- Geopolitical Strategist
- About Us
- My Account
The views expressed are those of the speaker(s) and are subject to change. Other teams may hold different views and make different investment decisions. For professional/institutional investors only. Your capital may be at risk.
Global Industry Analyst Eunhak Bae joins host Thomas Mucha to explore semiconductors' key role in the future of innovations like EVs, the metaverse, and cryptocurrencies as well as their implications for geopolitical issues like the conflict in Ukraine and US/China relations.
THOMAS: Semiconductors have become the ultimate strategic sector in a great power world. They’re in every advanced military weapon, of course, but they also power just about everything we use every day, from smartphones, to satellites, to medical devices, to our TVs, our automobiles, and more. So how should we think about this critical technology, in a rapidly changing geopolitical and macroeconomic environment? For answers to that question and more, we’re joined today by one of Wellington’s top experts on this subject, global industry analyst Eunhak Bae, who covers the global semiconductor and semiconductor capital equipment sectors. Welcome to WellSaid.
EUNHAK: Hi Thomas, thanks for having me.
THOMAS: It’s great to have you here. So, no surprise here, but let’s start with the geopolitics of semiconductors, which Washington policymakers view as such a critical industry, I’d even say the Pentagon has viewed this with a kind of obsession, given the importance to national security. So, what are your views on where we stand with US/China trade tensions? And what’s the outlook for semiconductors here as great power competition intensifies?
EUNHAK: So, under the Biden administration, it certainly feels like the temperature of the rhetoric has cooled, versus the previous administration. But the overall policy stance really hasn’t. We haven’t had any new tariffs, but there certainly have been a lot more Chinese companies added to the entity list over the past year. There hasn’t been more of that kind of activity recently, and I think we’re probably at a standstill, especially with everything going on in Ukraine and Russia, which adds a new element of volatility depending on how much say, China decides to help Russia or not, that’s something, Thomas, that you’re obviously much more familiar with than I am, but there’s no question as I look at the landscape that the tensions are not easing. So, I think we have seen peak globalization and the manufacturing landscape for semiconductors is going to look very different, in just a few years.
THOMAS: So how are companies coping with this shifting policy backdrop? And as an analyst, how do you keep up with that, and how does that impact your research process?
EUNHAK: Well, it’s better to be busy than bored I guess is what I always say. There is a lot to keep track of. Obviously figuring out the winners and losers here is the most critical thing, and I think you’re going to have very distinct sets of them. The first obvious bucket of winners are the semiconductor manufacturers, right, as you have all seen in the newspapers, there’s a very strong movement to re-shore semiconductor production in just about every developed market around the world. You have the CHIPS Act in the US; you have similar kinds of subsidies and policies for incentives being offered in the EU and in Japan to semiconductor manufacturers. Another set of winners that I think you’re going to see is contract manufacturers. They have multiple geographic locations around the world. That gives their customers much more flexibility than they’ve had in the past. And then in China, it’s going to be interesting, they will certainly champion regional alternatives to US semiconductor equipment suppliers. Right now, we have not seen any regional competitors in China who could take meaningful share of the big US equipment suppliers, but it does bear watching over the next few years, because those regional champions will get a ton of funding.
THOMAS: Yeah, that leads me to two sort of related follow-up questions. First, these efforts to support the semiconductor industry by Congress, how do you think that’s going to play out? Will that be successful? Can we re-shore semiconductors back to the US? And then second, how plausible is it that China can one day build its own semiconductor industry that’s more self-sufficient?
EUNHAK: The answer to the first question is relatively easy because it was happening even before Congress started contemplating these incentives. We had Intel already embark on a capacity expansion phase in the US, and due to a lot of persuasion by US customers, not the least of which, the US government, TSMC announced, a couple of years ago that they were going to start building a new plant in Arizona. And these are all happening regardless of subsidies. Texas Instruments is another company that recently announced really a decade-long capacity expansion plan. Again, before the US CHIPS Act has even passed. So, I think that there will be additional activity that gets unlocked if Congress does pass this act but I don’t think that re-shoring semiconductor manufacturing in the US is going to be dependent upon it. In terms of whether China can plausibly build their own semiconductor industry one day, well I guess we talk about semiconductors as this sort of monolithic industry, but there are many, many different kinds of semiconductors that require different skillsets. And I think for China to build a semiconductor industry say in advanced logic manufacturing is going to be very difficult. And that’s because advanced logic manufacturing requires leading-edge equipment, and the US has export restrictions on how cutting edge the technology that US suppliers can export to China. And so, I don’t think that China will be able to succeed there for at least a decade, but probably much longer. I think that China can succeed in building say, a Nand flash storage semiconductor industry. That’s because it uses lagging edge equipment. China is also trying to build a D-RAM industry, so I think they’ll have some measure of success in building, say, a memory semiconductor industry.
THOMAS: Can the US stop China from developing its own semiconductor industry?
EUNHAK: I don’t think that the US government is interested in stopping China altogether. I think it is a bit of a national security issue, as far as the US military is concerned, if you allow leading edge semiconductor manufacturing in China, it puts their military technology on the same footing as US military technology. So, I don’t think that the US is going to allow that. And as evidence of that, last year the US government put quite a lot of pressure on the Dutch government to prevent ASML from shipping what’s called an EUV lithography tool to China, that is the very cutting edge of semiconductor manufacturing, and it seems like the prospect of China being able to import those particular tools is dead in the water.
THOMAS: Gotcha. Now on the national security piece of this, obviously Taiwan plays a critical role here, from a geopolitical perspective, but critically, from a semiconductor production standpoint, as an analyst in this industry, how do you view this Taiwan issue thinking about these companies and the market opportunities?
EUNHAK: It’s a topic that has been really top of mind. I’ve been getting a lot of questions about that.
THOMAS: Me too.
EUNHAK: In light of Russia invading Ukraine, now people are concerned about China’s aspirations to reabsorb Taiwan, and then on top of that also grow its semiconductor industry, as you mentioned. So, Taiwan being such a critical technology center in the semiconductor world, they could kill two birds with one stone, so to speak, by doing so. So much of the semiconductor supply chain flows through Taiwan. But it is very important to understand that as formidable a manufacturer as TSMC is, even they would not be able to operate their fabs without the close partnership and support of its key equipment suppliers. All of the major equipment suppliers like ASML that I mentioned earlier, Applied Materials, etc., they keep large numbers of their own engineers on site at TSMC, or any other large customer, because those machines are the most complex that humans have ever created. And they require constant upkeep, and maintenance, and monitoring. So in the event of say, a Chinese takeover of Taiwan and TSMC’s fabs, I would assume that those support engineers would get evacuated fairly immediately, because those suppliers are almost all in the US, Europe, and Japan, and I don’t think that those fabs would be very operational within six months. I think a lot of things would start to break down. The thing to understand about semiconductor manufacturing is that it involves a lot of know-how. It’s not just IP and a bunch of toolsets. The best way to put it is there is just as much art as science in making semiconductors, and all of that art would be lost if you displaced all of those people from the process.
THOMAS: Not to mention the physical infrastructure that a war would bring, and some of the images that we’re seeing out of Ukraine really underscore, just how damaging conflict can be, and globalization and geopolitics don’t always line up, but it’s certainly something that you and I in particular have to stay close together on, because this is an intersection that’s very important from a strategic, but also market implications.
EUNHAK: Absolutely, absolutely.
THOMAS: So, on the Ukraine/Russia conflict, neon is a critical component in semiconductor manufacturing, a lot of it comes from Ukraine. The US is now using sanctions to impede Russian efforts in critical technologies, including semiconductors. How has this conflict in other ways changed your views or your approach to thinking about this industry?
EUNHAK: The thing to know about the semiconductor industry is it is the most engineering-intensive and iterative process in the world. These are $10 billion fabs that are running 24 hours, 7 days a week, and they are designed to be as disruption-proof as possible. So now to come back to neon, in 2014, the semiconductor industry, really drastically reduced its usage of neon starting then. The usage levels are already much lower. In addition, the amount of neon that’s actually used, I think, it’s a little incorrect in the headlines. I think I’ve seen that 90 percent of neon supply comes from Ukraine. I think those are outdated numbers, I think 70 percent, maybe even 60, is closer to it. But more importantly, most of the semiconductor manufacturers have said that they source about 20 to 25 percent of their neon supply from Eastern Europe, generally. I don’t think that the risk of disruption from neon shortages is going to be terribly meaningful to the industry, and my guess is this is more of a media storm that will blow over in a few months.
THOMAS: So, it’s on the margins?
EUNHAK: It’s on the margins, absolutely.
THOMAS: All right. Well, let’s move away from talk of geopolitics and war, and disruption, and into some of the more positive aspects of the broader semiconductor story, which are all of these thematic, secular growth drivers that are coming. Looking down the road, and looking at these investment implications, we’ve got an entirely new set of industries that are today helping drive semiconductor demand. I’d like to get your views on some of these, and how this is likely to play out, what’s driving the action, and how does this look over the next three, five, to 10 years?
EUNHAK: Sure. Well, we’ve got a whole bunch of secular themes that we could talk about, maybe I’ll start with 5G. I think 5G gets a little bit of a bad rap, because people see 5G on their phones now, and they’re like well, nothing’s different, what do I care? But I do think that over time, 5G could turn out to be a big discontinuity, the kind that comes every five years or more in the world, and that’s because 5G has much greater bandwidth and connectivity, and that enables more mobile digital consumption in real-time. So, the advent of 5G is not going to drive just the growth of cellular networks, but the growth of associated technology in ways that are hard to predict today, and if you think back to when the iPhone was first launched, it brought on a decade of change that completely reshaped the handset industry and its supply chain. But it also reshaped other industries that nobody predicted, that includes content, payments, and social media. Uber could not have existed without the iPhone, and I think you’re going to see similar transformative and unpredictable new technologies arise because of 5G.
THOMAS: So, things we haven’t even thought about yet will pop up and create new demand for semiconductors?
EUNHAK: That’s right. So, maybe one fun example is that because of the higher bandwidth and speed of 5G, you’re going to be able to run five cameras, 8K recording, running video, and four or five microphones to record surround sound. So, who cares? That will allow you to pick video streams when you’re watching an event, a sporting event or a concert, with 360-degree views and you can pick which view of what point in the game, or the concert, that you want to watch. The user will be in complete control of what he or she wants to see in real-time. So, that’s just one possible new smartphone application that 5G will enable.
THOMAS: Another one that’s getting a lot of attention inside of Wellington is the metaverse. So first of all, can you explain what the metaverse is? And then, how semiconductors might fit into this?
EUNHAK: Sure. So, the metaverse is very fun, I do think we have to be careful not to get swept up in the hype too early.
THOMAS: It’s got a cool name, so obviously that’s going to happen.
EUNHAK: It’s got a cool name! And it’s so cool that Facebook had to change its name to Meta. So, what is the metaverse? It’s something that’s accessed through your PCs and phones today, but in the future will be accessed through things like augmented reality glasses, and virtual reality glasses. And essentially it means whatever you can do or buy in the physical world, you’ll one day be able to do in the digital metaverse. Some real-world examples today are gaming companies like Fortnite and Roblox. I thought they were just gaming companies from what my kids talk about, but actually they hold huge concerts inside of their own metaverses. Fortnite just had 12 million real-time viewers for one of its concerts. Metaverse could replace theaters, stadiums, any venue where people congregate to share experiences.
THOMAS: So how do semis fit into this?
EUNHAK: On both ends, so there’s an enormous amount of infrastructure that has to get built to support collective, simultaneous, real-time viewing, or participation in the metaverse. You’re also going to see a proliferation of devices on the user side. So, glasses --
THOMAS: I hope they look cooler than the ones that are out today.
EUNHAK: They do look really dorky. I hope they look cooler too. So, I mean the great news is the harder the problem the more the semiconductors are needed. But it sounds like this is not something that’s going to be solved in one or two years, but more like five to 10. And that’s where I want people to sort of step back and say wow, this is cool, but let’s not put it in our numbers for a while.
THOMAS: All right, well something else that’s cool, but a little more tangible is the auto sector. So EVs, autonomous vehicles, things that we can actually touch and feel and understand. What’s the relationship here between semiconductor demand and this rapidly changing industry: autos?
EUNHAK: I’ll talk about autos but also expand it to just be a little bit broader than just autos, and talk about autos and industrial machinery, because they’re both sort of run by motors, and what’s exciting about what’s happening with them is they’re becoming intelligent, right? So, they’re becoming more autonomous, they’re becoming more intelligent, and intelligence in machines really comes from putting more semiconductors inside them, right?
THOMAS: The brains.
EUNHAK: The brains! Those are the brains, that’s exactly right. So, there is just a vast installed base of motor vehicles, cars, and industrial assets that can be replaced by smarter and faster machines that can perform their tasks more safely, cheaply, cleanly, and why is that? It’s because you can stick hundreds of sensors inside them now. Right? Sensors are super cheap, most of them cost less than $5. And now, going back to the 5G commentary, you can connect them all through 5G networks, so you have ubiquitous coverage of these machines or cars. And then on top of that, you can process all of that data using artificial intelligence, partially because the cost of compute has really fallen dramatically. ARM has said that its chips that go into these things, the cost of them has dropped from $10 to 10 cents, so that means you can --
THOMAS: Is that Moore’s Law, or is that --
EUNHAK: That’s Moore’s Law right there for you, so the remote monitoring system in an electric vehicle or an industrial motor, those used to be in jet engines at the cost of $10 million per system. But now they’re becoming standard in cars at a cost of $2,000 per system, right? So, it enables quite an enormous amount of intelligence, which is exciting.
THOMAS: The last sort of emerging industry I want to talk about here is crypto. What’s the relationship between crypto and semiconductor demand?
EUNHAK: It’s an interesting question, and it’s probably along the same lines as what we were saying about the metaverse, is, there are some technology-related issues that do have to get resolved for it to really scale up in the way that’s envisioned today. And that’s because crypto mining mostly uses graphics processors, GPUs. It also uses some custom chips, but these are some of the most power-hungry chips that are made. Crypto mining consumes an incredible amount of electricity. The current process that’s used, which is proof of work, is the most secure, but it’s also the most power hungry. There is some thinking that proof of stake could replace proof of work and solve some of these energy consumption issues, but that hasn’t happened yet. There have been some hurdles that proof of stake has not been able to overcome. So, I think that for now, I don’t see how cryptocurrency is going to be able to scale up to become a global mass currency until some of those energy consumption issues are resolved.
THOMAS: So, crypto to you is less of a sure thing than some of these other industries we’ve been discussing?
EUNHAK: Yes. Crypto is a much bigger question mark in my mind, and it has had more limited impact in the world of semiconductors.
THOMAS: Let’s move this onto some of the current issues that are facing the industry given COVID and the supply chain disruptions we’ve seen over the past couple of years, a different Fed policy, and, obviously, this deeply uncertain macro backdrop. Let’s start with the COVID shortages, and the supply chain issues. How is this going to play out in 2022, and how should we think about this hiccup?
EUNHAK: It’s interesting I was just doing a site visit at a semiconductor equipment company yesterday. And I heard firsthand that the supply shortages really have not been getting better. And I think the whole world, including myself, had thought that these would be largely resolved exiting this year, but certainly much better by the middle of this year.
THOMAS: So, what’s the holdup?
EUNHAK: Demand has just been so strong. The supply chain is making Herculean efforts to scale up, but it does take time. And with every scale up, the demand has been there to meet it. That has been the biggest challenge is just not expecting this level of demand growth year in, year out. There really hasn’t been a pause. And then on top of that, you have a pretty traumatized customer base, the automotive manufacturers being the poster child for that, where the disruptions to their business have been so severe that they want to build much bigger buffer stocks than they used to, to just have that kind of insurance. So, they’re frantic not just to get back to where they were pre-COVID, but pre-COVID plus X, right? Because they do not want to risk this kind of disruption again. Now, we will get there but it does take time, the supply chain is making the investments, as we talked about earlier, to build out capacity, but this typically does have an 18- to 24-month lead time, right?
THOMAS: It takes time to --
EUNHAK: It takes time.
THOMAS: -- build the factories, hire the workers, put it into process.
EUNHAK: That’s right. And ironically, it’s harder to get the semiconductor equipment right now, because the semiconductor equipment manufacturers can’t get the chips to make their tools. So, it’s a little bit of a vicious cycle here!
THOMAS: Yeah the snake head eating the tail.
EUNHAK: Exactly! Exactly. Unfortunately, I think the fastest way for these shortages to get resolved will be a demand recession which again unfortunately does look like it’s a greater probability today than it was even a few weeks ago, given everything that’s going on in Europe.
THOMAS: Yeah. Well, that brings up the question of rising interest rates. Fed policy and the conundrum that the Fed is in right now, given what’s happening in energy markets and everything else in the economy. Traditionally, how are semiconductors impacted by this?
EUNHAK: So, big technology and growth names, as you know, they’re very sensitive to higher rates, because their high valuations are based on future growth and future cashflows. So, when interest rates rise, the value of that future cashflow is discounted. We have seen some of the really high flyers on valuations come back to Earth. Now semiconductors, in contrast, they have very high margins, and very strong free cashflows in the present, and I think that they should hold up better relative to some of those technology companies that have profits way in the future. You haven’t seen a huge amount of differentiation quite yet, and I think that’s because the rising interest rate environment is still quite new, and people aren’t quite sure how long it’s going to go.
THOMAS: Yeah we don’t know where we’re going.
EUNHAK: So, I think you’re going to see more of that differentiation to come as interest rates rise.
THOMAS: And what about this growth to value rotation? I mean, is it over, is it going to continue? Are there pockets of semiconductors that are more value-oriented that will hold up?
EUNHAK: That’s a great question. And it’s one I don’t really have an answer to, because I have no idea how long the rotation will last. But I do know that we just had a very lovely decade where semiconductor and actually broader technology stocks were just downright cheap relative to the broader markets. And over the past year and a half, semiconductor stocks and broader technology stocks have ripped. And we’re now at the highest relative valuations to the broader markets than we have seen since the tech bubble of 2001. And I don’t want to scare people with that, because the valuations aren’t nearly as elevated as they were in 2000 and 2001, but they are higher than every period since. And then on top of that, I do think that forward valuations will look very different in reality now that the COVID disruptions, knock on wood, are mainly behind us, at least in the US and Europe. I know it’s still raging in Asia. Once demand and supply have normalized, and we’re living again in sort of an open world, we’re going to see what true earnings power looks like for these companies, because I’m pretty sure that the pandemic pulled in a lot of demand from future years. Whether for semiconductors because people bought more PCs, people bought more gaming consoles because they were stuck at home, they were online more, and now they want to go out to movie theaters and go shopping in malls again. So, I think in that different world what we assume are earnings today will look actually quite different in reality in two years. My thinking now is that there are some laggards in the semiconductor group, like memory stocks and the higher quality names in the analog semiconductor space that should hold up better in a growth to value rotation, because they didn’t participate, and they didn’t get as much of a rerating, if at all, in their multiples.
THOMAS: So, an uncertain 2022, given all of these variables. But how do you think about the sector overall on a three to five-year time horizon? What are the key variables that we should be looking at, and what are these key drivers?
EUNHAK: The key thing for me to watch is PCs. I don’t have a great answer on the timing, but I do think it’s inevitable that PCs will go back to their secular decline curve. Now, as you recall, they were in secular decline before the pandemic began. PC units being shipped are 30 percent higher than they were in 2019. That’s potentially a long way to get back down to the curve that we were on before the pandemic. So, if the PC demand falls off, that could loosen up a lot of capacity at what we call the mature nodes, i.e., the non-leading-edge nodes, in semiconductor manufacturing, and that’s where industrial and automotive semiconductor demand lives as well, i.e., those very markets where we’re in screamingly short supply. So, all of a sudden you’ll have kind of a broader loosening up of supply potentially if PCs fall off. Now, I think ’22 is baked in, in terms of PC demand, but 2023 is a whole other story, and I think PC demand cracking could be the trigger for the next down cycle.
THOMAS: All right, well, we’ll be watching, particularly with those dorky meta glasses on. Eunhak Bae, thanks for joining us. It’s been a fascinating discussion.
EUNHAK: It was great to be here. Thanks so much for having me.
All investing involves risk, including potential loss of principal. Past results are not a reliable indicator of future results. Forward-looking statements should not be considered as guarantees or predictions of future events. This material was current as of the publication date. Wellington assumes no duty to update the content in the event the information changes.
This commentary is provided for informational purposes only. It is not research that is required to be prepared in accordance with legal requirements designed to promote the independence of investment research, and it is not subject to any prohibition on dealing ahead of the dissemination of investment research. It should not be viewed as a current or past recommendation and is not intended to constitute investment advice or an offer to sell or the solicitation of an offer to purchase any securities. It does not take into account the investment objectives, financial situation or needs of any particular person. Wellington Management does not provide legal, tax or accounting advice.
This recording may not be reproduced or distributed in whole or in part, for any purpose, without the express written consent of Wellington Management. Please refer to the disclosures section of this podcast for complete details.
Views expressed are those of the speaker(s) and are subject to change. Other teams may hold different views and make different investment decisions. For professional/institutional investors only. Your capital may be at risk. Podcast produced March 2022.
Wellington Management Company LLP (WMC) is an independently owned investment adviser registered with the US Securities and Exchange Commission (SEC). WMC is also registered with the US Commodity Futures Trading Commission (CFTC) as a commodity trading advisor (CTA) and serves as a CTA to certain clients including commodity pools operated by registered commodity pool operators. WMC provides commodity trading advice to all other clients in reliance on exemptions from CTA registration. WMC, along with its affiliates (collectively, Wellington Management), provides investment management and investment advisory services to institutions around the world. Located in Boston, Massachusetts, Wellington Management also has offices in Chicago, Illinois; Radnor, Pennsylvania; San Francisco, California; Frankfurt; Hong Kong; London; Luxembourg; Milan; Shanghai; Singapore; Sydney; Tokyo; Toronto; and Zurich. This material is prepared for, and authorized for internal use by, designated institutional and professional investors and their consultants or for such other use as may be authorized by Wellington Management. This material and/or its contents are current at the time of writing and may not be reproduced or distributed in whole or in part, for any purpose, without the express written consent of Wellington Management. This material is not intended to constitute investment advice or an offer to sell, or the solicitation of an offer to purchase shares or other securities. Investors should always obtain and read an up-to-date investment services description or prospectus before deciding whether to appoint an investment manager or to invest in a fund. Any views expressed herein are those of the author(s), are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may make different investment decisions for different clients. In Canada, this material is provided by Wellington Management Canada ULC, a British Columbia unlimited liability company registered in the provinces of Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, Quebec, and Saskatchewan in the categories of Portfolio Manager and Exempt Market Dealer.
In Europe (excluding the United Kingdom and Switzerland), this material is provided by Wellington Management Europe GmbH (WME) which is authorized and regulated by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin). This material may only be used in countries where WME is duly authorized to operate and is only directed at eligible counterparties or professional clients as defined under the German Securities Trading Act. This material does not constitute investment advice, a solicitation to invest in financial instruments or information recommending or suggesting an investment strategy within the meaning of Section 85 of the German Securities Trading Act (Wertpapierhandelsgesetz). In the United Kingdom, this material is provided by Wellington Management International Limited (WMIL), a firm authorized and regulated by the Financial Conduct Authority (FCA) in the UK (Reference number: 208573). This material is directed only at eligible counterparties or professional clients as defined under the rules of the FCA. In Switzerland, this material is provided by Wellington Management Switzerland GmbH, a firm registered at the commercial register of the canton of Zurich with number CH-020.4.050.857-7. This material is directed only at Qualified Investors as defined in the Swiss Collective Investment Schemes Act and its implementing ordinance. In Hong Kong, this material is provided to you by Wellington Management Hong Kong Limited (WM Hong Kong), a corporation licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities), and Type 9 (asset management) regulated activities, on the basis that you are a Professional Investor as defined in the Securities and Futures Ordinance. By accepting this material you acknowledge and agree that this material is provided for your use only and that you will not distribute or otherwise make this material available to any person. Wellington Investment Management (Shanghai) Limited is a wholly-owned entity and subsidiary of WM Hong Kong.
In Singapore, this material is provided for your use only by Wellington Management Singapore Pte Ltd (WM Singapore) (Registration Number 201415544E). WM Singapore is regulated by the Monetary Authority of Singapore under a Capital Markets Services Licence to conduct fund management activities and is an exempt financial adviser. By accepting this material you represent that you are a non-retail investor and that you will not copy, distribute or otherwise make this material available to any person. In Australia, Wellington Management Australia Pty Ltd (WM Australia) (ABN 19 167 091 090) has authorized the issue of this material for use solely by wholesale clients (as defined in the Corporations Act 2001). By accepting this material, you acknowledge and agree that this material is provided for your use only and that you will not distribute or otherwise make this material available to any person. Wellington Management Company LLP is exempt from the requirement to hold an Australian financial services licence (AFSL) under the Corporations Act 2001 in respect of financial services provided to wholesale clients in Australia, subject to certain conditions. Financial services provided by Wellington Management Company LLP are regulated by the SEC under the laws and regulatory requirements of the United States, which are different from the laws applying in Australia. In Japan, Wellington Management Japan Pte Ltd (WM Japan) (Registration Number 199504987R) has been registered as a Financial Instruments Firm with registered number: Director General of Kanto Local Finance Bureau (Kin-Sho) Number 428. WM Japan is a member of the Japan Investment Advisers Association (JIAA), the Investment Trusts Association, Japan (ITA) and the Type II Financial Instruments Firms Association (T2FIFA). WMIL, WM Hong Kong, WM Japan, and WM Singapore are also registered as investment advisers with the SEC; however, they will comply with the substantive provisions of the US Investment Advisers Act only with respect to their US clients. ©2022 Wellington Management Company LLP. All rights reserved.