the press, one would never think we've had shortages before. And if you if we're on slide three, you'll notice that if you look at the the semiconductor revenue and growth cycles, since the inception of the industry, the semis have really run on a four to five year cycle. And I think everyone tends to get amnesia a bit after the last upturn or downturn, and we end up having to relearn a lot of the same lessons over and over again, you know, what is unique about this current cycle is is really the culmination of a perfect storm, every downturn in the history of the semiconductor industry, everyone in the extended supply chain draws down their inventories, they slow down production. And then usually there's an inflection point in which things start to pick back up, and conditions start to get a little bit tight. And in this latest cycle, in late 2019, early 2020, the industry was just coming out of the last downturn that had started in third quarter of 2018. Then, of course, with the pandemic, everyone taps the brakes, again, in first half of 2020, you can see that red line, as it points down again at the beginning of 2020. And you know, at that point, everyone knows that PCs and comms and medical all ramp for remote work and to be able to support the pandemic. But then, by the end of 2020, really probably the beginning of fourth quarter, everyone realized that the world isn't falling apart, and everyone rushes to place orders simultaneously. So, you know, when I say it's the perfect storm, it's not just the pandemic, it's the itself and everybody coming back online, it's really been exacerbated by trillions of dollars of stimulus. A lot of that is that that new disposable income has gone toward new electronics, new cars, and everything that is continued to frustrate the supply chain. And the good news is that the front end fab capacity is just now starting to ease a bit. And everyone's talking about a lot of new capital going into new fabs, there still are a lot of spot shortages that are causing headaches. And there's still predictions about that lasting through the end of 22 or, or or beginning of 2023. I'm a little bit more optimistic than that. I think things will ease quite a bit in the fabs by first half of 2022, especially as a lot of the double ordering that always happens in these inflection points, starts to come off the books and stimulus and extended unemployment benefits start to dry up so there's not as much free cash floating in the economy. But everyone's hearing about governments around the world really scrambling to invest in subsidize in domestic fabs. It's especially with continued concerns about so much of the world's advanced capacity, sitting in Taiwan over 50% with tsmc alone. And there's even more frequent saber rattling by China, about Taiwan, especially in light of recent events that have happened here just in the last few days in the Middle East. So Semyon is tracking 38 new 300 millimeter fabs that are gonna be coming online till 2024. You know, tsmc is advertising $100 billion in capital investment. There's 11 new fabs going up in Taiwan, eight in China, the balance of that is spread around the world. But most of that capacity is not going to come online until the end of 2020 to 23, even up to 2024. And the the ironic thing is, is that one thing that's actually slowing that capacity coming online is that the equipment manufacturers like the smls, like the Applied Materials are actually currently limited in their production by semiconductor shortages, because to make semiconductor equipment, it takes semiconductors. The I think pinch point that's going to be really biting us here for the next six to nine months is in the back end, like fabs a lot of semiconductor companies that outsource a lot of package assembly and test and now There's there's pinch points there, that is lower margin business without the deep pockets of the foundries to be able to invest as much in capacity. So, if you go to the next slide I just make one comment is that, you know, as we come out of this downturn, there will be future shortages, even with all the investment that's coming online. And I'd liken this, I call it the, to the toilet paper conundrum. And, you know, it's just like at the beginning of the, the the pandemic, when everyone ran the store and bought out everyone out of toilet paper, we will not have the capacity in semiconductors to instantly satisfy all future inflection points, even with all those new capacity coming online, fabs are expensive, and time consuming to build. And really, they just like, toilet paper manufacturers, they're not going to go out and build new toilet paper factories, to be able to satisfy all the demand rush that would happen at the beginning of a pandemic. You know, fabs are expensive time consuming to build and they're going to build manufacturers will build for a steady state production level, when times are good. If you flip to the next slide, I do want to point out that a lot of problems in these times of shortage, some of them are self inflicted. It especially like if you look at automotive automotive has been a in the news for shutting down production lines with 10s of 1000s of workers idled. And a lot of that problem, they created themselves, they forced manufacturers to be able to take them direct to their really more high mix, low volume that should be going through the channel. And Walter is going to talk about the need for inventory and who owns it, I'll leave that to him. But it will say that, you know, you need to protect your supply chain, and make sure that there's some flexibility in there. If you go to the next slide, I'll also mentioned that as these newer fabs come online, and especially as consolidation continues, older lines will continue to shut down. It's really expensive, or even impossible to maintain some of these older lines, you know, a lot of analog and discretes are still built on point, one five point, you know, even larger lithography so that you can even get replacement equipment for now. And people need to be able to plan for that obsolescence and figure out what they're going to do about last time buys, what partners can they line up to be able to help them with these obsolescence challenges? You know, with consolidation, there's duplication and product portfolios as well, that is causing companies to be able to shut down less profitable or less lower revenue product lines. So I'll wrap up my comments there again, it's pleasure to be here and look forward to the conversation.

Aaron Conant 13:06

Yeah, absolutely. Thanks, David. And now I'm going to kick it over to Walter. Just a quick reminder, you can drop questions in the Questions tab there called people asking, Hey, is this going to be recorded? And yes, it is. And more than happy to connect anybody afterwards with any of the panelists today. But Walter, if I kind of kick it over to you next? I'll keep running the slide deck here. Yeah, just kind of guide me here. But I'll kind of kick it over. I'd love to hear your thoughts.

Walter Tobin 13:30

Sure. Thank you. I think David did a great job of sort of setting the stage for what we're faced with. So obviously, y'all have ERA I've had a career in distribution, electronic voltage distribution, l career, I'm the CEO of ERA for the last six years. And we are a not for profit trade association consisting of, frankly, the same membership constituents that ECIA we have ramps, we have distributors, we have manufacturers, I think the difference between the two associations is we focus very much on the field, we focus on the relationship in the field, between the reps, and in the end, the distributor branches, working on behalf of those lines that they share, to focus on the customer. And if you go to the next slide, this is kind of what we do. Okay, I'm sorry, this, this. We keep clicking through the slide, I apologize, this graphics, but we focus on the rep manufacturer distributor. And you know, it's it's easy to put a slide like this together. It's keep clicking, it's tough to do, it's tough to make sure that the reps distributors and manufacturers are working together, because the rep and the distributor partners but their competitors, you know, they have competing lines. And so it's hard to navigate that and those people that are successful either as a rapper distributor, managed to navigate those minefields and work together and have a trusted relationship between each other. Next slide. So how did we get here? Why did the supply Chain break and, you know, what can we do about it? So I think some of what I'm going to talk about, Dave's already covered David's already covered. But, you know, before the pandemic, you know, this is what the industry was going through the last 15 years. Everybody was outsourcing and if you were CEO of a company, you didn't outsource, you are manufacturing a supply chain, you are replaced, Wall Street talked about outsourcing. So we talked about outsourcing, capital expenditures were diverted very much away from fabs. So you saw most of the semiconductor people move fabs to Asia because Wall Street didn't want catbacks put in charge of put in North America moving over to Asia, it's low cost. I think Dave's comment David's comments about you know, what happens if Taiwan goes away? You know, we're we're in we're in deep trouble right today. But a lot of fab expansion was diverted overseas, BMS became very a contract manufacturer became very much a a force in manufacturing in the industry. And the emphasis quickly changed from total cost of ownership to purchase price variance. If you're anybody that's on the call that sells TMS knows that the price pressures that come from BMS are relentless. We talked about the last 15 years about just in time inventory, remember that in lean manufacturing, we wanted to get the product exactly one second before it was needed to go on the chip shooter on the automatic insertion equipment. Nobody wanted the inventory. What price are we paying now for the the focus on JT and lean Wall Street focus very much on public companies on earnings per share and return on working capital. Inventory wise is still very much is a dirty word. Wall Street doesn't want to see working capital tied up in inventory. And also we had the Dave David mentioned about the huge demand of the automotive industry, and mobile, we talked about the internet of things that we talked about that too, we were sick of hearing about it the last three, four years, very much a focus on IOT, and the focus on 5g. So that was the table that was set, the pandemic hit. What happened, work from home, everybody rushed, and that was a huge increase in on forecasted demand inside of lead time. That's the problem that we have today in the industry, the ability for the supply chain to satisfy and forecast the demand inside the lead time. Laptops, everybody needed a laptop upgrade bandwidth. Everybody needed to get new modems to upgrade the bandwidth. They're working from home, their kids are working from home. They're sucking up the bandwidth, medical equipment, David mentioned that ventilator and we couldn't get ventilators. You think there's a few electronic components in ventilators that was all on forecasted demand. Students at home, they sold a gazillion Chromebooks and forecasted demand for Chromebooks for kids at home supply chain was nervous, there was some overbuying there was some false demand signals. And yet, up to that all the it all the supply chain tools that we have worked exactly the way it was supposed to. Nobody had inventory. And I'll have a slide in inventory and the next slide. So what's the solution? I'll get to this in a little bit later on. But we need to get accurate forecasts from customers, we need to get accurate lead times to manufacture that sounds pretty simple, doesn't it? It's very difficult to get the right information, we need to have people stay close to the customers that I put. If you weren't close to the customer before the pandemic you were in a world of hurt, we need to have a strong alignment in the supply chain between the manufacturer, the rep and the distributor to give one message to the customer. Right now today. a customer's getting a lead time four weeks from a distributor six weeks from manufacturer, we need to make sure that they are aligned, the customers getting the same message need relief from Wall Street on capital expenditure and the use of working capital for inventory. And we need my Jimmy Lee from the pot is and I'll talk about that on the slide and a couple of slides. Next slide please. So in a perfect world, every customer should buy direct from the manufacturer everybody should go to Frank and buy all the Intel direct, right? Well, if you're buying from a manufacturer direct, there's restrictions on PR requirements as minimum orders lengthy schedule, there's no returns. So manufacturer and there's also a customer gets in on forecasted they get an upside order from a customer. It's on forecasted demand inside a lead time. So where did they go? They went to distribution manufacturers years ago, 70 years ago started putting on distributors. And today it's become $100 billion industry worldwide. Why? The ability to satisfy and forecast to demand inside a lead time component manufacturer. The people that build this up, they build everything to order. They build nothing for inventory. They rely on the channel. They rely on the customer to take it. contract manufacturers are building things for end customers, they don't want the inventory that they asked the distributors put stores in and put in all these sophisticated supply chain programs. They rely on the distributor, and the end customer wants no inventory at all, they didn't even want to finish goods, they have in many cases e m s doing direct customer fulfillment, doing depot repairs. So the the the inverted trial comes down on the channel, to maintain the inventory, it's a hot potato, and everybody's trying to throw the hot potato to the other person, because Wall Street doesn't want inventory, they think it's a bad use of working capital. Next slide. The ability of the supply chain, nobody talks about this, but the supply chain broke because of the profit margin that goes from the beginning to the end on the on the ability to fund the supply chain. So I took an unnamed semiconductor manufacturer, it's not an Intel fight, they talked about the gross profit, the last quarter gross profit of this unnamed semi manufacturer was 65%. Now you got to take out r&d, I get that r&d might be 25%. So this unnamed supplier is still running a gross profit of 40 points. If you look at the other end of supply chain, the OEM customers somebody that you all know, I took a chunk day of profit, dead gross profits 32%. In the middle, the people that are relying on the people that everybody's relying on for inventory, I took the gross the financials of a large publicly traded distributor and their gross profit last quarter was 11 points. I took a global contract manufacturer, their gross profit was 7%. So you know, there's a saying what pace gets fat and hogs get slaughtered, people in the middle of getting slaughtered, they're the ones being relied on to have all the inventory do the work. And yet the two ends of the supply chain are really putting pressure in the middle on from a profit point of view. Next slide. So this is maybe Pollyanna, we need to have to fix the supply chain, there has to be a return to the emphasis on total cost of ownership versus versus price. The image of the world is focusing on price versus total cost of ownership. You know, this is saying the most expensive part a customer has in the bill of materials is the one they don't have. This is this is really a sweet spot for what Micross is to provide, you know, into life product to customers, they can't get it. As David pointed out in the shortage people are forced to go in the gray market, there's a there's a danger of counterfeit, there's a danger about two out of out of date products. But we need to have people reverting to relying on trusted sources for their product. Last slide. Next slide. This is where we have to go the solution of the supply chain. And maybe I'm being very naive here, we need to have people share that share the profits. Right now today, everybody's in their own silo focusing on their own return on working capital return on inventory turns and all that. And they don't care what's happening to the left to the right of them. They're in it for themselves. And that's why the supply chain broke. Because everybody, nobody could could satisfy on forecasted demand inside a lead time. We need to share the wealth up and down. Simply the manufacturers have to begin to look at increasing the gross profit they give to the channel, the gross profit for the distributors has fallen probably 15 to 20 points in the last 20 years. That's not sustainable. contract manufacturers need to get a higher profit margin from their end customers, yo EMC to stop for asking for quarterly price reductions, we need to go back to total cost of ownership. We need to educate Wall Street on the use of cap ax to find fabs in North America buy inventory needs to return and and maybe I'm naive, but that's the solution. And that's the reason we get to the master at the inability of the industry to have to support and forecast the demand inside of lead time and the ability inability of the supply chain to find what they need to do. Thank you.

Aaron Conant 24:23

Awesome. Now love it. It's just a it's an interesting topic. And I don't want to say it said the word naive. I don't think so. I think it's it's a it's usually a tough sell at the end of the day. But I mean, it's a trend, right that that has to be looked at at this point in time. You know, I want to kick it over to Maria and Jim now to kind of walk through this next, you know, step as a whole this next portion and just a reminder, we're approaching the halfway mark here, just having a great conversation today around you know, supply chain as a whole what's going on across the board. So if you have any questions Whatsoever drop into the question section there, and we'll be sure to get an answer. Yeah. Is the slide deck going to be shared? Yeah, I will just confirm with all the presenters that their portions are, they're comfortable sharing, but probably more than happy to share that after the after the call, we might just connect you individually with them. But you know, Maria, Jim, you know, do you want to kind of walk through these next few slides here?

Maria Gillespie 25:23

Yeah, sure. Thanks, Aaron. Can everybody hear me? Okay?

Aaron Conant 25:26

Yeah, loud and clear.

Maria Gillespie 25:28

All right. Awesome. So yes, certainly, Walter and David both mentioned, right, the the pandemic and geopolitical factors, and certainly highlighting the issues in supply chain, and expressing the vulnerabilities that we've seen. And in partly because of our offering, and what we could do is that people are also being challenged, folks are being challenged to take a look at different situations. Walter, you were talking about, you know, just in time components and lead times and situations, that way, we are seeing a refreshing kind of look outside the box, for not having that lead time fight, per se, necessarily for components that are out there, or lack thereof, right. So we are a global provider of wafer and dye. And we have a suite of solutions. As you can see it I won't go into too much detail, but as you can see from our side, right, and and what that does is allows us to support our customers and suppliers equally, and kind of a different way. Right? We're, we're not looking at the traditional place, the order component lead time, we're looking at picking dye and creating form fit function equivalents replacements, where the shortages are not there, the shortages are causing those issues. And we're seeing engineering folks, you know, resources at customers, redeploying those engineering resources to redesign product and focus on shortages and end of life. And so we're, we're supporting that with what we can offer. As they focus on end of life and shortages, we also see suppliers, a need to establish or re establish, and end of life programs in support of their need to redeploy resources, because while you know, they're to David's slide earlier, right, obsolescence issues continue. And so there's a new pressure, or I would say, not new, because it's something that's happened for a long time, but probably just, we feel it a little bit more to address that. And we've actually taken our components that are our life, end of life component portfolio, and we're expanding that and formalizing the process, and we're engaging with our suppliers to help support that and allow them to redeploy their resources to do that. And, you know, just elaborating on the URL piece of it. You know, as many of us know, the god the Department of Defense has specific requirements for establishing the policies in order to mitigate the impacts that we are seeing, know as we begin to fall to define the challenges that customers are having on a specific socket, and define the support behind that there is a focus on surveillance, a focus on analysis and taking a look at those things ahead of time of these issues. So that so that we can start to mitigate that as well. I know Jim, you can talk to that a little bit based on your experience with our customer base.

Jim Althoff 28:22

Well, thank you Maria. And good morning again, you know certainly doesn't fall short of what we're seeing in the news today as far as the the recent d o t campaigns in Afghanistan and you know, just how vulnerable our DOD suppliers supply chain is to the impacts we're talking about today. You know, as many of you are aware, do D sustainment is established as policy within title 10 of the US code. So, this is law. The joint capabilities integration and development system defines that implementation, the con ops the mission objectives, and some of the major key performance parameters which influence the fence system life cycles from the program award through the end of life disposal. So, how, how is this government oversight word salad, affecting sustainment decisions and actions at our customers today? You know, in my business development role, I have the unique opportunity to first to view firsthand and sustain the challenges that our DOD customers created by the current supply chain storm in semiconductor industry. Micross is experiencing significant growth in both interested in and one business related directly to our customers DMS ms challenges and their proactive or As stated earlier reactive activities to mitigate mission impact, the foundry capacity, component allocations, shipping delays, and the normal component lifecycle events such as process or component end of life have, in the best case, increased lead times and as a worst case outcome concluded with product obsolescence all the logistics activities most prime contractors and many lower tier manufacturers including Micross employees surveillance solutions, enabling the proactive and real time analysis of components supply chain. Ideally, these lifecycle surveillance tools available for me to third parties, internally developed solutions or outsource the surveillance service providers you know, catch the majority of the lifecycle anomalies such as end of life announcements, significant lead time increases for semiconductor process challenges their accuracy with predicting disruption events, is not 100% and must be supplemented with a comprehensive suite of reactive solutions when a disruption affects mission success. I'll share a couple of certainties examples, as well as some anecdotal evidence of supply chain disruptions that I've witnessed over the course of the past 12 months throughout the pandemic. The increased use and certainly Walter was referencing this earlier in increased use and reliance on gray market non franchise components, you know, is a major catalyst for the robust growth we're experiencing with our counterfeit mitigation business. We recently added turnkey material procurement from our distribution partners as an option to the robotic hot solder dip, the BGA reballing and the lead attach services provided by our component modification services enterprise. The customer interest in this option has grown exponentially since implementation. voice of the customer feedback identified both reduced process steps and touch points and procurement resource limitations as the primary catalysts for selecting the turnkey option and having related challenges are the primary calls. we've extended our product offerings to include custom async FPGA and multi chip module based circuit circuit replication, and component recreation solutions to our portfolio based on the call from our customers, our unique dye and wafer sourcing relationships with the original semiconductor manufacturers enables the integration of multiple dye and supporting components into a single package, emulating the functionality and form fit of obsolete digital and analog components. This option is seeing significant interest from legacy system integrators experiencing component obsolescence challenges when an alternate component source is not available. When the high level alternatives are available, but may include vastly different circuit bio layout, Micross will implement dire wafer level redistribution layers to replicate the original package Iose assignments, commercial aerospace, military high rail system integrators are employing this option as an alternative to circuit redesign and to minimize requalification costs and timelines. When facing component AOL challenges which affect long term Mission Support. Components supply disruptions, increasing lead times and the lack of high rail components solution availability is increasing consideration of component ups screening services and qualifications. Components solutions from dye and plastic and capsulated modules to the more complex hybrid solutions can be up screen to higher quality levels. This is standard practice among space segment payload and satellite buss integrators. Most components solutions are not available according to an SMD drawing or middle class qualification flow, meeting the system reliability requirements of screening as an alternative to custom high rail component design solutions. You know, in addition to these complex mitigation options, Micross has a number of programs specifically focused on proactive DMS. Ms. Resolution, Maria will expand on such programs. Maria?

Aaron Conant 33:50

And Maria, I want to jump in and just because I have a question that came in, around, you know, can you have Maria had mentioned that there are solutions provider to help with pain points, if you can elaborate a little bit on that. And then there's there's also another thread that would be great to be pulled and obviously want to hear your commentary as well as you know, when you talked about proactive solution, you know, that you guys are going after in this space as a whole so that first one that comes in as you said your your your solution provider, the space, what does that mean? And then what does it mean to be proactive? We'd love to hear those thoughts.

Maria Gillespie 34:25

Sure. And I'll take that and so, so what does that mean? So without going into customer program specifics or customer details, right, I can take you you know, briefly high level in a linear form of our product offering our products and services offering right so we start with exclusive access to dye and wafers which allow you to design hybrids and asix moving through to our IT team which is our interconnect team. We for bumping we for sign and again looking at this in a linear fashion. It doesn't have to be that way. But that's just part of the you know that Offering higher oil package assembly, flip chip and cm assemblies, package design and full characterization to name a couple of things. And then moving into testing, we can test, you know, a broad range in our facilities, our state of the art facilities in Orlando and Milpitas you know, at all levels including FPGAs, microcontrollers, processors, you name it, right. And we can also do we have a specific program for burning, and it is a dynamic burnin capability. And that also teased in a little bit into what we were talking about about screaming and the counterfeit risk mitigation options that we have, you know, and then wrapping it up with our component modification, which can be hazza, robotic cut, solder dip, tuning, leak forming, just to name a couple of things. And so when you look at it in a linear fashion, that's kind of, you know, the one source one solution end to end offerings that we have. And again, I could I could spend the entire hour talking about our, our offerings and what we could do, but it kind of gives you a brief overview of really everywhere you touch and how it can help bridge the gap. Certainly, until we make what Walters You know, a lot of the comment and Walter said, you know, we can we can influence, you know, Wall Street, and we can influence the thought process. And we can change all of that in the interim. You know, we can kind of be a support system for these new ways of thinking and new ways of doing things and new ways of executing the business and supporting customers and suppliers alike. And then on the topic of suppliers, the question came up for what does that mean to get ahead of the curve, right, so So Jim talked about sustainment and a program based sustainment to offer that surveillance to our customers and how it ties in with what we already have in house and what we've been doing and how we're using that to support in this time during the supply chain issues, right. We've been executing product continuation for quite some time. But we formalized this program to allow us to explore explore that, expand that portfolio. and support the customer requirements and supplier requirements need for reallocation, right. So we try to get ahead of the pcn, the product change notifications, or the end of life notifications for parts that are being considered for end of life and allowing our manufacturers that need to exit product line or reallocate resources where they need a service within their manufacturing process that is no longer available, and needs to be brought back in, you know, and we can support that through through, you know, through our suite of services. So, so, you know, from a customer perspective, they are utilizing technical resources to redesign products and capital capital to hold last time buy inventory, right for X amount of time, that's that's a burden to our customers as well. And so especially when that end of life component is detrimental to multiple programs, they have to do this they have to do that creates a burden. And so what this program does is allow the supplier to exit a line that may be diminishing, allow us to take it on and support the customer program 510 15 years past intended end of life. And we're trying to do that with the Sustainment Program to customers needs respond to responding to customers needs. And we're also building the portfolio on products that we identify as being needed in the industry and working with our suppliers to do that. So so we have a couple of engagements that are working very nicely. And and we're looking to expand that portfolio in support of that as well.

Aaron Conant 38:43

Awesome. Love it in I think so. Ryan can see your question that came in as well. And others if you have questions that you want us to tackle here, we've got a few more slides to get through. Don't hesitate to keep dropping them in the Questions tab there. And we'll keep we'll keep getting to them for sure. So should we kick it over to Frank now? Awesome. So Frank, I'll kind of kick it over to you if you want to do you know kind of give a intro on yourself here. That would be awesome. And we can kind of jump into this as well.

Frank Ferrante 39:12

That's great. Thanks, Aaron, to everybody. I'm responsible for the military, aerospace and government division and that that means that my team, the team of architects that design silicon, as well as mcps and I'd Intel we've started to create mcps or multi chip products that include not only Intel silicon but from foundries like tsmc and global foundries. So we'll actually incorporate making multi chip products. This caught the interest of the of the US government and they awarded us a program called ship which stands for state of the art heterogeneous integrated packaging. And you utilizing that we're able to take some of the most advanced pieces of silicon and interconnect them and multi chip products, offering capabilities that that previous were not possible. With 1000s of interconnect per millimeter squared, and like I said not only incorporating Intel dye, but incorporating dye from other other companies. As we we foster that relationship with the government, they realized over these past couple of years, like, hey, the, you know, the country is at risk with Walter was addressing previously is that most of silicon manufacturing, and even packaging is moved out of the United States, we show a slide that there were 20 companies 10 years ago that were making, you know, doing silicon within the US. And now at the state of the art mode. It's really just just Intel, if you could go to the next slide, please. Alright. So as we look at Intel, we're an integrated device manufacturer. So we currently spend about $14 billion a year in research and development, a billion of that just goes into packaging, we spend north of $10 billion a year building fabs and packaging facilities. And these are the capabilities that we have starting off with, you know, silicon technology, you can read in the newspaper, you know, until it was a little bit late on 10. And maybe a little bit late on seven. But when we look at the transistors that we pack into those, you know, millimeters per millimeter squared, we're still pretty much on par with with any of you know, other state of the art foundry. And as we roll forward, you would have seen an announcement from our CEO Pat Gelsinger on our new 20 a technology, we will reinvent the transistor again, as we did for the FinFET where other companies will then follow, you'll see our new gate all around technology. And that will be in a timely fashion to put Intel back as one of the silicon leaders. And you know, as both Walter and David kind of mentioned, this is super expensive. Stock Market never likes people spending it. But if we realized, you know, the United States staying relevant in the world stage, and not having the risk of TSM, you know, tsmc or other companies either going by the wayside, it could be a hurricane, we've seen just miss forecasts and causing this disruption in in the semiconductor, you know, spaces, as David showed us, we need to make sure that we stay relevant as a country and Intel has made a commitment. Also from Pat, in the April timeframe, where we say we're going to build $20 billion worth of foundry within the United States and state of the art node. We're also increasing investment in our packaging capability. So as an IBM what you can see on the page, we have silicon and we design our own parts. So we do our IAA architecture will now offer that as IP to companies as we open up foundry for foundry surface, so services so that $20 billion investment is not just to support, you know, Intel processes anymore, or FPGAs, or a structured asix. It's going to be open for companies, we'll see announcement if you haven't already that Qualcomm will be one of the first customers on Intel foundry services. We also, having done this, we do our own product design. As I mentioned, my team, we're a team of architects, so we understand what it's like to build products, not only with Intel, silicon, but other companies silicon. As I've mentioned, we have manufacturing, package assembly and test. And we are one of the largest software companies, we create massive amounts of software for the silicon that we we then produce the the third concept is making sure that the supply chain stays viable, this investment within the United States and within some other countries, as you probably know, we have fabs in Ireland, we have fabs in Israel, just that it's not all geographically located in in, you know, in one place, the fact that we were diverse, we're gonna stay either, you know, in the lead or close to the lead in state of the art semiconductor manufacturing, we're giving the supply chain the ability to, to have an option. We ask for everyone's support in that naturally, people have probably seen the chips for America Act American petitive act. There's a pretty big difference between building fabs in the United States and building them outside of the United States from a financial cost. That's why Canada Walters point that you know, stock market never likes people investing in this huge capital. They further don't like when you're investing in the United States. There's been the drive for everybody to outsource to somewhere else in the world because it's a little bit cheaper. Hopefully as as things balance out in the world, we you know, that will will start to go away but for right now, the US government realizes that working within As the you know, last domestically owned, integrated development and manufacturer is super important. And there's some programs in place. And we ask for everybody's support in those programs, making sure that we keep the United States healthy. And from what you can see of what we're showing you on infills technology, it is state of the art. And we will drive the next revolution in transistors. So we think we have a perfect way of keeping the not only the country healthy, but the worldwide supply chain healthy as offering people options in both silicon packaging and design.

Aaron Conant 45:36

Awesome, love it. And a couple questions coming in around and you know, connections afterwards more more than happy to make those but one that comes in and says, Hey, fully agree with all the points so far. But what about what about efficiencies within emfs as a whole running on paper spreadsheets? You know, would you agree there needs to be a broader push, and maybe this is for, for Walter, anybody can handle it doesn't matter to me? Would you agree that there needs to be a broader push for these internal systems to go more digital in order to provide better supply chain across market cycles.

David Loftus 46:09

I'll make a comment on that. I'll say that. You know, there's someone that from from our industry that went over the EMF side, maybe we say go over the dark side, Lynn Terell, who's the chief purchasing officer for, for Flexon. They have gone that they were actually one of the first major customers to jump on AI and to fully digitize their supply chain, their their entire tire procurement process. And now she talks about the fact that they got out ahead of this and we're able to support their customers really much better than than their competitors. Not all are to that level. But I will say that some of them are really setting the standard and really impressed with a lot of work they're doing to be able to try to make sure that they're they're de risking their supply chains, they've got ways to be able to pinpoint shortages all the way through their, their their procurement process, and and it's pretty impressive their ability to be able to fight fires and to be able to look proactively at at their, their supply chain.

Walter Tobin 47:21

Yeah, I would echo David's comments, I think the the global emfs people have very sophisticated, very sophisticated supply chain programs very, very sophisticated. You know, without mentioning names, you know, we've been in most of their headquarters. They don't they don't miss a trick, provided they get accurate forecasts from their end customers. That's the challenge they have getting forecasts from their end customers. If you get to some of the regional or smaller BMS, that's when you find people doing things with sticks and stones, if you will. So that's the challenge. They don't have the the infrastructure to invest in a lot of sophisticated systems that the challenges as they get bigger, they get more sophisticated with their tools. But again, the focus needs to shift away from price to total cost of ownership and on time delivery and all that, versus PPV. But the big ones are pretty sophisticated, to echo David's comments.

Aaron Conant 48:24

Maria, Jim, thoughts there, especially in the total cost of ownership piece and inventory and everything?

Jim Althoff 48:29

I think, you know, the comment was made earlier, the question was asked earlier about what what we bring to bear on really being proactive about mitigating DMS, Ms challenges, you know, particularly within the DOD. And, you know, this all begins with surveillance. And you know, as Walter points out, you can bring to bear all the software that you want, but it comes down to simple communications across the entirety of the supply chain from, from the ODM to the original dye manufacturers, in this case, the Intel's of the world, all the way through to the customer base, you know, when when there is a forecast, that that we get visibility to, we have to couple that with the feedback that we're getting from the suppliers providing the solutions to solving some of the supply chain problems. And it's really that proactive stance, whether we're utilizing surveillance tools in order to give us you know, the benefit of visibility to future occurrences or planned occurrences. You know, that that's really at this point, one of the, you know, one step which would ultimately be the best that we can do today. However, with with the expansion of AI and the the integration of AI into some of these decision making tools, you know, we are increasing the accuracy of these supply chains. tools that we're using to try to forecast lifecycle disruptions within the supply chain. So we are seeing improvements. However, again, it comes down to just the fundamental communications between suppliers and customers and being able to tackle these problems before they become problems.

Maria Gillespie 50:22

Right and kind of teeing off of what Walter said on the, you know, total cost of ownership, you know, as a solution provider, we obviously, lean on that, right, because we are creating something many times, you know, from scratch to solve these problems, and understanding that total cost of ownership and really what it takes to go from, you know, from one side to the other to provide a solution is key and where we're where we're going as an industry to, to allow that room, right? Because that's, that's what's going to actually allow us to move out of this and forward.

Aaron Conant 50:54

Yeah, so I see we've got about two minutes left here, we promised everybody we get out, we get them out of here and time to get to their next meeting, grab a cup of coffee along the way, you know, you know, if we go like Round Robin, you know, a 32nd key takeaway, you know, starting with brank, you know, and I'll kind of call it out, you know, so Frank, if you want to go first 30 seconds, and he's like, key takeaways for people that are listening in.

Frank Ferrante 51:20

Maybe I mean, for Intel is in the foundry business, please reach out to us if you're interested in in producing, you know, whether it's piece of silicon or or, or packaging technology. And we're partnered with Micross. And that also, please, please reach out.

Aaron Conant 51:36

David, I'll kick it to You Next, and then we'll go to Walter.

David Loftus 51:39

Yeah. Thanks, everyone. I again, I think that we will continue to have shortages, when wherever we have extraordinary storms like we've had in the in the past year here. And I think that it's just incumbent upon any procurement organization to be able to find ways to be able to de risk your supply chain, it's not always going to be like Walter said, the absolute cheapest part price, you've got to make sure that you build in some safety valves to be able to when you have on forecasted upside.

Aaron Conant 52:15

Awesome, Walter, I can't get to you. And then Jim, and then Maria wrap us up.

Walter Tobin 52:19

The issue that we're facing is the inability of the industry to support and forecast the demand inside of manufacturers lead time. So the solution is, we need better forecast from the customers, we need more accurately times and manufacturers. That'll fix the problem

Aaron Conant 52:35

Jim, I'll kick it over to you.

Jim Althoff 52:37

And from a Micross perspective, as we showed on our one slide, we present ourselves as the middleware, you know that that link in the chain that is ultimately taking the place of that broken supply chain. So there are options, there are services that we offer that can assist our customers with mitigating these supply chain disruptions, whether they be purely just stocking in inventory, or bringing to bear more technology, deep solutions on product recreation and solution recreation. We're here to serve as our customers and assist them with any DMS Ms. issues that they may see.

Aaron Conant 53:16

Maria, you want to wrap us up here?

Maria Gillespie 53:18

Yeah, so I'll just echo what Jim said, right full service provider and that, you know, access to to global die creative solutions, a different way to go about the business a different way to solve those problems. So I urge you to take a look at Micross if you haven't. And AOL die sustainment. Also a solutions provider for that. And what you know, Jim mentioned the overall sustainment support. So, so as you're looking at these and these hurdles, that you're going through supply chain professionals, engineering professionals out there, reach out. Yeah, we were willing to help and we want to help.

Aaron Conant 53:53

Awesome. Well, hey, thanks again, to everybody who was able to participate today. Thanks for everybody who's sending great questions. Once again, looking for any kind of follow up connections whatsoever. You need any support in this area whatsoever, you know, Micross friends, partner support is the network as a whole 100% worth of follow up conversation to learn more about what they're doing in the space. And with that, we're going to wrap it up. hope everybody has a fantastic Thursday, everybody, take care, stay safe and look forward to having you on a future event already. Thanks again. Take care.