The Peter Zeihan Podcast Series - How a Small Town in NC Could Disrupt Global Semiconductor Production || Peter Zeihan

Episode Date: October 16, 2024

Don't miss out on the Live Q&A on Wednesday, Oct. 23rd. Click here to join Patreon and help us donate to MedShare: https://bit.ly/medsharepatreon We're hitting the backroads today and chatting about the small town of Spruce Pine, North Carolina. What this town lacks in population, it makes up in its (extremely important) quartz mines.Full Newsletter: https://mailchi.mp/zeihan/how-a-small-town-in-nc-could-disrupt-global-semiconductor-production

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Everybody, Peter Zine here coming to you from D.C. in the National Mall. And today we're going to talk about a little bit of hurricane damage that you probably were unaware of, specifically the town of Spruce Pine, the town of like 2,300 people in western North Carolina. And the issue is that this is a town that produces sand. And so roughly 150 million years ago, as Southerners tell time, there was a series of non-volcanic intrusions into the area that is now part of the Appalachians. And we got all of these field spar quartz and mica deposits. And until recently, the field spar is what everybody was after.

So you've heard of Pyrex. Field spar is used in the high-quality glass that they produce. But the rest of it, especially the quartz, was basically used. It's like concrete aggregate and construction and local road production. Nothing special. Then the semiconductor sector took off. Wow, it's getting really winning. Moved behind some of the construction equipment that is everywhere in D.C. right now.

Anyway, then the semiconductor industry got started, and semiconductor is made primarily of silicon, and silicon is basically just processed quartz. And what they discovered was that the type of quartz that exists in the spruce pine's mines was so pure that, it could be melted into something called a crucible, which is basically a little bowl. And the crucibles then could be used to melt other lesser quality silicon. You have to do the melting in a very, very, very, very, very high quality crucible.

Otherwise, the crucible will introduce flaws and other materials into your silicon and then you don't get the electrical properties you are after. And the sand that comes out of the spruce pine's mind is so pure that it is used for 70 to 90% of global crucibles to make the semiconductors. They also use the other silicon they have there as well, and it's also very good for that, but it's the crucible quality silicon that you're really after. Anyahu, two companies control the space. They're not very chatty when it comes to the details. About 70% of the labor force in Spruce Pines, you know, population 2300 works in the mines, and the miners are, well, they got two feet of rain dropped on them, did a significant amount of damage to the mines,

although the miners are not telling us what, and they're focusing on helping the people recover, and the people can't recover because the city is cut off. There is one road out of the mine. It's been largely destroyed, and it's going to be at least a month, probably closer to two, before we have some idea of whether or not

it can be repaired to a level that allows equipment to come in to, say, pump the water out of the mines. And this is not a priority for things like FEMA, because Asheville, population 100,000, is also cut off, and it's on the interstate, so everyone's going to focus on that first. So we've got quite a while before we know whether or not the mine has been damaged sufficiently to impair a long-term production of this very specific type of quartz silicon. As to everybody else, most of the folks that make these things, most of the semiconductor fabs who use this stuff, and most of the purification facilities probably have about three months of reserves to use, so there's no immediate disruption from supply.

But we're going to have to wait one to two months before we fight out if this temporary interrupt, is something more significant. And if it is, then all bets are off, because this is where we get almost all of it. Again, while you can make a crucible out of lesser silicon, that lesser silicon will then contaminate whatever it is you're trying to smelt, which means that high-grade semiconductor quality silicon will not be available in sufficient quantities to do more than a third of what we currently expect our semiconductor industry to create. That could be a very big deal.

We won't know for a couple months.