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First Move with Julia Chatterley
The U.S. Senate Agrees a $200 Billion Plus Bill to Counter Rivals; Hackers Compromise the Colonial Pipeline Using Single Old Password; Leaked Data Reveals Just How Little Tax America's Wealthiest Pay. Aired 9-10a ET
Aired June 09, 2021 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:23]
JULIA CHATTERLEY, CNN BUSINESS ANCHOR, FIRST MOVE: Live from New York, I'm Julia Chatterley. This is FIRST MOVE and here is your need to know.
Turbocharging tech. The U.S. Senate agrees a $200 billion plus bill to counter rivals.
Security stupidity. Hackers compromise the Colonial Pipeline using single old password.
And mega rich make hay. Leaked data reveals just how little tax America's wealthiest pay.
It's Wednesday, let's make a move.
Welcome once again to FIRST MOVE. Fantastic to be with you as always this Wednesday.
Last century was all about U.S.-Russia space race. Well, today, we're discussing the U.S.-China chip chase. Let me be clear, the U.S. Senate
passing a massive research and spending bill focused on competing with China, accelerating development in essential technologies like robotic,
artificial intelligence and chip making, of course.
And we'll be speaking to the CEO of U.S. chip making giant, GlobalFoundries to get their take on this bill and find out how they will be spending the
money assuming it gets passed in the house. The U.S. and China have more than just hopes for technology dominance in the future in common, they also
have higher inflation in common, too.
China also announcing today that factory prices rose to a 13-year high, fueled by supply shortages and rising commodity prices. It's not yet
translating to rising consumer prices, which suggests companies aren't passing those costs on, but will that remain the case? We'll discuss
shortly on the show.
We also have U.S. inflation data on top on Thursday, too, and from the everything shortage in global economies to the drama shortage on global
markets, the S&P 500 tantalizingly close to record highs and trying to move higher premarket after a pretty flat close on Tuesday.
In the meantime though, we can add another meme stock to the team, Clover Health in the clover, up some 85 percent in trading on Tuesday. It is up
another 20 percent, I believe premarket today. Just to be clear, Clover is a medical insurance firm which recently went public via SPAC and is up 185
percent in the past five sessions alone. Wowsers.
Now, from the rally in memes to U.S. manufacturing dreams. Let's get to the drivers.
China accusing the United States of quote, "paranoid delusion" after the Senate passed a massive spending bill to tackle the rising tech threat from
Beijing. The bill aims to boost America's home grown tech sector to a sweeping investment worth more than $200 billion.
Here to discuss John Harwood joins us from Washington, David Culver is in Shanghai. Great to have you both with us.
I have to say, John, first to you, it is an extraordinary feat of marketing that arguably an investment in technology that the U.S. needs regardless of
the threat from China manages to pass with bipartisan ease under the guise of doing something to threat -- or tackle the threat of China. What does it
mean in practice?
JOHN HARWOOD, CNN WHITE HOUSE CORRESPONDENT: Well, it's not surprising that China is discomforted by this development because you did get a
substantial bipartisan majority, 19 Republicans to go with 49 Democrats to pass this $200 billion investment.
It is a lot of money. $80 billion for the National Science Foundation. As you indicated in the lead-in, robotics, artificial intelligence,
semiconductors, all things that the United States feels it needs to invest in substantially to counter the growing threat from China. Some of the
supply chain issues that we have been dealing with during the pandemic and in the recovery from the pandemic underscored the need -- felt the need
within both parties to make this investment.
And it is notable that at a time when the U.S. political system so often struggles to have the two parties come together, especially when you have a
high-profile an issue from a President, this is a case where a Republican senator, Todd Young of Indiana; a Democrat, Chuck Schumer of New York who
has been concerned about China for a long time came together, crafted this bill and managed to incorporate some of President Biden's priorities
without it being seen as a big Biden initiative that enabled it to pass by a large bipartisan majority.
The House has now got it passed and they will have a Conference Committee to resolve some differences, but nobody doubts that is going to get to
President Biden's desk.
[09:05:07]
CHATTERLEY: David, come in here because some could step back and say hang on a second, this looks pretty reminiscent of Made in China 2025, but the
Americans looked out and were like, okay, hang on a second, this is really concerning for us, too.
As you would expect, China reacting with some choice words, let's call it that.
DAVID CULVER, CNN CORRESPONDENT: They are not happy about it, no question, Julia, and regurgitating some of the same lines that we have seen in recent
months and even dating back the Trump administration.
What separates this is that as you pointed out, a rarity in Washington, you had both sides agreeing and going forward and now, you have President Biden
moving forward with some of the G-7 members likely to then drum up more support among allies that puts more pressure on Beijing.
And Beijing is responding saying that this is Cold War ideology. They are saying that this is the U.S. trying to contain China, trying to prevent
China from really coming to fruition in its development. And what we have seen from China, though in recent months has been a push towards similar
technology and development and especially when you look at it with the National People's Congress put forward just a few months ago and that was a
projection to 2025, as you mentioned, estimating that as they get to that year, they will be spending some $580 billion in research and development
alone.
Now, that's not even including what we've already seen play out and something that the U.S. is trying to catch up with everything from
technology hubs to 5G technology, which really has already been in use here at the commercial level for several months and quite successfully.
So, if you look at where China is now and where they are pushing forward, while they may see this as the U.S. trying to infringe on their domestic
sovereignty, which is interesting that they point that out in some of their rebukes, they are also alluding to some of the other human rights concerns
that the U.S. has put forward and even in some of this legislation that is going forward, Julia, is an abdication for U.S. officials to not be able to
attend the 2022 Beijing Olympics.
All of this is putting China in a difficult situation, certainly from a PR perspective.
CHATTERLEY: Yes, you know, I look at the monetary value of this as well, and $200 billion plus bill and it is incredibly important and it is great
to hear, John that this will hit Biden's desk, but even the footnotes here of this Senate legislation, they are saying China is investing aggressively
over $150 billion in semiconductor manufacturing specifically.
I mean, the scale and the size of investment here, you know, has to be talked about, too. But, John, the most important thing, when do we think
based on the timeline for agreeing on all this that the money starts flowing?
HARWOOD: Oh, I think that will be at least months down the road because the House has got to act and then they are going to have their conference
agreement. But this is -- when you have a bipartisan consensus of this kind, it speeds the process along considerably and this is something that
while the Biden administration has been pursuing other elements of its agenda and those have been moving in slow motion, this has gone quite
rapidly to Senate passage, it is a remarkable moment, and we're going to -- we would certainly expect this to become law within a few months, certainly
by the end of the year.
CHATTERLEY: David, incredibly quickly because I have about a minute. I always hear and say to people that China seems to lose the race of the
Industrial Revolution. They don't want to lose the race of the Technology Revolution that's going on in the 21st Century.
Do they respond with more money in the face of this, in your mind?
CULVER: Likely, they will push forward with more money. The investment is going to be something that's inevitable especially as they've made those
projections with the National People's Congress. I think beyond that we are going to see roll out is an increased propaganda campaign.
They are going to continue to put forward as though they are a developing nation that is being contained as they put it by the U.S., it is this
effort to showcase to the rest of the world really even pushing aside some of the more advanced societies and looking at some of those developing
countries, specifically those that have the Belt and Road Initiative investments within them that they are being targeted unfairly as they put
it, by the United States.
So, I think you're going to see that more than anything else.
CHATTERLEY: Yes, you mentioned it, international consensus as well. It just happens that the G-7 is meeting this week, too. Guys great to have you
with us. John Harwood, David Culver, thank you so much to both of you on that.
Okay, let's move on. Toughen up: the American Commerce Secretary wants businesses to ramp up cybersecurity after recent hacks with less than
stellar defense measures, the CEO of one of the compromised companies, Colonial Pipeline, admitted having only single factor authentication for
remote access meaning just a single password was needed.
(BEGIN VIDEO CLIP)
JOSEPH BLOUNT, PRESIDENT AND CEO, COLONIAL PIPELINE: It was a complicated password, so I want to be clear on that. It was not a Colonial 123 type
password.
(END VIDEO CLIP)
CHATTERLEY: Alex Marquardt joins us now. Alex, I watched that in awe. We are basically saying that my Gmail is, in fact more secure than fuel
suppliers to the U.S. Southeast. That's what we're saying.
[09:10:10]
ALEX MARQUARDT, CNN SENIOR NATIONAL SECURITY CORRESPONDENT: It is. And Julia, that is such a critical point and a critical moment in yesterday's
hearings. That's how those attackers who are believed to have been based in Russia got in to the Colonial Pipeline IT system through what Joseph
Blount, the CEO called a legacy VPN that only had what is known as single factor authentication.
So, what you heard there was Blount saying, okay, we only had one layer of defense, but it was pretty complicated. He later went on to admit that yes,
his general view of these things is that you need multi-factor authentication, which is just baseline simple cybersecurity practices these
days.
He also went on to say that despite the fact that they spend tens of millions of dollars, around $40 million on average in cybersecurity every
year that they actually didn't have a plan for ransomware, and Julia, you know well, ransomware is not something that just sprung up in the last few
weeks. This has been around for a long time. So, that was rather surprising.
The thrust of the hearings yesterday and what we will again hear today in Day 2 of these hearings, this time in the House of Representatives was that
Joseph Blount made a full-throated defense of the fact that he paid a ransom to these hackers to get the system, the pipeline back up and
running.
He said that in situations like this, when hackers get inside, you don't know what access they've got. So the goal is to get operations back up and
running. He made a $4.4 million payment in Bitcoin. He said it was the hardest decision that he has ever had to make in his 39-year career, but he
understood how critical the pipeline was to the country, how important this was for the country to get that gas flowing again.
Take a listen to a bit more of what he had to say.
(BEGIN VIDEO CLIP)
BLOUNT: I believe with all my heart it was the right choice to make. But I want to respect those who see this issue differently.
I also now state publicly that we quietly and quickly worked with the law enforcement in this matter from the start, which may have helped lead to
the substantial recovery of funds announced by the D.O.J. this week.
(END VIDEO CLIP)
MARQUARDT: So, Julia, that was another part of his defense. Yes, we paid this ransom, but we also told the F.B.I. very quickly and that's actually
something that he is being thanked for by the Department of Justice.
F.B.I. investigators were then able to track that Bitcoin to a cryptocurrency wallet and recover more than half of it. The Bitcoin that
they got back is worth -- was worth around $2.3 million, which is a rare coup for the department and for the F.B.I. against this growing wave of
ransomware attacks -- Julia.
CHATTERLEY: Yes. Absolutely. As we discussed yesterday, an unfortunate fact is of course that the Bitcoin, the value of Bitcoin dropped so
substantially that what was recovered was so much less and that's part of the price that you pay with this.
But, critical point there, Alex. No plan for ransomware. We have seen a 300 percent plus increase in ransomware attacks in the last year. Did you get
the sense that there was alarm? Recognition among Congress that we're not prepared, we don't really understand the threat that we are tackling and in
this case, just a simple non-verified password was enough to get access to critical infrastructure in the United States and the U.S. isn't alone in
this. This weakness is all around the world.
MARQUARDT: That's right, and I think that's what I may be watching out for today, Julia, in this second day of hearings, particularly because Blount
is going to be sitting next to a senior official from Mandiant, which is one of the biggest and most significant cybersecurity firms in the world
and they are the ones who have been helping out at Colonial in the wake of this and so, I expect that we will see lawmakers pressing those two men a
lot harder on their failures.
The fact that they are a critical infrastructure company that went down because of their failure to essentially have very basic cybersecurity
protocols. In the wake of that attack, and, you know, we saw long lines at gas station and gas prices spike, as that pipeline was taken offline, the
Biden administration did impose a new security directive specifically on the pipeline sector.
So, it remains to be seen whether more regulation will come from the administration across critical infrastructure sectors and whether more
action will come from Congress -- Julia.
CHATTERLEY: Yes. More required. Alex Marquardt, thank you so much for that.
MARQUARDT: Thank you.
CHATTERLEY: Okay, back to China now where the price of goods leaving factories is rising at its fastest pace in 13 years. The country's Producer
Price Index for last month jumped nine percent from a year ago. China's surging inflation is threatening to spill over to the rest of the world, or
is it?
Clare Sebastian has all the details for us. Clare, great to have you with us to explain this. So, we are seeing factory prices rising. I'm not seeing
that translate to consumer prices. So, it kind of means that the companies themselves are at least for now warehousing these extra costs.
The question is do they start to pass it on? And does it filter into export prices, too? And what does it mean?
[09:15:07]
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, that is the big question, Julia. You're right, a big difference between the Producer Price
Index, the cost of those manufactured goods sold to retailers and out into the economy and consumer prices, which were only up 1.3 percent in May. So,
a really big difference there.
A couple of reasons behind this. One, you know, despite the fact that China has avoided a recession due to the pandemic and has been roaring back in
terms of its recovery this year, we're still seeing some reluctance among consumers.
Retail sales have not bounced back as fast as some were expecting, and that may explain why producers don't want to pass on those prices. They don't
want to lose customers by forcing prices up too fast. So, that's one potential reason.
The other is that the government is managing the situation. This is something that the Chinese government does with the economy. They have been
cracking down on things like commodity price speculation, trying to bring down the prices of raw materials that have really been contributing to
these producer prices. They have lifted some steel tariffs, we're seeing local governments lifting some curbs on steel production. They're
tolerating a significant increase over the past year in the value of the currency versus the dollar, that gives them more purchasing power for
importing commodities, which of course, we're seeing some scarcity on a global scale as they support their recovery.
So, they are doing a number of different things. And of course, many economists still believe that this will be temporary, and we are seeing in
some areas, commodity prices starting to come down.
So, it looks like it could be temporary. But for the moment, this is a sign to the Chinese authorities, Julia, that their recovery still needs to be
supported.
CHATTERLEY: Yes, absolutely. Clare Sebastian, great to have you with us. Thank you for that.
Okay, let me bring you up to speed now with some of the other stories making headlines around the world.
At this hour, President Joe Biden and his wife are on their way to the U.K. for his first G-7 Summit as U.S. President. Their first stop, Suffolk,
England to greet U.S. troops at RAF Mildenhall. From there, they will had to Cornwall for the meeting in a meeting with the British Prime Minister
Boris Johnson.
Nic Robertson joins us live for a preview of President Biden's important European trip, his first foreign trip of course, since becoming a U.S.
President. The tone, I think will be very different from perhaps from the former President's visits across Europe, and with some of these leaders.
I'll miss the long and extended handshakes, but plenty of tough topics to discuss, too.
NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: There will be. He will have a bilateral with Boris Johnson on Thursday, and Boris Johnson would
like to have President Biden's support on a sort of post-Brexit wrangling, if you will, with the European Union, particularly over the Northern
Ireland protocol as well.
President Biden is more predisposed to support the Irish and the E.U. on that. Johnson is going to want Biden to open up travel between the U.S. and
the United Kingdom. He is going to want to strengthen that relationship between the two countries. We may see progress on that, that's an area to
look towards for tomorrow.
But the big issue is the pandemic, the recovery after the pandemic, the vaccination of as many people as possible around the world in a shorter
space of time as possible. That's going to be big on the agenda.
President Biden has talked about, you know, lifting the -- or waiving rather the patents on the medicines, on the vaccines, and this is not
something that is supported by the European Union. So, expect intense discussion on that.
But you know, there will be other ways as taught from other former world leaders that there should be a really strong commitment, billions of
dollars should be spent in making sure that vaccines reach the whole of the population of the planet.
Boris Johnson is talking about vaccinating the whole planet by the end of 2022, so that's one big part of the agenda. But there will be other things,
China and Russia will be on the agenda, important for President Biden. But I think, when you look at this, stand back and look at it, the big takeaway
is, this is sort of getting back to business as usual by world leaders in Summit. This will be the first time they get to sit and talk face-to-face
in almost two years.
And that is a sign really, that the recovery is on the way, but they're going to want to make this recovery green and talk a lot about
environmentally friendly practices. Carbon zero will be on the agenda as well. These will be just a few of the things that get spoken about over the
next few days.
CHATTERLEY: Yes, eyes on a post-pandemic future in more ways than one. Nic Robertson, thank you so much for that.
Okay, Bitcoin clearing another hurdle. El Salvador is now officially the first country to adopt the cryptocurrency as a legally valid form of
payment alongside the U.S. dollar. A majority of lawmakers have approved the proposal.
El Salvador's President says using Bitcoin will promote innovation and economic development.
Okay, still to come here on FIRST MOVE, cash for chips. America's biggest chip maker on what the Senate's more $200 billion investment will buy.
And get rich quick, an explosive new report reveals that Bezos, Bloomberg and fellow billionaires pay almost nothing in federal income taxes, and
it's all perfectly legal. That's next, stay with us.
(COMMERCIAL BREAK)
[09:22:52]
CHATTERLEY: Welcome back to FIRST MOVE. More pre-summer sluggishness on Wall Street with tech sector to inch higher for the fourth straight
session. Investors perhaps waiting for tomorrow's U.S. inflation data before making any big market commitments, which makes sense.
Treasury investors also awaiting the data, too. Ten-year bond yields are currently sitting near three-month lows and breaking below that one and a
half percent. Investors also bracing for a big $30 billion 10-year auction later today.
Inflation concerns soaring. Campbell's in the soup. Shares of the food giant down more than eight percent as you can see premarket. Earnings far
from delicious. Campbell's also cutting forecasts due to higher raw material and transportation costs.
In the meantime, a new report by ProPublica reveals just how little some of the world's richest people pay in taxes, if anything at all. The list
includes Jeff Bezos, the richest person in the world; Elon Musk and Michael Bloomberg, among others. The raw data came from an unidentified source
unknown even to ProPublica it says.
Christine Romans joins us on this story, and we should probably start there, there is nothing illegal, it seems about what these individuals have
done except the fact in this conversation the way that the data was got may have been illegal. So, we should just point that out.
But this is about a system that focuses on taxing wages rather than taxing wealth, and this is what it comes down to.
CHRISTINE ROMANS, CNN BUSINESS CHIEF BUSINESS CORRESPONDENT: And you're right. And look, there's an investigation into how this secret material was
leaked. This is private information of these people.
CHATTERLEY: Right.
ROMANS: So, there's an investigation there. The White House is clear on that. The White House also saying, reminding, reiterating that this is why
the President would like to raise taxes on the wealthy to pay for some of his -- for some of his endeavors.
Look, when you look at these numbers from 2014 to 2018, the wealth growth of Elon Musk, look he added $13 billion to his wealth. His tax rate there,
about three percent. Michael Bloomberg, Jeff Bezos, less than one percent, and Warren Buffett one-tenth of one percent.
And here's why. They're -- they are making their money on investments, on property, on things that they are buying and holding and are appreciating
and then are being valued. And it is tricky on how you tax wealth and how we do that. We know how to tax earnings. You and I are taxed on earnings
all the time. The average people are taxed on their earnings.
[09:25:10]
ROMANS: The very wealthy can grow this big tax pile and grow it with relatively little tax exposure, because of the way the system is designed
and it is completely legal.
Let me give you -- step back a bit and show you some other numbers here that ProPublica and this expo put through here.
So, the richest 25 Americans, their wealth in 2018 was $1.1 trillion. It would take 14.3 million typical wage earners to have that same pile of cash
as those just 25 people. The tax bill for the richest $1.9 billion. The tax bill for all of those millions of wage earners, $143 billion, right?
So the point here is that your wages are taxed more consistently and higher and that is what is sort of driving the money into the Federal coffers to
pay for our country, less this big growing cash pile of so many of these rich people.
CHATTERLEY: Yes, simplify the tax system if you want to address this.
It's funny, Christine, I was just talking about how U.S. bond yields are tracking down, stocks are doing incredibly well because the expectation
here is that we are simply not going to see this monster infrastructure spending bill that you and I were talking about and have been talking about
for weeks and weeks and weeks, expectations of are falling. There is something far more -- expectations are building, I'm sorry, that something
far smaller, perhaps is going to be done and that's why you're not seeing the alarm, perhaps in the bond markets here over big borrowing, quite
frankly.
Do you think something like this resets the conversation with those that come in and say, hey, we need to be looking at a wealth tax?
ROMANS: You know, I wonder. And it is interesting because there are people who are actually on this list who have said that we should reconsider our
Tax Code and we should think about how to tax the wealthy. For example, George Soros, for example, somebody from his office said that, you know, he
didn't pay -- he lost money on his investments in 2016 to 2018. Therefore, he did not owe Federal income taxes in those years. Mr. Soros has long
supported higher taxes for wealthy Americans.
Buffett has also said, look, we need to figure out how to tax the rich, how to raise taxes on the wealthy. Elizabeth Warren, the senator when she was
running for President, she was talking about a wealth tax on all wealth above -- what -- $50 billion, tax it at two percent.
So, you know, the first $50 billion is free, after that, tax the wealth. So, that's what we haven't done in this country very well is tax wealth,
right, things that are investments, things that are -- that grow and change in value every year and over time. But there sure, certainly, is a big pile
of money there and for those top 25 is growing pretty consistently.
CHATTERLEY: Yes, they're not doing anything they're not allowed to do, saying, don't look at me, look at Congress.
ROMANS: Right.
CHATTERLEY: Here we are.
ROMANS: Even after a tax reform. Remember? Even after a tax reform, it's still designed this way.
CHATTERLEY: Even after a tax reform. Christine Romans, thank you for that.
ROMANS: Nice to see you.
CHATTERLEY: The market opens next. Stay with us.
(COMMERCIAL BREAK)
[09:31:09]
CHATTERLEY: Welcome back to FIRST MOVE. U.S. President Joe Biden on his way to the United Kingdom for his first G-7 Summit, his plane taking off
within the past hour.
In the meantime, U.S. markets trying to gain a bit of altitude, too, with the bulls hoping to push the S&P 500 to fresh records. A heavy lift the
past few days as investors await new positive catalysts, inflation pressures, and ongoing parts and labor shortages remain a dominant Wall
Street theme.
Paint giant, Sherwin-Williams; soup superstar Campbell's and U.S. restaurant chain, Chipotle all seeing growing pricing pressures. Chipotle
raising food prices by four percent to pay for the higher wages needed to attract new workers.
The battle for labor is set to intensify, too, with new numbers showing more than nine million job openings currently in the United States. Wow.
And back to our top story, the Innovation and Competition Act is now headed to the U.S. House after the Senate passed a rare bipartisan legislation. It
would provide $52 billion in assistance to semiconductor manufacturers, including GlobalFoundries, the world's third biggest chip maker. It has
factories here in the United States, Singapore and Germany and counts Qualcomm and Broadcom among its many customers.
It is also the only manufacturer of the U.S. military's most sensitive chips.
And joining us now is the CEO of GlobalFoundries, Tom Caulfield. Tom, fantastic to have you on the show once again. This is an important
milestone. I feel like you must be very pleased, if not entirely satisfied, because I vividly remember our last conversation on this subject and the
dollar amounts that are required.
TOM CAULFIELD, CEO, GLOBALFOUNDRIES: Well, good morning, Julia. Yesterday's vote was historic. The Senate did the right thing.
Look, it not only boosts semiconductor manufacturing in the U.S., but more importantly, it literally impacts every single one of our lives in how
important semiconductors are to everything we do.
CHATTERLEY: I mean, you told me last time that 12 percent of semiconductors at this moment are manufactured in the United States. I
know, there's a timing mismatch here and it takes time to scale up and ramp up production, but where does this money get us from 12 percent to -- in
your mind?
CAULFIELD: Look, I think -- that's great point to make here. The U.S. needs to use this to set an ambitious goal. Remember, today we're 12
percent of the semiconductor manufacturing in this country. U.S. headquartered companies represent 49 percent of the demand. We set an
ambitious goal. We fund it the right way, we should double this to 24 percent in the next decade.
CHATTERLEY: Wow. So, it's significant. Do you know how much money you're going to get at GlobalFoundries versus Intel, for example?
CAULFIELD: No, these will all be project based. I think we'll get our fair share. We have to make sure that when this money is distributed that we
don't concentrate it in any particular part of the semiconductor market. We need to make sure that memory is covered, single digit nanometer for high
speed digital applications, the broad, pervasive market segments that GF plays in.
We need to make sure the whole portfolio of semiconductors gets covered if we're going to do something to make sure not only we have enough to
manufacture, but that we create the supply chain security for semiconductors in the nation.
CHATTERLEY: With all of that in mind, what's fair in terms of size? I'm pushing you now -- you can avoid answering.
CAULFIELD: We'll take somewhere between, you know 10 to 20 percent of that, in that segment that I spoke about that we play in.
CHATTERLEY: And since we last spoke, you also announced you're moving your headquarters to New York where I know your most advanced semiconductor
facility lies. I mean, this is a huge announcement in itself, but is that where some of the spending that you're talking about is going to go? If not
--
[09:35:00]
CAULFIELD: Yes, we will take our spending for growing our U.S. footprint. First and foremost in our most advanced facility, we call it Fab 8. It's in
the capital region of upstate New York. We will not only fill out the capacity we have there, we will then look to put new brick and mortar in
the ground.
You know, I think this can allow us to accelerate our capacity expansion, a minimum of three years, maybe more and we will also use some of this money
to update and create new capacity in our Burlington facility.
CHATTERLEY: I was going to ask you that, how quickly you can scale up production here? You're saying this will accelerate plans by three years?
CAULFIELD: Yes, there was a certain amount of investment GF could do on its own in these partnership-type investments.
CHATTERLEY: Right.
CAULFIELD: We can accelerate them, yes.
CHATTERLEY: What about hiring?
CAULFIELD: Yes, I think that's -- we talk about supply chain, security. We talked about supply chain and making waivers. I think the biggest challenge
we're going to have as an industry, not just GF is making sure we have all the talented people around to work in these factories, to contribute to
these factories. And that's a big part of the GF investment.
You know, five percent of all the hours worked in our company is training our staff. We bring in people right out of high school, right out of
college, out of the military, and we put them in intensive training programs to create the skills they need to do these types of jobs.
CHATTERLEY: Yes, I mean, that's fascinating, five percent of working hours. You know, I was looking at the Senate legislation last night, and I
noted, one of the quotes in there said that China is aggressively investing over $150 billion in semiconductor manufacturing, specifically, and it goes
back to the original point about whether or not this is enough money.
And I just wondered whether we need to view this as a kind of technology arms race relative to China, or the fact that they're saying this is all
built on some paranoid delusion has some merit. How do you view this sort of global competition? This battle that we're in?
CAULFIELD: Look, let's recall the problem we're trying to solve today in the U.S. Today, nearly 50 percent of the semiconductor demand is generated
through U.S. headquartered semiconductor companies, while only 12 percent of semiconductor supply comes out of U.S. manufacturing. By the way, that's
down from 37 percent a little over a decade ago.
CHATTERLEY: Yes.
CAULFIELD: Meanwhile, over 70 percent of the semiconductor foundry manufacturing is concentrated in Taiwan, a few hundred miles from China.
This is a critically important dynamic in our industry and it creates not only supply chain security issues, but national security issues, and quite
frankly, economic security issues.
And that's why the passage of this bill sets the foundation for the U.S. to set this ambitious goal I spoke about a moment ago. This is really
important to get this balance in place to make sure something so critical to the world economy, national security, economic security, that the U.S.
has its fair share of that capability in manufacturing.
CHATTERLEY: Yes, I mean, we can take the emotion out of it and we just focus on the facts as you laid out there and that tells you everything you
need to know.
Tom, I know we talked about this last time as well and I asked you about the IPO and you said, look, you're just focusing on meeting customer needs.
But these rumors, they do keep circulating. So you have to tell me something else now to fop me off until the next time I ask or another
report of yours.
CAULFIELD: All right, round two. Round two on this one.
CHATTERLEY: Round two of many, I'm sure.
CAULFIELD: Look, of course, we always are evaluating our strategic options, and it's important that we look at all ways to grow our company.
I'm just going to have to lie silent on this one this time, but I will tell you that for us, the most important thing that we do each and every day is
figure out how to get more capacity online as fast as possible, how to get as much out of our capacity today and keep leaning on our -- and thanking
our 15,000 employees worldwide who do a great job each and every day.
I know again, that's not the answer you're looking for. Maybe the third time will be a charm.
CHATTERLEY: Yes. I'll never stop trying. On a more serious note, and it's come up this week and I'm sure it's something that you also are sort of
finding difficult to discuss at this stage as well and you can bear with me on the question, but IBM requesting $2.5 billion payment for investment
decisions, legacy decisions.
I do -- I sort of looked at the timing this week in light of the rumors of your valuation and it sort of made me wonder, can you give us any sense of
where GlobalFoundries stands on that request?
CAULFIELD: Yes, sure, Julia. Look, GlobalFoundries, you know, we took legal action to defend ourselves and maybe more importantly, to defend our
reputation. And especially at a time when, you know, semiconductor manufacturing has never been more crucial.
You know, quite frankly -- you know, today I'm very disappointed. It's coming from a company that we've had such a strong partnership with. It's
an action as you say coming two and a half years of silence, right?
And, you know, a little bit on a personal note, I grew up as an executive at IBM. It was a great company. And that's what makes this sort of behavior
so much more disappointing.
[09:40:20]
CAULFIELD: I think more importantly, and this is where we always have to keep focusing, you know, what's the issue here? As an industry, we need to
stay focused on solving the semi supply chain imbalance and restoring U.S. manufacturing leadership. I can't waste -- not me, all of us shouldn't be
wasting time or energy on frivolous matters like this.
This industry is better than this. And you know, GF is going to do its part to solve these more important issues.
CHATTERLEY: And that's the focus for now. Oh, I think I lost him there. Tom, I hope you can hear me.
CAULFIELD: Yes.
CHATTERLEY: Oh, you're still there? Yes. I was just saying, and that's the focus for now, and on that, I'm going to let you go.
Tom, congratulations.
CAULFIELD: Thanks for having me.
CHATTERLEY: Congratulations on this announcement, and progress ahead. Come back and talk to us soon, please.
Tom Caulfield, CEO of GlobalFoundries there. Sir, thank you.
Okay, we've got a big Fintech IPO coming up after the break. The name, you may never have heard of it. Its customers, you definitely have, the CEO of
Marqeta is next.
(COMMERCIAL BREAK)
[09:43:26]
CHATTERLEY: Welcome back to FIRST MOVE. Ringing the opening bell over at the NASDAQ a few moments ago, Marqeta, the payments company which works
behind the scenes providing brands like Uber, DoorDash and Instacart with access to card services.
Marqeta's IPO raised more than $1.2 billion, giving it a market valuation of over $14 billion. What caught my eye here, their biggest customer,
Square, accounted for over 70 percent of its revenue last year. So, what's the risk of so many eggs in one basket when there are so many cards in our
wallets?
Jason Gardner is founder and CEO of Marqeta and joins us now.
Jason, never mind that for a second. This is a huge day for you and the team. Tell me how it feels.
JASON GARDNER, FOUNDER AND CEO, MARQETA: Hi, Julia, thank you for having us. It is -- it's really exciting. It's such a great step in our journey.
CHATTERLEY: I mean, investors are looking at this and we've laid out what you do as a business in brief terms here. But for investors looking into
buying into Marqeta today, what is the future growth opportunity that this company represents in your mind.
GARDNER: So Marqeta is an open platform for companies to build core products like Visa, Mastercard cards, physical plastic cards, probably like
the one in your wallet or your purse. They can be virtual, they can be tokenized to fit into Google Pay and Samsung Pay, and Apple Pay.
And if you think about the opportunity, it's tremendous, $6.7 trillion in carded volume in the United States and we are simply scratching the surface
at $60 billion in volume. There's a $30 trillion opportunity in carded volume outside the United States and then $74 trillion in global money
movement.
And if you truly believe that everything is moving to modern platforms and that digitization of catch, you've got to believe in the future of Marqeta
that this is truly a generational business.
[09:45:11]
CHATTERLEY: I mean, those are monster numbers. This is a huge growth opportunity in the United States. It's also a huge growth opportunity, it
seems internationally.
When I sort of break down the numbers, though, the bulk of the revenues do come from the United States and what I was reading about in the prospectus
is interchange fees, and this is the cost that the merchants pay when customers use those cards.
You do say in there, fees subject to intense legal and regulatory scrutiny. Is there any reason to suggest those fees are going to be reduced in any
way in the short to medium term, just based on what was in the prospectus?
GARDNER: We do not see any change in the short and medium term. What people are referring to when you read this, as the Durbin Amendment?
The Durbin Amendment was enacted in 2010 to protect consumers and protect small community banks. And that is a lifeblood of Marqeta, and it sustains
a lot of different companies around the world.
As we think about around the world, only two percent of market as revenue is derived internationally. So, that's an extraordinarily large opportunity
for us. Most of our revenue, 98 percent is in the United States. It's where we got started, where we power companies like Square, Instacart, DoorDash,
Affirm, Klarna, Ramp, the list goes on, and we're just really, really excited about today and our customer support and partnership worldwide.
CHATTERLEY: I guess those interchange fees don't exist, though, outside of the United States in the same way. So, how do you see that sort of balance
between the revenues that you're generating, 98 percent in the United States, I think that was the number versus two percent sort of evolving
over time?
GARDNER: That's right. The majority of interchange, the largest forms of interchange, are certainly within the United States. There are other forms
of interchange outside the United States. We have created different models, specifically in Europe, that is not interchange based, and we've been able
to build a successful business in Europe, also a successful business in Australia, and in New Zealand where also interchange is regulated.
CHATTERLEY: Yes, so not sounding worried at all by that. The other thing that people have pointed out to me, and I mentioned it in the introduction
was, at least for now, and I'm sure the business will diversify, the reliance on Square. And it wasn't necessarily concerned that perhaps in
2024, when this deal with them runs away, it's the idea that they've got three years to perhaps build the kind of technology that you're providing
in the card issuance operations and do it in-house. Are you worried about that?
GARDNER: We're not focused on the improbable. Square is a phenomenal customer. Their success is our success and that success is driven by
relationship. It's driven by technical innovation, and it's driven by our ability to operate at massive scale. They are a tremendous customer, and
really a shining example of modern card issuing.
But if you truly believe that the $6.7 trillion in carded volume is an enormous opportunity for Marqeta, you have to believe that there's many,
many more Squares in our future, and we certainly believe that we have some on our platform today.
CHATTERLEY: Yes, you know, speaking of the improbable to the probable, I know you power Coinbase's Visa debit card, and also Shakepay as well, these
announcements at the back end of last year, and o got very excited. That's the Canadian crypto exchange.
Do you think -- and you can tell me what your views are here of whether we're at the point in your mind where sort of cryptocurrencies work
alongside bank accounts, credit cards, and one can be as much a store of value is also being spent?
GARDNER: Marqeta powers Coinbase, you're correct. We power Shakepay, which is, as you said, the Canadian Coinbase. The ability to spend crypto at the
point of sale is a phenomenal opportunity. It converts crypto to the point of sale, so you're actually spending fiat currency, U.S. dollars, euros,
and it's a tremendous opportunity.
I think the fact that we are all talking about crypto and blockchain and different form of crypto for so long that the ship has sailed. We think
that crypto is going to be a great opportunity for Marqeta in the future to really connect at the point of sale, so people can buy goods and services,
whether online or offline.
CHATTERLEY: What do you think the biggest impediment to that is in your mind?
GARDNER: Well, it's regulation. Regulation, you know, and new forms of currency, but we've seen especially here in the United States, where states
have embraced that. You see Janet Yellen talking about it.
It is really part of our culture now, whether it's blockchain or whether it is crypto and we're going to see more at the point of sale. We are going to
see regulation, but I believe we're going to see the really the connection of crypto to the point of sale eventually. It's truly inevitable.
CHATTERLEY: Fantastic to have you on the show, Jason. Congratulations on a huge day, I know for you and your team in. Enjoy it. Jason Gardner founder
and CEO of Marqeta.
GARDNER: Thank you, Julia. Great to see you again.
CHATTERLEY: Likewise, thank you.
You're watching FIRST MOVE. More to come.
(COMMERCIAL BREAK)
[09:52:12]
CHATTERLEY: Welcome back to FIRST MOVE. You remember before the break, the CEO of GlobalFoundries was telling us how crucial Taiwan's semiconductor
industry is to the functioning of the global economy. Well, Taiwan is now not only facing a surge in COVID cases, but also one of the worst droughts
in decades. Will Ripley explores how that is presenting a challenge not only to the country, but to the manufacturing sector, too.
(BEGIN VIDEOTAPE)
WILL RIPLEY, CNN INTERNATIONAL CORRESPONDENT (voice over): Taiwan's worst drought in more than half a century, making this island look more like a
desert.
Cracks snake across the bottom of Sun Moon Lake, Taiwan's largest body of water, parched. Reservoirs across the island, evaporating.
Recent rains put a small dent in a big problem, a problem scientists predict will only get worse.
HUANG-HSIUNG HSU, CLIMATE RESEARCHER, ACADEMIA SINICA: Our projection show that it is going to become more and more serious in the future.
RIPLEY (voice over): Climate change models paint a dire picture for Taiwan. Stronger typhoons, more flooding, less frequent rain, future
droughts far more severe.
RIPLEY (on camera): This mural gives you an idea of what Baoshan Reservoir usually looks like. This is what it looks like now. Water levels are right
around 30 percent, they were less than three percent before monsoon season kicked off in mid-May.
Taiwan is experiencing its worst drought in decades. That's a big problem because this reservoir is the primary water source for the Hsinchu Science
Park, home to nearly 600 electronics companies, including the world's leading semiconductor manufacturer, TSMC.
Why is this drought a problem for Taiwan's semiconductor industry?
JEFFEREY CHIU, ELECTRICAL ENGINEER, NATIONAL TAIWAN UNIVERSITY: Every layer we need a lot of chemical process and every process, we need to clean
the surface. We need to clean by water flowing, pure water.
RIPLEY (voice over): Semiconductor manufacturers are searching for solutions. Water recycling, purifying seawater, both years away from
quenching the insatiable thirst of chip factories.
Making chips also requires huge amounts of energy. Taiwan, like the world, is trying to fight the climate crisis, cutting its carbon footprint while
phasing out nuclear power.
The island's semiconductor industry is investing big in green energy. Hundreds of giant wind turbines line the coast, solar panels dot the
landscape.
HSU: We need to cut down on carbon dioxide emission, but on the other hand, we need to generate more electricity.
RIPLEY (voice over): Just after we arrived, rolling blackouts hit the Taiwanese capital. Energy demand grows as temperatures rise. Taiwan's top
energy consumer, semiconductors, vital to the global economy powering everything from cars to computers.
If Taiwan's power and water supply is in peril, the whole world could feel the pain.
(END VIDEOTAPE)
[09:55:26]
CHATTERLEY: Wow. Okay, before we go, one of the greatest mysteries of the cosmos has finally been explained and it is actually something I've been
lucky enough to see myself.
It's been finally confirmed that space weather causes the amazing sight of the northern lights. Well, to be fair that's a simple version.
Scientists from the University of Iowa have proved they are the result of, quote, "powerful electromagnetic waves during geomagnetic storms."
So, there is your twinkly end to today's FIRST MOVE.
That's it for the show. Stay safe.
"Connect the World" with Becky Anderson is next and I'll see you tomorrow.
(COMMERCIAL BREAK)
[10:00:00]
END
