You may have heard that manufacturers like GM are facing shortages of semiconductors. They (and likely many manufacturers in other industries) have slowed down production due to the missing parts. The drought seems to include microcontrollers, embedded systems-on-a-chip, power, flash memory controllers, GPUs, and many other components.

Folks in the electronics industry tell me some semiconductor products used in consumer applications have lead times of up to a year. The consequences are difficult to predict. I expect some products to redesign with whatever equivalent parts they can buy -- something that could add months to any new project schedule. Others will have to wait for production to meet demand.

Unlike, say, alkaline batteries, few of these semiconductor devices have exact equivalents. Redesigning a system to use a different microcontroller, transistor, DAC, etc., might spill over to other parts. It will often require redesigning the printed circuit board, which could spill into changes to a product's exterior physical design and packaging. These design changes also imply new revisions of internal development hardware and manufacturing test hardware.

Switching components also often spills over to software. Pin mappings, encodings, algorithms, or even software instruction set changes could result. Both the software and hardware changes will require work to verify the new implementations. All of this costs both time and money.

To sum up, anyone selling electronic hardware may have a challenge ahead of them. I wouldn't be surprised if some companies face financial troubles due to these supply chain issues.

On the other hand, some manufacturers might have a product sell more than expected due to inventory. Wouldn't it be ironic if a part nobody wanted in early 2020 now sells well simply because they're ready to ship from a Digi-Key warehouse?

Real Estate Syndication and Online Signals

A friend recently alerted me to Real Estate syndicates as a complement to investing in SaaS companies. An income-generating stake in an apartment building can provide returns today, while SaaS companies generally take a while to mature. Also, a real estate syndicate (unlike REITs) can reduce the investors' tax burden.

I've been reading up on the topic and looking at the various online platforms for syndication. One deal jumped out at me because it expected to start returning capital quickly after closing, and it was in a state benefitting from Covid migration. I started digging into the details: occupancy rates, current revenue, locations. All the fundamentals you'd consider for any deal. It seemed like it had potential.

Then I started looking at the syndication company's website. Their list of successful projects looked good, but none of those projects were in the same state as the proposal I was considering. Odd, but maybe not a deal killer. They do have at least one other project in the same area, but perhaps not yet far along enough to be listed.

Then I looked up the leadership team on LinkedIn. I was hoping for a team with at least some 2008 experience, but none of them did. Most of the group had around four years of business experience. Not many of them listed experience besides their current role, and one of them even misspelled their title. My confidence faltered.

Finally, I looked up the company on Glassdoor. No need to go further; I instantly made up my mind. The company had an average rating of about 2.5 stars. A low score isn't immediately disqualifying. Many companies have low Glassdoor scores simply because the least-happy employees feel most incentivized to review their employer. Unfortunately, the text of the reviews had a pattern indicated otherwise.

Their most positive reviews contained glittering generalities. "They're great." "Good bonuses." They're the kind of note you might write if your boss made you. The negative reviews were specific: the property managers received little guidance from management, no budget to attend to tenant needs, and disorganization from the top. Multiple employees pointed to the same issues: a remote leadership team detached from their properties' ground truth. Yikes!

In one sense, you invest in a syndicate so that top talent can operate the properties. In exchange, the managers take generous fees. If the managers can't keep talent working at their investment properties, how will they improve the investments' condition? On top of that, I have no desire to support bad bosses.

As promising as I think their investment idea is, I don't think I'll participate in this deal. A rising tide might lift all boats, but they're not the only boat out there. Why wouldn't I pick a better boat?

WindAddict

Semiconductors & Real Estate Syndication