1 00:00:10,560 --> 00:00:14,320 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:14,360 --> 00:00:18,439 Speaker 1: I'm Joe Wisenthal and I'm Tracy Halloway. Tracy, we're doing 3 00:00:18,680 --> 00:00:22,400 Speaker 1: We're doing another semi Conductor's episode today. There's no escape. 4 00:00:23,200 --> 00:00:25,279 Speaker 1: Once you're in, you can't get out, right, We're gonna 5 00:00:25,320 --> 00:00:29,800 Speaker 1: be doing semi conductors episodes, um for for the rest 6 00:00:29,840 --> 00:00:32,200 Speaker 1: of our career, I'm sure. But you know, I think 7 00:00:32,200 --> 00:00:35,800 Speaker 1: there's actually like two reasons we maybe three, or maybe 8 00:00:36,159 --> 00:00:38,120 Speaker 1: why we keep going back to this. Well. I mean, 9 00:00:38,360 --> 00:00:40,599 Speaker 1: for one, there's just a lot of news, like so 10 00:00:40,640 --> 00:00:44,320 Speaker 1: many things have happened, whether it's a sort of new 11 00:00:44,400 --> 00:00:47,920 Speaker 1: ventures from say Intel, or new spending plans from Tawan Semi, 12 00:00:48,000 --> 00:00:50,640 Speaker 1: or new legislation being proposed, So there's all kinds of 13 00:00:50,680 --> 00:00:53,840 Speaker 1: new news. But I also think, um, it's just a 14 00:00:53,960 --> 00:00:57,880 Speaker 1: really good it's a good topic for us. Yeah. I 15 00:00:57,880 --> 00:01:01,520 Speaker 1: think it's an interesting mix of technology and sort of 16 00:01:01,560 --> 00:01:06,840 Speaker 1: business competition and also government policy. And we've spoken a 17 00:01:06,840 --> 00:01:10,600 Speaker 1: lot about this, but government policy plays such a big 18 00:01:10,720 --> 00:01:16,160 Speaker 1: role in sort of um incubating semiconductor industry, and I 19 00:01:16,160 --> 00:01:19,080 Speaker 1: think we spoke about this probably the most with Taiwan 20 00:01:19,280 --> 00:01:22,520 Speaker 1: and t SMC, But even in the US, you have 21 00:01:22,640 --> 00:01:26,280 Speaker 1: that history of government support nurturing the early stages of 22 00:01:26,280 --> 00:01:30,399 Speaker 1: the semiconductor industry as well. Yeah, that's exactly right, Like 23 00:01:30,440 --> 00:01:36,280 Speaker 1: it touches on all these things technology, competition, market, stock market. 24 00:01:36,560 --> 00:01:38,360 Speaker 1: But as you say, you know, there is a long 25 00:01:38,560 --> 00:01:43,600 Speaker 1: history in China now currently Taiwan, Japan, the US of 26 00:01:43,720 --> 00:01:46,080 Speaker 1: governments playing a role. And I think there's like this 27 00:01:46,200 --> 00:01:48,360 Speaker 1: sort of broader macro thing which we talked about all 28 00:01:48,360 --> 00:01:53,520 Speaker 1: the time, of sort of more activist role for government, 29 00:01:53,560 --> 00:01:57,320 Speaker 1: for democratically elected or elected leaders, like thinking taking a 30 00:01:57,400 --> 00:02:01,880 Speaker 1: more active role in shaping economy and managing the economy 31 00:02:02,240 --> 00:02:05,040 Speaker 1: and so like. Because of that and because of the 32 00:02:05,120 --> 00:02:09,320 Speaker 1: history of chips. Uh, semiconductors fit right into our fit 33 00:02:09,440 --> 00:02:12,280 Speaker 1: right into our wheelhouse. Yeah, it's sort of a nice 34 00:02:12,280 --> 00:02:16,000 Speaker 1: petree dish, I guess for a greater fiscal role for 35 00:02:16,040 --> 00:02:19,960 Speaker 1: government's Yeah, exactly exactly right. And uh, every time we 36 00:02:20,000 --> 00:02:22,160 Speaker 1: do semi conductor episodes, people listen to them and they 37 00:02:22,200 --> 00:02:24,919 Speaker 1: want more, so we are going to deliver. So here 38 00:02:24,919 --> 00:02:26,799 Speaker 1: we are again. Yeah, so here we are. Here we 39 00:02:26,840 --> 00:02:29,120 Speaker 1: are gonna so you know, like I've forgotten all the 40 00:02:29,120 --> 00:02:31,400 Speaker 1: ones we've done, We've done the fall of Intel, the 41 00:02:31,520 --> 00:02:36,200 Speaker 1: rise of Taiwan, semi China's own ambitions, the stumbles of 42 00:02:36,240 --> 00:02:38,880 Speaker 1: the US. I don't know if we've like really done 43 00:02:38,880 --> 00:02:42,639 Speaker 1: one yet on what it would take for the US 44 00:02:42,720 --> 00:02:49,399 Speaker 1: to really have a sustained recovery in its semiconductor manufacturing prowess. 45 00:02:49,440 --> 00:02:51,800 Speaker 1: And of course we know that that's important because we 46 00:02:51,880 --> 00:02:56,800 Speaker 1: have this acute semiconductor shortage, particularly affecting autos, but also 47 00:02:56,919 --> 00:02:59,280 Speaker 1: there is this sort of long term maybe it's a 48 00:02:59,360 --> 00:03:02,919 Speaker 1: defense of it's a geopolitical concern beyond this acute moment 49 00:03:03,240 --> 00:03:06,640 Speaker 1: that it is problematic, that's such an important piece of 50 00:03:06,680 --> 00:03:11,400 Speaker 1: basically everything that gets built is almost entirely important. I'm 51 00:03:11,400 --> 00:03:14,160 Speaker 1: pretty sure we've touched on it in various episodes, but 52 00:03:14,200 --> 00:03:17,120 Speaker 1: you're right, we haven't done a whole episode dedicated to 53 00:03:17,800 --> 00:03:20,120 Speaker 1: US policy in the same way that we've done it 54 00:03:20,160 --> 00:03:24,200 Speaker 1: for Taiwan or China. Yeah, exactly right. So today I'm 55 00:03:24,280 --> 00:03:26,679 Speaker 1: very excited because we're going to finally talk about some 56 00:03:26,760 --> 00:03:31,639 Speaker 1: of the history of semiconductor policy in the United States 57 00:03:32,080 --> 00:03:38,200 Speaker 1: and also perhaps what policies could could revive the domestic industry. 58 00:03:38,480 --> 00:03:40,480 Speaker 1: All right, let's do it, all right, So I'm very 59 00:03:40,480 --> 00:03:43,360 Speaker 1: excited to speak to our guests. It's sort of actually 60 00:03:43,360 --> 00:03:46,360 Speaker 1: the perfect combo because we actually have two guests today. 61 00:03:46,560 --> 00:03:48,520 Speaker 1: One of them is an economist and one of them 62 00:03:48,560 --> 00:03:52,560 Speaker 1: is a technologist. Alex Williams and huss And Kohn wrote 63 00:03:52,560 --> 00:03:56,440 Speaker 1: a piece for Employee America back in March total titled 64 00:03:56,480 --> 00:03:59,880 Speaker 1: a Brief History of Semiconductors, How the US cut cost 65 00:04:00,200 --> 00:04:03,800 Speaker 1: and lost the leading edge and m Alex is an 66 00:04:03,800 --> 00:04:07,680 Speaker 1: economist and research analyst and Employe America. Husson he's a 67 00:04:07,680 --> 00:04:12,520 Speaker 1: PhD from Carnegie Mellon on semiconductor policy specifically, and he 68 00:04:12,560 --> 00:04:16,120 Speaker 1: now works in tech in both operations and procurement. So 69 00:04:16,240 --> 00:04:18,679 Speaker 1: between the two of them, kind of the perfect way 70 00:04:18,720 --> 00:04:21,640 Speaker 1: to talk about the macro and the micro at once. Uh, 71 00:04:21,920 --> 00:04:24,160 Speaker 1: Alex and Husson, thank you so much for joining us. 72 00:04:24,279 --> 00:04:26,840 Speaker 1: Really excited to hear. Yeah, glad to be here. So 73 00:04:26,880 --> 00:04:29,240 Speaker 1: what is it from your perspective? I mean, as I said, 74 00:04:29,279 --> 00:04:32,120 Speaker 1: you guys wrote this piece on Employee America, which normally 75 00:04:32,160 --> 00:04:35,400 Speaker 1: is sort of very focused on bigger picture macro stuff, 76 00:04:35,640 --> 00:04:39,760 Speaker 1: labor market stuff in general. Why from your perspectives is 77 00:04:39,800 --> 00:04:42,920 Speaker 1: semi conductors as sort of a thing that fits into 78 00:04:42,960 --> 00:04:48,000 Speaker 1: that rubric. So I think the big overriding theme behind this, uh, 79 00:04:48,040 --> 00:04:50,080 Speaker 1: this series that we've been doing on semi conductors. We 80 00:04:50,120 --> 00:04:52,279 Speaker 1: have two pieces out so far. We have a third 81 00:04:52,279 --> 00:04:55,520 Speaker 1: one that should be ideally coming out right around when 82 00:04:55,560 --> 00:04:58,719 Speaker 1: this episode goes public, and then a fourth one after that. 83 00:04:59,320 --> 00:05:01,839 Speaker 1: But the I you just like us, once you start 84 00:05:01,880 --> 00:05:04,679 Speaker 1: the semi conductor series, you can't stop. It's so true. 85 00:05:04,720 --> 00:05:07,160 Speaker 1: We originally were going to write one piece and then 86 00:05:07,200 --> 00:05:09,640 Speaker 1: it was so big, and then it kept going. It 87 00:05:09,839 --> 00:05:12,880 Speaker 1: just yeah, there's something about this industry that every every 88 00:05:12,880 --> 00:05:15,159 Speaker 1: time you look a little bit closer, there's an entire 89 00:05:15,320 --> 00:05:17,920 Speaker 1: other world that opens up. All right, Sorry, keep going. 90 00:05:17,960 --> 00:05:20,680 Speaker 1: I didn't mean to interrupt you. Oh, no, worries. So 91 00:05:21,000 --> 00:05:25,680 Speaker 1: really what we wanted to talk about was was semiconductors 92 00:05:25,720 --> 00:05:29,240 Speaker 1: is a lens for thinking about sort of the intersection 93 00:05:29,520 --> 00:05:34,800 Speaker 1: of you know, industrial policy, trade policy, stagnant demand over 94 00:05:34,880 --> 00:05:39,040 Speaker 1: the period since the two thousand crash and dot coms 95 00:05:39,040 --> 00:05:42,320 Speaker 1: and things like that. And the idea was that we're 96 00:05:42,360 --> 00:05:46,080 Speaker 1: a labor market focused institution, but industrial policy, you know, 97 00:05:46,279 --> 00:05:49,599 Speaker 1: of its nature, has a strong you know, labor market focus, 98 00:05:49,600 --> 00:05:52,159 Speaker 1: and that the idea is that you're directing the economy 99 00:05:52,200 --> 00:05:55,240 Speaker 1: to make best use of its resources, even if sort 100 00:05:55,240 --> 00:06:00,000 Speaker 1: of short run profit considerations or efficiency considerations don't necessar 101 00:06:00,040 --> 00:06:03,880 Speaker 1: sarely support that. So it seems, you know, a little strange. 102 00:06:03,880 --> 00:06:05,440 Speaker 1: We write about the FED a lot, we write about 103 00:06:05,480 --> 00:06:07,480 Speaker 1: labor markets a lot, But the idea is that we 104 00:06:07,520 --> 00:06:10,279 Speaker 1: wanted to bite off something a little bit bigger to say, okay, cool, 105 00:06:11,360 --> 00:06:13,760 Speaker 1: we do care a lot about labor markets. But part 106 00:06:13,760 --> 00:06:16,279 Speaker 1: of that is up skilling, and part of that is 107 00:06:16,560 --> 00:06:21,719 Speaker 1: focusing economic policy around specific industrial objectives. And when you 108 00:06:21,839 --> 00:06:25,720 Speaker 1: do that, you naturally you can't help but intervene in 109 00:06:25,800 --> 00:06:28,479 Speaker 1: the labor market to do so. On the one hand, 110 00:06:28,920 --> 00:06:32,240 Speaker 1: and on the other hand, you know, there's been real 111 00:06:32,320 --> 00:06:37,040 Speaker 1: sort of bipartisan support for sort of doing something about semiconductors. 112 00:06:37,080 --> 00:06:39,919 Speaker 1: Like there's really regardless of what political party you look to, 113 00:06:40,040 --> 00:06:44,839 Speaker 1: there's you know, energy behind doing something about this situation. 114 00:06:44,880 --> 00:06:47,080 Speaker 1: And we wanted to kind of spell out, you know, 115 00:06:47,279 --> 00:06:51,640 Speaker 1: from a perspective that sees these labor market outcomes as 116 00:06:52,560 --> 00:06:55,320 Speaker 1: critical and not just accidental. We wanted to spell out 117 00:06:55,400 --> 00:06:59,840 Speaker 1: what that kind of policy intervention should look like. If 118 00:06:59,880 --> 00:07:02,400 Speaker 1: I can had one thing on just the industrial policy lens. 119 00:07:02,760 --> 00:07:07,000 Speaker 1: It's really interesting because the semiconductor industry has has been 120 00:07:07,040 --> 00:07:09,000 Speaker 1: at the forefront of a lot of these debates in 121 00:07:09,040 --> 00:07:12,360 Speaker 1: the past. And if you revisit the industrial policy debates 122 00:07:12,360 --> 00:07:14,800 Speaker 1: of the nineteen eighties UM when they were talking about 123 00:07:14,800 --> 00:07:18,680 Speaker 1: saving steel and auto, they weren't focused on the semiconductor 124 00:07:18,680 --> 00:07:23,160 Speaker 1: industry as a place that needed intervention. And so I 125 00:07:23,480 --> 00:07:25,760 Speaker 1: do think given this moment in time and the focus 126 00:07:25,880 --> 00:07:28,560 Speaker 1: on the industry, is a good chance for us to 127 00:07:28,560 --> 00:07:30,640 Speaker 1: reflect on you know, we had a chance to do 128 00:07:30,720 --> 00:07:32,880 Speaker 1: i P in the past, and we chose not to 129 00:07:33,720 --> 00:07:36,320 Speaker 1: because we we thought, hey, the booming industries will save us. 130 00:07:36,560 --> 00:07:38,400 Speaker 1: And we're kind of back at that same debate with 131 00:07:38,400 --> 00:07:41,360 Speaker 1: an industry that that was ignored in those previous debates. 132 00:07:41,360 --> 00:07:43,160 Speaker 1: So it is a good chance for us to kind 133 00:07:43,160 --> 00:07:45,920 Speaker 1: of revisit the history too and say what can we 134 00:07:46,000 --> 00:07:49,880 Speaker 1: learn from the past debates that we had. So Alex 135 00:07:49,920 --> 00:07:54,160 Speaker 1: mentioned this idea of industrial policy being tied to labor 136 00:07:54,200 --> 00:07:58,480 Speaker 1: markets and also allowing um an industry to sort of 137 00:07:58,920 --> 00:08:02,640 Speaker 1: look past short term inefficiencies for the sake of like 138 00:08:02,760 --> 00:08:07,000 Speaker 1: longer term competitive gains. Can you talk a bit about 139 00:08:07,000 --> 00:08:11,320 Speaker 1: how that relates to semiconductors specifically, like why is that 140 00:08:11,440 --> 00:08:15,960 Speaker 1: important for the semiconductor business? Model. One of the lessons 141 00:08:16,000 --> 00:08:20,320 Speaker 1: that gets lost when we talk about off shoring of 142 00:08:20,360 --> 00:08:23,840 Speaker 1: production is that it's not just moving a facility offshore, 143 00:08:24,080 --> 00:08:28,440 Speaker 1: you actually move that expertise offshore. So a factory is 144 00:08:28,520 --> 00:08:31,200 Speaker 1: not just a box with a bunch of machines in 145 00:08:31,240 --> 00:08:34,680 Speaker 1: it that are outputting widgets. It is that capex, but 146 00:08:34,760 --> 00:08:37,640 Speaker 1: it's also the people who come together to produce out 147 00:08:37,640 --> 00:08:41,280 Speaker 1: of that factory. And so one of the major consequences 148 00:08:41,640 --> 00:08:44,360 Speaker 1: of sort of the last thirty years of the like 149 00:08:44,520 --> 00:08:50,200 Speaker 1: offshoring revolution in manufacturing from the United States perspective is 150 00:08:50,200 --> 00:08:53,400 Speaker 1: that we also lost a lot of latent expertise within 151 00:08:53,440 --> 00:08:56,480 Speaker 1: the economy. So actually, my advisor has worked with other 152 00:08:56,559 --> 00:09:00,680 Speaker 1: researchers and students that showed that when plans shut down, 153 00:09:00,720 --> 00:09:03,079 Speaker 1: a lot of the folks who are in the scientific 154 00:09:03,120 --> 00:09:06,320 Speaker 1: research department leave the industry. They don't patent in the 155 00:09:06,360 --> 00:09:09,680 Speaker 1: industry anymore. So now you have scientific expertise exiting the 156 00:09:09,679 --> 00:09:13,240 Speaker 1: industry entirely. And similarly, think of like blue collar workers 157 00:09:13,360 --> 00:09:15,920 Speaker 1: who you know, they might be doing servicing of machinery 158 00:09:16,080 --> 00:09:18,800 Speaker 1: or they might be floor operators. They have to go 159 00:09:18,880 --> 00:09:20,880 Speaker 1: find work elsewhere, and they have a lot of latent 160 00:09:20,920 --> 00:09:24,520 Speaker 1: knowledge about processes and how to actually build things that 161 00:09:24,559 --> 00:09:27,319 Speaker 1: gets lost when they go work in a different industry. Altogether. 162 00:09:27,720 --> 00:09:32,080 Speaker 1: The upshot is that um, that human capital is not 163 00:09:32,240 --> 00:09:35,480 Speaker 1: just like jobs, but they're actually the people who figure 164 00:09:35,480 --> 00:09:39,640 Speaker 1: out solutions on how to make how to push technology forward, right, 165 00:09:39,800 --> 00:09:42,960 Speaker 1: and not just from a academic perspective, pushing technology forward 166 00:09:43,000 --> 00:09:45,840 Speaker 1: with invention, but actually with you know, tweaking on the 167 00:09:45,840 --> 00:09:50,720 Speaker 1: shop floor and translating uh research and development ideas into 168 00:09:51,040 --> 00:09:54,480 Speaker 1: production capabilities. And the role that policy can play in 169 00:09:54,520 --> 00:09:58,160 Speaker 1: this is you know, after say the two thousand you 170 00:09:58,200 --> 00:10:01,000 Speaker 1: know dot com bubble bursting, you had to situation where 171 00:10:01,640 --> 00:10:04,360 Speaker 1: you know, in a lot of sort of economic models, 172 00:10:04,360 --> 00:10:06,959 Speaker 1: you think, oh, there's a crash, it's going to force 173 00:10:07,040 --> 00:10:10,400 Speaker 1: out the less competitive companies so that the more competitive 174 00:10:10,440 --> 00:10:14,200 Speaker 1: ones can restructure themselves and win the day. But the 175 00:10:14,280 --> 00:10:17,120 Speaker 1: issue is is that you had substantial labor market attrition. 176 00:10:17,240 --> 00:10:19,840 Speaker 1: So this sort of you know, sort of squeezing effect 177 00:10:19,920 --> 00:10:22,040 Speaker 1: like an accordion where people get pushed in and out 178 00:10:22,040 --> 00:10:26,360 Speaker 1: of the labor market creates just an incredible excess waste 179 00:10:26,520 --> 00:10:32,199 Speaker 1: of capacity when under a policy supported softer budget constraint regime, 180 00:10:32,720 --> 00:10:36,160 Speaker 1: you could actually preserve and inculcate that you know that 181 00:10:36,280 --> 00:10:39,280 Speaker 1: human capital, as it were, one of the things that 182 00:10:39,640 --> 00:10:42,040 Speaker 1: you guys talk about in this piece as sorry, And 183 00:10:42,120 --> 00:10:44,199 Speaker 1: as you mentioned, there's two pieces by now, but I'm 184 00:10:44,200 --> 00:10:46,840 Speaker 1: looking at the one that you wrote in margin, and 185 00:10:46,920 --> 00:10:51,760 Speaker 1: you draw this distinction between industrial policy, and I hadn't 186 00:10:51,800 --> 00:10:55,280 Speaker 1: heard the term before, but it's very useful science policy. 187 00:10:55,960 --> 00:10:58,320 Speaker 1: And I think you know, when people think, oh, let's 188 00:10:58,320 --> 00:11:01,000 Speaker 1: you get to take to revive of US industry or 189 00:11:01,160 --> 00:11:03,720 Speaker 1: revive tech expertise, like oh what about R and D 190 00:11:03,840 --> 00:11:06,000 Speaker 1: and spending, and you sort of put that in this 191 00:11:06,080 --> 00:11:09,360 Speaker 1: category of science policy. But can you talk about the 192 00:11:09,440 --> 00:11:13,240 Speaker 1: sort of the distinction between these two things and the 193 00:11:13,520 --> 00:11:16,120 Speaker 1: some of the approaches that have been taken in the past, 194 00:11:16,200 --> 00:11:18,719 Speaker 1: Because this isn't the first time that there has been 195 00:11:18,800 --> 00:11:23,200 Speaker 1: anxiety about chips elsewhere sort of pulling away from US. 196 00:11:23,880 --> 00:11:26,640 Speaker 1: So I'm gonna say one quick thing before leaving it 197 00:11:26,640 --> 00:11:29,120 Speaker 1: to Hussan to talk about the history of this split. 198 00:11:29,440 --> 00:11:32,000 Speaker 1: But I think that the core thing to remember here 199 00:11:32,120 --> 00:11:36,400 Speaker 1: is there's this idea that technology is just some overlay 200 00:11:36,480 --> 00:11:40,240 Speaker 1: that sits on top of existing productive processes, whether you're 201 00:11:40,280 --> 00:11:43,559 Speaker 1: thinking of like you know, sort of total factor productivity 202 00:11:44,160 --> 00:11:47,320 Speaker 1: or other ideas of technology that it just sort of 203 00:11:47,440 --> 00:11:51,520 Speaker 1: is this faery dust sprinkled over existing production. The issue 204 00:11:51,640 --> 00:11:54,640 Speaker 1: is is that for technology to really be incorporated in 205 00:11:54,679 --> 00:11:58,480 Speaker 1: the capital stock, it has to feed out through and 206 00:11:58,559 --> 00:12:02,600 Speaker 1: become incorporated in the actual physical products used in production. 207 00:12:03,200 --> 00:12:06,680 Speaker 1: And so if you don't have an industry that is booming, 208 00:12:06,720 --> 00:12:11,400 Speaker 1: that is getting turnover in CAPEX where older technology production 209 00:12:11,440 --> 00:12:15,320 Speaker 1: equipment is being replaced with newer technology production equipment. The 210 00:12:15,440 --> 00:12:17,360 Speaker 1: things that you know how to do with the frontier 211 00:12:17,440 --> 00:12:22,240 Speaker 1: don't necessarily translate into production outcomes. But I will leave 212 00:12:22,679 --> 00:12:25,720 Speaker 1: the history of of you know this this situation to Hassan. 213 00:12:27,400 --> 00:12:30,400 Speaker 1: What Alex said is is very apt. I think where 214 00:12:30,440 --> 00:12:34,760 Speaker 1: the policy mistake happened in the past was this framing 215 00:12:34,800 --> 00:12:37,800 Speaker 1: of America needs to maintain its lead. In order to 216 00:12:37,840 --> 00:12:40,120 Speaker 1: maintain our lead, we're going to fund R and D. 217 00:12:40,720 --> 00:12:45,600 Speaker 1: The production and competition aspect of technology will be left 218 00:12:45,679 --> 00:12:48,439 Speaker 1: up to firms in the market. And so there was 219 00:12:48,440 --> 00:12:51,600 Speaker 1: a broad policy consensus to say, will fund R and D, 220 00:12:51,760 --> 00:12:54,240 Speaker 1: whether that's through the military or through institutions like the 221 00:12:54,320 --> 00:12:57,960 Speaker 1: NSF for national labs. The problem becomes that there is 222 00:12:58,000 --> 00:13:02,040 Speaker 1: this translation that has to happen ween a researcher, who is, 223 00:13:02,480 --> 00:13:06,360 Speaker 1: you know, doing cutting edge research and what is commercializable. So, 224 00:13:06,440 --> 00:13:09,040 Speaker 1: just as one small anecdote, as part of my work 225 00:13:09,160 --> 00:13:13,960 Speaker 1: on alternative Secilican SEAMOSS and graduate school UM, the industry 226 00:13:14,040 --> 00:13:18,559 Speaker 1: was evaluating proposals by different academic researchers, and a researcher 227 00:13:18,600 --> 00:13:21,840 Speaker 1: got up in front of an audience of industry researchers 228 00:13:21,840 --> 00:13:23,840 Speaker 1: and was very confident that I solved your problem. I 229 00:13:23,880 --> 00:13:26,120 Speaker 1: have your next transistor and went through and presented all 230 00:13:26,160 --> 00:13:29,360 Speaker 1: sorts of data on its ability to operate and and 231 00:13:29,400 --> 00:13:31,680 Speaker 1: showed that it was better in some cases. And the 232 00:13:31,720 --> 00:13:35,719 Speaker 1: first question was what temperature does your transistor operate at? 233 00:13:35,880 --> 00:13:40,440 Speaker 1: And very confidently the researcher said, oh, uh, seventy seven kelvin. 234 00:13:40,440 --> 00:13:44,320 Speaker 1: It's cool that by liquid nitrogen. So just very spent 235 00:13:44,360 --> 00:13:46,240 Speaker 1: two seconds thinking about it. That's not something you or 236 00:13:46,280 --> 00:13:48,360 Speaker 1: I could put in our laptop or cell phone, and 237 00:13:48,400 --> 00:13:50,400 Speaker 1: that's sort of you know, that's but that's kind of 238 00:13:50,400 --> 00:13:52,560 Speaker 1: the where the disconnect is. We fund a lot of 239 00:13:52,600 --> 00:13:54,920 Speaker 1: researchers who have leeway to go do all sorts of 240 00:13:54,920 --> 00:13:58,440 Speaker 1: crazy things, and they do invent very interesting ideas, but 241 00:13:58,480 --> 00:14:00,520 Speaker 1: at the end of the day. To take that, UM, 242 00:14:00,920 --> 00:14:03,719 Speaker 1: the realm of science to the realm of technology requires 243 00:14:03,760 --> 00:14:07,480 Speaker 1: a lot of translation and attention to you know, different 244 00:14:07,480 --> 00:14:09,800 Speaker 1: types of variables like can I make a million of these? 245 00:14:09,880 --> 00:14:12,600 Speaker 1: Can I put them in people's homes? Um? And something 246 00:14:12,640 --> 00:14:15,199 Speaker 1: like a transistor at you know, this liquid nitrogen cooled 247 00:14:15,559 --> 00:14:18,439 Speaker 1: fails that test for a technologist, but maybe not a scientist. 248 00:14:33,840 --> 00:14:37,840 Speaker 1: Can we get into, like, um, the actual historical aspects 249 00:14:38,120 --> 00:14:40,720 Speaker 1: of some of this, So just in terms of the 250 00:14:40,800 --> 00:14:45,200 Speaker 1: industrial versus science policy split, you talk a lot about 251 00:14:45,200 --> 00:14:48,720 Speaker 1: it in relation to what happened to the semiconductor industry 252 00:14:48,840 --> 00:14:52,680 Speaker 1: in the nineties. Could you describe that period and exactly 253 00:14:52,800 --> 00:14:55,640 Speaker 1: what happened and how it sort of set the US 254 00:14:55,760 --> 00:15:01,120 Speaker 1: up for being less competitive in the tooth puss To 255 00:15:01,200 --> 00:15:03,120 Speaker 1: come to where we were the decisions that were made 256 00:15:03,120 --> 00:15:05,280 Speaker 1: in the nineties, it helps to take a step back. 257 00:15:05,400 --> 00:15:08,480 Speaker 1: So at the founding of the semiconductor industry, you have 258 00:15:08,600 --> 00:15:13,080 Speaker 1: this breakthrough at Bell Labs, and the military is extremely 259 00:15:13,160 --> 00:15:16,000 Speaker 1: interested in this and it plays a very heavy handed 260 00:15:16,120 --> 00:15:21,600 Speaker 1: role in shaping the diffusion of transistor technology across basically 261 00:15:21,600 --> 00:15:25,160 Speaker 1: the entire economy. UM. It requires Bell Labs to openly 262 00:15:25,240 --> 00:15:28,040 Speaker 1: license it um and it requires second source and contracts 263 00:15:28,040 --> 00:15:31,600 Speaker 1: for any firms that are manufacturing transistors. The end result 264 00:15:31,760 --> 00:15:35,400 Speaker 1: is that because of the military implications of this technology, 265 00:15:35,440 --> 00:15:38,240 Speaker 1: we had this de facto industrial policy saying we need 266 00:15:38,280 --> 00:15:42,320 Speaker 1: to diffuse semiconductor expertise throughout the economy. So that kind 267 00:15:42,360 --> 00:15:44,720 Speaker 1: of lays the foundation for the U s having a 268 00:15:44,800 --> 00:15:47,560 Speaker 1: durable lead for a couple of decades. Beginning in the 269 00:15:47,600 --> 00:15:51,840 Speaker 1: late nineties seventies, Japanese firms begin to catch up, beginning 270 00:15:51,880 --> 00:15:54,640 Speaker 1: with their their targeting of d RAM markets UM and 271 00:15:54,680 --> 00:15:58,280 Speaker 1: they take the process lead from US firms. And this 272 00:15:58,320 --> 00:16:00,720 Speaker 1: is sort of a major major watershed moment in the 273 00:16:00,760 --> 00:16:03,960 Speaker 1: industry because the industry does actually ask for help, but 274 00:16:04,120 --> 00:16:06,400 Speaker 1: it's first ask for help is on trade grounds, and 275 00:16:06,440 --> 00:16:09,720 Speaker 1: it basically gets uh it asked for, like anti dumping 276 00:16:09,720 --> 00:16:14,360 Speaker 1: measures against Japanese UM suppliers. There's all sorts of debates 277 00:16:14,400 --> 00:16:17,640 Speaker 1: that happened. The big electronics manufacturers think firms like HP 278 00:16:17,960 --> 00:16:19,960 Speaker 1: or IBM kind of sit out these debates because they 279 00:16:20,000 --> 00:16:23,320 Speaker 1: actually like having cheap chips from Japan and there isn't 280 00:16:23,360 --> 00:16:27,880 Speaker 1: a major push towards more heavy handed government involvement. The 281 00:16:27,920 --> 00:16:31,160 Speaker 1: industry does get some wins in the nineteen eighties where 282 00:16:31,160 --> 00:16:35,240 Speaker 1: the government allows them to do collaborative research, but even 283 00:16:35,280 --> 00:16:38,800 Speaker 1: there it's pretty hands off. The government basically says, all 284 00:16:38,880 --> 00:16:42,680 Speaker 1: we're going to do is fund advanced lithography and help 285 00:16:42,720 --> 00:16:47,280 Speaker 1: you coordinate some of your investments across firms, but we're 286 00:16:47,280 --> 00:16:50,080 Speaker 1: not going to take an active hand in shaping where 287 00:16:50,080 --> 00:16:52,200 Speaker 1: the industry needs to go. We're going to look to 288 00:16:52,280 --> 00:16:55,080 Speaker 1: the industry to kind of define where we need to go. 289 00:16:55,760 --> 00:16:58,960 Speaker 1: And that kind of gets institutionalized in a few different institutions, 290 00:16:59,000 --> 00:17:01,960 Speaker 1: the first being the SRC, which is a semi conductor 291 00:17:02,000 --> 00:17:07,359 Speaker 1: Research Corporation which funds university research. Then SEMITECH, which is 292 00:17:07,400 --> 00:17:10,879 Speaker 1: the most talked about industrial consortia UM which was jointly 293 00:17:10,920 --> 00:17:13,960 Speaker 1: funded between U s sm E conductor firms and the 294 00:17:14,040 --> 00:17:15,840 Speaker 1: do O D. And then the lastly is the National 295 00:17:15,840 --> 00:17:19,840 Speaker 1: Technology road Map for Semiconductors, which is basically the industry 296 00:17:19,880 --> 00:17:22,359 Speaker 1: saying here's where we think semiconductors are going to be 297 00:17:22,400 --> 00:17:25,520 Speaker 1: in fifteen years and here the technical capabilities will need. 298 00:17:26,000 --> 00:17:28,480 Speaker 1: And hey, government would be great if you helped to 299 00:17:28,520 --> 00:17:31,760 Speaker 1: coordinate some of the early stage research research that we're 300 00:17:31,800 --> 00:17:34,199 Speaker 1: going to need, you know, fifteen years from now. For 301 00:17:34,359 --> 00:17:38,200 Speaker 1: future products. So how did that work out? The good 302 00:17:38,240 --> 00:17:40,840 Speaker 1: side is that in the early nine nineties you actually 303 00:17:40,840 --> 00:17:43,480 Speaker 1: have a resurgence for U S SMI conductor firms. They 304 00:17:43,480 --> 00:17:45,919 Speaker 1: begin to recapture market share, and it is kind of 305 00:17:46,000 --> 00:17:50,119 Speaker 1: like a everyone celebrates. Hey, this policy regime that we 306 00:17:50,119 --> 00:17:53,560 Speaker 1: we established seems to be working. But the US takes 307 00:17:53,600 --> 00:17:56,119 Speaker 1: its foot off the pedal and actually begins to wind 308 00:17:56,119 --> 00:17:58,440 Speaker 1: down a lot of these institutions. One they no longer 309 00:17:58,480 --> 00:18:02,120 Speaker 1: have a national focus. They begin Internet nationalized, so SEMITECH 310 00:18:02,200 --> 00:18:05,240 Speaker 1: begins to introduce international members beginning the late nineties. The 311 00:18:05,280 --> 00:18:08,800 Speaker 1: Technology Roadmap begins to introduce international members also in the 312 00:18:08,840 --> 00:18:11,719 Speaker 1: late nineties, so it's no longer national technology roadmap, it's 313 00:18:11,720 --> 00:18:14,679 Speaker 1: an international technology roadmap. UM. The end result is that 314 00:18:15,000 --> 00:18:18,399 Speaker 1: a lot of entrepreneurs outside of the US kind of 315 00:18:18,400 --> 00:18:20,159 Speaker 1: have a blueprint for what it's going to take to 316 00:18:20,240 --> 00:18:24,320 Speaker 1: compete with US firms, and they they begin to catch 317 00:18:24,440 --> 00:18:27,760 Speaker 1: up in key UH industry processes. So you see it 318 00:18:27,800 --> 00:18:30,600 Speaker 1: in things like d RAM where Korean firms have have 319 00:18:30,800 --> 00:18:33,600 Speaker 1: majorly caught up to even Japanese firms, and most Japanese 320 00:18:33,640 --> 00:18:36,239 Speaker 1: firms have left the market. UM. And you see it 321 00:18:36,240 --> 00:18:39,520 Speaker 1: now with the rise of foundries, where foundry firms were 322 00:18:39,560 --> 00:18:42,920 Speaker 1: able to catch up to integrated device manufacturers and overtake 323 00:18:43,040 --> 00:18:46,040 Speaker 1: you know, most recently with t SMC and Samsung overtaking 324 00:18:46,080 --> 00:18:49,320 Speaker 1: Intel in terms of their process capabilities. And then the 325 00:18:49,720 --> 00:18:52,280 Speaker 1: third sort of a trend that kind of makes this 326 00:18:52,560 --> 00:18:56,119 Speaker 1: more exacerbated is you have a major technology revolution in 327 00:18:56,160 --> 00:19:00,720 Speaker 1: the late two thousands where traditional manufacturing also sees get 328 00:19:00,760 --> 00:19:05,440 Speaker 1: more expensive and US firms, which we're funding heavily in 329 00:19:05,600 --> 00:19:09,080 Speaker 1: R and D and were previously integrated device manufacturers so 330 00:19:09,080 --> 00:19:11,640 Speaker 1: they were vertically integrated, they begin to pull out most 331 00:19:11,640 --> 00:19:15,240 Speaker 1: of their manufacturing and rely more and more on foundries, right, 332 00:19:15,320 --> 00:19:18,719 Speaker 1: and so that helps those founderies also increase their overall 333 00:19:18,880 --> 00:19:22,160 Speaker 1: CAPEX bend because they now have more customers kind of 334 00:19:22,240 --> 00:19:24,560 Speaker 1: they have a stronger customer base to drive their R 335 00:19:24,640 --> 00:19:26,680 Speaker 1: and D in capex and and help them further push 336 00:19:26,920 --> 00:19:31,240 Speaker 1: the frontier of manufacturing. So ultimately, it worked out well 337 00:19:31,240 --> 00:19:33,400 Speaker 1: in the near term in that a lot of these 338 00:19:33,440 --> 00:19:37,480 Speaker 1: companies became more profitable because they were able to coordinate 339 00:19:37,480 --> 00:19:40,600 Speaker 1: their research and development more tightly with one another, and 340 00:19:40,640 --> 00:19:43,280 Speaker 1: they were able to sort of hone in on a 341 00:19:43,359 --> 00:19:47,399 Speaker 1: particular vision of industry organization. But the problem is is 342 00:19:47,440 --> 00:19:52,959 Speaker 1: that by distributing who is working on what in that manner, 343 00:19:53,200 --> 00:19:57,440 Speaker 1: you don't build out redundancies in the system. If every 344 00:19:57,480 --> 00:20:01,600 Speaker 1: individual firm is competing on every individ dual product line 345 00:20:01,840 --> 00:20:04,840 Speaker 1: or if not product line approach to production, so like 346 00:20:04,920 --> 00:20:08,000 Speaker 1: sort of production methodology or what have you, you just 347 00:20:08,200 --> 00:20:12,000 Speaker 1: from an evolutionary perspective, have more people working on the 348 00:20:12,040 --> 00:20:15,120 Speaker 1: same thing, so more sort of opportunities for kinds of 349 00:20:15,600 --> 00:20:18,600 Speaker 1: you know, mutations in the method of production that may 350 00:20:18,680 --> 00:20:21,480 Speaker 1: or may not be worthwhile. If you cut out that 351 00:20:21,760 --> 00:20:26,920 Speaker 1: entire you know, base, once what you're working on starts 352 00:20:27,040 --> 00:20:30,240 Speaker 1: to not quite work as well, you don't have a 353 00:20:30,359 --> 00:20:34,760 Speaker 1: rolodex of strange ideas or mutations or slight differences that 354 00:20:34,800 --> 00:20:37,280 Speaker 1: you can point to. On the one hand, and on 355 00:20:37,320 --> 00:20:41,040 Speaker 1: the other hand, you self consciously shrunk the market for 356 00:20:41,240 --> 00:20:46,320 Speaker 1: semicap for productive for producing machinery to produce semiconductors for 357 00:20:46,480 --> 00:20:50,960 Speaker 1: domestic firms. And so these two together lead to this 358 00:20:51,080 --> 00:20:55,040 Speaker 1: kind of self reinforcing situation where you're running really quickly, 359 00:20:55,400 --> 00:20:59,399 Speaker 1: but the moment you trip, you're on the ground. Just 360 00:20:59,440 --> 00:21:02,240 Speaker 1: one more has oracle question Before we move on to 361 00:21:02,800 --> 00:21:08,360 Speaker 1: modern day efforts to boost U S semiconductor expertise and capacity. 362 00:21:08,400 --> 00:21:11,600 Speaker 1: Can you talk a little bit more about Japan in 363 00:21:11,640 --> 00:21:13,800 Speaker 1: the nineteen eighties, because this was such a big deal 364 00:21:13,960 --> 00:21:17,200 Speaker 1: in terms of competition with the US, and they kind 365 00:21:17,240 --> 00:21:20,200 Speaker 1: of on the one hand they went down a similar 366 00:21:20,280 --> 00:21:25,480 Speaker 1: path in that the government was promoting their own domestic industry. 367 00:21:25,520 --> 00:21:28,080 Speaker 1: But on the other hand, they didn't have nearly as 368 00:21:28,160 --> 00:21:32,600 Speaker 1: much involvement um from the military because Japan's military it 369 00:21:32,720 --> 00:21:35,760 Speaker 1: kind of exists, but it's nowhere near the size um 370 00:21:35,920 --> 00:21:40,800 Speaker 1: or scale of the U S. Did you describe that contrast. So, 371 00:21:41,040 --> 00:21:44,800 Speaker 1: the major institution in Japan that drove industrial policy for 372 00:21:44,880 --> 00:21:49,520 Speaker 1: semi conductors and also computing is MITTY, which is and 373 00:21:49,520 --> 00:21:51,640 Speaker 1: I always forget the exact name, but it's the Ministry 374 00:21:51,680 --> 00:21:55,560 Speaker 1: for International Trade. They actually played a very heavy handed 375 00:21:55,640 --> 00:22:01,720 Speaker 1: role in reshaping both the semiconductor and computing industries during 376 00:22:01,760 --> 00:22:05,960 Speaker 1: the nineteen eighties. They set targets for what their technology, 377 00:22:05,960 --> 00:22:09,280 Speaker 1: what their internal firms needed to be capable of UM 378 00:22:09,320 --> 00:22:12,280 Speaker 1: at a technology level, so they said, by four we 379 00:22:12,320 --> 00:22:15,640 Speaker 1: need to have x y z process and product capabilities, 380 00:22:15,840 --> 00:22:19,880 Speaker 1: and they would actually reshape firms by force forcing UM 381 00:22:20,080 --> 00:22:25,600 Speaker 1: collaborations between competitors on specific technology approaches. The end result 382 00:22:25,680 --> 00:22:29,160 Speaker 1: was that it allowed them to leap frog American firms 383 00:22:29,359 --> 00:22:31,679 Speaker 1: in product categories like d RAM, where they took a 384 00:22:31,680 --> 00:22:34,919 Speaker 1: more conservative path um to reaching sort of the targets 385 00:22:34,920 --> 00:22:37,560 Speaker 1: that have been laid out by Mitti and capturing huge 386 00:22:37,560 --> 00:22:41,439 Speaker 1: portions of market share. The apex of fears over Japanese 387 00:22:41,560 --> 00:22:45,560 Speaker 1: domination of the industry came with the announcement of Japan's 388 00:22:45,960 --> 00:22:49,880 Speaker 1: fifth Generation Supercomputing project, which I believe was in four 389 00:22:50,200 --> 00:22:52,920 Speaker 1: sort of based on the heels of their success with 390 00:22:53,400 --> 00:22:56,200 Speaker 1: their v l s I program UM, where they basically said, 391 00:22:56,359 --> 00:22:58,760 Speaker 1: we're going to now that we've caught up to the 392 00:22:58,760 --> 00:23:01,320 Speaker 1: frontier in some econo pers and computing, we're going to 393 00:23:01,440 --> 00:23:04,359 Speaker 1: define the next generation of computing with advances and semic 394 00:23:04,359 --> 00:23:09,959 Speaker 1: connectors and computing technology. However, that program mostly was a 395 00:23:09,960 --> 00:23:13,840 Speaker 1: failure UM. It petered out and sadly going into the 396 00:23:14,480 --> 00:23:18,280 Speaker 1: ES from Japan's perspective, the the economy more broadly UM 397 00:23:18,280 --> 00:23:22,680 Speaker 1: stagnated UM and you know today Japanese computer and semic 398 00:23:22,680 --> 00:23:25,240 Speaker 1: connector firms are nowhere near the leadership they were in 399 00:23:25,280 --> 00:23:28,040 Speaker 1: the eighties and nineties. So they did take a very 400 00:23:28,080 --> 00:23:30,960 Speaker 1: different tact to sort of play catch up to U 401 00:23:31,040 --> 00:23:34,040 Speaker 1: S firms, but they were also unable to to sort 402 00:23:34,080 --> 00:23:37,800 Speaker 1: of build on that catch up phase to establish long 403 00:23:37,880 --> 00:23:40,480 Speaker 1: term dominance the way the U S industry was able 404 00:23:40,480 --> 00:23:43,040 Speaker 1: to do in the decades prior. If I can just 405 00:23:43,200 --> 00:23:45,760 Speaker 1: offer a short summary of that in a in a 406 00:23:45,800 --> 00:23:51,200 Speaker 1: certain way. So much of industrial policy for ketchup is effective, 407 00:23:51,400 --> 00:23:54,160 Speaker 1: especially in East Asia, because the rest of the world 408 00:23:54,240 --> 00:23:57,040 Speaker 1: presents a target and the goal of policy is to 409 00:23:57,119 --> 00:24:00,960 Speaker 1: hit that target. When you're at the technical logical frontier 410 00:24:01,080 --> 00:24:04,520 Speaker 1: or when you're attempting to gain the technological frontier, you 411 00:24:04,560 --> 00:24:07,240 Speaker 1: need to not only be good at hitting targets, but 412 00:24:07,280 --> 00:24:11,160 Speaker 1: you need to become good at specifying or imagining targets 413 00:24:11,200 --> 00:24:14,760 Speaker 1: that no one sees yet, which is a different necessity 414 00:24:14,800 --> 00:24:17,480 Speaker 1: and sort of speaks to the fact that there is 415 00:24:17,480 --> 00:24:20,560 Speaker 1: a role for industrial policy. But the fact that there 416 00:24:20,600 --> 00:24:22,960 Speaker 1: is a role for industrial policy doesn't mean that there's 417 00:24:23,000 --> 00:24:27,639 Speaker 1: no role for science policy, which sort of funds people 418 00:24:27,760 --> 00:24:31,000 Speaker 1: thinking about where targets might be or where targets ought 419 00:24:31,080 --> 00:24:34,080 Speaker 1: to be. That that's super that's super interesting. So you 420 00:24:34,119 --> 00:24:36,040 Speaker 1: still have to have that R and D. You have 421 00:24:36,080 --> 00:24:38,760 Speaker 1: to have the crazies that think about can we have 422 00:24:39,480 --> 00:24:42,720 Speaker 1: a chip that's a negative seventies seven kelvin And Okay, 423 00:24:42,760 --> 00:24:44,359 Speaker 1: maybe that's never gonna be in a phone, but there 424 00:24:44,400 --> 00:24:48,320 Speaker 1: have to be people out there and investment in figuring 425 00:24:48,320 --> 00:24:51,600 Speaker 1: out what that that true? Like pure science tech frontier is, 426 00:24:52,080 --> 00:24:53,600 Speaker 1: you know, I know where we gotta get to, like 427 00:24:53,640 --> 00:24:55,520 Speaker 1: the sort of present tense like what's to be done? 428 00:24:55,520 --> 00:24:58,080 Speaker 1: But you know, one of the questions I'm still like 429 00:24:58,160 --> 00:24:59,680 Speaker 1: curious about her that I feel like we need to 430 00:24:59,680 --> 00:25:02,600 Speaker 1: talk abo out of. We we have. Part of the 431 00:25:02,640 --> 00:25:04,920 Speaker 1: consternation right now is the sort of model that you 432 00:25:05,040 --> 00:25:07,639 Speaker 1: talked about where we have design in the US and 433 00:25:07,760 --> 00:25:09,919 Speaker 1: a lot of companies that are still extremely good at it, 434 00:25:10,200 --> 00:25:15,719 Speaker 1: but manufacturing overseas. The separation of design and production the foundries, 435 00:25:15,760 --> 00:25:17,800 Speaker 1: and that's what left has left us sort of like 436 00:25:18,000 --> 00:25:22,720 Speaker 1: I guess GEO politically vulnerable. Perhaps how much is the 437 00:25:22,960 --> 00:25:26,760 Speaker 1: role of Wall Street specifically in the history a contributor 438 00:25:27,040 --> 00:25:31,880 Speaker 1: to companies opting for this business model. So I think 439 00:25:31,920 --> 00:25:34,959 Speaker 1: that is a good question, and I think we're you again. 440 00:25:35,040 --> 00:25:38,000 Speaker 1: I don't have like a deep study on it, but 441 00:25:38,080 --> 00:25:40,400 Speaker 1: I do think you saw a change in the industry 442 00:25:40,960 --> 00:25:45,680 Speaker 1: when you saw generational change in its leadership. So UM 443 00:25:45,720 --> 00:25:48,320 Speaker 1: in the late eighties and early nineties, many of the 444 00:25:48,480 --> 00:25:52,800 Speaker 1: leaders of US semi connector firms like Intel or fair 445 00:25:52,920 --> 00:25:56,320 Speaker 1: Child or am D, we're still their founders. And there 446 00:25:56,400 --> 00:25:59,080 Speaker 1: was actually, when you talk about this split between design 447 00:25:59,080 --> 00:26:03,840 Speaker 1: and manufacturing, a model from integrated vertically integrated manufacturers that 448 00:26:03,960 --> 00:26:07,959 Speaker 1: quote real men have fabs UM. It was meant as 449 00:26:07,960 --> 00:26:11,560 Speaker 1: an insult towards foulist firms who, you know, we're relying 450 00:26:11,600 --> 00:26:15,320 Speaker 1: on foundries to build their chips. And there was a 451 00:26:15,359 --> 00:26:19,000 Speaker 1: generational change in that leadership that also sort of saw, 452 00:26:20,080 --> 00:26:23,480 Speaker 1: I think the financialized approach of hey, you know, we 453 00:26:23,560 --> 00:26:26,000 Speaker 1: can shed some of our assets and reduce our overall 454 00:26:26,040 --> 00:26:30,040 Speaker 1: costs and increase our margins if we rely on foundries UM. 455 00:26:30,119 --> 00:26:32,480 Speaker 1: SO I think it was a mix of both Wall 456 00:26:32,480 --> 00:26:36,199 Speaker 1: Street's influence, but also when that first generation of leaders 457 00:26:36,280 --> 00:26:39,239 Speaker 1: left the industry, new managers came in and took a 458 00:26:39,280 --> 00:26:44,160 Speaker 1: different approach to UM technology development and influence in terms 459 00:26:44,200 --> 00:26:47,040 Speaker 1: of mood and approach rather than profit pressures, you know 460 00:26:47,119 --> 00:26:50,760 Speaker 1: necessarily or a priori So maybe just to set the 461 00:26:50,800 --> 00:26:52,399 Speaker 1: scene for the present day, when you look at the 462 00:26:52,480 --> 00:26:57,440 Speaker 1: U S semiconductor industries competitiveness its place in the world, 463 00:26:58,320 --> 00:27:01,639 Speaker 1: What do you see as lacking and where are the 464 00:27:01,640 --> 00:27:04,640 Speaker 1: biggest areas for potential improvement, and then we can talk 465 00:27:04,640 --> 00:27:08,280 Speaker 1: a little bit about how we might get there. So 466 00:27:08,320 --> 00:27:10,040 Speaker 1: I think if you were to look at the U S. 467 00:27:10,040 --> 00:27:13,440 Speaker 1: Smiconductor industry today, there are certainly pockets of excellence. We 468 00:27:13,720 --> 00:27:17,560 Speaker 1: have world leading firms and electronic design automation like Synopsis 469 00:27:17,560 --> 00:27:20,360 Speaker 1: and Cadence. We have world leading firms and equipment manufacturing 470 00:27:20,600 --> 00:27:23,320 Speaker 1: like Applied Materials and k l A. Ten Core, And 471 00:27:23,359 --> 00:27:27,320 Speaker 1: we have world leading fabulous design firms like Qualcom and 472 00:27:27,359 --> 00:27:30,920 Speaker 1: in Video, and increasingly a new crop of tech giants 473 00:27:30,920 --> 00:27:34,080 Speaker 1: like Google, Apple and Facebook who have realized they can 474 00:27:34,119 --> 00:27:38,159 Speaker 1: get into chip design for their specific workloads. Where the 475 00:27:38,280 --> 00:27:42,960 Speaker 1: U S industry has gotten weakest is it's specifically in 476 00:27:43,000 --> 00:27:47,520 Speaker 1: its semiconducting manufacturing ecosystem. Although we do have quite a 477 00:27:47,520 --> 00:27:49,840 Speaker 1: few fabs still in the US, both at the leading 478 00:27:49,920 --> 00:27:53,160 Speaker 1: edge and at the trailing edge, we don't have sort 479 00:27:53,200 --> 00:27:58,520 Speaker 1: of a thick ecosystem of equipment suppliers and manufacturers on 480 00:27:58,560 --> 00:28:02,560 Speaker 1: the ground working together to push the edge on what's possible. 481 00:28:03,000 --> 00:28:06,080 Speaker 1: And that's one place where, for example, a weakness is 482 00:28:06,200 --> 00:28:10,480 Speaker 1: we don't have any EUV lithography machines in the US 483 00:28:10,480 --> 00:28:13,760 Speaker 1: producing commercially outside of Intel, right, we have just one 484 00:28:13,840 --> 00:28:16,600 Speaker 1: company in the U S who is using that technology. 485 00:28:16,680 --> 00:28:20,720 Speaker 1: And we don't have that learning environment between multiple manufacturers 486 00:28:20,840 --> 00:28:23,280 Speaker 1: and suppliers who are visiting multiple sites, who are kind 487 00:28:23,320 --> 00:28:26,720 Speaker 1: of learning best in class techniques from different firms to 488 00:28:26,800 --> 00:28:29,520 Speaker 1: continue to push the envelope. And and that kind of 489 00:28:29,600 --> 00:28:32,480 Speaker 1: hinders our ability to innovate because you don't get innovation 490 00:28:32,520 --> 00:28:35,000 Speaker 1: across the entire stack. You kind of focus your innovation 491 00:28:35,040 --> 00:28:37,160 Speaker 1: on the places where we do lead, So you don't 492 00:28:37,240 --> 00:28:39,840 Speaker 1: you don't kind of bring that full package together where 493 00:28:39,840 --> 00:28:43,400 Speaker 1: you're where you're developing new technologies in the fab and 494 00:28:43,640 --> 00:28:48,480 Speaker 1: helping that helping leverage those findings with suppliers and equipment 495 00:28:48,520 --> 00:28:53,400 Speaker 1: manufacturers and design firms. And this is exactly the role 496 00:28:53,400 --> 00:28:55,800 Speaker 1: of industrial policy and speaks to the sort of target 497 00:28:55,880 --> 00:28:59,120 Speaker 1: metaphor that you know I used earlier, which is that 498 00:28:59,200 --> 00:29:01,680 Speaker 1: if you have these cutting edge firms at the absolute 499 00:29:01,760 --> 00:29:05,680 Speaker 1: peak of your industry, while you are at the technological frontier, 500 00:29:06,160 --> 00:29:08,240 Speaker 1: it's clear that you have people who know how to 501 00:29:08,280 --> 00:29:14,160 Speaker 1: set targets. The issue becomes translating that into a you know, 502 00:29:14,240 --> 00:29:17,880 Speaker 1: industrial organization, you know, sort of like an ecosystem is 503 00:29:17,920 --> 00:29:21,440 Speaker 1: a very good word for it, where you know, sort 504 00:29:21,440 --> 00:29:25,640 Speaker 1: of there are a variety of firms engaged in and 505 00:29:25,840 --> 00:29:30,160 Speaker 1: you know who in principle can help hit that target 506 00:29:30,240 --> 00:29:33,560 Speaker 1: that is being specified by those sort of absolute front 507 00:29:33,600 --> 00:29:36,000 Speaker 1: of the line firms. So the idea is that an 508 00:29:36,040 --> 00:29:41,040 Speaker 1: introduction of industrial policy into the existing industry like will 509 00:29:41,080 --> 00:29:44,400 Speaker 1: sort of allow it to do what it does well 510 00:29:44,600 --> 00:29:58,160 Speaker 1: even better by virtue of adding support and supply line. 511 00:30:04,200 --> 00:30:07,160 Speaker 1: So I realized, there's one more question I want to 512 00:30:07,200 --> 00:30:10,120 Speaker 1: get to, uh, and it's related to this before we 513 00:30:10,160 --> 00:30:11,959 Speaker 1: get to the sort of pure question of like, all right, 514 00:30:12,000 --> 00:30:14,120 Speaker 1: what is the best policy it looks like and uh 515 00:30:14,520 --> 00:30:16,000 Speaker 1: huss and you sort of hinted at it when you 516 00:30:16,040 --> 00:30:19,680 Speaker 1: were talking about Japan's rise and fall, and it's something 517 00:30:19,760 --> 00:30:23,719 Speaker 1: Alex that your colleague Scanda m. Nath has talked a 518 00:30:23,720 --> 00:30:27,240 Speaker 1: little bit about. But what is also the role of 519 00:30:27,440 --> 00:30:30,080 Speaker 1: just the sort of sluggish economy and all this the 520 00:30:30,160 --> 00:30:33,200 Speaker 1: lack of capital deepening, the lack of capital investment of course, 521 00:30:33,480 --> 00:30:37,000 Speaker 1: from the Great Financial Crisis to you know, the virus, 522 00:30:37,240 --> 00:30:41,120 Speaker 1: the pandemic economic growth was weak. Tech really never really 523 00:30:41,280 --> 00:30:44,560 Speaker 1: tech spending never really recovered in the same way after 524 00:30:44,600 --> 00:30:47,240 Speaker 1: the dot com bubble. What is the role that just 525 00:30:47,280 --> 00:30:51,840 Speaker 1: like our our our acceptance of poor growth contributed to 526 00:30:52,040 --> 00:30:57,040 Speaker 1: this sort of hollowing out of techno. How so, our 527 00:30:57,120 --> 00:30:59,880 Speaker 1: first piece in the series, actually, which is called supp 528 00:31:00,040 --> 00:31:04,280 Speaker 1: lying demand the chip shortage in macro context, delves into 529 00:31:04,280 --> 00:31:08,440 Speaker 1: this question, you know, pretty pretty intensively, and the simplest 530 00:31:08,480 --> 00:31:10,880 Speaker 1: answer is a basic, you know, sort of Canzian answer. 531 00:31:11,000 --> 00:31:15,120 Speaker 1: If you don't have strong demand, manufacturers are going to 532 00:31:15,200 --> 00:31:18,560 Speaker 1: see that and say, Okay, our present capacity, in whatever 533 00:31:18,640 --> 00:31:21,920 Speaker 1: technological quality it's in is sufficient to meet what we 534 00:31:21,960 --> 00:31:24,120 Speaker 1: think is going to happen. So there's no need for 535 00:31:24,200 --> 00:31:27,640 Speaker 1: us to invest in new capacity here because at that 536 00:31:27,720 --> 00:31:29,640 Speaker 1: point we'll just flood the market and we'll begin to 537 00:31:29,640 --> 00:31:32,480 Speaker 1: eat into our own margins. So if you can durably 538 00:31:32,560 --> 00:31:34,680 Speaker 1: predict that there's going to be low demand for a 539 00:31:34,720 --> 00:31:37,920 Speaker 1: long period of time, you can cut capex and not 540 00:31:38,080 --> 00:31:40,640 Speaker 1: have it, you know, negatively impact you because there's no 541 00:31:40,720 --> 00:31:44,080 Speaker 1: demand for you know, anyone in in that market space. 542 00:31:44,120 --> 00:31:47,160 Speaker 1: But the problem is is that if you have say 543 00:31:47,560 --> 00:31:51,200 Speaker 1: technology advancing at a constant rate, and like I said before, 544 00:31:51,360 --> 00:31:54,600 Speaker 1: for that technology to enter into the production process. It 545 00:31:54,680 --> 00:31:57,520 Speaker 1: has to come through, it has to become embodied in 546 00:31:57,960 --> 00:32:01,600 Speaker 1: new capital goods for production. If you don't have a 547 00:32:01,600 --> 00:32:05,720 Speaker 1: macroeconomic environment that has enough you know, effective demand to 548 00:32:06,200 --> 00:32:10,760 Speaker 1: persuade producers to invest in new capital goods and to 549 00:32:10,840 --> 00:32:13,800 Speaker 1: add capacity, you're not going to see that technology be 550 00:32:13,840 --> 00:32:16,080 Speaker 1: taken up because you're not going to see the capex happen. 551 00:32:16,520 --> 00:32:19,360 Speaker 1: An environment of low effective demand is going to redound 552 00:32:19,440 --> 00:32:23,440 Speaker 1: not only on poor employment, which you know, creates a 553 00:32:23,520 --> 00:32:26,840 Speaker 1: less skilled labor force, you know, and even without even 554 00:32:26,880 --> 00:32:31,200 Speaker 1: speaking to layoffs caused by you know, sort of market slowdowns, 555 00:32:31,200 --> 00:32:34,760 Speaker 1: but it's just going to not have technological advances that 556 00:32:34,840 --> 00:32:37,800 Speaker 1: do happen be incorporated into the economy as a whole 557 00:32:37,840 --> 00:32:39,480 Speaker 1: as quickly as it could be, and so you'll see 558 00:32:39,520 --> 00:32:44,360 Speaker 1: a productivity slowdown as well. So does that suggest that 559 00:32:44,640 --> 00:32:47,480 Speaker 1: one of the fixes for the market right now could 560 00:32:47,480 --> 00:32:51,240 Speaker 1: be setting some sort of demand floor, like just ensuring 561 00:32:51,280 --> 00:32:55,200 Speaker 1: that the government is there to buy up excess capacity 562 00:32:55,240 --> 00:33:00,880 Speaker 1: of semiconductors. So I think that that's a a necessary 563 00:33:01,000 --> 00:33:05,760 Speaker 1: part of the fiscal spending, part of an industrial policy plan. However, 564 00:33:06,600 --> 00:33:11,320 Speaker 1: it's very difficult to specify beforehand where that should be done. 565 00:33:11,440 --> 00:33:15,040 Speaker 1: As I'm sure Huston can speak to, semiconductors are an 566 00:33:15,080 --> 00:33:20,200 Speaker 1: astoundingly differentiated market where you know, the there's there's very 567 00:33:20,280 --> 00:33:22,959 Speaker 1: little that is you know, you could think of as 568 00:33:23,000 --> 00:33:25,120 Speaker 1: a simple baseline. You know, in the same way that 569 00:33:25,480 --> 00:33:28,280 Speaker 1: price supports for commodities like milk, you can define a 570 00:33:28,320 --> 00:33:31,040 Speaker 1: basic this is milk everywhere you go, this is what 571 00:33:31,160 --> 00:33:34,959 Speaker 1: milk is. So before we can do that, really what 572 00:33:35,040 --> 00:33:39,160 Speaker 1: needs to be done is the US government would need 573 00:33:39,200 --> 00:33:41,960 Speaker 1: to build out a data gathering apparatus to get a 574 00:33:42,000 --> 00:33:45,560 Speaker 1: full picture of what supply chains look like now, because 575 00:33:45,680 --> 00:33:51,680 Speaker 1: with the level of differentiation, it's difficult to say what 576 00:33:51,880 --> 00:33:54,320 Speaker 1: that would look at before that data is gathered. They'll 577 00:33:54,320 --> 00:33:56,640 Speaker 1: I'll let us and speak on that if he wants to. 578 00:33:57,320 --> 00:34:00,000 Speaker 1: And actually this is a place where the Biden administer 579 00:34:00,000 --> 00:34:02,160 Speaker 1: it should sort of started on the right foot. Um. 580 00:34:02,200 --> 00:34:04,479 Speaker 1: It was one of the first executive orders that they 581 00:34:04,480 --> 00:34:07,960 Speaker 1: announced was a supply chain review of semi conductors, and 582 00:34:08,320 --> 00:34:10,480 Speaker 1: it's sort of as as Alex hinted at earlier, I 583 00:34:10,480 --> 00:34:13,920 Speaker 1: think it's really important because there is a major bipartisan 584 00:34:13,960 --> 00:34:18,360 Speaker 1: consensus on doing something. But to cut through the noise 585 00:34:18,640 --> 00:34:21,800 Speaker 1: and get to the what is this something we should do. 586 00:34:22,040 --> 00:34:24,640 Speaker 1: I do think the government has to take time to 587 00:34:24,719 --> 00:34:29,040 Speaker 1: take stock of where are our biggest vulnerabilities in the 588 00:34:29,080 --> 00:34:32,080 Speaker 1: supply chain today? UM. We've had some a lot of 589 00:34:32,120 --> 00:34:36,160 Speaker 1: noise related to the shortage, especially with say automakers, But 590 00:34:36,239 --> 00:34:38,680 Speaker 1: I don't think there's anyone who's saying we need to 591 00:34:38,960 --> 00:34:43,759 Speaker 1: completely reshore the automobile I see supply chain. UM. I 592 00:34:43,800 --> 00:34:47,040 Speaker 1: think instead, you know, the conversation we should be having 593 00:34:47,080 --> 00:34:50,440 Speaker 1: at at an industrial policy level is what are the 594 00:34:50,480 --> 00:34:54,000 Speaker 1: internal capabilities that we need to maintain in order to 595 00:34:54,040 --> 00:34:58,680 Speaker 1: maintain a resilient UM semi conductor ecosystem in the United States, 596 00:34:59,120 --> 00:35:01,279 Speaker 1: and how can we support that? So there may be 597 00:35:01,440 --> 00:35:06,000 Speaker 1: areas of that ecosystem that are best supported with purchase guarantees, um, 598 00:35:06,040 --> 00:35:09,560 Speaker 1: you know, for specific markets to make them competitive. UM, 599 00:35:09,600 --> 00:35:12,400 Speaker 1: But I do think other areas would have other support 600 00:35:12,400 --> 00:35:15,960 Speaker 1: mechanisms as well. Right So, with autos, although it's a 601 00:35:16,000 --> 00:35:19,480 Speaker 1: problem right now, my understanding is that the actual technology 602 00:35:19,520 --> 00:35:22,440 Speaker 1: that's missing is they're cheap, they're low end. It's not 603 00:35:22,560 --> 00:35:26,319 Speaker 1: like necessarily the most urgent thing. Ultimately, it's just sort 604 00:35:26,320 --> 00:35:28,480 Speaker 1: of a weird thing going on right now. So in 605 00:35:28,520 --> 00:35:31,160 Speaker 1: your view, like, where should we be looking like, where 606 00:35:31,160 --> 00:35:33,680 Speaker 1: do you think we're going to find the supply chain 607 00:35:33,880 --> 00:35:38,520 Speaker 1: vulnerabilities and what are some of the perhaps best policies 608 00:35:38,880 --> 00:35:41,000 Speaker 1: that we could be putting forth in terms of like 609 00:35:41,160 --> 00:35:45,920 Speaker 1: legislation and dollars that that might go towards addressing it 610 00:35:46,040 --> 00:35:49,600 Speaker 1: or maybe building a system that can resiliently address issues 611 00:35:49,640 --> 00:35:52,719 Speaker 1: as they come up. I think I'll talk a little 612 00:35:52,719 --> 00:35:55,480 Speaker 1: bit about the specific deficiencies that I see, and then 613 00:35:55,520 --> 00:35:58,600 Speaker 1: Alex can maybe talk more about some of the proposals 614 00:35:58,600 --> 00:36:02,879 Speaker 1: that we've seen and where those are most promising. So 615 00:36:02,960 --> 00:36:05,000 Speaker 1: I think we're where where the U S has a 616 00:36:05,120 --> 00:36:09,840 Speaker 1: deficiency is we've weakened sort of our overall ecosystem for 617 00:36:10,320 --> 00:36:13,640 Speaker 1: manufacturing innovation, and I think I would give to give 618 00:36:13,680 --> 00:36:15,840 Speaker 1: a good counterexample of what that might look like. Is 619 00:36:16,000 --> 00:36:18,800 Speaker 1: You've had Dan Wang on this podcast to talk previously 620 00:36:18,840 --> 00:36:21,640 Speaker 1: about how magical of a place Shenzen is for its 621 00:36:21,680 --> 00:36:25,600 Speaker 1: electronics ecosystem where you have engineers from across the world 622 00:36:25,680 --> 00:36:28,760 Speaker 1: kind of coming together and tunkuring to build new things. 623 00:36:29,200 --> 00:36:31,440 Speaker 1: And if you go back to Silicon Valley in the nineties, 624 00:36:31,520 --> 00:36:33,719 Speaker 1: that's what you had. You had, you know, engineers from 625 00:36:33,760 --> 00:36:37,279 Speaker 1: different firms coming together, meeting up at local bars and 626 00:36:37,360 --> 00:36:39,360 Speaker 1: kind of learning from each other and learning from local 627 00:36:39,360 --> 00:36:43,480 Speaker 1: suppliers on what best and class capabilities were. Because today 628 00:36:43,640 --> 00:36:46,960 Speaker 1: that our domestic ecosystem has been so thinned out, you 629 00:36:47,040 --> 00:36:50,480 Speaker 1: really only have you know, a few company towns where 630 00:36:50,520 --> 00:36:54,040 Speaker 1: you don't get that same sharing of information. That's one weakness. 631 00:36:54,200 --> 00:36:56,960 Speaker 1: I think the other weakness that we have is we 632 00:36:56,960 --> 00:37:02,200 Speaker 1: we have reliance on individual rule suppliers for key key 633 00:37:02,239 --> 00:37:04,279 Speaker 1: links in the supply chain. So the one that's gotten 634 00:37:04,280 --> 00:37:07,040 Speaker 1: talked a lot about is t SMC at the leading edge, 635 00:37:07,120 --> 00:37:09,479 Speaker 1: where you can't manufacture a trip at five or seven 636 00:37:09,480 --> 00:37:12,480 Speaker 1: animeters without relying on t SMC. But we're also seeing 637 00:37:12,480 --> 00:37:16,520 Speaker 1: it in trailing edge nodes where a lot of materials 638 00:37:16,560 --> 00:37:20,319 Speaker 1: and components are single source, sometimes out of Taiwan or 639 00:37:20,360 --> 00:37:22,879 Speaker 1: sometimes out of other countries like China, and those create 640 00:37:22,920 --> 00:37:27,440 Speaker 1: vulnerabilities for our entire industrial ecosystem because hey, guess what 641 00:37:27,520 --> 00:37:30,840 Speaker 1: that two dollar integrated circuit that's nothing to write home about. 642 00:37:31,040 --> 00:37:33,560 Speaker 1: You can only get from one plant. And so I 643 00:37:33,600 --> 00:37:36,720 Speaker 1: think you know that leads you to the first policy 644 00:37:36,719 --> 00:37:39,440 Speaker 1: point that that Alex introduced, which is we need to 645 00:37:39,480 --> 00:37:41,879 Speaker 1: do a review of our supply chains to understand where 646 00:37:41,880 --> 00:37:46,520 Speaker 1: those gaps really are and then think about remedies. And 647 00:37:46,560 --> 00:37:50,040 Speaker 1: I would say, in terms of taking seriously that the 648 00:37:50,120 --> 00:37:54,239 Speaker 1: first step towards coming up with a truly efficacious industrial 649 00:37:54,280 --> 00:37:58,000 Speaker 1: policy program. In terms of proposals on the table to 650 00:37:58,080 --> 00:38:02,319 Speaker 1: do this, the Endless Frontiers Act doesn't really address this 651 00:38:02,400 --> 00:38:04,600 Speaker 1: too much. A lot of its funding is still focused 652 00:38:04,600 --> 00:38:08,640 Speaker 1: through academia, even though it does engage with the Manufacturing 653 00:38:08,760 --> 00:38:13,160 Speaker 1: USA program. The Chips Act does provide for a survey 654 00:38:13,160 --> 00:38:17,280 Speaker 1: of manufacturers, you know, about national security concerns, particularly across 655 00:38:17,320 --> 00:38:20,719 Speaker 1: the supply chain UH, and it does the uh, you know, 656 00:38:20,760 --> 00:38:22,719 Speaker 1: sort of in my opinion, good move of anchoring that 657 00:38:22,760 --> 00:38:26,080 Speaker 1: in the Department of Commerce rather than the you know, 658 00:38:26,120 --> 00:38:29,640 Speaker 1: the n c s C, the National uh Counterintelligence and 659 00:38:29,640 --> 00:38:32,840 Speaker 1: Security Council or something like that has a similar you know, 660 00:38:32,960 --> 00:38:36,840 Speaker 1: national security in the semiconductor supply chain a project that 661 00:38:36,880 --> 00:38:41,239 Speaker 1: it's working on. UM. But really the the ideal is 662 00:38:41,600 --> 00:38:45,600 Speaker 1: the sort of spec infrastructure plan that the Biden administration 663 00:38:45,640 --> 00:38:49,600 Speaker 1: put forward, which includes fifty billion dollars for the establishment 664 00:38:49,600 --> 00:38:51,640 Speaker 1: of an Office of the Department of Commerce to monitor 665 00:38:51,719 --> 00:38:55,880 Speaker 1: domestic industrial capacity just across the board, which you know, 666 00:38:56,080 --> 00:39:02,640 Speaker 1: insofar as the problems in semiconductors are you know, significant 667 00:39:02,840 --> 00:39:07,680 Speaker 1: and melorable through industrial policy. But there's also a critical 668 00:39:08,360 --> 00:39:11,960 Speaker 1: sense that this industrial policy tool kit is something that 669 00:39:12,000 --> 00:39:13,959 Speaker 1: we are going to have to get better at as 670 00:39:14,000 --> 00:39:18,040 Speaker 1: we sort of confront the absolute necessity of adapting the 671 00:39:18,040 --> 00:39:21,839 Speaker 1: economy to climate change in ways other than just reducing 672 00:39:22,840 --> 00:39:26,279 Speaker 1: fossil fuel usage in order to adapt to a significantly 673 00:39:26,360 --> 00:39:32,200 Speaker 1: changing landscape, having active monitoring of domestic industrial capacity and 674 00:39:32,320 --> 00:39:34,920 Speaker 1: factors impacting it from a variety of sources is going 675 00:39:34,960 --> 00:39:36,120 Speaker 1: to be something that we're going to have to get 676 00:39:36,200 --> 00:39:40,040 Speaker 1: much better at. And semiconductors provide, through their complexity and 677 00:39:40,120 --> 00:39:44,320 Speaker 1: through their product differentiation, just an incredible sandbox for testing 678 00:39:44,320 --> 00:39:48,440 Speaker 1: out methods for doing this. I have a devil's advocate question, 679 00:39:48,560 --> 00:39:51,719 Speaker 1: which is, what do you say to people who are 680 00:39:51,760 --> 00:39:55,560 Speaker 1: sort of um markets fundamentalists, let's call them, who would 681 00:39:55,600 --> 00:39:59,080 Speaker 1: say that, well, the US has squandered its edge in 682 00:39:59,160 --> 00:40:03,920 Speaker 1: semiconductor is Intel has made a ton of missteps in 683 00:40:03,960 --> 00:40:07,160 Speaker 1: its own business. It doesn't deserve to have help from 684 00:40:07,200 --> 00:40:09,359 Speaker 1: the government in any way because it's just not going 685 00:40:09,400 --> 00:40:11,400 Speaker 1: to be efficient or it's not going to be competitive 686 00:40:11,920 --> 00:40:17,399 Speaker 1: with Taiwan or China and other manufacturers. What's the response there. 687 00:40:18,760 --> 00:40:21,640 Speaker 1: I agree that any industrial policy should not be viewed 688 00:40:21,680 --> 00:40:24,560 Speaker 1: as a giveaway to national firms, and I think the 689 00:40:24,680 --> 00:40:29,000 Speaker 1: any administration looking to implement industrial policies should be also 690 00:40:29,120 --> 00:40:32,279 Speaker 1: looking to make sure that they're either getting concessions from 691 00:40:32,520 --> 00:40:36,040 Speaker 1: firms that they're providing help to, or using it to 692 00:40:36,200 --> 00:40:40,200 Speaker 1: seed not just existing firms, but also helping um you know, 693 00:40:40,280 --> 00:40:43,080 Speaker 1: new firms take advantage of those. But the other comment 694 00:40:43,120 --> 00:40:45,560 Speaker 1: I'd make is we should be kind of blunt that 695 00:40:45,880 --> 00:40:49,360 Speaker 1: there is no free market operation in the global semiconductor 696 00:40:49,440 --> 00:40:53,880 Speaker 1: industry when Taiwan is subsidizing the production of fads. China 697 00:40:53,960 --> 00:40:58,080 Speaker 1: has openly stated its ambitions for the for its domestic 698 00:40:58,120 --> 00:41:01,200 Speaker 1: semiconductory industry, and Korean Japan, of course, have a long 699 00:41:01,239 --> 00:41:03,759 Speaker 1: history of supporting their domestic industries as well, and there's 700 00:41:03,800 --> 00:41:06,919 Speaker 1: also talk now of Europe funding leading edge fat. So 701 00:41:07,360 --> 00:41:11,320 Speaker 1: the question kind of comes given that, you know, national 702 00:41:11,320 --> 00:41:14,239 Speaker 1: governments across the world are going to be subsidizing and 703 00:41:14,239 --> 00:41:16,960 Speaker 1: protecting their industries, what do we need to do in 704 00:41:17,080 --> 00:41:20,000 Speaker 1: order to make sure that we have a sufficiently capable 705 00:41:20,040 --> 00:41:24,799 Speaker 1: and resilient ecosystem to service our economy. Because as Alex 706 00:41:24,880 --> 00:41:28,640 Speaker 1: kind of hinted at semi characters are so pervasive they 707 00:41:28,680 --> 00:41:31,960 Speaker 1: they touch every part of a modern twenty century economy. 708 00:41:32,080 --> 00:41:35,000 Speaker 1: And to find ourselves at the mercy of far flung 709 00:41:35,080 --> 00:41:39,160 Speaker 1: suppliers because that's what the market requires, I think, is 710 00:41:39,200 --> 00:41:41,760 Speaker 1: a risk that a government doesn't actually want to take, 711 00:41:42,080 --> 00:41:46,120 Speaker 1: regardless of its adherence to free market principles. And worse 712 00:41:46,200 --> 00:41:49,560 Speaker 1: than that, it's bad economics. The idea that you know, 713 00:41:49,719 --> 00:41:52,239 Speaker 1: free market principles would say that you should, you know, 714 00:41:52,360 --> 00:41:55,480 Speaker 1: pursue comparative advantage and let these other countries with their 715 00:41:55,520 --> 00:41:59,400 Speaker 1: cheaper labor do these lower value add processes, and you 716 00:41:59,400 --> 00:42:03,640 Speaker 1: know sort of and the torpedoes to the domestic economy, 717 00:42:03,840 --> 00:42:06,040 Speaker 1: you know, relies on this notion that you know, we 718 00:42:06,120 --> 00:42:09,160 Speaker 1: are specializing in high value add and they're specializing in 719 00:42:09,200 --> 00:42:12,640 Speaker 1: low value add and then we sell our high value 720 00:42:12,680 --> 00:42:15,040 Speaker 1: add and buy their low value add and then it's 721 00:42:15,080 --> 00:42:17,839 Speaker 1: better for everyone. This is sort of the you know, 722 00:42:17,960 --> 00:42:21,120 Speaker 1: happy family of the Riccardian models you know, from you know, 723 00:42:21,120 --> 00:42:24,319 Speaker 1: a thousand years ago. The problem is is that in 724 00:42:24,760 --> 00:42:29,960 Speaker 1: an actual dynamic economy, everyone firms and nations alike are 725 00:42:30,040 --> 00:42:33,239 Speaker 1: trying actively to move up the value chain. So if 726 00:42:33,280 --> 00:42:36,520 Speaker 1: you sort of say, hey, sure you can have all 727 00:42:36,560 --> 00:42:38,600 Speaker 1: of this, you know, sort of low value add work, 728 00:42:38,680 --> 00:42:40,920 Speaker 1: like have fun. We're going to be, you know, just 729 00:42:41,120 --> 00:42:43,719 Speaker 1: doing the ultra high tech. You know, we're just going 730 00:42:43,760 --> 00:42:46,040 Speaker 1: to design the chips and you'll never catch us up 731 00:42:46,080 --> 00:42:50,400 Speaker 1: at that. And then you know, five years, ten years, fifteen, 732 00:42:50,400 --> 00:42:54,120 Speaker 1: twenty years later, these firms that we're doing what used 733 00:42:54,160 --> 00:42:56,839 Speaker 1: to be low value add work have stacked up enough 734 00:42:56,880 --> 00:43:00,040 Speaker 1: process improvements that all of a sudden, hey, if you 735 00:43:00,040 --> 00:43:03,160 Speaker 1: want to produce something at five nanometers or seven nimeters, 736 00:43:03,239 --> 00:43:05,040 Speaker 1: you have to go through them. Because at the time 737 00:43:05,120 --> 00:43:08,120 Speaker 1: we decided, oh, you know, this is sort of schlap 738 00:43:08,200 --> 00:43:11,239 Speaker 1: work and you know, sort of Ricardian comparative advantage will 739 00:43:11,239 --> 00:43:15,560 Speaker 1: take care of us forever. Markets don't work that way. 740 00:43:15,760 --> 00:43:18,239 Speaker 1: Was anyone ever like warning about this back then? Where 741 00:43:18,239 --> 00:43:20,279 Speaker 1: there people are like, oh, maybe it's not a good 742 00:43:20,320 --> 00:43:24,920 Speaker 1: idea that all these companies for all these products are 743 00:43:24,960 --> 00:43:27,000 Speaker 1: just sort of assuming, you know, just sort of thinking 744 00:43:27,000 --> 00:43:30,560 Speaker 1: of Taiwan is their factory and you know, let's just 745 00:43:30,600 --> 00:43:34,799 Speaker 1: do the high tech stuff here. Chalmers Johnson famously I 746 00:43:34,800 --> 00:43:37,560 Speaker 1: think Hussin can speak to more. I mean, there was 747 00:43:37,600 --> 00:43:40,360 Speaker 1: an enormous freak out in the nine eighties when Japan 748 00:43:40,440 --> 00:43:43,319 Speaker 1: became ascendant. Uh, and that's where the d D really 749 00:43:43,360 --> 00:43:46,160 Speaker 1: did get involved. But but I don't I don't think 750 00:43:46,200 --> 00:43:49,120 Speaker 1: anyone in the eighties and nineties sort of as we were, 751 00:43:49,160 --> 00:43:51,239 Speaker 1: you know, crafting the path that we ended up now 752 00:43:52,080 --> 00:43:55,640 Speaker 1: foresaw a future where you know, the U. S. Economy 753 00:43:55,680 --> 00:44:00,879 Speaker 1: could be ground to a halt by foreign ship supplier availability. Right. 754 00:44:01,040 --> 00:44:03,800 Speaker 1: I think it's kind of gotten to a point where, 755 00:44:04,200 --> 00:44:08,040 Speaker 1: well beyond what the architects of our current policy regime 756 00:44:08,520 --> 00:44:11,720 Speaker 1: sort of imagined. Do you want do you like? How 757 00:44:11,760 --> 00:44:14,920 Speaker 1: optimistic do either of you feel based on you know, 758 00:44:14,960 --> 00:44:18,279 Speaker 1: we have this sort of emerging bipartisan consensus. It might 759 00:44:18,360 --> 00:44:21,640 Speaker 1: be like one of the only bipartisan issues that there is. Like, 760 00:44:21,680 --> 00:44:25,160 Speaker 1: it really does seem like both Republicans and Democrats are 761 00:44:25,280 --> 00:44:28,720 Speaker 1: kind of on similar pages on this, and there's willingness 762 00:44:28,760 --> 00:44:31,360 Speaker 1: to spend money and identification of some of the issues. 763 00:44:31,400 --> 00:44:34,759 Speaker 1: So how optimistic are you that this sort of like 764 00:44:34,880 --> 00:44:39,000 Speaker 1: long decay of our production no how can start to 765 00:44:39,000 --> 00:44:43,160 Speaker 1: be reversed? Just speaking from a policy perspective, I think 766 00:44:43,160 --> 00:44:45,920 Speaker 1: it really all comes down to the correct choice. And 767 00:44:45,960 --> 00:44:48,759 Speaker 1: I'll let Husson speak a little bit more to what 768 00:44:48,920 --> 00:44:52,640 Speaker 1: that correct choice of policy program is. I was gonna 769 00:44:52,640 --> 00:44:56,239 Speaker 1: say two things on how optimistic I am one is. 770 00:44:56,600 --> 00:44:59,680 Speaker 1: I think in the short term I'm very optimistic that 771 00:44:59,719 --> 00:45:03,840 Speaker 1: we will pass policy. Whether it's the right policy depends 772 00:45:03,840 --> 00:45:07,560 Speaker 1: on making sure we get policymakers to listen on what 773 00:45:07,600 --> 00:45:10,359 Speaker 1: approaches we have. I think in the long term, on 774 00:45:10,440 --> 00:45:14,759 Speaker 1: whether or not this episode helps the United States adopt 775 00:45:14,960 --> 00:45:19,520 Speaker 1: afford looking industrial policy strategy that can be leveraged for say, 776 00:45:19,640 --> 00:45:23,600 Speaker 1: climate change is still is a much bigger question, and 777 00:45:23,640 --> 00:45:26,000 Speaker 1: that's the level that I would like to see US 778 00:45:26,000 --> 00:45:30,520 Speaker 1: get to UM for for success. I think what Alex 779 00:45:30,560 --> 00:45:32,880 Speaker 1: has done and and has seen in proposals that are 780 00:45:32,880 --> 00:45:35,480 Speaker 1: out there today is that the right pieces are in 781 00:45:35,560 --> 00:45:39,720 Speaker 1: proposals UM. Whether that's the Endless Frontiers Act, the Biden 782 00:45:39,760 --> 00:45:44,200 Speaker 1: Infrastructure Bill, or work from some senators like Senator Coon's, 783 00:45:44,360 --> 00:45:47,520 Speaker 1: the pieces are there, I think to be really successful 784 00:45:47,520 --> 00:45:49,879 Speaker 1: in the short term, it's about pulling out the right 785 00:45:50,200 --> 00:45:54,160 Speaker 1: specific proposals and and merging them together into the right 786 00:45:54,200 --> 00:45:58,439 Speaker 1: approach with a focus on supply chain analysis, setting clear 787 00:45:58,480 --> 00:46:02,239 Speaker 1: goals for what the US semiconductor ecosystem should be capable of, 788 00:46:02,760 --> 00:46:06,040 Speaker 1: and then building up that supply chain, a supply chain 789 00:46:06,120 --> 00:46:09,560 Speaker 1: monitoring muscle to sort of look forward and beyond the 790 00:46:09,680 --> 00:46:14,719 Speaker 1: semiconductor industry to where else will want to manage our 791 00:46:15,280 --> 00:46:19,640 Speaker 1: industrial capabilities to tackle, you know, future challenges with climate change, 792 00:46:21,160 --> 00:46:24,399 Speaker 1: anything else, Alex and husting any sort of last things 793 00:46:24,440 --> 00:46:26,200 Speaker 1: we didn't ask about. Our key ideas you want to 794 00:46:26,360 --> 00:46:29,120 Speaker 1: keep something you want to get across. I guess just 795 00:46:29,320 --> 00:46:31,760 Speaker 1: to look out for sort of the next two pieces 796 00:46:31,920 --> 00:46:34,600 Speaker 1: in this series, which the next one will be a 797 00:46:35,680 --> 00:46:39,440 Speaker 1: sort of thorough account of what the Industrial Policy tool 798 00:46:39,520 --> 00:46:43,200 Speaker 1: Kit ought to be UH for for our government's looking 799 00:46:43,239 --> 00:46:46,160 Speaker 1: to implement this UH and the one after that being 800 00:46:46,280 --> 00:46:50,040 Speaker 1: sort of a longer theory based, you know, sort of 801 00:46:50,160 --> 00:46:54,600 Speaker 1: argument against this this Ricardian comparative advantage approach to trade policy, 802 00:46:55,360 --> 00:46:59,200 Speaker 1: which the semiconductor industry illustrates particularly well, but which holds 803 00:47:00,239 --> 00:47:03,600 Speaker 1: across sectors. I can't wait to read them all right, 804 00:47:03,680 --> 00:47:07,040 Speaker 1: Husson and Alex, thank you both so much for coming up. 805 00:47:07,840 --> 00:47:12,319 Speaker 1: Thanks so much for having us. This is wonderful. Thanks guys, 806 00:47:12,400 --> 00:47:28,440 Speaker 1: that was great. I found that to be a very 807 00:47:28,520 --> 00:47:32,480 Speaker 1: helpful UH conversation to sort of like frame where we 808 00:47:32,560 --> 00:47:35,359 Speaker 1: are right now. I really like I like this idea. 809 00:47:35,360 --> 00:47:37,360 Speaker 1: I mean, it's we've we've talked about this, you know, 810 00:47:38,080 --> 00:47:40,200 Speaker 1: Dan Long and a few others. You know, obviously this 811 00:47:40,360 --> 00:47:43,960 Speaker 1: idea of like learning by doing the importance of actual 812 00:47:44,080 --> 00:47:46,600 Speaker 1: like getting your hands already know how. But I felt like, 813 00:47:46,880 --> 00:47:50,640 Speaker 1: you know, is Alex put it that, you know, technology 814 00:47:50,800 --> 00:47:54,920 Speaker 1: isn't just something that's like is handed down to producers 815 00:47:55,000 --> 00:47:57,880 Speaker 1: and then they like upgrade the thing like production is 816 00:47:58,040 --> 00:48:01,239 Speaker 1: like what technology is. It's just like a very like 817 00:48:01,320 --> 00:48:04,879 Speaker 1: sort of like useful way to think about the challenge. Yeah. 818 00:48:04,960 --> 00:48:08,239 Speaker 1: And I also like this idea that you know, people 819 00:48:08,320 --> 00:48:13,440 Speaker 1: tend to think about industrial policy and government involvement in 820 00:48:13,640 --> 00:48:17,040 Speaker 1: industry as a sort of um like a really boring, 821 00:48:17,760 --> 00:48:22,560 Speaker 1: very controlling, like stifle stifling of innovation, I think, but 822 00:48:23,560 --> 00:48:26,800 Speaker 1: the way um Alex and Husson kind of described it, 823 00:48:27,800 --> 00:48:32,239 Speaker 1: it can be a backstop for getting really creative innovation 824 00:48:32,640 --> 00:48:34,640 Speaker 1: in different products. And I think a lot of people 825 00:48:34,680 --> 00:48:38,520 Speaker 1: don't necessarily think of it that way totally, right, And 826 00:48:38,640 --> 00:48:40,520 Speaker 1: I just think, you know, I really appreciate this sort 827 00:48:40,520 --> 00:48:45,360 Speaker 1: of like more granular discussion about the different periods of 828 00:48:46,080 --> 00:48:48,719 Speaker 1: our different policy regimes and thinking like, oh, we can 829 00:48:48,800 --> 00:48:51,080 Speaker 1: do this just by funding a lot of R and D, 830 00:48:51,280 --> 00:48:53,200 Speaker 1: and of course I don't think anyone is going to 831 00:48:53,280 --> 00:48:56,560 Speaker 1: deny that R and D is extremely important. But then 832 00:48:56,640 --> 00:48:58,920 Speaker 1: also the demand side of element. But you can't just 833 00:48:59,080 --> 00:49:01,360 Speaker 1: get the demand because there's no such thing as just 834 00:49:01,880 --> 00:49:04,040 Speaker 1: a chip or saying you know, I can't say we're 835 00:49:04,040 --> 00:49:06,600 Speaker 1: gonna bull the chips, having to identify them. It's a 836 00:49:06,719 --> 00:49:09,839 Speaker 1: difficult problem. And I think you know that that point 837 00:49:09,920 --> 00:49:12,400 Speaker 1: that Husted made at the end, like what matters is 838 00:49:12,440 --> 00:49:14,759 Speaker 1: getting the policy right, Like there isn't going to be 839 00:49:15,080 --> 00:49:19,800 Speaker 1: a sort of nice, a nice clean up, one shot solution. 840 00:49:20,080 --> 00:49:23,920 Speaker 1: It's got to be a sort of a multi pronged focus. Yeah. Absolutely, 841 00:49:24,480 --> 00:49:27,040 Speaker 1: I'm sure. I have this terrible feeling that in like 842 00:49:27,640 --> 00:49:30,000 Speaker 1: two decades, we're going to be having a conversation about 843 00:49:30,080 --> 00:49:32,520 Speaker 1: this moment in time, talking about whether or not the 844 00:49:32,640 --> 00:49:36,279 Speaker 1: US's attempts to revive its semiconductor industry We're successful or not. 845 00:49:36,920 --> 00:49:39,239 Speaker 1: It's going to be a never ending semi series. We 846 00:49:39,320 --> 00:49:41,560 Speaker 1: will we will definitely talk about it in two decades, 847 00:49:41,640 --> 00:49:44,640 Speaker 1: but maybe it'll maybe we'll be looking back at how 848 00:49:44,680 --> 00:49:48,720 Speaker 1: it was, how the US turned it around. Absolutely, Okay, 849 00:49:49,080 --> 00:49:52,399 Speaker 1: shall we leave it there, Yeah, let's leave it there. Yeah, 850 00:49:53,000 --> 00:49:55,800 Speaker 1: this has been another episode of the All Thoughts Podcast. 851 00:49:55,920 --> 00:49:58,600 Speaker 1: I'm Tracy Alloway. You can follow me on Twitter at 852 00:49:58,640 --> 00:50:01,800 Speaker 1: Tracy Alloway and I'm Joey Wasn't Though. You can follow 853 00:50:01,880 --> 00:50:05,160 Speaker 1: me on Twitter at the Stalwart. Follow our guests on 854 00:50:05,239 --> 00:50:10,120 Speaker 1: Twitter Alex Williams, He's at Tragic Bios. Follow Hussan con 855 00:50:10,280 --> 00:50:13,359 Speaker 1: on Twitter. He's at Hussan Cohn and check out all 856 00:50:13,440 --> 00:50:15,640 Speaker 1: of their writing. And you know there's ones coming up 857 00:50:15,680 --> 00:50:18,880 Speaker 1: at the Employee America Medium page or at the Employee 858 00:50:18,920 --> 00:50:23,879 Speaker 1: America website. Lots of super deep stuff there. Be sure 859 00:50:23,920 --> 00:50:27,720 Speaker 1: to follow our producer Laura Carlson. She's at Laura M. Carlson. 860 00:50:28,080 --> 00:50:31,960 Speaker 1: Follow the Bloomberg head of podcast Francesca Levi at Francesca Today, 861 00:50:32,400 --> 00:50:35,399 Speaker 1: and check out all of our podcasts at Bloomberg onto 862 00:50:35,440 --> 00:50:38,160 Speaker 1: the handle at podcasts. Thanks for listening.