Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.
Speaker 1: I'm Geo Wist and I'm Tracy Alloway. Tracy, do you
Speaker 1: ever want to write a book? One day? Yes? You
Speaker 1: know this, Joe. You know this because I try to
Speaker 1: make you write a book with me all the time.
Speaker 1: I don't want to write a book. It seems like
Speaker 1: a lot of work. No, it would be fun. Well,
Speaker 1: first of all, it is a lot of work. I
Speaker 1: wrote two book proposals last year and it nearly killed me.
Speaker 1: That's a very long story for another time. But I
Speaker 1: think it would be fun. We should do it. All
Speaker 1: thoughts the book come on. Maybe I could see an
Speaker 1: Odd Lots book. But here's what would worry me about
Speaker 1: writing a book, which is you, we could have a
Speaker 1: book idea today, in two maybe we get a deal
Speaker 1: sometime in and then they're like it's going to come
Speaker 1: out and fall six, congrats like that. It's like, I
Speaker 1: don't have time. It's just too long. And then here's
Speaker 1: the thing that I would worry about is that by
Speaker 1: the time like August two comes out, it's like maybe
Speaker 1: no one at all cares about what we want to
Speaker 1: say in our book. All I'm going to say in
Speaker 1: response to that, is how many game stop books came
Speaker 1: out in like, there were at least three, and they
Speaker 1: all came out within a year of it actually happening. Yeah,
Speaker 1: and by then no one cared anymore. There's my point, Okay.
Speaker 1: I take the point that it's very difficult to write
Speaker 1: a well researched book that says something new and interesting
Speaker 1: on a topic at exactly the right time ahead of
Speaker 1: it kind of blowing up in the public consciousness. That
Speaker 1: is difficult. But our guest today has done that. We're
Speaker 1: going to be speaking to a guest who has a
Speaker 1: new book out, and I think the timing could not
Speaker 1: have been better. I don't even know how the timing
Speaker 1: was possible, right, So this is actually a book on
Speaker 1: a topic that we First of all, we should say
Speaker 1: that we have had this guest on before talking about
Speaker 1: a topic that kind of became core all thoughts content
Speaker 1: and also a core issue for the rest of the world.
Speaker 1: It truly exploded into the public's consciousness in a way
Speaker 1: that I don't think any of us weren't necessarily expecting
Speaker 1: when we first started talking about this. I think that
Speaker 1: was back in like late nineteen and then COVID happened,
Speaker 1: and everyone became focused on this particular issue or thing,
Speaker 1: and then fast forward a couple of years and it
Speaker 1: also became an issue of strategic and even military importance.
Speaker 1: That's right. So we've done semiconductor episodes in the past.
Speaker 1: We've done several of them, and we sort of tried
Speaker 1: to trace the semi conductor supply chain, and one of
Speaker 1: the companies at the end or somewhere in the semi
Speaker 1: conductor supply chain that's very important is the Dutch Advanced
Speaker 1: Lithography Maker a SML, which applies equipment, and so we're like, okay,
Speaker 1: who should we talk to about a s m L.
Speaker 1: I never said, you gotta talk to this guy, Chris Miller,
Speaker 1: who knows all about them. And at the time, he
Speaker 1: was writing this book, and the book has just come out.
Speaker 1: It's out, and of course the timing is perfect. So
Speaker 1: Chris Miller, he is the author of Chip War, The
Speaker 1: Fight for the World's Most Critical techno Oology. And of
Speaker 1: course we just had the Biden administration announcing new restrictions
Speaker 1: on semi conductor technology export to China, which is something
Speaker 1: we briefly touched on in a recent episode with Dan Wong,
Speaker 1: But it is truly the perfect guest with the perfect timing,
Speaker 1: the perfect guest with the perfect timing. I'm thrilled that
Speaker 1: we have Chris back on the show to talk about
Speaker 1: this new action and how they fit in the broader
Speaker 1: context and his research. So Chris Miller, thank you so
Speaker 1: much for coming back on the podcast, Thanks for having
Speaker 1: me back, and congratulations. Just like incredible timing, because I mean,
Speaker 1: the book just came out right and then right then
Speaker 1: we have everybody talking about the chip war basically because
Speaker 1: of these actions by the Biden administration. Well, that's right,
Speaker 1: that this the timing of the regulations that were released
Speaker 1: a couple of weeks ago. We're a bit of a
Speaker 1: surprise to me, but I think the trajectory was pretty
Speaker 1: clear from the last time we spoke about two years ago,
Speaker 1: that we're going to see more tightening of controls and
Speaker 1: more bifurcation between the US and China developing separate some
Speaker 1: conector ecosystems. Wait, was the trajectory clear, because you know,
Speaker 1: my impression was there was a lot of noise during
Speaker 1: the Trump administration about technology security and these types of issues,
Speaker 1: but no one was necessarily expecting the Biden administration to
Speaker 1: take this up to the extent that it did. So
Speaker 1: the export controls that were announced recently, well maybe you
Speaker 1: can tell us, like how extreme are they in your view?
Speaker 1: But do you think it was expected? Were you expecting
Speaker 1: something along those lines? Well? I think so. I mean,
Speaker 1: if you look at the Trump administration's actions, I think
Speaker 1: you've got to differentiate a bit between sort of what
Speaker 1: the Twitter feed was showing any individual day and the
Speaker 1: direction of travel of the National security bureaucracy underneath it.
Speaker 1: And I think the bureaucracy was trending in the same
Speaker 1: direction actually, from the late Obama administration in terms of
Speaker 1: greater skepticism of inbound investment into U S SMI connector firms,
Speaker 1: from in terms of greater concern about the difficulty of
Speaker 1: preventing chips from reaching military end users in China, greater
Speaker 1: confidence that computing power and some my conductors would be
Speaker 1: critical to the future of military power, and thus concerned
Speaker 1: that China's access to U S ship technologies would have
Speaker 1: a military benefit. All that has been developing for really
Speaker 1: about a decade in Washington and is less driven by
Speaker 1: the question of of who's president and more the collective
Speaker 1: assessment of the Pentagon and the Commerce Department and then
Speaker 1: our security councils involved, and that's been a pretty steady intensification,
Speaker 1: even though the politicians at the top have have differed. Sorry,
Speaker 1: I'm just looking again at you know, your book was
Speaker 1: released October four, and the restrictions I think we're announced
Speaker 1: October seven or right around there, so basically the same day.
Speaker 1: But you know, before we get again to these specific restrictions,
Speaker 1: you know, I think when we talked about a s
Speaker 1: m L in our episode, you know, even at that time,
Speaker 1: a s mL, I believe was restricted from exporting its
Speaker 1: most advanced technology to Chinese companies. And maybe they were
Speaker 1: still able to export some technologies, but not the most
Speaker 1: advanced lithography. You know, you mentioned some of the factors
Speaker 1: driving concerns about constraining Chinese semiconductors. But where did this
Speaker 1: really start the story of the US deciding that, you know,
Speaker 1: limits on technology transfer would be part of our foreign
Speaker 1: policy with China. Well, I would actually start the story
Speaker 1: before China was the focus, because there have been limitations
Speaker 1: on semi conductor technology transfer since the invention of the
Speaker 1: first chips. And if you think back to where chips
Speaker 1: came from They emerged out of demands to miniat your eyes,
Speaker 1: computing power to fit and guidance computers on missiles during
Speaker 1: the Cold War, and so there's been a deep into
Speaker 1: relationship from the earliest days between defense technology and the
Speaker 1: chip industry, and so controls have been part of the
Speaker 1: US government strategy since that time. So during the Cold
Speaker 1: War So Union, there were really extensive controls placed both
Speaker 1: on the transfer of chips to the Soviet Union and
Speaker 1: also the transfer of chip making equipment and so in
Speaker 1: in some ways, what we're seeing today is just a
Speaker 1: continuation of that process of trying to control technology transfer
Speaker 1: that's militarily relevant. Now it's different because the target is
Speaker 1: different at this time it's China. And it's different because
Speaker 1: unlike in the earliest days of the chip industry and
Speaker 1: the late nineteen fifties and nineteen sixties, at that point,
Speaker 1: most chips were going towards some sort of military use,
Speaker 1: whereas today percent of chips are going towards civilian uses.
Speaker 1: So so that's different. But the basic concept that you
Speaker 1: want to control the ability to produce advanced ships because
Speaker 1: they have military uses is basically something we've always had now,
Speaker 1: certainly there's been a shift in the policy towards China
Speaker 1: over the past couple of years, driven by a couple
Speaker 1: of factors. I think one most important is that the
Speaker 1: military balance in general between the U S and China
Speaker 1: has shifted. Whereas a decade or two ago is clear
Speaker 1: the U S military area was far stronger, today that's
Speaker 1: less clear, especially when you look at potential hotspots like
Speaker 1: the Taiwan Straits, and so it's easy to find analysts
Speaker 1: who say the US would have a hard time defending Taiwan,
Speaker 1: which wouldn't have been the case a decade or two ago.
Speaker 1: So that's that's one. More concerned about the Chinese military capabilities.
Speaker 1: Two is that China plays a bigger role than ever
Speaker 1: before in the global electronics and computing supply chain. Still
Speaker 1: a circumscribe role, and we can talk about the specifics,
Speaker 1: but nevertheless its relative weight is more important than certainly
Speaker 1: a decade or two ago. And then third, China's trying
Speaker 1: to catch up technologically in advanced semiconductors and through a
Speaker 1: number of industrial policy programs, the most famous of one
Speaker 1: which is probably made in China. It's specifically targeting its
Speaker 1: hip industry with really substantial subsidies, and and so this
Speaker 1: has raised concern not only Knew US, but particularly then
Speaker 1: US that China might succeed in reaching the cutting edge
Speaker 1: and a number of key technologies which would have both
Speaker 1: technological and economic but also potentially uh military implications on
Speaker 1: the road. Right. So this is actually something we were
Speaker 1: speaking with Dan Wong about, the the Gavicale tech analyst
Speaker 1: who also wrote a little blurb for your book. So
Speaker 1: it's nice to see multiple odds guests come together in
Speaker 1: that way. But can I ask, like just a very
Speaker 1: general step back question. I think it's become really common
Speaker 1: nowadays to say that semiconductors are the new oil in
Speaker 1: the sense that they're you know, military lee and strategically significant.
Speaker 1: But are they really like oil in the sense that,
Speaker 1: you know, they don't necessarily seem bounded by geography. I mean,
Speaker 1: it's not like we're trying to pull out a finite
Speaker 1: resource from the ground. We're trying to build up expertise
Speaker 1: and technological capability to make additional chips available. And you know,
Speaker 1: there are some fabs in the US, not a lot,
Speaker 1: but the Chips Act is all about building more of
Speaker 1: these chips factories so I guess what are the parallels
Speaker 1: with oil and what are the key differences. Yeah, I
Speaker 1: think you're you're right that there are obviously differences with oil.
Speaker 1: The geographic distribution is one difference though, Actually I think
Speaker 1: oil is more geographically distributed than chip making capabilities, especially
Speaker 1: at the leading edge. And if you look at Saudi
Speaker 1: Arabia produces ten or fifteen percent of the world's oil supply.
Speaker 1: By contrast, Taiwan produces over a third of the world's
Speaker 1: processor chips every year. And if you're talking about the
Speaker 1: most advanced processor chips or SML has got a far
Speaker 1: bigger role in the lithography production process percent of the
Speaker 1: leading edge of UV lithography compared to what everyone else
Speaker 1: has in the oil industry. So in terms of concentration,
Speaker 1: we actually have more concentration at multiple parts of the
Speaker 1: chip supply chain than than Saudi Arabia or even OPEC
Speaker 1: as a whole has. So if you're worried about the
Speaker 1: risks of supply cutoffs, there's more reason to be concerned
Speaker 1: about some my conductors. I think that concerned about oil.
Speaker 1: So this is something that you touch on in your book.
Speaker 1: But when COVID happened. There were plenty of businesses that
Speaker 1: were disrupted by the pandemic, and semiconductors became a big
Speaker 1: issue around that time. And we can argue about whether
Speaker 1: or not there were semiconductor shortages because of the chips
Speaker 1: makers themselves, or because the companies putting in orders massively
Speaker 1: underestimated demand and things like that. But what role did
Speaker 1: the pandemic play in I guess highlighting these shortage issues
Speaker 1: that you just described, or maybe shortage isn't the right word,
Speaker 1: it's it's uneven distribution. I guess yeah, I think that's
Speaker 1: the right way to describe it. And you know, the
Speaker 1: shortage context has to be understood in that supply increased
Speaker 1: dramatically in terms of aggregate chips produced in one It's
Speaker 1: just that demand grew even faster and that created this
Speaker 1: set of shortages in certain subsets. I think if you
Speaker 1: actually look at the track record in both of those
Speaker 1: pandemic years of the global chip industry and producing chips,
Speaker 1: you'd have to say it it's sailed through the crisis
Speaker 1: with comparatively few disruptions. The fact that supply increased dramatically
Speaker 1: across the board, the fact that you know, we had
Speaker 1: major economies that played a big part in the chip
Speaker 1: supply chain being shut down for several months, if not
Speaker 1: longer across COVID, and yet the number of disruptions were
Speaker 1: actually quite limited, suggests the extent that which the supply
Speaker 1: chain actually works pretty well and in producing the chips
Speaker 1: that are needed. And when you look at where we've
Speaker 1: seen the most disruption in terms of shortages, which is
Speaker 1: the auto sector, I think there's a pretty good argument
Speaker 1: that what we're seeing is not a chip shortage but
Speaker 1: a automaker inability to properly plan the number of hips
Speaker 1: that they need, which is the problem that they faced.
Speaker 1: Automakers made an error in early slashing their chips sales
Speaker 1: just as demand for smartphones and PCs, etcetera was spooming
Speaker 1: because of the work from home trend, and as a result,
Speaker 1: when they came back to their chip suppliers a couple
Speaker 1: months later and said, actually, we're not gonna need to
Speaker 1: cut demand as much as we expected, they found that
Speaker 1: capacity was already reallocated. So this is really more a
Speaker 1: question of how automakers managed their procurement and they're just
Speaker 1: in time procurement processes than anything to do with chips
Speaker 1: per se, and if you look at specific disruptions to
Speaker 1: the shipmaking process one you'll find that factory fires or
Speaker 1: ice storms and Texas were probably just as impactful as
Speaker 1: any sort of COVID related disruption. But you know, all
Speaker 1: that is to say that certainly COVID put semi conductor
Speaker 1: shortages in the headlines in a way that catalyzed politicians
Speaker 1: to take the issue more seriously into act. And I
Speaker 1: don't think we would have seen the Chips and Science
Speaker 1: Act passed and the way that it did had it
Speaker 1: not been for the fact that COVID made this and
Speaker 1: visceral and seeming to be relevant to the typical person.
Speaker 1: By the way, speaking of all the people who have
Speaker 1: glowingly blurbed your book, I see Admiral stephrevious. Also is
Speaker 1: one here another odd Lots guests, So I'm glad to
Speaker 1: see the odd Lots crew so represented. All right, let's
Speaker 1: get to the new news. And of course, as we
Speaker 1: discussed there, there were already restrictions on what kind of
Speaker 1: technology could be exported to China. But why don't you
Speaker 1: sort of summarize what was the status quo and say September,
Speaker 1: where were we a month ago, and how dramatically have
Speaker 1: things changed with the new announcements from the Commerce Department
Speaker 1: and the Biden administration on exports, like just summarize, give
Speaker 1: us the big picture differences of them versus now. So
Speaker 1: one month ago, there were i'd say two main categories
Speaker 1: of restrictions that applied to China. First was for equipment
Speaker 1: at the most cutting edge, so UVY lithography machines being
Speaker 1: the best example of this, that were impossible to transfer
Speaker 1: to China, and it's really only referred to a small
Speaker 1: set of tool roles that only restricted Chinese ability to
Speaker 1: move to the most advanced process nodes in producing logic
Speaker 1: ships and certain types of memory ships as well. But
Speaker 1: it was the most cutting edge set of machinery that
Speaker 1: was the first restrictions. And then second there restrictions on
Speaker 1: specific Chinese firms that were restricted either from accessing US
Speaker 1: technology or also in some cases accessing production capacity in
Speaker 1: Taiwan at t SMC that use US technology, and so
Speaker 1: Huawei is the best example of this, but there were
Speaker 1: also a bunch of Chinese firms that were assessed to
Speaker 1: have links to the Chinese military, and so these were
Speaker 1: the two sets of restrictions that were in place today.
Speaker 1: After the new set of regulations, these have been broadened
Speaker 1: pretty substantially. And so, first off, the the set of
Speaker 1: equipment that is no longer possible to ship to China
Speaker 1: is expanded a lot, so it's no longer just the
Speaker 1: most cutting edge, is also tools that are actually kind
Speaker 1: of one or two generations, with three generations behind the
Speaker 1: cutting edge today. So in the logic chip making space,
Speaker 1: anything that's headed towards the facility that's sixteen nanometers or
Speaker 1: blow is no longer possible to send to China. So
Speaker 1: so this is not the most cutting edge ship like
Speaker 1: you find an iPhone processor, for example, But this is
Speaker 1: a much broader swath of chips, and there's a whole
Speaker 1: lot of chips that you still can send equipment forward
Speaker 1: to China, but there's a broader definition of the cutting
Speaker 1: edge which is designed to more tightly restrict China's ability
Speaker 1: to advance. So that's that's one big change. The second
Speaker 1: is that there's a new set of restrictions on the
Speaker 1: ability to send certain chips to China, and this focuses
Speaker 1: on chips called GPUs, which are used in artificial intelligence
Speaker 1: applications and data centers. And alongside this there are restrictions
Speaker 1: on sending chips to Chinese supercomputers. So this set of
Speaker 1: the restrictions focuses on limiting China's ability to develop capabilities
Speaker 1: and artificial intelligence and advanced data centers, so that this
Speaker 1: is a new focus area. And then three, there is
Speaker 1: a set of restrictions on US persons, so citizens, Green
Speaker 1: card holders and US companies on interacting with a bunch
Speaker 1: of different firms in the Chinese ship industry. And this
Speaker 1: is new. Before there weren't any restrictions on individuals in
Speaker 1: such a broad fashion working in the Chinese ship industry.
Speaker 1: And this is going to have major effects because there
Speaker 1: are actually a lot of dual citizens who are working
Speaker 1: in Chinese ship industry, including CEO, so some of the
Speaker 1: biggest firms in China. And so this this is a
Speaker 1: new escalation of the controls designed again to take apart
Speaker 1: to decouple the U s and the Chinese ship industry
Speaker 1: at the cutting edge. But all of this is to
Speaker 1: say that there's still no restrictions on anything that's not
Speaker 1: cutting edge for the most part, and so the goal
Speaker 1: of the regulations is to be fairly targeted in saying
Speaker 1: we're not going to allow any progress in the cutting edge,
Speaker 1: but we're still leading all of the lighting edge, mostly unrestricted,
Speaker 1: so it's it's still targeted, but it's pretty sweeping in
Speaker 1: the sense that it's saying no more progress towards advanced notes.
Speaker 1: So that third point about Americans or Green card holders
Speaker 1: no longer being able to do that kind of work
Speaker 1: in China, That's exactly what I wanted to ask you about,
Speaker 1: because this seems to be so far one of the
Speaker 1: things that is getting a lot of attention, one of
Speaker 1: the most extreme things. And we've already seen at least
Speaker 1: one semiconductor company talk about how it's having to like
Speaker 1: send people home or at least cut off their access
Speaker 1: at work. But first of all, how exactly does this
Speaker 1: restriction work in practice? And then secondly, I have seen
Speaker 1: some people talk about an expectation that maybe some of
Speaker 1: these companies are going to get some type of exemption.
Speaker 1: What's the possibility that that happens, and that some of
Speaker 1: the extreme moves that have been outlined in these export
Speaker 1: controls are actually not necessarily rolled back, but they're sort
Speaker 1: of softened through these types of exemptions. Well, the Commerce
Speaker 1: Department in their announcement did clarify where they were likely
Speaker 1: to give exemptions and not likely to give exemptions, and
Speaker 1: so they were pretty clear that for foreign chip firms
Speaker 1: operating in China, and again there's it depends on the specifics,
Speaker 1: but there's their scope for receiving exemptions. So companies like
Speaker 1: t SMC or some of the big South koreanship makers
Speaker 1: have facilities in China and the goal of these restrictions
Speaker 1: is not to impact their production, so there will be
Speaker 1: exemptions for their ability to acquire certain types of machinery
Speaker 1: things like that. But across most the other restrict restrictions,
Speaker 1: the Commerce Department has what's called a presumption of denial,
Speaker 1: which means that you can apply for license, but the
Speaker 1: presumption is that it will be denied. And again there's
Speaker 1: a lot of nuance in this, but I think broadly
Speaker 1: we should treat this as as something that's not a
Speaker 1: bureautic kick up, and that in fact, most of the
Speaker 1: places where the Commerce Department has said there will be
Speaker 1: a presumption of denial will be a place with there's
Speaker 1: lots of licenses that are denied, and probably people won't
Speaker 1: apply for licenses in the first place. I I think
Speaker 1: we shouldn't. We shouldn't assume that these are regulations that
Speaker 1: are accidentally overly broad. I think the by administration put
Speaker 1: two years of work into this, and I think they
Speaker 1: have a pretty clear sense of what they're trying to accomplish.
Speaker 1: And my guess is that looking at the impact in
Speaker 1: the first couple of days after the regulations were now,
Speaker 1: it's there more or less seeing results that they had anticipated.
Speaker 1: So what's it going to do the sort of in
Speaker 1: the first order effect, I mean, long term, maybe China
Speaker 1: will redouble or accelerated effort at building out its domestic capabilities,
Speaker 1: But what is the effect going to be tomorrow and
Speaker 1: in the short term on Chinese tech? The short term
Speaker 1: effect is that China is going to buy a lot
Speaker 1: less equipment from US suppliers, but also as a result
Speaker 1: from Japanese and Dutch suppliers, just because there's no point
Speaker 1: in buying half a production line. So the overall equipment
Speaker 1: sales will be decreasing. Again, it's not across the board,
Speaker 1: because for lower tech production that's still possible to acquire,
Speaker 1: but but there will be an impact on equipment firms,
Speaker 1: and you've seen that reflected in their public statements. That's
Speaker 1: one to There are a number of Chinese firms that
Speaker 1: were close to the cutting edge that will be directly
Speaker 1: impacted by this. So one example is the Chinese nand
Speaker 1: memory producer called y MTC, which was in the process
Speaker 1: of being of having its chips qualified for use in
Speaker 1: Apple's iPhones. Apple was reportedly going to buy y MTC
Speaker 1: ships for a large chunk of its iPhones going forward,
Speaker 1: and that firm was targeted by these regulations, and so
Speaker 1: now according to media reports, Apple is no longer going
Speaker 1: to be buying y YMTC ships for its iPhones. And
Speaker 1: so for firms that are are directly impacted like that,
Speaker 1: because they're right at the cusp of being at the
Speaker 1: cutting edge and therefore directly impacted by these regulations, we're
Speaker 1: going to see their ability to produce and their ability
Speaker 1: to expand directly impacted. And then third, we're going to
Speaker 1: see disruption of of individuals, jobs and livelihoods because of this.
Speaker 1: Tracy mentioned the restrictions and individuals. That's going to have
Speaker 1: a pretty dramatic effect because there will be people in
Speaker 1: positions of having to choose between continuing their work or
Speaker 1: potentially renouncing cititionship or green cards, and that's a that's
Speaker 1: a dramatic effect. Now, you know, this isn't isn't new,
Speaker 1: because there's lots of companies around the world that Americans
Speaker 1: are barred from doing business with. But I don't think
Speaker 1: many people in who are impacted by this. We're expecting
Speaker 1: this type of regulation, and this is probably the part
Speaker 1: of the rules that have most surprised people in the industry.
Speaker 1: You know, I asked Dan Wong the same question, but
Speaker 1: I would love to hear your response as well. But
Speaker 1: what kind of reaction would you expect from China here?
Speaker 1: So we've already had some statements from various officials talking
Speaker 1: about how it's going to endanger China's economic recovery and
Speaker 1: how it's generally a very bad thing for the economy.
Speaker 1: But would you expect any concrete measures from China after
Speaker 1: these restrictions? Yeah, it's an interesting question because on the
Speaker 1: one hand, you know, I think you'd hypothesize that China
Speaker 1: has to do something in retaliation. On the other hand,
Speaker 1: if you look at the track record of China's responses
Speaker 1: to prior iterations of semiconductor export controls, China hasn't done
Speaker 1: much when the US put Huawei on the entity list
Speaker 1: and thereby restricted the transfer of a lot of US
Speaker 1: chips and chip technologies to wah Way. China issued some
Speaker 1: angry statements, but ended up doing nothing, despite the fact
Speaker 1: that these restrictions hobbled one of China's biggest tech firms,
Speaker 1: which was I think a pretty striking demonstration of of
Speaker 1: where escalation dominance in this sphere. If you will, stands
Speaker 1: that China felt like actually any sort of retaliation would
Speaker 1: leave it worse off than not retaliating. Now, this is
Speaker 1: a an order of magnitude more impactful than the Huawei restrictions,
Speaker 1: although it's in some ways a bit more opaque since
Speaker 1: it doesn't target a single firm and sort of hidden
Speaker 1: in the specifics of Commerce Department regulations with which most
Speaker 1: people don't understand. But I would think China would feel
Speaker 1: more pressure to retaliate this time. But if you ask yourself,
Speaker 1: what's the best way for China to retaliate in a
Speaker 1: way that imposes more costs on the US than it
Speaker 1: does in China, it's not obvious that there's a great
Speaker 1: option there. In China still deeply dependent on importing ships
Speaker 1: across the board, and China's economy, of course, is as
Speaker 1: weak as it's been in many years, so this isn't
Speaker 1: a time when j Ping wants to probably impose further
Speaker 1: cost on the Chinese economy. And in particular, if you're
Speaker 1: a Chinese electronics firm or from in the semi connector space,
Speaker 1: you're desperate right now to keep the connections that you
Speaker 1: do have open, because if there's any way you're gonna
Speaker 1: get around the current regulations, it's going to be by
Speaker 1: whatever collaboration you have still functioning with leading firms in
Speaker 1: other countries, and so keeping those those lines of communication
Speaker 1: and cooperation open with from other countries is really crucial,
Speaker 1: I think for China's hopes of finding some way to
Speaker 1: counter these rules. So I'm not sure actually if China's
Speaker 1: going to take a dramatic retaliatory step, even though I
Speaker 1: think there's obviously a political impetus in China to do
Speaker 1: something and to look like you're not just taking these
Speaker 1: restrictions lying down. So you know, it's easy enough, and
Speaker 1: I kind of did, maybe lazily enough, but it's easy
Speaker 1: enough to say, Okay, well, this is going to hurt
Speaker 1: China in the short term, but in the long term,
Speaker 1: they're only going to you know, accelerate their own work
Speaker 1: on building out an advanced domestic semiconductor industry, which they might,
Speaker 1: but like that seems still really hard, even if you
Speaker 1: have the entire sort of like force and money of
Speaker 1: the government. And I'm just thinking back to when we
Speaker 1: talked before, and the one one of the details that
Speaker 1: I remember from our conversation was like a SML itself
Speaker 1: is a customer of a company that makes the smoothest
Speaker 1: substance on Earth, because that's important, I guess, like for
Speaker 1: the mirrors to like shoot the light or whatever. And
Speaker 1: you know, it does not seem inevitable that China can
Speaker 1: catch up. I mean, we know, like the challenge that
Speaker 1: Intel has with catching up to Taiwan, Semi, etcetera. And
Speaker 1: without this sort of like best expertise of this very
Speaker 1: globally integrated supply chain, Like what is it? How do
Speaker 1: you assess China's chances of becoming a tech leader in
Speaker 1: the space with so many restrictions. Well, I think it's
Speaker 1: going to be really hard. Is catch up possible? I
Speaker 1: think it's certainly possible over some time frame with some
Speaker 1: amount of expenditure, But I think the timeframe is long,
Speaker 1: and the expenditure is going to be large, and so
Speaker 1: China might decide that it's not willing to pay the price.
Speaker 1: If you look just at the this the space if
Speaker 1: some connected manufacturing equipment, which is in some ways the
Speaker 1: space on which all these other restrictions depend, the reality
Speaker 1: is that the number of companies in this space is
Speaker 1: very limited. Most of the key firms have been in
Speaker 1: their market position for several decades and in some cases
Speaker 1: almost half a century, and their supply chains, as you mentioned,
Speaker 1: involved sourcing some of the most complex and heavily engineered
Speaker 1: products ever made, and so it's just going to be
Speaker 1: very difficult to do so. In addition, we're seeing more
Speaker 1: and more the US government targeting China's firms in this space.
Speaker 1: So there's part of the restrictions are that we're rolled
Speaker 1: out recently limit the transfer of component parts to Chinese
Speaker 1: equipment manufacturers, which is again deliberately designed to make their
Speaker 1: process of advancement harder. And if you think about what
Speaker 1: it takes to make a machine tool in this space,
Speaker 1: you know, it's one thing to make a machine tool
Speaker 1: that can do a specific process once or even a
Speaker 1: dozen times or hundred times, but to make a commercially
Speaker 1: viable machine tool in the chip industry, you need a
Speaker 1: machine that not only is able to move materials at
Speaker 1: almost the atomic level, but it also needs to do
Speaker 1: so with you know, basically perfect run time, perfect accuracy,
Speaker 1: and to be cost competitive. And and that's something you
Speaker 1: can only really develop, I think, when you're closely collaborating
Speaker 1: with the firms that are going to be using your equipment.
Speaker 1: And so if you look at how innovation in the
Speaker 1: in the machine part of the machine tool part of
Speaker 1: the chip industry happens right now, it happens in really
Speaker 1: deep collaboration with the customers t smc Intel, Samsung, etcetera.
Speaker 1: Because the tools have to be optimized for those customers.
Speaker 1: And so if you're in China today trying to develop
Speaker 1: your own machine tools, you're working with firms that have
Speaker 1: lower volumes, especially at the cutting edge. They're actually not
Speaker 1: producing the most cutting edge chips. And that's a harder
Speaker 1: environment which to produce machine tools that are going to
Speaker 1: compete at all with the cutting edge you can acquire abroad.
Speaker 1: So if you've got this closed loop innovation system where
Speaker 1: everything is second or third best compared to what you
Speaker 1: can get in Taiwan or what you can get in
Speaker 1: the other lands. It's just a really hard environment to
Speaker 1: catch up in. So this actually leads nicely into something
Speaker 1: I wanted to ask you about, because, of course we've
Speaker 1: been very focused on the US efforts to restrict cutting
Speaker 1: edge chip technology into China. But the other plank of
Speaker 1: U s strategy is to build up its own self
Speaker 1: sufficiency when it comes to semiconductors. And in the book
Speaker 1: you mentioned that there's growing discussion among US officials about
Speaker 1: potentially using export controls on chip design, software and manufacturing
Speaker 1: equipment that comes from the US. So a lot of
Speaker 1: the chips, as we've discussed on this podcast numerous times,
Speaker 1: they're designed in the US and then those designs are
Speaker 1: shipped out to Taiwan to be actually manufactured or whatever.
Speaker 1: And so if you were to impose export controls on
Speaker 1: the designs or the software, that could, in effect, I guess,
Speaker 1: pressure Taiwan to roll out more technology into the US
Speaker 1: and Europe or allow the US and to build up
Speaker 1: their own expertise. Do you think that's the next step
Speaker 1: in these export controls. Is that something that you see
Speaker 1: on the horizon. Well, I'm not aware of it. Having
Speaker 1: been discussed at the government to government level. It is
Speaker 1: something that you can find written about and think tank
Speaker 1: policy papers, and your discussed to some extent in in Washington,
Speaker 1: d C. I don't know if the US government is
Speaker 1: going to go to to that level, and I think
Speaker 1: that would be a pretty dramatic step. You know, It's
Speaker 1: one thing to impose extuport controls on countries that you
Speaker 1: see is primarily competitor. Something else to impose them in
Speaker 1: country countries that you see primarily as a partner. And
Speaker 1: so I think there would be some medicines in the
Speaker 1: US to use that type of coercive strategy visa vi Taiwan.
Speaker 1: But I think it is true that everyone in the
Speaker 1: industry knows that the US does have the ability to
Speaker 1: impose these controls, and indeed, the US already has imposed
Speaker 1: controls on China in a way that forces Taiwan Taiwanese
Speaker 1: firms to take certain steps they wouldn't otherwise taken to
Speaker 1: the Chinese customers. And so the fact that the US
Speaker 1: has this threat I think probably does influence both how
Speaker 1: US government officials and Taiwanese government officials think about the dynamic.
Speaker 1: But if you look right now at at what Taiwan
Speaker 1: these firms, And really that just means t SMC has
Speaker 1: planned in the United States in terms of opening new facilities.
Speaker 1: They're opening one facility in Arizona. It will be relatively
Speaker 1: small in terms of its capacity, and most of t
Speaker 1: s MC's capital expenditure going forward is still going to
Speaker 1: take place in Taiwan. Even if you include the Arizona facility,
Speaker 1: the new facility in Japan, potential facilities and Singapore and
Speaker 1: Europe that are being discussed, we're still talking about a
Speaker 1: company that's primarily focused in Taiwan, especially when it comes
Speaker 1: to its most advanced production nodes. So right now, I
Speaker 1: don't think t SMC is planning to dramatically diverseify away
Speaker 1: from Taiwan in nor do I think it feels really
Speaker 1: substantial pressure to do so. A little bit of pressure,
Speaker 1: but not not substantial un of pressure to make it
Speaker 1: change its business model. By the way, when you were
Speaker 1: talking about, you know, the jail lenge of getting the
Speaker 1: equipment to run perfectly each time, I remember our episode
Speaker 1: we talked to Willy she at HBS and like the
Speaker 1: math is just mind boggling, Like nine point correct execution
Speaker 1: is like not anywhere near sufficient for how like many
Speaker 1: steps and how right everything has to go. But I
Speaker 1: want to pivot to the Chips Act. And you know,
Speaker 1: Tracy mentioned that, yes, part of strategy right now is
Speaker 1: constraining China's ambitions. But also there's been you know, legislation
Speaker 1: that move forward in the US, A laws passed designed
Speaker 1: to bolster US capacity. What do you see, like, how
Speaker 1: would you ascribe just sort of big picture the significance
Speaker 1: of that act and how much do you think that's
Speaker 1: going to move the dial in terms of sort of
Speaker 1: bringing setting t SMC aside bringing on shore to the
Speaker 1: US more more capacity. So I think the Chips Act
Speaker 1: is the biggest move in semi connected policy since the
Speaker 1: nineteen eighties that we've seen from the US government. In
Speaker 1: the there was a trade war with Japan, which was
Speaker 1: at the time a big chip maker, and the U
Speaker 1: S and POST bunch of threaten to impose a bunch
Speaker 1: of tariffs on on Japanese ship imports until the Japanese
Speaker 1: agreed to limit their semi connector exports and that was
Speaker 1: a big focus of policy at the time, and then
Speaker 1: for about four decades, at least three decades, US policymakers
Speaker 1: more or less ignored some my conductors as a as
Speaker 1: a policy issue, in part because U S firms appeared
Speaker 1: to dominate them, and that's obviously changed. The Chip and
Speaker 1: Science Act will do two main things. First, it allocates
Speaker 1: thirty nine billion dollars to subsidizing the manufacture of chips
Speaker 1: in the US, mostly focused on leading edge ships, but
Speaker 1: with some funds for lagging edge and then second to
Speaker 1: votes on twelve billion dollars to R and D efforts
Speaker 1: in in ships and so on. The On the manufacturing side,
Speaker 1: I think there's no doubt that the subsidy funds will
Speaker 1: result in more manufacturing facilities being built in the US,
Speaker 1: and that's sort of a simple economic calculation. And I
Speaker 1: think we've already seen many of the firms that would
Speaker 1: be impacted, Samsung and t SMC, Intel, Mike Run already
Speaker 1: in the process or in the announcement stage of of
Speaker 1: opening new facilities. So so there will certainly be an
Speaker 1: impact on the amount of chip making in the US.
Speaker 1: Is it going to dramatically change the status quo? You know,
Speaker 1: it depends what you mean by that. But right now
Speaker 1: the US produces ten or fifteen percent of chips. We're
Speaker 1: not going to see that go up to fifty or
Speaker 1: anything near that level anytime soon, but we will have
Speaker 1: more leading edge ship making in the U S and
Speaker 1: we otherwise would have. I think that's that's pretty clear.
Speaker 1: I think the more interesting part actually is the R
Speaker 1: and D funds, because my guess is that when we
Speaker 1: look back in ten years time and ask what was
Speaker 1: the biggest impact of the Chips Act, it will actually
Speaker 1: not be the subsidization of manufacturing, but actually the R
Speaker 1: and D because the amount of money that's going into
Speaker 1: chips R and D is is really substantial. There's always
Speaker 1: been some via the National Science Foundation and some via DARPA,
Speaker 1: but twelve million dollars is a big influx over a
Speaker 1: fairly short period of time, and so I think this
Speaker 1: actually has the chance to have a really substantial impact
Speaker 1: overcoming decade. So just listening to this and the amount
Speaker 1: of money and effort that the US is going to
Speaker 1: put into building out its own ships capacity, is the
Speaker 1: US actually aligned with some of its allies such as
Speaker 1: Taiwan potentially Europe when it comes to its plans for
Speaker 1: chips Because it feels like there's a tension here if
Speaker 1: the US has to balance between saying we're going to
Speaker 1: build out our own capability versus we're going to take
Speaker 1: market share away from TSMC, which is a huge company
Speaker 1: in Taiwan, of course, which is one of the US's
Speaker 1: major military allies in the Asia region. That does seem
Speaker 1: like a bit of a balancing act. Yeah, it is,
Speaker 1: and especially when you set that next to the export
Speaker 1: control side as well, which imposes interesting differential effects on
Speaker 1: on different firms um some some negative, some positive, depending
Speaker 1: on which control you're looking at. And so I think
Speaker 1: you do need to look at the Chips Act funding,
Speaker 1: which applies both to US firms and for non US
Speaker 1: firms building facilities in the US, alongside the X four
Speaker 1: controls as part of a unified strategy to coerce and
Speaker 1: a tracked the world's ship firms more into the U
Speaker 1: S ecosystem and less into the Chinese ecosystem. In terms
Speaker 1: of advanced fabrication subsidies, I think there's certainly is a
Speaker 1: bit of a zero sum dynamic between the US and
Speaker 1: Taiwan and the US and Korea in the following sense
Speaker 1: that both the SMC and Samsung prefer to have most
Speaker 1: of the capacity in their home country, and they prefer
Speaker 1: to have most not all of their R and D
Speaker 1: in their home country. And they prefer that both three
Speaker 1: economic reasons that their businesses work quite well and the
Speaker 1: current set up, and also I think for political reasons,
Speaker 1: and so the extent that the US is is pushing
Speaker 1: for more investment in the US, there there is a
Speaker 1: bit of a zerosum dynamic. Now the US is not
Speaker 1: just pushing, it's also subsidizing, so that helps to compensate
Speaker 1: them to some extent. But I think you're right, Tracy
Speaker 1: to suggest that t SMC wouldn't have been pushing for
Speaker 1: any of these changes if it were in charge. It's
Speaker 1: it's responding to shifts that governments are imposing on the
Speaker 1: this my conductor industry more generally in terms of other
Speaker 1: subsidy programs in Japan, Singapore, from Europe, I think it
Speaker 1: depends who you're looking at. The Japanese, for example, have
Speaker 1: subsidized t SMC to build a facility in Japan, but
Speaker 1: it's not focusing on leading edge, is focusing on a
Speaker 1: more of a lacking edge node that is critically relevant
Speaker 1: for Sony, which is a big customer of t s
Speaker 1: mc s and so that doesn't really conflict much at
Speaker 1: all with with what the U S is planning to
Speaker 1: spend money on. With Europe. Europe's own chips bill is
Speaker 1: still a work in progress, and I think we're gonna
Speaker 1: have to wait and see what actually Europe decides to
Speaker 1: spend its money on. I I worry most actually about
Speaker 1: potential market inefficiencies created by europe chip subsidies, since they
Speaker 1: remained quite unclear as to where they're headed. I think
Speaker 1: it's harder to imagine that Europe will succeed leading edge
Speaker 1: manufacturing simply because it has less infrastructure even than the US.
Speaker 1: But if Europe puts its money towards lagging edge manufacturing,
Speaker 1: that's an industry that already is getting plenty of subsidies
Speaker 1: from around the world, including from China. So I think
Speaker 1: there are questions to be asked about how Europe actually
Speaker 1: plans to spend the fifty billion euros that it intends
Speaker 1: to devote to the industry. So mentioned that, Okay, the
Speaker 1: US is probably not going to dramatically jump over the
Speaker 1: next several years in a share of global semiconductor manufacturing,
Speaker 1: but it presumably the goal is for it to increase
Speaker 1: a bit in ten years or however many years. What
Speaker 1: would we have to see to say the Chips Act
Speaker 1: was a success or what would constitute success? I mean again,
Speaker 1: and even R and D can sometimes be ambiguous what
Speaker 1: that turns into in terms of commercialized products. So from
Speaker 1: your perspective, what would constitute okay, this bill actually achieved
Speaker 1: a taim I think part of the way to conceptualize
Speaker 1: this bill is as an insurance policy. And it's an
Speaker 1: insurance policy that is protecting us in case of some
Speaker 1: sort of escalation around Taiwan, which could disrupt hip production
Speaker 1: and if so, it would be dramatically costly for the
Speaker 1: world economy, and so so calculating the efficacy of an
Speaker 1: insurance policy is a hard thing to do, especially because
Speaker 1: ideally you don't have to cash it in. But I
Speaker 1: think that is the right way to look at this.
Speaker 1: And again, it's not that we're going to go from
Speaker 1: scale dependence in Taiwan to zero, but that on the margin,
Speaker 1: we're going to become less dependent on the supply of
Speaker 1: chips crossing through the Taiwan straight and that that reduces
Speaker 1: the risk in case of some sort of war, and
Speaker 1: it also reduces China's ability to use our reliance on
Speaker 1: Taiwan as a as a mechanism of pressure. So I
Speaker 1: think that's that's the first thing is that there is
Speaker 1: sort of a national security insurance mechanism here that is
Speaker 1: is hard to price in economic terms. The second thing
Speaker 1: on R and D, I think actually we should be
Speaker 1: able to pretty clearly know in a decade's time whether
Speaker 1: the R and D funding worked or didn't work, and
Speaker 1: if if we can't find clear evidence of pretty direct
Speaker 1: lines between spending and commercial successes, I think we should
Speaker 1: tell ourselves that it it failed. And this is where
Speaker 1: I think there's the most work actually to be done
Speaker 1: at the Commerce Department and else where in the US
Speaker 1: government is that it's it's easy to dole out funds
Speaker 1: to subsidize evance manufacturing, especially when the number of plausible
Speaker 1: firms that could be involved is really limited. And if
Speaker 1: you're going to build an advanced logic facility, there's only
Speaker 1: three firms in the world they're going to do it,
Speaker 1: and the US government will probably give money to all
Speaker 1: three of them, so that that job is relatively easy.
Speaker 1: The harder job is how do you set up and
Speaker 1: build out a R and D infrastructure that will fill
Speaker 1: some of the gaps that we currently have, and that's
Speaker 1: a much harder task, but I think in some ways
Speaker 1: an even more important one. So since you mentioned the
Speaker 1: idea of the US kind of hedging disruption in Taiwan,
Speaker 1: I have to ask a question that's getting a lot
Speaker 1: of attention at the moment. You know, loads of people
Speaker 1: on Twitter talking about theoretical situations and various possibilities here.
Speaker 1: But if there was some sort of invasion of Taiwan
Speaker 1: or some sort of military action against the country, how
Speaker 1: would you expect that to impact t s MC. And
Speaker 1: you know, one of the things that comes up in
Speaker 1: these discussions is the idea that if China did a
Speaker 1: full on invasion and they took over all the fabs
Speaker 1: in Taiwan, would they be able to just keep manufacturing
Speaker 1: semiconductors like they were before the invasion or is there
Speaker 1: something particular about the chip making business that makes that
Speaker 1: scenario more difficult. Well, I think if if we have
Speaker 1: a sort of D Day style invasion, if you will,
Speaker 1: the likelihood that any semi chectural facilities in Taiwan remain
Speaker 1: intact after the fact is pretty low. We're talking about
Speaker 1: the most precise machinery ever made. Chip fabs are full
Speaker 1: of explosive gases. It seems perfectly designed to not survive
Speaker 1: a war. And even if by some miracle, t SMCS
Speaker 1: facilities did survive a war, you'd still need all the
Speaker 1: personnel in place, and in place in a way that
Speaker 1: they wanted to keep facilitating the production process rather than
Speaker 1: sabotaging it. And you still need supplies from abroad because
Speaker 1: t SMC relies on chemicals, for example, sourced from from
Speaker 1: Japan and elsewhere. So I think it's it's implausible, close
Speaker 1: to a zero present probability that China could invade Taiwan,
Speaker 1: would have a massive war, and at the end, China
Speaker 1: would have perfectly functional chipmaking facilities. Now, whether Chinese leaders
Speaker 1: understand that, you know, I don't know. I don't know
Speaker 1: to what extent they've dug into the chip making production process.
Speaker 1: And I do worry a bit that there is a
Speaker 1: fair amount of discussion in Chinese social media, for example,
Speaker 1: and even among Chinese government aligned analysts about taking Taiwan
Speaker 1: but to seize the chip fabs. But I think that
Speaker 1: idea is a fantasy. But I also think that when
Speaker 1: you envision military escalation scenarios there's a lot that could
Speaker 1: happen between peace where we are right now and a
Speaker 1: D Day style invasion. And in those types of coercion,
Speaker 1: coursive measures or gray zone measures, if you will, in
Speaker 1: military lingo, that's where I think you could envision down
Speaker 1: the road, China applying pressure making demands on Taiwan, and
Speaker 1: if Taiwan doesn't feel like it has the backing of
Speaker 1: the United States or doesn't feel like the U S
Speaker 1: could actually successfully come to its aid militarily, Taiwan might
Speaker 1: be pressured too, for example, change its regulations when it
Speaker 1: came to access to t SMC s FABS. And so
Speaker 1: that that's a more plausible scenario to me, which which
Speaker 1: could still have dramatic implications for the United States. And
Speaker 1: you can terms also in military terms. Chris Miller, it
Speaker 1: was such a treat to have you back on and
Speaker 1: sort of again extraordinary confluence of expertise, news and new
Speaker 1: book out. Appreciate you coming back on odd lots. Well,
Speaker 1: thanks for having me back. Thanks so much, Chris. That
Speaker 1: was great. It was fantastic, Trazy, that was great. I mean,
Speaker 1: Chris really was the perfect guest. But you know, just
Speaker 1: sort of like working backwards through some of the things
Speaker 1: that he discussed, you know, the implausibility of Taiwan semiconductor
Speaker 1: capacity like holding up in like a sort of like
Speaker 1: true like hot war style invasion. I think, like, just right,
Speaker 1: that's an interesting point to start because again, you know,
Speaker 1: ship manufacturing is so complex, relies on such a global network,
Speaker 1: relies on so much sort of embedded expertise of the
Speaker 1: people who work there. It really is sort of hard
Speaker 1: to imagine that you could have that and the chip
Speaker 1: fabs just keep running, right. This was sort of why
Speaker 1: I asked that question about the oil analogy at the beginning,
Speaker 1: because I think, you know, lots of people look at
Speaker 1: it and they go, oh, it's a strategic resource. People
Speaker 1: use chips for military applications. There's actually some great anecdotes
Speaker 1: in Chris's book about how Russia's lack of chips is
Speaker 1: basically hindering its invasion of Ukraine. Right now, the temptation
Speaker 1: is to draw a direct parallel between oil and chips,
Speaker 1: But on the other hand, there is a key difference.
Speaker 1: You know, you can build up your own semiconductor capacity
Speaker 1: in many respects, it's far more difficult than you know,
Speaker 1: just installing an oil rig to pull crude oil out
Speaker 1: of the ground. It does seem to take years and
Speaker 1: vast amounts of money, but there is that possibility. It's
Speaker 1: not bounded by geography in the same way that oil is.
Speaker 1: You know, another thing that's really helpful trying to create
Speaker 1: is the sort of distinction. And both are important, but
Speaker 1: the distinction between leading edge and lagging tech and both
Speaker 1: are preticulational. I mean, we started talking about chips, you know,
Speaker 1: one of the big themes was like, well, what's going
Speaker 1: on with the automakers that's not advanced tech? Right? A
Speaker 1: lot of that stuff was like the least advanced chips.
Speaker 1: It was, you know, stuff to like that displayed an
Speaker 1: image on a dashboard or something like that, about as
Speaker 1: basic as it gets. But if you don't have that,
Speaker 1: then you know, it doesn't matter that is leading edge
Speaker 1: or sort of lagging edge or whatever. If you don't
Speaker 1: have it, you can't make the car. And so, you know,
Speaker 1: thinking about the Chips Act, and as he put it,
Speaker 1: you know, this sort of insurance against this disruption, like, Okay,
Speaker 1: maybe the subsidies won't necessarily bring the leading edge manufacturing
Speaker 1: or expand that, but expanding access to the lagging edge
Speaker 1: is also pretty crucial, you know, the ubiquity of chips
Speaker 1: and everything from cars to refrigerators and washing machines or
Speaker 1: whatever appliance. I do find that kind of concerning the
Speaker 1: idea that you could use chips to hold the global
Speaker 1: economy hostage for a certain strategic or military goal in
Speaker 1: the same way that you know, to some extent, Russia
Speaker 1: has used oil and gas to do the same thing
Speaker 1: that worries me, it does. You know. The other thing
Speaker 1: about that, though, is like again, because there's so much interconnection,
Speaker 1: and you brought up software. You know, I'm glad you
Speaker 1: brought that out because actually, at some point we should
Speaker 1: do like a design software thing, go back to the
Speaker 1: supply chain. But like everybody depends on anyone everyone else, right,
Speaker 1: So in a way, it's hard to imagine like this
Speaker 1: sort of like standoff like without like really hurting yourself
Speaker 1: because everyone, you know, it's so cross border. You mentioned
Speaker 1: like Japanese chemicals and software that might be designed in
Speaker 1: the United States, which I think the US is still
Speaker 1: really good at designing a design software, And so it's
Speaker 1: that sort of makes the chips chips chips diplomacy tricky
Speaker 1: and unique in the sense that it seems really hard
Speaker 1: to like hurt your enemy or hurt another entity without
Speaker 1: harming yourself. Chips Diplomacy is a good way of putting it.
Speaker 1: That should be the name of our book, Joe. The
Speaker 1: market for good semiconductor books, I think has just been
Speaker 1: filled knockoff version of chip wark Tray chip Diplomacy. All right,
Speaker 1: shall we leave it? Let's leave it there. Okay, this
Speaker 1: has been another episode of the Odd Lots podcast. I'm
Speaker 1: Tracy Alloway. You can follow me on Twitter at Tracy
Speaker 1: Alloway and I'm Joe wi Isn't Thalt. You can follow
Speaker 1: me on Twitter at the Stalwart. Definitely follow our guest
Speaker 1: Chris Miller. He's at c R Miller One. Follow our
Speaker 1: producer Kerman Rodriguez at Kerman Arman, and check out all
Speaker 1: of our podcasts at Bloomberg under the handle at podcasts.
Speaker 1: Thanks for listening year to