Highlights this week: 🏭 Huawei battles their own chip shortage, 🚢 15th century shipbuilding techniques, and 🛩 breaking down a mid-air collision in AZ

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Primer on the chip shortage: We wrote up a twitter thread on the global chip shortage that has affected everyone from automakers to cyclists. Start here to get caught up!

What’s happening: Huawei is hurting. The world’s largest telecommunications company dominates (and supplies) much of the smartphone and telecom equipment markets. Due to aggressivie US government restrictions, Huawei has limited access to specialty chips and are shifting focus to software and alternative markets. Their way out of this mess? Spending more than Apple in R&D.

Why it’s important: Huawei’s revenue is down for the third straight quarter, and their global telecom prowess is shrinking. The US government’s restrictions on Huawei: from accessing advanced American-designed chips to limiting their ability to sell 5G equipment globally, has slowed the behemoth — but these restrictions have also exacerbated the chip shortage crisis being felt by manufacturers and consumers worldwide.

The details: The US has placed serious restrictions on Huawei, forcing them to sell of business units, and shift focus into electric vehicles, software, and coal-mining.
  • Huawei is selling its budget smartphone business unit, and forecasts up to $40B in lost smartphone revenue this year. Revenue from telecom equipment (ie basestations and routers) fell 14%.
  • Despite production challenges and huge losses in revenue, Huawei remains profitable. Their “insurance plan”? A massive R&D budget that, at $22B, beats even Apple.
  • The Trump administration blocked Huawei from contracting US-based machinery and software. China and Huawei retaliated by cutting off US companies from Chinese chips, and began stockpiling chips from TSMC. China's import of chips surged by more than $50B to $380B in 2020.
  • The US restrictions on cutting off Chinese fabs from using US tools to make chips also forced customers to move production to other manufacturers, like TSMC. TSMC became overbooked, with no easy way to quickly boost production. This further strains the global chip supply chain, among other major factors like covid-19 and natural disasters.
  • Huawei’s CFO, Meng Wanzhou, made untrue statements to a major bank about Huawei’s operations that were in violation of US sanctions in Iran. For that, through some complicated global policy, she was on house arrest in Canada. While she was recently released (after 3 years), the Biden administration say this doesn’t indicate a softening of US policy.

Government: How Military Equipment Flows to Local Police 👮

Grenade launchers, UAV’s, armored vehicles —> sound like the military’s closet? It’s just as likely to be in the hands of your local police squad. Created as part of 1997’s National Defense Authorization Act, the 1033 program allows the Department of Defense to get rid of excess equipment by passing it off to local authorities. Over $7.4 billion of property has been transferred since the program’s inception; more than 8,000 law enforcement agencies have enrolled.

One interesting takeaway: transferring military equipment to police forces inflates DOD’s budget. The more things the DOD claims as ‘excess’, the more things it can say it needs. This has implications for manufacturing contracts, federal budgeting, and so much more — ultimately, someone is left holding the bag (or grenade).

A more detailed breakdown here.

Startup News 🚀

SkyCell, a swiss pharma-tech company, raises a $35M series C

Halio, an AI chipmaker, raises a $136M series C

Warpspace, a Japanese startup developing an optical relay network for LEO satellites, raises $9M in series A funding

Magic Leap raises $500M at $2B valuation…7 years after raising $542M at $2B

Varda Space will launch its first spacecraft on a SpaceX Falcon 9 mission in 2023

One Interesting Picture: vapor cone around blue angel super hornet

One Interesting Tweet: world’s deepest cave