1 00:00:10,920 --> 00:00:15,560 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:15,760 --> 00:00:20,240 Speaker 1: I'm Joe Wisenthal. Uh. My co host Tracy Alloway. She's off. 3 00:00:20,280 --> 00:00:23,960 Speaker 1: She couldn't make today's episode. It's kind of an emergency 4 00:00:24,360 --> 00:00:27,680 Speaker 1: at last minute episode though, because we wanted to do 5 00:00:27,840 --> 00:00:32,080 Speaker 1: something very timely with just the right guest. Obviously, the 6 00:00:32,240 --> 00:00:36,200 Speaker 1: trade tensions with China continuing to ratchet up, and it's 7 00:00:36,240 --> 00:00:40,559 Speaker 1: really becoming less and less I would say about the 8 00:00:40,600 --> 00:00:44,120 Speaker 1: trade deficit and some of these classical topics that we 9 00:00:44,159 --> 00:00:46,960 Speaker 1: think of in a trade war, and much more about 10 00:00:47,040 --> 00:00:50,840 Speaker 1: this sort of brewing technology cold war as people are 11 00:00:50,880 --> 00:00:54,240 Speaker 1: putting it, and the moves that the Trump administration has 12 00:00:54,360 --> 00:00:59,080 Speaker 1: taken against some of China's big tech companies. Today, I'm 13 00:00:59,120 --> 00:01:02,280 Speaker 1: going to be speaking on the subject with a previous 14 00:01:02,320 --> 00:01:05,800 Speaker 1: Odd Lots guest. Going to be talking with Dan Wong. 15 00:01:05,880 --> 00:01:10,039 Speaker 1: He's a technology analyst at gav Quel dragon Omics. He's 16 00:01:10,080 --> 00:01:14,440 Speaker 1: also a Bloomberg opinion columnist, which is very cool. You 17 00:01:14,520 --> 00:01:16,959 Speaker 1: might recall we spoke to Dan a while ago about 18 00:01:16,959 --> 00:01:21,360 Speaker 1: the China Initiative, the endeavor on the part of the 19 00:01:21,440 --> 00:01:26,040 Speaker 1: Chinese government to really sort of build its own domestic 20 00:01:26,560 --> 00:01:29,640 Speaker 1: leadership and all these big tech areas. So Dan is 21 00:01:29,720 --> 00:01:32,960 Speaker 1: really the perfect person to discuss these new developments with. 22 00:01:33,480 --> 00:01:35,919 Speaker 1: Wanted to get him on, wanted to get his perspective 23 00:01:36,080 --> 00:01:40,080 Speaker 1: on the latest development. So without further ado, I want 24 00:01:40,080 --> 00:01:42,880 Speaker 1: to bring in Uh Dan Dan Wong, thank you very 25 00:01:42,920 --> 00:01:48,400 Speaker 1: much for joining us. So obviously pretty uh, pretty interesting 26 00:01:49,080 --> 00:01:51,600 Speaker 1: moves we've seen over the last few weeks, a very 27 00:01:51,680 --> 00:01:56,320 Speaker 1: serious ratcheting up in the trade war talks as President 28 00:01:56,360 --> 00:02:00,360 Speaker 1: Trump has moved to uh really uh put the pressure 29 00:02:00,400 --> 00:02:04,560 Speaker 1: on Huawei, major Chinese tech giant. What do you describe 30 00:02:04,600 --> 00:02:07,200 Speaker 1: to us to start? What is Huahwei? What is their 31 00:02:07,280 --> 00:02:12,239 Speaker 1: significant in the global or in the Chinese tech ecosystem? 32 00:02:12,240 --> 00:02:14,560 Speaker 1: Where did they come from? How did they become so important? 33 00:02:15,080 --> 00:02:18,519 Speaker 1: So I think Huawei is the most important technology company 34 00:02:18,520 --> 00:02:21,560 Speaker 1: in China uh, and it has a few major business lines. 35 00:02:22,000 --> 00:02:24,800 Speaker 1: I think the two most important ones are it's smartphone 36 00:02:24,840 --> 00:02:28,280 Speaker 1: business UH and then it's a network equipment business. So 37 00:02:28,320 --> 00:02:31,640 Speaker 1: as a matter of comparison, Huawei sold about as many 38 00:02:31,720 --> 00:02:36,440 Speaker 1: smartphones as Apple did last year, although much lower profits UM. 39 00:02:36,480 --> 00:02:39,760 Speaker 1: But it is a major seller of smartphones around the world, 40 00:02:40,040 --> 00:02:42,640 Speaker 1: not just in China but also in Southeast Asia and 41 00:02:42,680 --> 00:02:46,640 Speaker 1: now increasingly UH in Europe. The other major business line 42 00:02:46,639 --> 00:02:50,480 Speaker 1: it has is network infrastructure equipment. So all of these 43 00:02:50,480 --> 00:02:54,880 Speaker 1: things that make mobile calling possible and for G or 44 00:02:55,000 --> 00:02:57,920 Speaker 1: LTE possible. This a lot of it, at least outside 45 00:02:57,919 --> 00:03:01,600 Speaker 1: the US, is provided by Huawei, And as the world 46 00:03:01,680 --> 00:03:04,800 Speaker 1: is getting ready to transition to the next generation, the 47 00:03:04,840 --> 00:03:09,280 Speaker 1: fifth generation of mobile network technologies or five G, Huawei 48 00:03:09,520 --> 00:03:13,200 Speaker 1: is a pretty major player in that ecosystem. How cutting 49 00:03:13,320 --> 00:03:15,959 Speaker 1: edge are they? I mean, if you look at the 50 00:03:16,000 --> 00:03:19,359 Speaker 1: company and I guess either on both lines, whether it's 51 00:03:19,360 --> 00:03:23,240 Speaker 1: smartphones or networking equipment, are they sort of a best 52 00:03:23,280 --> 00:03:26,560 Speaker 1: of breed player on this stuff? I think the consensus 53 00:03:26,600 --> 00:03:29,160 Speaker 1: is that Huawei is very competent on both the smartphone 54 00:03:29,200 --> 00:03:32,600 Speaker 1: business and then also the network business. So on the smartphones, 55 00:03:33,040 --> 00:03:36,160 Speaker 1: I think people in the US don't really get to 56 00:03:36,200 --> 00:03:38,800 Speaker 1: see this, But a lot of the reason that Apple 57 00:03:38,840 --> 00:03:41,280 Speaker 1: has been doing not so well in China is that 58 00:03:41,480 --> 00:03:45,000 Speaker 1: basically Huawei and a few other players have made pretty 59 00:03:45,000 --> 00:03:48,920 Speaker 1: good phones at quite a bit lower prices than Apple does. 60 00:03:49,400 --> 00:03:52,160 Speaker 1: In fact, Samsung has been almost completely squeezed out of 61 00:03:52,200 --> 00:03:55,800 Speaker 1: the China market because Huawis phones are really good, and 62 00:03:56,040 --> 00:03:58,920 Speaker 1: Huawei is giving a run for Samsung's money basically and 63 00:03:59,520 --> 00:04:02,240 Speaker 1: many more kids in the world. But you know, plausibly, 64 00:04:02,280 --> 00:04:04,520 Speaker 1: Huawei is a little bit behind, are quite a lot 65 00:04:04,560 --> 00:04:08,240 Speaker 1: behind Apple on the smartphone business. On the network equipment business, 66 00:04:08,440 --> 00:04:12,080 Speaker 1: I think it is arguably really eating everything I hear 67 00:04:12,280 --> 00:04:16,600 Speaker 1: is that basically the network equipment business. Uh. Not only 68 00:04:16,680 --> 00:04:19,359 Speaker 1: is it selling as good or cutting edge equipment or 69 00:04:19,360 --> 00:04:22,080 Speaker 1: even better equipment than its competitors, which are mostly Ericson 70 00:04:22,080 --> 00:04:26,159 Speaker 1: and Nokia, it is also often significantly cheaper. Talk to 71 00:04:26,240 --> 00:04:32,040 Speaker 1: us about the action that Trump took. Obviously, the companies 72 00:04:32,080 --> 00:04:36,200 Speaker 1: that supplied technology to Huahwei, including many American companies, are 73 00:04:36,240 --> 00:04:40,440 Speaker 1: now theoretically restricted from doing business with them. So how 74 00:04:40,560 --> 00:04:45,600 Speaker 1: existential is this to Huahwei's business? Uh, this move from 75 00:04:45,600 --> 00:04:49,920 Speaker 1: the Trump administration, I think it is a pretty existential threat. Now, 76 00:04:49,960 --> 00:04:52,719 Speaker 1: what the Trump administration did was about two weeks ago 77 00:04:52,839 --> 00:04:56,799 Speaker 1: it added Huawei to this UH list called the Entity List. 78 00:04:57,080 --> 00:05:01,239 Speaker 1: And what this is effectively as this export blacklist, which 79 00:05:01,279 --> 00:05:06,039 Speaker 1: doesn't allow US companies to export any equipment basically any 80 00:05:06,040 --> 00:05:10,600 Speaker 1: components or any technologies over to Huawei. And I think 81 00:05:10,640 --> 00:05:13,480 Speaker 1: this is a really big deal because Huawei depends very 82 00:05:13,520 --> 00:05:17,120 Speaker 1: significantly on US technology to make a lot of its 83 00:05:17,160 --> 00:05:20,840 Speaker 1: own systems function. So on the smartphone side, it needs 84 00:05:20,839 --> 00:05:23,680 Speaker 1: a lot of different types of chips. On the network 85 00:05:23,680 --> 00:05:25,760 Speaker 1: equipment side, it also needs a lot of chips, and 86 00:05:25,760 --> 00:05:30,080 Speaker 1: then also some specialty laser products. Not only is the 87 00:05:30,200 --> 00:05:34,440 Speaker 1: US are the US chips companies prevented from selling to Huawei. Basically, 88 00:05:34,480 --> 00:05:37,160 Speaker 1: the US is able to cut off Google's Android from 89 00:05:37,200 --> 00:05:40,280 Speaker 1: supplying to Huawei as well. This is another big risk 90 00:05:40,640 --> 00:05:44,560 Speaker 1: this to the company. This is able to Basically I 91 00:05:44,560 --> 00:05:48,160 Speaker 1: think there's a good chance that Huawei's smartphone sales overseas 92 00:05:48,160 --> 00:05:51,080 Speaker 1: outside China could very well collapse this year because it 93 00:05:51,080 --> 00:05:54,920 Speaker 1: doesn't have access to Android. And uh, there's just a 94 00:05:54,920 --> 00:05:59,480 Speaker 1: lot of components that Huawei needs that are almost exclusively 95 00:05:59,520 --> 00:06:02,120 Speaker 1: supplied by the US. There's a lot of these types 96 00:06:02,160 --> 00:06:03,680 Speaker 1: of chips, you know, if you have if you lack 97 00:06:03,760 --> 00:06:07,320 Speaker 1: even a single chip inside inn a system, the entire 98 00:06:07,400 --> 00:06:09,400 Speaker 1: thing may not work. And so I think this is 99 00:06:09,440 --> 00:06:11,480 Speaker 1: a pretty big deal. And not only is the US 100 00:06:11,560 --> 00:06:15,880 Speaker 1: able to stop basically U S companies from supplying to Halweih, 101 00:06:15,920 --> 00:06:18,760 Speaker 1: the US has a little bit of an extra territorial 102 00:06:18,839 --> 00:06:21,560 Speaker 1: reach as well. So the U S Department of Commerce 103 00:06:21,920 --> 00:06:25,960 Speaker 1: defines has this di Minimus threshold standard. If it takes 104 00:06:25,960 --> 00:06:28,400 Speaker 1: a look at any foreign product sold by let's say 105 00:06:28,440 --> 00:06:32,719 Speaker 1: European or Japanese or Korean company, and if over the 106 00:06:32,760 --> 00:06:35,479 Speaker 1: value was generated in the US, then the U S 107 00:06:35,520 --> 00:06:39,120 Speaker 1: Department of Commerce asserts that to be a US product. 108 00:06:39,480 --> 00:06:42,040 Speaker 1: And so in this way, basically it can deny non 109 00:06:42,160 --> 00:06:45,520 Speaker 1: U S firms from selling to the Chinese UH controlled 110 00:06:45,600 --> 00:06:48,280 Speaker 1: entity in this case allway as well. And so from 111 00:06:48,279 --> 00:06:51,000 Speaker 1: news reports we've seen that basically in fine On, a 112 00:06:51,160 --> 00:06:55,599 Speaker 1: German semi conductor firm, arm a UK semi conductor firm, 113 00:06:55,880 --> 00:06:58,880 Speaker 1: and then also Panasonic, a Japanese firm, all have announced 114 00:06:58,920 --> 00:07:01,160 Speaker 1: that they are going to stop us supplying to Haalwei. 115 00:07:01,920 --> 00:07:04,760 Speaker 1: And as soon as this happened, the founder came out 116 00:07:04,920 --> 00:07:07,120 Speaker 1: saying that's basically this may not be too big of 117 00:07:07,160 --> 00:07:09,480 Speaker 1: a deal. We have plenty of spare tires. I really 118 00:07:09,520 --> 00:07:11,560 Speaker 1: don't buy that argument. I think that it is very 119 00:07:11,600 --> 00:07:14,960 Speaker 1: unlikely that while we can still survive basically being cut 120 00:07:15,000 --> 00:07:19,200 Speaker 1: off from almost all of its forts suppliers. So I mean, 121 00:07:19,280 --> 00:07:22,200 Speaker 1: that's exactly right. I mean there had been reports and 122 00:07:22,240 --> 00:07:26,640 Speaker 1: I guess Huawei itself saying that it had a stockpile 123 00:07:26,840 --> 00:07:30,600 Speaker 1: of chips. Maybe it anticipated a potential action like this, 124 00:07:31,160 --> 00:07:34,880 Speaker 1: but ultimately, in your view, it just doesn't have many 125 00:07:34,920 --> 00:07:38,240 Speaker 1: cards to play as long as this action by the 126 00:07:38,240 --> 00:07:43,640 Speaker 1: Trump administration remains in effect. That's right. It's really striking 127 00:07:43,880 --> 00:07:48,040 Speaker 1: just hearing you describe the severity of this, and to 128 00:07:48,200 --> 00:07:50,640 Speaker 1: think that a few months ago we were talking about 129 00:07:51,240 --> 00:07:54,600 Speaker 1: China is going to increase its purchase of US soybeans 130 00:07:54,680 --> 00:07:57,360 Speaker 1: and that was going to help get a deal you 131 00:07:57,400 --> 00:08:01,920 Speaker 1: can just send. This is a very serious escalation. I 132 00:08:01,960 --> 00:08:04,680 Speaker 1: think it is a very serious escalation that basically the 133 00:08:04,760 --> 00:08:08,360 Speaker 1: US has this ability to turn off one of China's 134 00:08:08,400 --> 00:08:11,800 Speaker 1: most important companies period that this is a company that 135 00:08:12,360 --> 00:08:15,080 Speaker 1: is really important domestically in China as one of the 136 00:08:15,160 --> 00:08:18,480 Speaker 1: few firms that really do have does have an international 137 00:08:18,520 --> 00:08:22,600 Speaker 1: presence selling smartphones all over the world outside of the US. 138 00:08:22,920 --> 00:08:25,920 Speaker 1: Then also selling network equipment all over the world, but 139 00:08:26,000 --> 00:08:28,720 Speaker 1: again outside the US, just to illustrate a little bit 140 00:08:28,760 --> 00:08:32,400 Speaker 1: of how important this company is. Basically, you know, if 141 00:08:32,440 --> 00:08:35,960 Speaker 1: you ignore the smartphones and focus on the network equipment business, 142 00:08:36,240 --> 00:08:40,680 Speaker 1: it's become an incredibly consolidated market. So always main competitors 143 00:08:40,679 --> 00:08:43,120 Speaker 1: selling four gen now as soon to be five G 144 00:08:43,280 --> 00:08:46,760 Speaker 1: equipment are ericson in Nokia. Basically a lot of the 145 00:08:46,840 --> 00:08:50,760 Speaker 1: US position has pretty much vanished. These firms that used 146 00:08:50,800 --> 00:08:55,040 Speaker 1: to be major US of phone technology mobile telephony technology 147 00:08:55,480 --> 00:09:01,120 Speaker 1: companies included names like Motorola, Lucent and in Canada based Nortel. 148 00:09:01,840 --> 00:09:06,000 Speaker 1: Basically none of these are going independent concerns anymore, and 149 00:09:06,200 --> 00:09:09,079 Speaker 1: a Huawei Arison and Nokia are really the big players 150 00:09:09,120 --> 00:09:11,920 Speaker 1: left in the game. You know, if you go is 151 00:09:12,320 --> 00:09:15,120 Speaker 1: an incredibly consolidated market, and if the US is able 152 00:09:15,120 --> 00:09:18,400 Speaker 1: to knock out the biggest player in a consolidated market, 153 00:09:18,400 --> 00:09:21,320 Speaker 1: bring the number of players from three to two. Basically 154 00:09:21,360 --> 00:09:24,840 Speaker 1: the prices may not rise by only a few percentage points. 155 00:09:24,880 --> 00:09:28,559 Speaker 1: For service providers let's say like Deutsche Telecom or Vota 156 00:09:28,600 --> 00:09:32,640 Speaker 1: Phone or British Telecom, prices can may well double because 157 00:09:32,679 --> 00:09:34,760 Speaker 1: there's just so much less competition and there's just so 158 00:09:34,840 --> 00:09:37,840 Speaker 1: much more collusion when you have the world being supplied 159 00:09:37,840 --> 00:09:40,560 Speaker 1: by this Nordic duopoly. And so, you know, I think 160 00:09:40,559 --> 00:09:43,800 Speaker 1: this is the actions are of the US are having 161 00:09:43,920 --> 00:09:47,200 Speaker 1: reverberations around the world on not just in the U 162 00:09:47,240 --> 00:09:50,280 Speaker 1: S and China as well. Is there something about the 163 00:09:50,280 --> 00:09:55,680 Speaker 1: telecom equipment industry that has naturally caused it to have 164 00:09:55,840 --> 00:09:58,280 Speaker 1: so many major flame outs. I mean you I forgot 165 00:09:58,400 --> 00:10:02,480 Speaker 1: you know all these names that you mentioned, like Motorola, Lucent, 166 00:10:02,760 --> 00:10:06,640 Speaker 1: nor Tell, all those companies like just sort of I 167 00:10:06,640 --> 00:10:09,360 Speaker 1: don't remember exactly. I think when a Motorola like selled 168 00:10:09,360 --> 00:10:12,440 Speaker 1: a Google or something like that. Uh yeah, all these 169 00:10:12,440 --> 00:10:16,160 Speaker 1: companies sort of like evaporated as shelves of their former selves. 170 00:10:16,320 --> 00:10:21,120 Speaker 1: Why has this business been so brutal and gotten to 171 00:10:21,160 --> 00:10:27,280 Speaker 1: the point where there's just a few a few oleglopolistic players. Arguably, well, arguably, 172 00:10:27,320 --> 00:10:29,440 Speaker 1: I think that is a lot of the story with 173 00:10:29,559 --> 00:10:33,400 Speaker 1: the uh, you know, chech general technology sector and not 174 00:10:33,520 --> 00:10:35,760 Speaker 1: so much talking about the Internet companies here, although I 175 00:10:35,760 --> 00:10:38,160 Speaker 1: know that's a big debate. Basically, if you look at 176 00:10:38,200 --> 00:10:41,040 Speaker 1: something like chips, something really striking to me recently was 177 00:10:41,120 --> 00:10:45,120 Speaker 1: that Apple had to settle very long running litigations with 178 00:10:45,200 --> 00:10:49,480 Speaker 1: Qualcom firm. It's been embroiled with in litigation for a 179 00:10:49,520 --> 00:10:53,120 Speaker 1: really long time, mostly because a firm like Intel couldn't 180 00:10:53,120 --> 00:10:55,920 Speaker 1: step up and be a credible supplier on something called 181 00:10:56,000 --> 00:10:59,080 Speaker 1: moting chips. And so just generally, I think the story 182 00:10:59,240 --> 00:11:04,160 Speaker 1: in this hardware space and technology is consolidation everywhere and uh, 183 00:11:04,440 --> 00:11:09,120 Speaker 1: limited players in basically every segment of hardware technologies. Is 184 00:11:09,160 --> 00:11:12,240 Speaker 1: it a situation where it's just really hard technologically to 185 00:11:12,360 --> 00:11:14,800 Speaker 1: produce this at scale? And so even you know, you 186 00:11:14,840 --> 00:11:18,120 Speaker 1: mentioned a giant like Intel. I think they're still the 187 00:11:18,120 --> 00:11:22,240 Speaker 1: biggest semiconductor company in the world and they're unable to 188 00:11:22,520 --> 00:11:26,439 Speaker 1: deliver these motive chips to Apple at scale. Is it 189 00:11:26,559 --> 00:11:29,800 Speaker 1: just because it's hard stuff to get right and get 190 00:11:29,840 --> 00:11:32,920 Speaker 1: good and doing high quantity? My understanding is that this 191 00:11:33,000 --> 00:11:35,320 Speaker 1: is not one of the most difficult technologies that the 192 00:11:35,360 --> 00:11:38,240 Speaker 1: world can produce. UM. A lot of this is still 193 00:11:38,280 --> 00:11:41,240 Speaker 1: fairly low margin, and that's uh one of the reasons 194 00:11:41,240 --> 00:11:44,800 Speaker 1: why so many firms have accidented the market. So one 195 00:11:44,800 --> 00:11:48,000 Speaker 1: of the things I mentioned it in the intro um. 196 00:11:48,040 --> 00:11:52,880 Speaker 1: But obviously last time you're on the podcast, we're talking 197 00:11:52,920 --> 00:11:58,000 Speaker 1: about the China Initiative and its efforts to become a 198 00:11:58,080 --> 00:12:00,760 Speaker 1: world leader at all these different areas like aerospace and 199 00:12:00,840 --> 00:12:05,280 Speaker 1: semiconductor and medical equipment and robotics, transportation, things like that. 200 00:12:06,040 --> 00:12:10,440 Speaker 1: The fact that the US can, in theory still unilaterally 201 00:12:10,480 --> 00:12:14,800 Speaker 1: deliver a death penalty to a major Chinese player. It 202 00:12:15,000 --> 00:12:18,760 Speaker 1: can't do anything, I would imagine except remind the Chinese 203 00:12:18,880 --> 00:12:21,679 Speaker 1: leadership how important it is to build up their own 204 00:12:21,760 --> 00:12:25,400 Speaker 1: domestic tech sector. I think that's exactly right. And I 205 00:12:25,440 --> 00:12:28,240 Speaker 1: think in an area like semiconductors is where the U 206 00:12:28,320 --> 00:12:31,360 Speaker 1: S power is clearest, that basically a lot of the 207 00:12:31,360 --> 00:12:34,480 Speaker 1: world has given up on semiconductors. A lot of the 208 00:12:34,480 --> 00:12:37,160 Speaker 1: European firms that used to be big have gone away, 209 00:12:37,640 --> 00:12:40,920 Speaker 1: the same ghost for Japan uh and China's trying to 210 00:12:40,960 --> 00:12:44,520 Speaker 1: work really hard to enter this technology space, in part 211 00:12:44,559 --> 00:12:48,480 Speaker 1: because it is just so owned by the US. And 212 00:12:48,520 --> 00:12:51,480 Speaker 1: I think that, um, you know, the Chinese response to 213 00:12:51,679 --> 00:12:53,439 Speaker 1: a lot of these actions really has to be to 214 00:12:53,520 --> 00:12:56,680 Speaker 1: try to double down on its efforts to develop all 215 00:12:56,679 --> 00:12:59,839 Speaker 1: of these different technologies. Not only can it basically not 216 00:13:00,160 --> 00:13:03,400 Speaker 1: count on US supply, a lot of foreign supply may 217 00:13:03,400 --> 00:13:05,559 Speaker 1: not be able to flow to China because of this 218 00:13:05,720 --> 00:13:08,760 Speaker 1: the Minimus threshold. And you know, I think it is 219 00:13:08,800 --> 00:13:13,120 Speaker 1: politically intolerable for the Chinese that the US has this 220 00:13:13,200 --> 00:13:16,920 Speaker 1: at will ability to shut off a major technology company. 221 00:13:17,040 --> 00:13:19,319 Speaker 1: This is not the first time over the last year 222 00:13:19,400 --> 00:13:21,280 Speaker 1: that the US has done this. In fact, the US 223 00:13:21,360 --> 00:13:23,840 Speaker 1: has done this three times over the last twelve months. 224 00:13:24,559 --> 00:13:26,839 Speaker 1: In April last year, the U s A. This is 225 00:13:26,920 --> 00:13:29,280 Speaker 1: z T, which is kind of like a small Quahwei 226 00:13:29,400 --> 00:13:33,440 Speaker 1: with both smartphone presents and then also network equipment presence. 227 00:13:34,160 --> 00:13:36,440 Speaker 1: And also did this to a company called fusansin KLA, 228 00:13:36,559 --> 00:13:39,360 Speaker 1: which is a memory chip maker in Southeast China. And 229 00:13:39,400 --> 00:13:41,760 Speaker 1: now the US is doing this to Huawei, And so 230 00:13:41,840 --> 00:13:45,200 Speaker 1: I think the Chinese leadership really feels that needs to 231 00:13:45,200 --> 00:13:48,040 Speaker 1: do a lot more to promote its own capabilities and 232 00:13:48,200 --> 00:13:52,880 Speaker 1: these trips. So is this always where it was inevitably headed? 233 00:13:52,960 --> 00:13:57,800 Speaker 1: Because when Donald Trump decided to really change the US 234 00:13:57,920 --> 00:14:02,160 Speaker 1: trading polished your with China the start of administration, the 235 00:14:02,240 --> 00:14:06,480 Speaker 1: critique was that, you know, his complaints about the trade 236 00:14:06,520 --> 00:14:10,240 Speaker 1: deficit and how much we import from China were off 237 00:14:10,280 --> 00:14:14,120 Speaker 1: the mark or maybe not clear economic thinking, but that 238 00:14:14,160 --> 00:14:17,920 Speaker 1: there really was some merit to this idea that on 239 00:14:18,200 --> 00:14:23,000 Speaker 1: areas like technology and intellectual privacy, China really did pose 240 00:14:23,120 --> 00:14:26,040 Speaker 1: some sort of threat and it didn't play by the rules, 241 00:14:26,160 --> 00:14:30,640 Speaker 1: arguably according to some people we've spoken with, So these 242 00:14:30,720 --> 00:14:34,160 Speaker 1: moves against the Chinese tech sector, is this sort of 243 00:14:34,200 --> 00:14:37,880 Speaker 1: always what it was really about? I think that's a 244 00:14:37,920 --> 00:14:40,840 Speaker 1: really fair assessment. And basically, if you look at the 245 00:14:40,880 --> 00:14:44,320 Speaker 1: report that launched this trade war UH and referring specifically 246 00:14:44,360 --> 00:14:47,720 Speaker 1: to the US Trade Representatives Section three or one report, 247 00:14:48,160 --> 00:14:51,160 Speaker 1: Basically it lists a lot of these technology issues of 248 00:14:51,240 --> 00:14:55,000 Speaker 1: front and center and core, including basically the term that 249 00:14:55,040 --> 00:14:58,440 Speaker 1: they use force technology transfer UH and it mentions made 250 00:14:58,480 --> 00:15:01,920 Speaker 1: in China. I believe over a hundred times in the 251 00:15:01,920 --> 00:15:06,160 Speaker 1: section three of one report basically that the US feels 252 00:15:06,280 --> 00:15:09,400 Speaker 1: challenged on a lot of these technology areas, that it 253 00:15:09,480 --> 00:15:13,040 Speaker 1: alleges that China doesn't play fair trying to compete against 254 00:15:13,040 --> 00:15:15,400 Speaker 1: the US and a lot of these areas, and so 255 00:15:15,560 --> 00:15:39,320 Speaker 1: it really has to maintain its technological edge over the Chinese. 256 00:15:43,800 --> 00:15:47,560 Speaker 1: Now as of right now when we're recording this UM, 257 00:15:47,600 --> 00:15:49,840 Speaker 1: I guess people are still holding out some hope for 258 00:15:49,880 --> 00:15:54,200 Speaker 1: a deal. If you talk to investors and traders, they're like, oh, 259 00:15:54,280 --> 00:15:57,760 Speaker 1: they'll come to something. There's an upcoming G twenty meeting 260 00:15:58,040 --> 00:16:01,760 Speaker 1: and Trump and she shouldn't paying or might meet. Maybe 261 00:16:01,800 --> 00:16:04,600 Speaker 1: they'll shake hands there and there will be a thought. 262 00:16:05,160 --> 00:16:08,400 Speaker 1: Do you see any possibility of a thought on the 263 00:16:08,440 --> 00:16:11,320 Speaker 1: tensions here still at this point or have we sort 264 00:16:11,360 --> 00:16:14,960 Speaker 1: of hit a point of no return in which the 265 00:16:15,040 --> 00:16:17,200 Speaker 1: book sides are really going to be dug in for 266 00:16:17,280 --> 00:16:21,640 Speaker 1: a while, and the relationship between these two countries is 267 00:16:21,680 --> 00:16:26,440 Speaker 1: sort of permanently and revocably changed. I think it is 268 00:16:27,520 --> 00:16:31,480 Speaker 1: a permanent change in many ways. Now, I think it 269 00:16:31,560 --> 00:16:33,840 Speaker 1: is really difficult to predict whether there will be a deal. 270 00:16:34,080 --> 00:16:37,080 Speaker 1: I think it is at least still plausible that you 271 00:16:37,120 --> 00:16:40,080 Speaker 1: can read a lot of the actions in recent weeks, 272 00:16:40,240 --> 00:16:42,480 Speaker 1: ever since the Trump tweets on the tariffs on the 273 00:16:42,600 --> 00:16:46,560 Speaker 1: five to be basically this negotiating, you know, tactic to 274 00:16:46,640 --> 00:16:48,840 Speaker 1: get the Chinese to concede on a little bit more 275 00:16:48,960 --> 00:16:51,720 Speaker 1: basically at the end of the process um or you know, 276 00:16:51,800 --> 00:16:54,840 Speaker 1: maybe it is the case that both sides are basically 277 00:16:54,840 --> 00:16:57,800 Speaker 1: walking away from a deal. And if you had to 278 00:16:57,840 --> 00:16:59,840 Speaker 1: push me, I would say it's a little bit of 279 00:16:59,880 --> 00:17:02,360 Speaker 1: the ladder. It is um you know, especially with this 280 00:17:02,520 --> 00:17:04,960 Speaker 1: escalation on Huawei, I think it just makes it much 281 00:17:04,960 --> 00:17:07,679 Speaker 1: more difficult for the On the one handed, you know, 282 00:17:07,960 --> 00:17:10,359 Speaker 1: taking down one of their major companies, it's really a 283 00:17:10,400 --> 00:17:14,520 Speaker 1: big deal, and Chinese diplomats are not willing to see 284 00:17:14,520 --> 00:17:17,520 Speaker 1: one of its major companies fail. On the other hand, 285 00:17:17,880 --> 00:17:19,879 Speaker 1: you know, it just makes it much more difficult to 286 00:17:19,920 --> 00:17:22,080 Speaker 1: come to a deal. But one core point that I 287 00:17:22,080 --> 00:17:24,840 Speaker 1: want to make is that regardless of whether there will 288 00:17:24,880 --> 00:17:26,880 Speaker 1: be a trade deal, I think a lot of these 289 00:17:26,880 --> 00:17:32,040 Speaker 1: technology issues are permanently changed. Basically, by that, I mean 290 00:17:32,119 --> 00:17:34,960 Speaker 1: that while the White House was prosecuting this trade war, 291 00:17:35,400 --> 00:17:37,560 Speaker 1: Congress has handed a lot of tools so the rest 292 00:17:37,560 --> 00:17:40,560 Speaker 1: of the bureaucracy to deal with the tech sector, not 293 00:17:40,640 --> 00:17:43,360 Speaker 1: just in China but also in the US by passing 294 00:17:43,680 --> 00:17:47,479 Speaker 1: various laws. Dan Agri go into that further, I hadn't 295 00:17:47,560 --> 00:17:49,600 Speaker 1: seen much or heard much about this. So what are 296 00:17:49,720 --> 00:17:53,160 Speaker 1: the sort of uh, the specific laws that Congress has 297 00:17:53,240 --> 00:17:57,040 Speaker 1: passed to what you're referring. So I think this is 298 00:17:57,200 --> 00:18:00,679 Speaker 1: the shows that the US has a really wide toolbox 299 00:18:00,760 --> 00:18:03,920 Speaker 1: to deal with the Chinese and then also to some extent, 300 00:18:03,960 --> 00:18:08,280 Speaker 1: the American tech sector. One recent legislative change is the 301 00:18:08,320 --> 00:18:12,399 Speaker 1: Foreign Investment Risk Review Modernization Act or FIRMA. So this 302 00:18:12,480 --> 00:18:15,080 Speaker 1: is a bill that Congress passed last year that significantly 303 00:18:15,119 --> 00:18:19,399 Speaker 1: strengthens this fairly obscure government body called CIFIUS c f 304 00:18:19,480 --> 00:18:21,720 Speaker 1: i U S, which is the Committee for Foreign Investment 305 00:18:21,960 --> 00:18:27,159 Speaker 1: into the United States. Previously, SIFIAS was scrutinizing acquisitions of 306 00:18:27,440 --> 00:18:31,720 Speaker 1: US companies by foreigners for a national security review. And 307 00:18:32,520 --> 00:18:35,840 Speaker 1: you know, if this uh interagency body, which is staffed 308 00:18:35,880 --> 00:18:38,919 Speaker 1: mostly by Treasury but also has representatives from Department of 309 00:18:38,960 --> 00:18:41,520 Speaker 1: Defense and Department of Commerce and a few other places, 310 00:18:41,680 --> 00:18:45,760 Speaker 1: decides that a foreigner cannot own a US asset, then 311 00:18:45,800 --> 00:18:48,879 Speaker 1: it has the ability to uh, you know, block that acquisition. 312 00:18:49,480 --> 00:18:52,720 Speaker 1: And what firma the legislative act passed in August did 313 00:18:53,040 --> 00:18:57,040 Speaker 1: was expand the SIFEST power to scrutinize beyond acquisitions to 314 00:18:57,359 --> 00:19:01,360 Speaker 1: into non controlling investments. So basically, a deal now that 315 00:19:01,800 --> 00:19:06,359 Speaker 1: involves a foreigner that is offers a foreigner any information 316 00:19:06,440 --> 00:19:10,960 Speaker 1: rights or decision making rights has the chance to be rejected. 317 00:19:11,240 --> 00:19:16,120 Speaker 1: And this is applies mostly to technology companies, even unlisted ones. 318 00:19:16,680 --> 00:19:19,280 Speaker 1: So I think the interesting news from last month was 319 00:19:19,320 --> 00:19:23,680 Speaker 1: that siphias forced the divestment by a Chinese company of Grinder, 320 00:19:24,000 --> 00:19:26,080 Speaker 1: which is, uh, you know, I'm not sure if everybody 321 00:19:26,080 --> 00:19:28,840 Speaker 1: on Bloomberg knows this, but it is a gay dating app. 322 00:19:29,080 --> 00:19:31,359 Speaker 1: This was a gay dating app that had been acquired 323 00:19:31,440 --> 00:19:35,439 Speaker 1: by a Chinese firm. The sifia's body has decided that 324 00:19:35,520 --> 00:19:38,000 Speaker 1: this is a national security risk for the Chinese to 325 00:19:38,040 --> 00:19:40,840 Speaker 1: own our gay dating apps and therefore must be divested. 326 00:19:41,160 --> 00:19:44,520 Speaker 1: And that's because of the data and the information that 327 00:19:44,680 --> 00:19:48,480 Speaker 1: could be gleaned from that app presumably, but Siphias is 328 00:19:48,560 --> 00:19:52,159 Speaker 1: not very often open about publishing these opinions. But I 329 00:19:52,160 --> 00:19:55,320 Speaker 1: think that is the right idea. What are there Are 330 00:19:55,359 --> 00:19:58,240 Speaker 1: there any other tools that the US has available to 331 00:19:58,320 --> 00:20:02,440 Speaker 1: you mentioned Sifia's I've usually we talked about export controls 332 00:20:02,520 --> 00:20:05,439 Speaker 1: in the beginning. Are there any other tools in the 333 00:20:05,480 --> 00:20:09,879 Speaker 1: administration's toolbox at this point to further apply pressure on 334 00:20:10,480 --> 00:20:14,600 Speaker 1: Chinese investors or Chinese tech or Chinese companies. Another tool 335 00:20:14,840 --> 00:20:18,439 Speaker 1: tool in the toolbox is um criminal prosecutions from the 336 00:20:18,480 --> 00:20:22,000 Speaker 1: Department of Justice, and there is a formal named initiative here. 337 00:20:22,160 --> 00:20:25,840 Speaker 1: Basically it is called the China Initiative. Right before Jeff Sessions, 338 00:20:25,920 --> 00:20:29,120 Speaker 1: the previous Attorney General, departed from his post, he announced 339 00:20:29,160 --> 00:20:32,400 Speaker 1: this China Initiative, which is this political instruction on the 340 00:20:32,440 --> 00:20:35,120 Speaker 1: rest of the bureaucracy to scrutinized Chinese actions a lot 341 00:20:35,119 --> 00:20:38,560 Speaker 1: more closely. It includes a lot of things, but mostly 342 00:20:39,000 --> 00:20:43,200 Speaker 1: ideas like trade secret misappropriation. If a Chinese person or 343 00:20:43,240 --> 00:20:45,160 Speaker 1: firm has done that, then the US ought to really 344 00:20:45,160 --> 00:20:48,200 Speaker 1: bring it to prosecution. One interesting thing to note about 345 00:20:48,200 --> 00:20:51,080 Speaker 1: the China initiative is that it designates five U S 346 00:20:51,080 --> 00:20:53,760 Speaker 1: attorneys as part of a working group to carry this out. 347 00:20:54,160 --> 00:20:56,080 Speaker 1: One of the five US attorneys is the U S 348 00:20:56,119 --> 00:20:58,359 Speaker 1: Attorney for the Eastern District of New York, who is 349 00:20:58,400 --> 00:21:01,240 Speaker 1: the person who issued the arrest warrant for Moment Show, 350 00:21:01,320 --> 00:21:04,080 Speaker 1: who is the CFO of Allway. This is a very 351 00:21:04,160 --> 00:21:08,840 Speaker 1: novel sort of prosecution, basically nabbing the CFO of a 352 00:21:08,840 --> 00:21:11,480 Speaker 1: company alleged you to have broken sanctions and then also 353 00:21:11,520 --> 00:21:15,199 Speaker 1: committed financial fraud while she wasn't transit in Canada. And 354 00:21:15,240 --> 00:21:17,920 Speaker 1: so this is creating basically a political issue as well. 355 00:21:18,680 --> 00:21:21,080 Speaker 1: But basically you can see how these types of fairly 356 00:21:21,119 --> 00:21:25,840 Speaker 1: novel prosecutions are now permissible in this new political environment. 357 00:21:26,040 --> 00:21:29,560 Speaker 1: After you know, something like the China Initiative has been announced, 358 00:21:30,200 --> 00:21:32,280 Speaker 1: we just have a few minutes left, so let's talk 359 00:21:32,320 --> 00:21:36,000 Speaker 1: about what we should be watching for next. So from 360 00:21:36,119 --> 00:21:41,320 Speaker 1: China's perspective, obviously the moves against Huawei will encourage them to, 361 00:21:41,720 --> 00:21:44,800 Speaker 1: you know, double down on building their domestic tech sector. 362 00:21:44,840 --> 00:21:47,520 Speaker 1: But you know that's an overnight thing that's gonna it's 363 00:21:47,560 --> 00:21:50,640 Speaker 1: a long term project. You can't just snap your fingers 364 00:21:50,640 --> 00:21:54,240 Speaker 1: and create domestic replacements for chip suppliers. So what else 365 00:21:54,320 --> 00:21:58,600 Speaker 1: might we see from the Chinese in your view, to 366 00:21:58,760 --> 00:22:01,040 Speaker 1: address the current tent and both in terms of their 367 00:22:01,040 --> 00:22:05,320 Speaker 1: own domestic needs and also from a retaliatory perspective. So 368 00:22:05,359 --> 00:22:11,280 Speaker 1: we believe that the Chinese retaliatory toolboxes quite weak. Um, Basically, 369 00:22:11,400 --> 00:22:14,320 Speaker 1: you know, there's some news now that they may impose 370 00:22:14,760 --> 00:22:17,440 Speaker 1: rare earth bands. I think that is a temporary sort 371 00:22:17,440 --> 00:22:20,159 Speaker 1: of thing that will cause some pain. Our view is 372 00:22:20,200 --> 00:22:24,000 Speaker 1: that it will not harass the U S companies too much, 373 00:22:24,359 --> 00:22:28,199 Speaker 1: mostly because the Chinese companies are not very entwined in 374 00:22:28,359 --> 00:22:31,520 Speaker 1: the US, but US companies are very entwined in China. 375 00:22:31,680 --> 00:22:34,480 Speaker 1: So Apple employees something like, you know, a few hundred 376 00:22:34,480 --> 00:22:39,080 Speaker 1: thousand young Chinese men uh making iPhones through Fox Con 377 00:22:39,840 --> 00:22:42,440 Speaker 1: and basically the Chinese government would like to see these 378 00:22:42,480 --> 00:22:45,480 Speaker 1: people continue to be employed. A similar story goes for 379 00:22:45,720 --> 00:22:49,000 Speaker 1: major US firms like GM or even Starbucks and McDonald's. 380 00:22:49,000 --> 00:22:52,000 Speaker 1: It keeps a lot of people employed. So the Chinese 381 00:22:52,320 --> 00:22:55,840 Speaker 1: you know, harassment tool basically also hurts itself quite a lot. 382 00:22:56,600 --> 00:22:59,760 Speaker 1: We really don't buy the idea that the Chinese will 383 00:22:59,760 --> 00:23:03,800 Speaker 1: sell US treasuries. That is not unnecessarily a very effective option. 384 00:23:04,359 --> 00:23:07,800 Speaker 1: But basically what they can do is to permit the 385 00:23:07,920 --> 00:23:11,800 Speaker 1: currency to depreciate, which is mostly a market driven process 386 00:23:11,880 --> 00:23:14,679 Speaker 1: that you know, if the U S imposes greater tariffs 387 00:23:14,760 --> 00:23:17,159 Speaker 1: than the currency should weaken, and the People's Bank of 388 00:23:17,240 --> 00:23:19,080 Speaker 1: China is not going to get in the way, uh 389 00:23:19,160 --> 00:23:23,840 Speaker 1: necessarily unless it is quite a steep fall from basically 390 00:23:24,000 --> 00:23:26,960 Speaker 1: allowing the currency to depreciate a little bit. Further, real 391 00:23:27,040 --> 00:23:30,320 Speaker 1: quickly on the rare Earth's questions, So it's literally just 392 00:23:30,600 --> 00:23:33,040 Speaker 1: as of this morning when we're recording it, and this is, 393 00:23:33,080 --> 00:23:35,439 Speaker 1: by the way, recording it on the twenty nine. There's 394 00:23:35,480 --> 00:23:38,320 Speaker 1: a lot of rare earth talk today because of something 395 00:23:38,320 --> 00:23:41,520 Speaker 1: that was published in Peopil's Daily. Why is that people 396 00:23:41,600 --> 00:23:43,960 Speaker 1: hear that and I see rare earths and apparently they're 397 00:23:43,960 --> 00:23:46,600 Speaker 1: not even that rare, but they know that they're important 398 00:23:46,640 --> 00:23:49,960 Speaker 1: for all kinds of advanced technologies and that currently about 399 00:23:49,960 --> 00:23:52,960 Speaker 1: eighty percent of them come from China. Why is that 400 00:23:53,240 --> 00:23:56,480 Speaker 1: threat not really as big of a deal as maybe 401 00:23:56,520 --> 00:24:00,199 Speaker 1: people might think it when they see the headlines. So 402 00:24:00,240 --> 00:24:02,399 Speaker 1: as you point out where earths doesn't turn out to 403 00:24:02,440 --> 00:24:04,920 Speaker 1: be all that rare, it seems like there are major 404 00:24:04,960 --> 00:24:09,159 Speaker 1: deposits also in Australia, Japan, California. It's just going to 405 00:24:09,200 --> 00:24:12,400 Speaker 1: take a little bit of time for that to come online. 406 00:24:13,000 --> 00:24:15,639 Speaker 1: And actually this is sort of a similar point with 407 00:24:16,200 --> 00:24:18,520 Speaker 1: you know, the um with US export controls trying to 408 00:24:18,560 --> 00:24:21,960 Speaker 1: mike export control rare earths. While in general as economists 409 00:24:22,000 --> 00:24:24,560 Speaker 1: we believe that the supply curve slopes up, you know, 410 00:24:24,720 --> 00:24:27,800 Speaker 1: at higher price points, there will be more supplied come 411 00:24:28,080 --> 00:24:31,840 Speaker 1: supply this sort of thing. If the Chinese significantly raised 412 00:24:31,880 --> 00:24:34,520 Speaker 1: the price, while there will be more processing overseas to 413 00:24:34,560 --> 00:24:38,280 Speaker 1: do something like this. And similarly, as the Americans raise 414 00:24:38,359 --> 00:24:40,960 Speaker 1: the price of semi conductors in some cases to affinity 415 00:24:41,000 --> 00:24:44,040 Speaker 1: by totally banning them, while the Chinese also have more 416 00:24:44,040 --> 00:24:46,200 Speaker 1: incentive to try to figure out a lot of this 417 00:24:46,240 --> 00:24:48,240 Speaker 1: stuff as well, It's just going to take a lot 418 00:24:48,240 --> 00:24:51,320 Speaker 1: more time for the Chinese to figure out most aspects 419 00:24:51,320 --> 00:24:53,520 Speaker 1: of semi conductors than for most of the rest of 420 00:24:53,520 --> 00:24:57,600 Speaker 1: the world to develop their reserves of rare earths. And then, 421 00:24:57,680 --> 00:24:59,879 Speaker 1: so what would you be watching for next From the 422 00:25:00,040 --> 00:25:03,320 Speaker 1: West perspective again, I would come to export controls. That 423 00:25:03,640 --> 00:25:06,359 Speaker 1: export controls is really, I think the most important tool 424 00:25:06,400 --> 00:25:08,240 Speaker 1: in the U S toolbox to her China. I think 425 00:25:08,280 --> 00:25:11,840 Speaker 1: we've seen them being used to devastating effect with Chinese 426 00:25:11,840 --> 00:25:14,480 Speaker 1: firms with the ones I mentioned were Zte, Fudanti in 427 00:25:14,520 --> 00:25:16,720 Speaker 1: Qua and now with Huawei. And I want to preview 428 00:25:16,760 --> 00:25:19,639 Speaker 1: a little bit that this is another legislative change that 429 00:25:19,840 --> 00:25:22,880 Speaker 1: the US has offered. Basically concurrently with passing the bill 430 00:25:22,920 --> 00:25:26,119 Speaker 1: on SIPHIUS, the US also passed the Export Control Reform 431 00:25:26,560 --> 00:25:29,600 Speaker 1: Act in August of last year, and among several things, 432 00:25:29,680 --> 00:25:32,880 Speaker 1: the Export Control Reform Act requires the Department of Commerce 433 00:25:32,920 --> 00:25:35,919 Speaker 1: to come up with several lists of technologies. One is 434 00:25:35,920 --> 00:25:38,960 Speaker 1: in UH Emerging List of Technologies, and others a Foundational 435 00:25:39,000 --> 00:25:42,000 Speaker 1: List of technologies. The Emerging List is something we have 436 00:25:42,040 --> 00:25:45,000 Speaker 1: a proposal of. It hasn't been finalized yet. The Foundational 437 00:25:45,040 --> 00:25:47,240 Speaker 1: List hasn't been finalized yet, so we have a sense 438 00:25:47,280 --> 00:25:49,879 Speaker 1: of what the Emerging List looks like. It is UH. 439 00:25:49,960 --> 00:25:55,639 Speaker 1: It enumerates technologies like artificial intelligence, biotechnology, quantum computing. If 440 00:25:55,680 --> 00:25:57,920 Speaker 1: you take a look at a lot of these items, 441 00:25:58,320 --> 00:26:01,480 Speaker 1: smart dust is in their M sensing whatever that is, 442 00:26:01,800 --> 00:26:04,920 Speaker 1: it's in there. And these look like big science projects 443 00:26:05,040 --> 00:26:07,639 Speaker 1: rather than major pillars of US exports. But I think 444 00:26:07,680 --> 00:26:10,640 Speaker 1: they really are quite material, mostly because the US defines 445 00:26:10,680 --> 00:26:13,639 Speaker 1: and export and extremely brought terms. It is not just 446 00:26:13,680 --> 00:26:16,880 Speaker 1: the sale of a final good across borders. Any transfer 447 00:26:16,880 --> 00:26:20,120 Speaker 1: of information to a foreign national is deemed and export. 448 00:26:20,160 --> 00:26:22,680 Speaker 1: It is a deemed export. So Joe, let's say that 449 00:26:23,040 --> 00:26:24,679 Speaker 1: you know, you and I are sitting in a cafe 450 00:26:24,760 --> 00:26:27,439 Speaker 1: in Australia and I am a U S national and 451 00:26:27,480 --> 00:26:32,199 Speaker 1: you are a French national, or Iranian national or Russian national, whatever. 452 00:26:32,480 --> 00:26:34,480 Speaker 1: And if I'm just talking to you, or if I'm 453 00:26:34,480 --> 00:26:37,800 Speaker 1: sending you an email about a control technology, which right 454 00:26:37,840 --> 00:26:40,399 Speaker 1: now is mostly things like munitions and weaponry, that is 455 00:26:40,440 --> 00:26:43,600 Speaker 1: deemed an export subject to control by the Department of Commerce. 456 00:26:44,320 --> 00:26:47,600 Speaker 1: And if you think through the implications of that, plus 457 00:26:47,640 --> 00:26:50,720 Speaker 1: the idea that the US might control UH as something 458 00:26:51,200 --> 00:26:56,919 Speaker 1: as vague as artificial intelligence AI as a national security technology, 459 00:26:57,119 --> 00:27:00,879 Speaker 1: then you know, consider that US firm in the US, 460 00:27:01,440 --> 00:27:06,240 Speaker 1: like Microsoft, Amazon, Intel, Apple, Amazon, the employee substantial numbers 461 00:27:06,320 --> 00:27:09,800 Speaker 1: of foreign nationals working on these technologies. And I've spoken 462 00:27:09,800 --> 00:27:12,399 Speaker 1: to people at these firms who say that, you know, 463 00:27:12,440 --> 00:27:14,159 Speaker 1: they have to really think about if they had to 464 00:27:14,200 --> 00:27:18,000 Speaker 1: sequester or even terminate portions of their staff, otherwise they 465 00:27:18,000 --> 00:27:21,119 Speaker 1: would be in violation of USX port control laws, So 466 00:27:21,160 --> 00:27:23,480 Speaker 1: I think that is possibly the next shoot to drop, 467 00:27:23,800 --> 00:27:26,720 Speaker 1: just depending on how this regulatory process goes. This is 468 00:27:26,760 --> 00:27:29,679 Speaker 1: one of the risks that I think people ought to 469 00:27:29,920 --> 00:27:32,040 Speaker 1: be watching out for. I think it's going to create 470 00:27:32,520 --> 00:27:36,200 Speaker 1: basically a lot of havoc um if the rolemaking process 471 00:27:36,240 --> 00:27:39,360 Speaker 1: posed as you know, the proposal, what it looks like 472 00:27:40,480 --> 00:27:42,840 Speaker 1: so people talk, I mean, you think about this term. 473 00:27:42,880 --> 00:27:45,840 Speaker 1: You hear a tech cold war, so to speak. But 474 00:27:45,960 --> 00:27:48,760 Speaker 1: that's really what this sounds like when you think of 475 00:27:48,840 --> 00:27:52,560 Speaker 1: this idea that you know, US tech multinationals might not 476 00:27:52,760 --> 00:27:57,679 Speaker 1: even be able to allow collaboration between their US based 477 00:27:57,720 --> 00:28:01,520 Speaker 1: researchers and foreign nationals. You could really just sort of 478 00:28:02,200 --> 00:28:06,720 Speaker 1: see how essentially disruptive to the way the world works 479 00:28:06,760 --> 00:28:09,600 Speaker 1: that would be. I think it could be really disruptive 480 00:28:09,720 --> 00:28:13,720 Speaker 1: that h Potentially the US might stop flows of knowledge 481 00:28:14,080 --> 00:28:17,840 Speaker 1: between people, and I think the you know, I I 482 00:28:17,840 --> 00:28:20,680 Speaker 1: am still not quite yet ready to call this a 483 00:28:20,800 --> 00:28:24,360 Speaker 1: cold war. I think that is a fairly extreme scenario. 484 00:28:24,800 --> 00:28:28,080 Speaker 1: And in any case, basically China is much more entwined 485 00:28:28,440 --> 00:28:30,560 Speaker 1: with the US than the U S was with the 486 00:28:30,600 --> 00:28:33,640 Speaker 1: Soviet Union. So how this exactly shakes out, I don't 487 00:28:33,680 --> 00:28:36,359 Speaker 1: even know. If the previous Cold War might be a 488 00:28:36,480 --> 00:28:39,960 Speaker 1: useful president. But yes, I think you are getting into 489 00:28:40,040 --> 00:28:44,160 Speaker 1: some interesting problems here. UH industry has pushed back a 490 00:28:44,200 --> 00:28:47,960 Speaker 1: lot against this deemed exports idea. One of the industries 491 00:28:48,040 --> 00:28:51,000 Speaker 1: has suggested that basically, you know, if you take this 492 00:28:51,080 --> 00:28:54,520 Speaker 1: steamed exports very seriously, an admitter of a technology, if 493 00:28:54,520 --> 00:28:57,480 Speaker 1: it had gone up a final list of control technologies 494 00:28:57,880 --> 00:29:00,440 Speaker 1: might be prevented from possessing it. And oh, you know, 495 00:29:00,480 --> 00:29:03,400 Speaker 1: you get into these very odd situations where you know, 496 00:29:04,000 --> 00:29:06,880 Speaker 1: a lot of things can be shaken up. Well, Dan, 497 00:29:07,080 --> 00:29:10,720 Speaker 1: on that note, I'm thinking we have to reschedule you again, 498 00:29:11,400 --> 00:29:14,120 Speaker 1: maybe every six months or something like that, for the 499 00:29:14,160 --> 00:29:17,520 Speaker 1: next several years, because it feels like what you're describing 500 00:29:17,600 --> 00:29:20,120 Speaker 1: and as you say, it's not going away, and the 501 00:29:20,240 --> 00:29:24,920 Speaker 1: uh the ramifications of these moves are bewildering and kind 502 00:29:24,960 --> 00:29:29,360 Speaker 1: of almost extremely hard to comprehend how they will really 503 00:29:29,360 --> 00:29:33,360 Speaker 1: play out. But really appreciate your perspective. The perfect guest 504 00:29:33,800 --> 00:29:36,040 Speaker 1: given the spade of news over the last few weeks. 505 00:29:36,040 --> 00:29:51,120 Speaker 1: So thank you very much for coming on. Well, thank you. Well, 506 00:29:51,200 --> 00:29:53,600 Speaker 1: here is where I would normally chat with Tracy and 507 00:29:53,680 --> 00:29:56,440 Speaker 1: talk about what a great conversation that was and that 508 00:29:56,480 --> 00:29:59,800 Speaker 1: one actually was really fantastic. But since she's not here, 509 00:30:00,200 --> 00:30:02,920 Speaker 1: I'm just going to wrap it up and obviously, uh, 510 00:30:03,640 --> 00:30:06,880 Speaker 1: this has been another episode of the Odd Lots podcast 511 00:30:06,920 --> 00:30:08,920 Speaker 1: and I'm Joe Wi isn't though you can follow me 512 00:30:09,200 --> 00:30:12,200 Speaker 1: on Twitter at the Stalwart. Even though she wasn't here, 513 00:30:12,240 --> 00:30:15,240 Speaker 1: you should still follow Tracy on Twitter at Tracy Alloway, 514 00:30:15,880 --> 00:30:19,920 Speaker 1: definitely follow our guest on Twitter, Dan Wong at Dan 515 00:30:20,360 --> 00:30:24,360 Speaker 1: w Wong, and be sure to follow our producer Laura Carlson. 516 00:30:24,480 --> 00:30:27,960 Speaker 1: She's at Laura M. Carlson, as well as the Bloomberg 517 00:30:27,960 --> 00:30:32,720 Speaker 1: head of podcast, Francesco Levie at Francesca Today. Thanks for 518 00:30:32,760 --> 00:30:33,120 Speaker 1: listening