WEBVTT - Tiny Chips, Giant Stakes 0:00:15.316 --> 0:00:25.996 Pushkin. This is a show about technological progress, and yet 0:00:26.836 --> 0:00:29.076 in the year or so we've been making the show, 0:00:29.436 --> 0:00:33.916 we have not had a single episode about the most 0:00:33.996 --> 0:00:42.596 important driver of technological progress in the modern world. Semiconductors, microchips, chips, 0:00:42.636 --> 0:00:46.236 as you know, are everywhere in the modern world, except 0:00:46.476 --> 0:00:50.076 on What's Your Problem. I apologize for the oversight, and 0:00:50.116 --> 0:00:57.796 we're going to fix it right now. I'm Jacob Goldstein, 0:00:57.876 --> 0:01:00.396 and this is What's Your Problem. My guest today is 0:01:00.476 --> 0:01:03.796 Chris Miller. He's a professor at Tufts University and the 0:01:03.876 --> 0:01:06.716 author of a book called Chipboard, The Fight for the 0:01:06.756 --> 0:01:11.156 World's most Critical Technology. The book explains not only how 0:01:11.236 --> 0:01:14.676 chips have become a billion times more powerful over the 0:01:14.716 --> 0:01:18.556 last several decades, but also how that extraordinary progress has 0:01:18.556 --> 0:01:24.076 made chips ubiquitous and essential and increasingly something governments are 0:01:24.156 --> 0:01:27.076 fighting over. The US government right now is fighting to 0:01:27.156 --> 0:01:30.996 keep chip making technology out of China. Also, the US 0:01:31.076 --> 0:01:34.156 government is spending tens of billions of dollars to get 0:01:34.156 --> 0:01:37.876 companies to build more chip factories in the United States. 0:01:38.436 --> 0:01:41.716 And on a related note, most of the world's cutting 0:01:41.796 --> 0:01:46.316 edge chips, almost certainly, including the chips powering your phone 0:01:46.596 --> 0:01:51.236 right now are made in Taiwan, a country that China 0:01:51.316 --> 0:01:54.756 claims as part of its territory and that China might 0:01:54.956 --> 0:01:59.396 invade or blockade or generally mess with in the coming years. 0:02:00.036 --> 0:02:02.116 Chris writes about all of this, and we talked a 0:02:02.116 --> 0:02:05.556 lot about it. But in order to really understand what's 0:02:05.596 --> 0:02:08.516 going on now and how we got here, we started 0:02:08.516 --> 0:02:12.876 out by talking about two companies, in particular, giant of 0:02:12.956 --> 0:02:16.516 companies that are doing amazing things and that are absolutely 0:02:16.636 --> 0:02:20.756 essential to the global economy. Also, almost nobody in the 0:02:20.836 --> 0:02:24.636 US ever talks about either of these companies. The first 0:02:24.636 --> 0:02:27.956 one we talked about is a Dutch company called ASML. 0:02:28.596 --> 0:02:31.996 They make this amazing machine that you have to buy 0:02:32.396 --> 0:02:35.076 from them if you want to make cutting edge chips. 0:02:35.556 --> 0:02:38.356 Nobody else in the world makes this machine. The machine 0:02:38.476 --> 0:02:43.276 uses a technique called lithography to print impossibly intricate chips. 0:02:43.556 --> 0:02:47.676 To start, I asked Chris to explain how lithography has evolved. 0:02:49.116 --> 0:02:50.836 So the way you do it is by using light 0:02:50.916 --> 0:02:54.996 as your tool, and you shine light through a mask 0:02:55.276 --> 0:02:58.796 that has the pattern you want to imprint on the chip. 0:02:59.476 --> 0:03:01.356 So the light goes through where the holes are, it 0:03:01.396 --> 0:03:04.596 doesn't go through where there aren't holes, and by using 0:03:04.676 --> 0:03:07.676 essentially an upside down microscope at the outset, you could 0:03:07.756 --> 0:03:10.476 take something that was big and make it look smaller, 0:03:10.756 --> 0:03:13.076 just like microscopes usually take something smaller, make it like 0:03:13.116 --> 0:03:15.036 when you look through the wrong end of a telescope. 0:03:15.556 --> 0:03:19.156 That's exactly right, that's exactly right. So you basically take 0:03:19.236 --> 0:03:23.196 sort of like a stencil, you stick it on a microscope, 0:03:23.196 --> 0:03:26.836 you shine light through the microscope the wrong way, and 0:03:26.916 --> 0:03:31.356 you you're able to basically print a chip that way. 0:03:32.196 --> 0:03:33.956 That's right, at least that's how it worked in the 0:03:34.396 --> 0:03:38.196 simple earliest days. So the challenge has always been to 0:03:38.396 --> 0:03:42.676 print ever smaller features on chips. And for a long time, 0:03:42.836 --> 0:03:48.996 visible light was perfectly acceptable printing device because it had 0:03:48.996 --> 0:03:51.956 a wavelength of several hundred nanimeters and that's pretty small. 0:03:52.276 --> 0:03:55.316 But a couple decades ago we got to the point 0:03:55.316 --> 0:03:58.036 where chips already had features that were so small a 0:03:58.116 --> 0:04:01.716 visible light wasn't small enough or powerful enough to do 0:04:01.796 --> 0:04:05.316 the printing. So is that is yes, a wild moment, right, 0:04:05.356 --> 0:04:07.516 So the idea that like these things on the chip 0:04:07.556 --> 0:04:12.756 are so fine, so close together, that light is weirdly 0:04:12.836 --> 0:04:18.996 too big, like they're smaller than the wavelength of visible light. 0:04:19.316 --> 0:04:22.276 So this is the next problem. How does that get solved? 0:04:23.116 --> 0:04:26.036 You need to make a jump to a very different 0:04:26.116 --> 0:04:29.596 light source with a much smaller wavelength, And that's the 0:04:29.596 --> 0:04:33.836 origins of the EUV, the extreme ultra violet lithography machines 0:04:33.876 --> 0:04:36.596 that we have today. So ultra violet light has a 0:04:36.716 --> 0:04:40.196 shorter wavelength than visible light, so therefore you can print 0:04:40.236 --> 0:04:44.876 even smaller stuff on a chip. Extreme ultra violet is 0:04:44.876 --> 0:04:48.156 presumably the short end of ultraviolet light, so you can 0:04:48.196 --> 0:04:51.076 still get smaller and smaller. So we're in this world 0:04:51.156 --> 0:04:54.716 where there's this one company, SML. Right, tell me about 0:04:54.756 --> 0:04:57.716 this company, and tell me about the EUV machine that itselfs. 0:04:58.876 --> 0:05:03.956 So the machines themselves create UV light by having balls 0:05:03.996 --> 0:05:07.236 of tin thirty microns wide, so thirty millions of the 0:05:07.276 --> 0:05:10.756 meter wide falling through a vacuum. Then, like, first of all, 0:05:10.796 --> 0:05:12.916 what does that even me? Right? You say those words, 0:05:12.956 --> 0:05:18.356 but like why it's what a ball of tin thirty 0:05:18.356 --> 0:05:21.356 microns wide falling through a vacuum, Like what's even going on? 0:05:21.476 --> 0:05:23.916 Why do you need falling balls of tin in a vacuum? 0:05:24.676 --> 0:05:27.556 Because this tin, when you strike it twice with an 0:05:27.636 --> 0:05:32.836 ultra powerful laser will explode into a plasma that is 0:05:33.516 --> 0:05:36.276 forty or fifty times hotter than the surface of the sun, 0:05:37.076 --> 0:05:41.396 and this plasma will release light with exactly the right 0:05:41.396 --> 0:05:44.636 wavelength extreme ultra violet light needed for lethar. And so 0:05:44.676 --> 0:05:47.356 then that light goes through some kind of a mask 0:05:47.516 --> 0:05:51.276 or stencil and makes the imprint on a chip. Well, 0:05:51.316 --> 0:05:54.596 the trick is that you need really unique mirrors that 0:05:54.756 --> 0:05:58.396 the flattest mirrors humans have ever made to collect that 0:05:58.476 --> 0:06:01.396 light after it's produced by the plasma. And there's around 0:06:01.436 --> 0:06:03.636 a dozen of these mirrors inside of each machine that 0:06:03.716 --> 0:06:07.396 then directs it towards the stencil and then onto the 0:06:07.476 --> 0:06:10.396 silicon wafer. So okay, so that those are the basic 0:06:10.636 --> 0:06:14.316 mechanics of the machine. How big is one of these machines? 0:06:14.516 --> 0:06:19.996 What's it look like? The size of a truck? Okay? 0:06:20.196 --> 0:06:24.996 And they look like they got wires and tubes of 0:06:24.996 --> 0:06:29.636 all sorts coming out of them from every direction. They're 0:06:29.676 --> 0:06:32.916 the most complex manufacturing tool humans have ever made. And 0:06:33.116 --> 0:06:36.956 inside of them there are hundreds of thousands of component parts. 0:06:37.436 --> 0:06:39.356 So you say it's the size of a truck, like 0:06:39.436 --> 0:06:41.356 a like a pickup truck or like a semi truck. 0:06:41.436 --> 0:06:43.876 What am I picturing like a semi truck. It takes 0:06:43.956 --> 0:06:48.356 multiple airplanes to move one of these machines. Oh interesting, okay? 0:06:48.796 --> 0:06:51.796 And how much does it cost? Around one hundred and 0:06:51.796 --> 0:06:55.516 fifty million dollars apiece, So they're the most expensive machine 0:06:55.516 --> 0:06:59.596 tool produced in human history. So okay. Because this machine 0:06:59.716 --> 0:07:03.716 is so expensive and so complex, and because the market 0:07:03.756 --> 0:07:05.996 for it is so small, right, only a few companies 0:07:06.036 --> 0:07:08.956 in the world make truly cutting edge chips. We've found 0:07:08.996 --> 0:07:11.156 it in this world where there is only this one 0:07:11.236 --> 0:07:14.756 company ASML that makes this machine and that fact is 0:07:14.796 --> 0:07:18.316 really important in terms of trade and geopolitics and lots 0:07:18.316 --> 0:07:20.196 of other big things that I want to talk about that. 0:07:20.676 --> 0:07:23.756 But before we do, I want to talk about one 0:07:23.996 --> 0:07:29.596 other big important underdiscussed in the US company that also 0:07:29.676 --> 0:07:32.876 has an acronym for a name. That company is TSMC, 0:07:33.356 --> 0:07:36.476 the biggest chip maker in the world. So tell me 0:07:36.516 --> 0:07:40.756 the story of TSMC. TSMC was founded by an executive 0:07:40.836 --> 0:07:44.756 named Morris Chang who had spent his career at Texas 0:07:44.836 --> 0:07:47.996 Instruments really building the US chip industry, and TI at 0:07:47.996 --> 0:07:51.676 the time was one of the leaders in chip technology, 0:07:51.716 --> 0:07:54.796 but he was passed over for the CEO job in 0:07:54.836 --> 0:07:57.396 the middle of the nineteen eighties, was looking for something 0:07:57.436 --> 0:08:00.396 else to do and was approached by the Taiwanese government 0:08:00.516 --> 0:08:02.956 to help build a chip industry in Taiwan. And he 0:08:03.036 --> 0:08:07.916 realized at the time that as manufacturing chips was getting 0:08:07.916 --> 0:08:12.076 more complex and as the economies of scale to manufacturer 0:08:12.236 --> 0:08:17.956 growing because you needed more complex equipment, more specialized materials, 0:08:17.996 --> 0:08:21.076 that in the future there would be a market for 0:08:21.396 --> 0:08:24.956 manufacturing services of semiconductors. And so he can see this 0:08:24.996 --> 0:08:28.076 company not to design any chips. They've never designed chips. 0:08:28.116 --> 0:08:32.116 They only manufacture, and they serve a large number of 0:08:32.156 --> 0:08:36.796 companies from Apple to AMD to Nvidia that today don't 0:08:36.796 --> 0:08:39.956 do any manufacturing. They only do chip design. And so 0:08:41.036 --> 0:08:44.316 when people talk about like Apple zone chip, you know, 0:08:44.316 --> 0:08:47.396 when Apple starts using its own chips, Apple's not making 0:08:47.436 --> 0:08:49.556 those chips, right in the same way that they're not 0:08:49.636 --> 0:08:52.316 making whatever the rest of the iPhone, right, they're designing 0:08:52.356 --> 0:08:55.396 the chip and it's actually being made in a factory 0:08:55.556 --> 0:08:59.196 in Taiwan. In fact, that's right, and I think if 0:08:59.196 --> 0:09:00.756 you if you look on the back of an iPhone, 0:09:00.756 --> 0:09:04.716 it'll it'll say designed in California, assembled in China, And 0:09:05.076 --> 0:09:07.676 that's true, but it misses a critical step because all 0:09:07.716 --> 0:09:09.996 of the key chips, not only in iPhones but in 0:09:10.356 --> 0:09:13.836 most Apple products are manufactured by one company in Taiwan, 0:09:14.236 --> 0:09:18.356 and so t SNC is now at the frontier, right, 0:09:18.356 --> 0:09:24.356 they are making the smallest, most advanced chips. No US 0:09:24.436 --> 0:09:27.516 company is any longer at that frontier. So in that 0:09:27.676 --> 0:09:32.316 TSMC story, is there like a moment that is sort 0:09:32.316 --> 0:09:35.076 of the key moment when the kind of center of 0:09:35.116 --> 0:09:39.436 gravity and the chip world shifts from California to Taiwan. Yeah, 0:09:39.636 --> 0:09:43.156 the key shifts was the smartphone. Steve Jobs actually went 0:09:43.236 --> 0:09:46.996 to Intel when he was conceiving the iPhone and asked 0:09:47.036 --> 0:09:49.876 if Intel will be interested in producing chips for this device. 0:09:50.436 --> 0:09:52.116 But at the time it seemed a little bit crazy 0:09:52.156 --> 0:09:55.676 to think that people would want computer sized processing on 0:09:55.756 --> 0:09:58.996 their phone. Intel thought it'd be a low volume product 0:09:59.036 --> 0:10:03.476 and said no thanks, and he took it to contract 0:10:03.556 --> 0:10:06.836 manufacturers in East Asia instead, first producing it at Samsung 0:10:06.876 --> 0:10:10.156 and then later turning to TSM to be the exclusive 0:10:10.156 --> 0:10:13.236 producer of the iPhones chips. And it wasn't just Apple, 0:10:13.436 --> 0:10:17.396 the entire smartphone ecosystem grew up alongside TSMC, and so 0:10:17.556 --> 0:10:22.916 today TSMC produces on eighty percent of the world's smartphone processors, 0:10:23.356 --> 0:10:26.396 and a typical smartphone will have a dozen semiconductors inside, 0:10:26.436 --> 0:10:28.476 one for the Wi Fi, one for the Bluetooth, one 0:10:28.556 --> 0:10:31.876 for the audio. And many of these ships are produced 0:10:31.876 --> 0:10:36.396 by DSMC. So your background, you're a scholar, and your 0:10:36.436 --> 0:10:41.316 background is basically in international relations, right, not in technology 0:10:41.356 --> 0:10:46.476 your innovation. And it seems like that seems like an 0:10:46.476 --> 0:10:53.156 extraordinarily interesting and useful framework for thinking about chips basically right, 0:10:53.196 --> 0:10:56.396 for thinking about sort of global the global semiconductor industry today. 0:10:56.396 --> 0:10:59.036 I mean, you have one company that's essential that's in 0:10:59.076 --> 0:11:03.916 the Netherlands. You have another company, maybe the most important 0:11:03.916 --> 0:11:05.636 company in the global economy if I wanted to be 0:11:06.156 --> 0:11:10.076 found to reach for it, TSMC as in Taiwan. Taiwan 0:11:10.196 --> 0:11:12.596 is an island right off of China that thinks it's 0:11:12.596 --> 0:11:15.036 an independent country, but that China thinks is a part 0:11:15.036 --> 0:11:18.596 of China. Semiconductors are like the most important thing in 0:11:18.636 --> 0:11:22.076 the world economy right now. Maybe oil, but you could 0:11:22.076 --> 0:11:27.276 make a good case for semiconductors, like that's a super interesting, 0:11:27.316 --> 0:11:32.476 super complex, fraught situation. How should we think about it? Well, 0:11:32.956 --> 0:11:35.436 I think you're right about how complex it is. And 0:11:36.116 --> 0:11:39.756 what is striking to me is the extent to which 0:11:40.316 --> 0:11:43.996 we think of industries like the chip industries being globalized 0:11:44.756 --> 0:11:48.836 and they're international, but actually the production is concentrated in 0:11:48.836 --> 0:11:52.596 a number of really key countries and companies. Joe Biden 0:11:52.716 --> 0:11:57.436 was in the Netherlands a few months ago in part 0:11:57.516 --> 0:12:00.996 to make sure that SML wasn't selling its fancy machines 0:12:01.036 --> 0:12:03.396 to China, right, Like, that's how important it is that 0:12:03.756 --> 0:12:05.516 the president is going to go there and be like, 0:12:05.956 --> 0:12:08.396 thank you for not selling these machines to China. Please 0:12:08.476 --> 0:12:12.636 keep not selling them to China. The Biden administration also 0:12:13.076 --> 0:12:16.676 imposed restrictions more generally on selling chips to China. Was 0:12:16.716 --> 0:12:19.196 the last year, like talk me through that, talk me 0:12:19.236 --> 0:12:25.196 through China's role in in the global semi conductor industry. Today, 0:12:25.316 --> 0:12:28.276 China produces a fair number of chips, but almost all 0:12:28.276 --> 0:12:30.476 of them are pretty low tech, okay, And when it 0:12:30.476 --> 0:12:34.476 comes to cutting edge chips, China's far behind the cutting 0:12:34.516 --> 0:12:36.596 edge of what can be produced in Taiwan or in 0:12:36.636 --> 0:12:41.276 the United States. And almost all chipmaking in China requires 0:12:41.556 --> 0:12:45.276 machine tools like lithography tools from ASML, other types of 0:12:45.276 --> 0:12:48.116 tools that are imported from abroad from the US, from Japan, 0:12:48.716 --> 0:12:53.436 from the Netherlands, and because of that, the Chinese economy 0:12:53.596 --> 0:12:57.556 is critically dependent on imported chips. It's trying to trying 0:12:57.556 --> 0:12:59.516 to catch up. Are they gonna catch up? They've been 0:12:59.556 --> 0:13:02.756 trying to catch up Since twenty fourteen, the Chinese government 0:13:03.316 --> 0:13:06.756 has made some conductors a priority, pour billions of dollars 0:13:06.796 --> 0:13:09.796 each year into the chip industry in China. But the 0:13:09.796 --> 0:13:13.356 problem is it's really hard. It's really really hard to 0:13:13.396 --> 0:13:16.996 acquire these capabilities. And it's hard because we're talking about 0:13:16.996 --> 0:13:21.676 the most complex manufacturing humans have ever undertaken. The difficulty 0:13:21.756 --> 0:13:24.676 that Chinese firms have faced are twofold. First is that 0:13:25.156 --> 0:13:28.996 the market is so consolidated that breaking into it requires 0:13:29.316 --> 0:13:33.156 enormous capital investment plus really unique technologies, and so it's 0:13:33.156 --> 0:13:35.516 just hard to break into new markets when it comes 0:13:35.516 --> 0:13:37.996 to the chip industry, which is why you've seen in 0:13:38.076 --> 0:13:41.196 many segments of the industry, firms stay in their market 0:13:41.236 --> 0:13:44.636 position for years, if not decades. And that's just an 0:13:44.716 --> 0:13:48.476 environment where new entrance is hard, Like like making becoming 0:13:48.476 --> 0:13:52.796 another SML, it's like kind of not going to impossible. Yeah, 0:13:52.876 --> 0:13:55.756 that's right. Yeah. Yeah. The other issues that the US 0:13:55.796 --> 0:13:58.876 government has been making it harder over the past around 0:13:58.916 --> 0:14:02.636 five years by cutting off China's access to certain types 0:14:02.636 --> 0:14:09.436 of tools, equipment, materials, software, and knowledge because now it's 0:14:09.476 --> 0:14:12.636 illegal for USS and to work with certain Chinese semi 0:14:12.636 --> 0:14:15.916 conductor companies and transfer knowledge to them. And the US 0:14:15.996 --> 0:14:18.596 wants to do this because it's afraid that if China 0:14:18.676 --> 0:14:21.756 develops more advanced shipmaking capabilities, it will apply these to 0:14:22.276 --> 0:14:25.356 military and intelligence systems, which of course it would, That's 0:14:25.356 --> 0:14:33.156 what all governments do, right exactly. So China wants to 0:14:33.236 --> 0:14:37.516 make advanced chips, and Taiwan makes the most advanced chips 0:14:37.516 --> 0:14:40.996 in the world, and China thinks Taiwan should be part 0:14:40.996 --> 0:14:44.436 of China. In a minute, what does Taiwan's chip industry 0:14:44.636 --> 0:14:48.196 mean for its relationship to China? In particular, what does 0:14:48.236 --> 0:14:51.116 it mean for the possibility of a Chinese invasion or 0:14:51.196 --> 0:15:01.836 annexation of Taiwan. That's the end of the ads. Now 0:15:01.876 --> 0:15:04.836 we're going back to the show. In a more general context, 0:15:04.916 --> 0:15:09.956 people talk about the possibility of China invading or blockading 0:15:10.156 --> 0:15:15.476 or annexing Taiwan. How do you think about that in 0:15:15.516 --> 0:15:22.436 the context of the chip industry. Some people argue that 0:15:22.556 --> 0:15:25.636 China would want to attack Taiwan in order to acquire 0:15:25.676 --> 0:15:29.196 the chipmaking facilities there. I think that's close to impossible. 0:15:29.556 --> 0:15:33.756 The reality is that although Taiwan has unique manufacturing capabilities, 0:15:34.236 --> 0:15:38.476 the facilities in Taiwan require importing machines from the Netherlands, 0:15:38.556 --> 0:15:42.516 from the US, from Japan, they require importing materials like 0:15:42.556 --> 0:15:45.716 silicon wafers and lots of ultraspecialized chemicals, and so they 0:15:45.996 --> 0:15:50.316 really couldn't operate without regular imports from abroad. So I 0:15:50.356 --> 0:15:53.556 think it's really really unlikely that China were to attack 0:15:53.636 --> 0:15:56.596 Taiwan with the aim of seizing that you're making facilities, 0:15:56.636 --> 0:15:59.036 because the Chinese leaders know that they be blown up 0:15:59.036 --> 0:16:04.076 in the process. It wouldn't be possible. So China certainly 0:16:04.476 --> 0:16:06.996 thinks Taiwan should be part of China, right, that's not 0:16:07.076 --> 0:16:13.676 ambiguous independent of TSMC. So in a world where China 0:16:13.756 --> 0:16:16.596 tried to make Taiwan part of China by force, what 0:16:16.716 --> 0:16:19.636 would happen, Like, what is the sort of set of 0:16:19.636 --> 0:16:22.316 probabilities you think about in terms of what would happen 0:16:22.916 --> 0:16:25.316 to the chip industry and the global economy more generally 0:16:26.236 --> 0:16:29.596 if there were attack on Taiwan or a blockade that 0:16:29.676 --> 0:16:33.196 disrupted trade and out of Taiwan. The impact for the 0:16:33.196 --> 0:16:37.236 world economy would be catastrophic. TSMC produces eighty percent of 0:16:37.276 --> 0:16:40.716 smartphone processors, it produces a third of PC processors, It 0:16:40.796 --> 0:16:44.196 produces all sorts of critical chips and data centers and 0:16:44.276 --> 0:16:49.676 telecoms infrastructure, and then it produces tons of less sophisticated 0:16:49.756 --> 0:16:53.396 chips that are critical for many other types of goods dishwashers, 0:16:53.596 --> 0:16:58.156 washing machines, coffee makers, microwaves. A new car will often 0:16:58.236 --> 0:17:01.276 have a thousand chips inside of it, and in a 0:17:01.356 --> 0:17:03.956 given car, you should assume that at least twenty percent 0:17:03.996 --> 0:17:07.196 of the chips are made in Taiwan. So when you 0:17:07.556 --> 0:17:12.836 sort of think with your foreign affairs international relations training 0:17:12.956 --> 0:17:16.996 about those implications, like, I could imagine that going different 0:17:16.996 --> 0:17:20.236 ways in a kind of game theoretical way for China 0:17:20.356 --> 0:17:21.916 right on the one hand would be like, oh, well, 0:17:21.956 --> 0:17:24.556 we don't want to blow up the world economy. On 0:17:24.596 --> 0:17:26.676 the other hand, it's like, oh, that's like a kind 0:17:26.716 --> 0:17:29.036 of leverage. Right. We could say to the world, hey, 0:17:29.116 --> 0:17:31.236 just let us make Taiwan part of China, because we 0:17:31.276 --> 0:17:32.716 all know it's part of China, and we'll let the 0:17:32.756 --> 0:17:35.876 chips keep flowing. I don't know, are those are those 0:17:35.956 --> 0:17:37.196 the ways you think about it? How do you think 0:17:37.196 --> 0:17:44.156 about it? The Taiwanese government describes the chip industry is 0:17:44.156 --> 0:17:46.996 a silicon shield, the idea of being that China one 0:17:47.076 --> 0:17:50.596 attack because it knows that the economic consequences would be 0:17:50.636 --> 0:17:52.876 disastrous for China and for the rest of the world, 0:17:52.916 --> 0:17:56.756 which it would be. And I think that dynamic is present. 0:17:56.996 --> 0:18:01.316 But I worry as well that if China tries to 0:18:01.716 --> 0:18:04.356 move on Taiwan in a way that's below the threshold 0:18:04.356 --> 0:18:07.916 of what would necessarily trigger US response, so a partial blockade, 0:18:07.956 --> 0:18:10.556 for example, which would present the US with a really 0:18:10.556 --> 0:18:14.036 difficult calculus as to what to do. In that type 0:18:14.036 --> 0:18:16.676 of scenario, US leaders would have a choice. Do you 0:18:16.916 --> 0:18:20.916 do nothing and let China pressure Taiwan while watching US 0:18:20.996 --> 0:18:24.996 credibility in Asia disappear, or do you do something and 0:18:25.116 --> 0:18:27.276 risk a disruption of the supply chains on which the 0:18:27.316 --> 0:18:30.796 world economy depends. And in that scenario, I think it's 0:18:30.836 --> 0:18:34.916 far from obvious that the chip industry helps secure Taiwan, 0:18:34.956 --> 0:18:37.596 and in fact, it could well deter the US from 0:18:37.596 --> 0:18:41.556 helping Taiwan and therefore give China leverage over the United States. 0:18:42.516 --> 0:18:45.916 So the US passed a law last year, the Chips Act, 0:18:46.076 --> 0:18:53.476 which is basically subsidizing the manufacturer of chips in the US. Right, 0:18:53.556 --> 0:18:58.756 tell me about that law. So, the Chips Act allocates 0:18:58.916 --> 0:19:03.396 around fifty two billion dollars to semiconductors. Three quarters of 0:19:03.436 --> 0:19:06.756 that goes to subsidizing chipmaking in the US, one quarter 0:19:06.836 --> 0:19:09.996 goes to funding long run R and D. And the 0:19:10.036 --> 0:19:12.276 idea behind the Act is that right now, it's it's 0:19:12.436 --> 0:19:14.836 more expensive to build ship making facilities in the US 0:19:14.916 --> 0:19:18.036 than an East Asia for a variety of reasons, government subsidies, 0:19:18.036 --> 0:19:22.476 tax policy, regulation, etc. And the US wants to reduce 0:19:22.556 --> 0:19:25.756 the cost gap and is putting government money behind that, 0:19:26.436 --> 0:19:28.276 behind that to make it more competitive to build in 0:19:28.276 --> 0:19:31.356 the US. There's real concern about what happens if China 0:19:31.356 --> 0:19:34.996 does attackable like hate Taiwan, and in that scenario, we 0:19:35.036 --> 0:19:38.596 need more chip making capacity in other geographies, not in China, 0:19:38.636 --> 0:19:41.876 not in Taiwan. And so that's why Congress put money 0:19:41.876 --> 0:19:44.556 behind the Chips Act to try to build some capacity 0:19:44.636 --> 0:19:48.076 in other geographies. I feel like there's a there's a 0:19:48.236 --> 0:19:51.396 bigger theme here that's interesting, right. An interesting theme is 0:19:51.436 --> 0:19:56.076 the the relationship of the government to the private sector 0:19:56.156 --> 0:19:59.356 and innovation more generally, and that's a theme that runs 0:19:59.356 --> 0:20:02.676 through the history of the chip industry really and I'm 0:20:02.716 --> 0:20:05.156 curious if you could just sort of talk it through, 0:20:05.316 --> 0:20:08.956 you know today, how has that played out, and how's 0:20:08.956 --> 0:20:12.116 it playing out today, and like, how do you see 0:20:12.156 --> 0:20:17.196 that sort of optimal relationship there. The government's been deeply 0:20:17.236 --> 0:20:21.996 involved in the chip industry from day one. It funded 0:20:22.116 --> 0:20:24.396 a lot of the r and D that made chips possible. 0:20:24.476 --> 0:20:27.916 It was the first buyer of chips for missile programs 0:20:27.956 --> 0:20:31.996 and for the space race, and even today it's a 0:20:32.036 --> 0:20:35.796 major funder of research and development the chip industry. But 0:20:36.116 --> 0:20:38.836 it was never the forest that let the chip industry scale. 0:20:38.996 --> 0:20:42.956 Selling to consumer markets was always more important in terms 0:20:42.956 --> 0:20:45.276 of scaling because there's a lot more consumer demand than 0:20:45.316 --> 0:20:48.636 government demand. Tim Cook, Apple CEO has a lot more 0:20:48.636 --> 0:20:51.476 influence over this and nine country supply chain than the 0:20:51.556 --> 0:20:55.436 US president because he buys a lot more expensive chips. 0:20:56.316 --> 0:20:58.196 In the end, what do you think it's the fundamental 0:20:58.316 --> 0:20:59.836 question of the book or what do you think is 0:20:59.876 --> 0:21:03.156 the question the book ends up answering. I think the 0:21:03.796 --> 0:21:08.236 key takeaway from the book is that although we don't 0:21:08.276 --> 0:21:10.396 think about I can Inductor is much at all. They're 0:21:10.516 --> 0:21:13.516 very deep in our devices. In fact, you can't understand 0:21:13.596 --> 0:21:16.636 any of the major transformations in the modern world without them. 0:21:16.716 --> 0:21:19.876 Whether it's the shape of the globalized economy, whether it's 0:21:19.916 --> 0:21:22.116 the balance of military power, whether it's the rise of 0:21:22.156 --> 0:21:27.236 big tech firms. All of them have silicon semiconductors at 0:21:27.276 --> 0:21:30.796 their core, and they've structured all these big trends and 0:21:30.836 --> 0:21:33.916 ways that until recently we were only dimly aware of. 0:21:36.876 --> 0:21:39.996 In a minute, the lightning round, including where Chris thinks 0:21:40.036 --> 0:21:43.356 the next silicon valley might be, and also what his 0:21:43.476 --> 0:21:53.276 next book might be. Now back to the show. I 0:21:53.396 --> 0:21:56.516 know you have to go relatively soon, so I want 0:21:56.516 --> 0:21:59.676 to close with a lightning round a bunch of fast questions. 0:22:01.396 --> 0:22:05.796 So you've studied the Soviet Union and Russia extensively, You've 0:22:05.916 --> 0:22:08.676 lived and worked in Moscow. What's one thing that you 0:22:08.756 --> 0:22:13.116 wish more people in the US understood about Russia. M 0:22:15.156 --> 0:22:16.836 That's a hard question to answer, right, I mean, I 0:22:17.116 --> 0:22:18.196 don't know if I don't know if you have a 0:22:18.236 --> 0:22:21.036 good answer to that question in the context of this conversation. 0:22:21.196 --> 0:22:23.836 Forget the context of this I mean, look, obviously, the 0:22:23.836 --> 0:22:26.876 context for that question is the war in Ukraine. Frankly, Yeah, Okay, 0:22:26.876 --> 0:22:29.676 well that's the context. Yeah. I think what's striking about 0:22:29.716 --> 0:22:34.236 Russia is the extent to which the Russian foreign policy elite, 0:22:34.876 --> 0:22:37.196 the people who make foreign policy in the Foreign ministry 0:22:37.196 --> 0:22:40.916 in the Kremlin, they're convinced that their country is a 0:22:40.956 --> 0:22:43.436 great power on the world stage, and they're convinced that 0:22:43.476 --> 0:22:46.116 the way to make your country great power is to 0:22:46.196 --> 0:22:50.636 assert it militarily and territorially. It seems to me like 0:22:50.676 --> 0:22:55.716 a very nineteenth century or before view. The problem is 0:22:55.716 --> 0:22:58.356 that it's here and now in the twenty first century, 0:22:58.916 --> 0:23:04.076 and we can't wish it away. Every region wants to 0:23:04.076 --> 0:23:07.796 create its own silicon valley, you know, there's like whatever, 0:23:07.876 --> 0:23:11.076 Silicon beach, Silicon mountain. Everybody has their own bad name. 0:23:11.916 --> 0:23:13.796 What place do you think has the best shot of 0:23:13.836 --> 0:23:19.476 doing it? And why India right now is putting a 0:23:19.476 --> 0:23:22.876 lot of money into its chip industry, and simultaneous to that, 0:23:22.916 --> 0:23:26.476 it's putting a lot of focus on electronics assembly that 0:23:26.596 --> 0:23:29.756 India is trying to attract assembly that's leaving China for 0:23:29.836 --> 0:23:32.916 smartphones and PCs, and so I would say that although 0:23:32.916 --> 0:23:35.876 it's starting from a very low base, India is likely 0:23:35.956 --> 0:23:39.156 to substantially grow as chip industry over the next decade. 0:23:39.476 --> 0:23:43.236 What's one thing research universities get wrong about fostering innovation. 0:23:43.676 --> 0:23:48.116 Innovation is partly about science, it's probably about engineering, but 0:23:48.156 --> 0:23:52.156 it's also probably about business models. The innovations that really 0:23:52.156 --> 0:23:55.396 transform societies are those that have a business model that 0:23:55.436 --> 0:24:00.636 allow them to proliferate. And universities aren't nearly as good 0:24:00.676 --> 0:24:02.876 at producing business model innovation in the fact that I 0:24:02.996 --> 0:24:07.716 do any of it, relative to producing engineering innovation or 0:24:08.716 --> 0:24:12.156 innovation in fundamental science. I mean, maybe the question was 0:24:12.196 --> 0:24:14.876 misguided as I hear you answer it, because like, maybe 0:24:14.876 --> 0:24:18.636 a university shouldn't be in the business of innovating business models. 0:24:18.836 --> 0:24:21.556 I guess there's a business school. But yeah, I think 0:24:21.596 --> 0:24:26.196 that's right. I think if you look at TSMC, for example, TSMC, 0:24:26.516 --> 0:24:31.756 you know, Morris Chang had no unique technological or scientific 0:24:32.716 --> 0:24:37.036 insight when he started TSMC, But by starting TSMC, he 0:24:37.116 --> 0:24:39.916 has transformed the landscape of the global chip industry. And 0:24:39.956 --> 0:24:43.076 so I would put the founding of TSMC next to 0:24:43.116 --> 0:24:45.756 many of the other key innovations of the twentieth century. 0:24:46.116 --> 0:24:49.156 But it wasn't a Nobel Prize winning innovation, even though 0:24:49.196 --> 0:24:51.756 it was areuably more important than many that have one 0:24:51.796 --> 0:24:55.476 Nobel prizes. I mean, the fundamental innovation of TSMC was 0:24:56.076 --> 0:24:58.156 we're not going to design chips. We're just going to 0:24:58.196 --> 0:25:00.356 make chips that other people design. It was just that. 0:25:00.556 --> 0:25:03.156