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Speaker 1: Hello, and welcome to another episode of The Odd Lots Podcast.

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Speaker 1: I'm Joe Wisntal and I'm Tracy olliwa Tracy. You know,

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Speaker 1: sometimes I don't know if it's a joke, but at

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Speaker 1: the end of an episode we'll be like, well, we're

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Speaker 1: going to have to check back a year from now

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Speaker 1: to see how that developed. It's not meant to be

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Speaker 1: a joke. It's meant to be it's not a joke.

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Speaker 1: But we don't I don't know if we always do

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Speaker 1: it or if we really always, you know, follow up

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Speaker 1: on those, but it is something we say, all right,

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Speaker 1: but we're making good. We're making good on one of

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Speaker 1: those comments now though, right we are, we are doing

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Speaker 1: it an episode that I think can legitimately be said

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Speaker 1: to be a follow up, you know. I think it

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Speaker 1: was obviously, like basically a year ago around this time

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Speaker 1: that we first sort of became aware of the coronavirus.

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Speaker 1: We didn't know how big of a deal it was

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Speaker 1: going to be. We didn't know how, you know, we

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Speaker 1: knew it was sort of bubbling up. We knew that

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Speaker 1: there were cases in Wuhan. We didn't know much though

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Speaker 1: about the overall impact and um, you know, one of

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Speaker 1: the first people that we discussed it with was was

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Speaker 1: was it with our guest today? Right? So, this particular

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Speaker 1: guest has been on a few times now and we

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Speaker 1: always get requests for him to uh to come back.

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Speaker 1: Last year when we spoke to him, it was February.

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Speaker 1: As you mentioned, the coronavirus crisis was just really getting underway.

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Speaker 1: But we'd already seen a bunch of supply chain disruptions

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Speaker 1: and there was a lot of talk at the time

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Speaker 1: about what that might mean for tech specifically. So in

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Speaker 1: tech you have these really complicated supply chains with lots

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Speaker 1: of little components, particularly semiconductors. So we did uh what.

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Speaker 1: We had a big conversation about that at the time,

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Speaker 1: and now we can check in and see what's actually happened. Yeah,

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Speaker 1: I mean, I think it's useful. I think you're framing

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Speaker 1: there is really good because at the time we didn't

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Speaker 1: know yet that it was going to be this global

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Speaker 1: health crisis. We were really at the time we were

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Speaker 1: focused on, well, what does this mean for Chinese manufacturing

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Speaker 1: because we knew that a lot of factories were shut down,

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Speaker 1: including the suppliers. One of the first companies in the

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Speaker 1: US to really warn that they were seeing an impact

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Speaker 1: from the virus was the Apple, which talked about disruption

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Speaker 1: to its suppliers and the attendant disruption that would happen

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Speaker 1: with its product rollout. So even you know, in the

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Speaker 1: very early days, that still seemed like the angle um

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Speaker 1: tech and manufacturing. And then of course it was just

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Speaker 1: a few weeks later that we realized we were looking

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Speaker 1: at a full blown global health crisis. Right and now,

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Speaker 1: of course, UM, I mean this is a little bit

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Speaker 1: outside of tech. But now a year later, China's economy

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Speaker 1: is actually doing a lot better on a number of

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Speaker 1: measures versus places like the US or perhaps Europe. Uh.

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Speaker 1: It continues to develop its tech industry, of course, and

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Speaker 1: we know the government has really doubled down on its

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Speaker 1: attempts to create or improve its domestic tech capabilities. And

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Speaker 1: if anything, I guess the tensions with the U S

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Speaker 1: over trade, plus the supply chain disruptions from COVID has

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Speaker 1: really encouraged UH the leadership in China to look at

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Speaker 1: this and to accelerate this idea of tech independence. Yep.

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Speaker 1: So in extraordinary year, just sort of on all front,

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Speaker 1: as you mentioned, our guest is a recurring odd lots

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Speaker 1: guest always one of the most requests, so I'm very

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Speaker 1: excited to have him back. We're going to be speaking

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Speaker 1: with Dan Wong. He is a technology analyst at gav

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Speaker 1: col dragon Omics. Knows a lot about a lot of stuff,

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Speaker 1: particularly related to tech and manufacturing, and can speak about

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Speaker 1: it in a way that very few people can. So um, Dan,

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Speaker 1: thank you very much for coming back on coming back

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Speaker 1: on the show. Always a pleasure. Thank you, Joe and Tracy.

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Speaker 1: I mean, there's so much to discuss over the over

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Speaker 1: the last year, and so many different things, and of course,

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Speaker 1: you know, we've been talking a lot about chips on

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Speaker 1: the show, and we've been you know, everything, but it's

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Speaker 1: the starting big picture. I mean, we we had last

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Speaker 1: talked to you about a year ago. You know, what

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Speaker 1: is it? What did you learn? What have you learned

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Speaker 1: about China and it's manufacturing and business capabilities watching it

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Speaker 1: deal with the crisis over the last year. First, I

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Speaker 1: learned that China is a lot more brutal than I thought,

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Speaker 1: and already from a pretty high level of you know,

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Speaker 1: efficiency as well as ruthlessness. And second, I thought that

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Speaker 1: China is now the most can do our society in

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Speaker 1: the world, just by how quickly it mobilized to really

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Speaker 1: try to contain this pandemic and to really try to

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Speaker 1: restart production. And let me talk through both aspects of

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Speaker 1: that now. I lived in Paiging through the very worst

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Speaker 1: of the pandemic. I was in Beijing starting from early February,

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Speaker 1: and it was a pretty much a ghost town at

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Speaker 1: that time. A lot of restaurants have been closed, a

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Speaker 1: lot of workers, a lot of people who left Beijing

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Speaker 1: back home. I had not been able to make it

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Speaker 1: back to Beijing for about a few weeks to an

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Speaker 1: entire month, and uh of the city was mostly lockdown.

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Speaker 1: I had a person posted outside my apartment checking for

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Speaker 1: apartment passes to make sure that people can come in

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Speaker 1: and out. There was basically universal mask wearing, and there's

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Speaker 1: still almost is universal mask wearing. About twelve months after

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Speaker 1: the start of the pandemic, I had to bring a

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Speaker 1: health code app which is embedded into my smartphone everywhere

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Speaker 1: that I went, and it's it was very difficult to

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Speaker 1: travel within China, and for a lot of foreigners or

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Speaker 1: you know, people outside of China, it was very very

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Speaker 1: difficult for them to come act. And this is to

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Speaker 1: say nothing of the centralized quarantine system that China implemented

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Speaker 1: to separate sick people away from families so that they

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Speaker 1: don't transmit through an entire household, which basically was a

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Speaker 1: very ruthless affair. Now, if you take a look and

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Speaker 1: you know at the Chinese COVID numbers, there's always a

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Speaker 1: lot of questions about Chinese data. Officially, the country has

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Speaker 1: reported something like eighty thousand cases, and even if you

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Speaker 1: want to expand that by an order of magnitude, which

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Speaker 1: you know, maybe it's something that I can accept. Um

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Speaker 1: the trend of the data has shown that COVID was

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Speaker 1: pretty much conclusively stomped out in the country by April,

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Speaker 1: which lines up very well with our experiences. That's when

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Speaker 1: the lockdowns peaked and life slowly started to get back

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Speaker 1: to normal, even though there have been a few flare

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Speaker 1: ups here and there. And by September. I remember this

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Speaker 1: very vividly when I spent a month in Shanghai, which

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Speaker 1: had been much more relaxed than Pitching, I was sitting

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Speaker 1: shoulder to shoulder with folks in the cinema. All the

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Speaker 1: smart restaurant have been very difficult to book. Again. The

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Speaker 1: strangest thing was that people were reaching out to shake

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Speaker 1: my hand, and I found that kind of a very

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Speaker 1: bizarre and gross experience. It was very strange for me

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Speaker 1: to think that, you know, a culture that did not

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Speaker 1: invent handshaking is now sort of the only place really

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Speaker 1: perpetuating this tradition. UM. But you know, this is UM.

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Speaker 1: That's a sign that life had been basically normal through

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Speaker 1: a period of you know, pretty intense pain for a

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Speaker 1: couple of months. Now. The second part of you know,

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Speaker 1: the life in China is that, you know, I saw

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Speaker 1: how quickly trying to responded to really try to contain

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Speaker 1: this UM pandemic. In particular, I'll just highlight that manufacturers

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Speaker 1: are really spring into action to try to contain this pandemic.

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Speaker 1: I know that Bloomberg put out an article today saying

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Speaker 1: that showing that trying to export it's something like two

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Speaker 1: hundred forty billion masks last year, which is something like

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Speaker 1: forty masks per person in the world. Because it's production

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Speaker 1: for abilities were just able to get up and running

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Speaker 1: really quickly. Not One of the things I heard from

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Speaker 1: a manufacturer in China is that, you know, when they

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Speaker 1: take a look at their counterparts in the US, so

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Speaker 1: many of them had to ask if making masks as

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Speaker 1: part of their core competence. Where yes, the Chinese company

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Speaker 1: simply decided that making money is their core competence and

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Speaker 1: therefore they should go make masks, and therefore every part

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Speaker 1: of the supply chain really sprang up. A lot of

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Speaker 1: the consumer internet apps changed their user interfaces to accommodate

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Speaker 1: COVID tracking, for example, to make it very easy to

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Speaker 1: find a fever clinic or a hospital nearby. And you know,

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Speaker 1: China mobilize a really really quickly and very intensely to

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Speaker 1: deal with this big threat in a way that hasn't

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Speaker 1: necessarily replicated in a lot of parts of the West.

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Speaker 1: I have what might be a strange question based on that,

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Speaker 1: but how much of this can you attribute to they

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Speaker 1: can do spirit of Chinese society, as you put it,

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Speaker 1: versus the benefits of having a command economy with a

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Speaker 1: centralized authority that can instruct people to do things like

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Speaker 1: you know, post attendance outside of buildings and make sure

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Speaker 1: that people aren't breaking lockdown, and they can tell factories

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Speaker 1: to start manufacturing masks and things like that. I guess

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Speaker 1: I'm asking how much of it is spontaneous adaptation versus

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Speaker 1: centralized directives. I think it is both. I think it

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Speaker 1: is um neither entirely one uh and obviously not entirely

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Speaker 1: the other. I think that it is both the case

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Speaker 1: that a lot of Chinese folks, first of all, we're

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Speaker 1: very careful and complying with government orders, and then second

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Speaker 1: of all and figuring out what they can do as

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Speaker 1: part of this pandemic. If it were entirely a command economy,

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Speaker 1: you know, the Soviet style, this goes there, I don't

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Speaker 1: think it could have been quite as effective as a

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Speaker 1: lot of Chinese manufacturers just being very nimble, retooling their

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Speaker 1: products and then figuring out how to get production back

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Speaker 1: online again. Yeah. I thought it was interesting that what

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Speaker 1: you said companies identifying their core competent as making money

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Speaker 1: is sort of an interesting way to frame it. Could

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Speaker 1: you expand on that a little bit more and what

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Speaker 1: that process was like? I mean, they're obviously, you know,

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Speaker 1: must have been many factories, many companies that had never

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Speaker 1: made PPE equipment prior to the spring or prior to

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Speaker 1: last winter, suddenly got very good at it. And how

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Speaker 1: how did how did how do they do it? Well?

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Speaker 1: Then you know, I hastened to add a caveat here

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Speaker 1: that many of them were not necessarily very good at it,

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Speaker 1: and a lot of Chinese masks turned out to be

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Speaker 1: defective early on. Now a lot of these were either

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Speaker 1: called by regulatory action or they just learned and figured

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Speaker 1: out very quickly how to make better masks and were

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Speaker 1: able to explore to quite so many around the world.

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Speaker 1: And I think the issue here is that, you know,

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Speaker 1: one of the issues with manufacturing in the US early

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Speaker 1: on in the pandemic had been that the US government

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Speaker 1: did not send out these very clear profit signals that

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Speaker 1: we need a ppe, that we need we will pay

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Speaker 1: for all of this stuff. And the Chinese government first

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Speaker 1: of all established a lot of these clear up pressing

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Speaker 1: incentives in these regulated healthcare areas, as well as pretty

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Speaker 1: much making masks wearing mandatory, as well as you know,

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Speaker 1: sort of frightening people enough into believing that this is

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Speaker 1: indeed a very serious virus that everybody needs to take seriously.

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Speaker 1: And so once you had all of these things in place,

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Speaker 1: and you also had, you know, a lot of sympathy

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Speaker 1: for the victims of wind, early on, people felt that, well,

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Speaker 1: maybe we need to help out, and a lot of

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Speaker 1: companies reacted in a good way to try to contain

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Speaker 1: this pandemic. So does that adaptation, or that ability to

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Speaker 1: evolve your business model very quickly to adapt to new situations,

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Speaker 1: does that extend to more complicated manufacturing things like technology.

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Speaker 1: So we've had you on a bunch of times before,

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Speaker 1: as Joe and I have both mentioned, and we've talked

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Speaker 1: about some of the head winds facing China when it

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Speaker 1: comes to developing its own tech base, specifically in semiconductors.

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Speaker 1: In we saw new challenges to China's ambitions emerged. So

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Speaker 1: we had COVID nineteen messing with the supply chains, and

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Speaker 1: we also had the US basically doubling down on its

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Speaker 1: trade war with China and issuing a whole bunch of

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Speaker 1: new orders that are interfering with Chinese tech in some way.

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Speaker 1: How easy is it for China to adapt to that

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Speaker 1: new situation? Very good question, Tracy, And I'm not sure

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Speaker 1: if it is um that easy at all. I'm not

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Speaker 1: sure that these um, you know, the ability to mobilize

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Speaker 1: a lot during a pandemic necessarily translates into you know,

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Speaker 1: making China a scientific superpower UM in this case. You know,

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Speaker 1: I think the one clear area where the US really

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Speaker 1: distinguished itself was through its scientific establishment of getting together

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Speaker 1: these mRNA accines that have a really superb efficacy out

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Speaker 1: in a very awkward speed. Now the rest of the

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Speaker 1: US supply chain hasn't unnecessarily reacted very well. Distribution now

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Speaker 1: doesn't look like a great success yet. Um. But this

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Speaker 1: is where the US did very well, Whereas in China,

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Speaker 1: you know, I think the scientific establishment, you know, outside

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Speaker 1: of pandemic in the pandemic in general, has never really

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Speaker 1: been very well established. China has not after years of

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Speaker 1: trying very hard to become a leader in something like semiconductors,

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Speaker 1: it has not become a leader in aviation. Um. And

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Speaker 1: there are a whole bunch of you know, scientific knowledge

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Speaker 1: that I'm not sure that a lot of you know

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Speaker 1: folks here really possessed in a very big way. But

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Speaker 1: I think it is worth bringing up, as you did, Tracy,

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Speaker 1: that the US doubled down on this trade war over

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Speaker 1: which you know, was accelerated in some part by a

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Speaker 1: negative perception of China in the US. And having spoken

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Speaker 1: about a list of China's failures in the past, I

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Speaker 1: think one of the point is that I've been making

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Speaker 1: much more frequently now is that this time is different

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Speaker 1: for Chinese industrial policy, and this time is different for

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Speaker 1: Chinese industrial policy because of US actions. Now, if you

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Speaker 1: consider the broader history of Chinese industrial policy over the

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Speaker 1: last few years, to say nothing of the last few decades,

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Speaker 1: when trying to put out its first five year plan

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Speaker 1: in nineteen fifty nine, I would say that to the

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Speaker 1: broad mass of Chinese industrial policy has mostly been a failure. Now,

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Speaker 1: there you can point to some successes and something like

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Speaker 1: solar panels and something like high speed rail in certain

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Speaker 1: segments of heavy industries UM. For the most part, for

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Speaker 1: bigger ticket items, Chinese firms have not been highly distinguished

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Speaker 1: in segments like semiconductors or in aviation UM. And I

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Speaker 1: think the fundamental problem with Chinese industrial policy in the

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Speaker 1: past has been that the Chinese government was forcing basically

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Speaker 1: government ministries and state owned firms to buy obviously inferior

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Speaker 1: Chinese technologies and then hope that basically the scale of

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Speaker 1: the buying as well as interprovincial competition can drive a

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Speaker 1: lot of innovation and a lot of you know, high

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Speaker 1: quality and products. Now, sometimes that works in the case

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Speaker 1: of high speed rail, and also there's a lot of

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Speaker 1: different things that don't work, and what's happened after, you know,

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Speaker 1: the four years of the Trump administration. You know, a

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Speaker 1: lot of the Trump administration has really targeted a lot

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Speaker 1: of China's technology leaders leading firms, most of the private

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Speaker 1: for awesome form of sanctions. UM. For example, it has

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Speaker 1: really put the screws on a Huawei, which I think

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Speaker 1: is China's most important technology company, and you may have

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Speaker 1: a debate about whether it's private or not. UM. The

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Speaker 1: Trump administration has imposed a form of sanction on ten

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Speaker 1: Cent as well as on byte Dance, which owns respectively

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Speaker 1: each had as well as TikTok It's UM designated off

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Speaker 1: China's leading semiconductor maker Smick to the entity list. Really,

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Speaker 1: the only Chinese major technology company that hasn't faced some

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Speaker 1: form of sanctions has been Ali Baba. But in this case,

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Speaker 1: actually it is Beijing that's stepped up to the plate

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Speaker 1: to put the screws on Ali Baba. I think the

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Speaker 1: issue here is that the US government has entirely aligned

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Speaker 1: the incentives of Chinese firms with that of the state,

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Speaker 1: which has always tried to pursue self sufficiency as technological

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Speaker 1: greatness in the past. These Chinese companies have not always

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Speaker 1: tried to sign on to a lot of these UH

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Speaker 1: their agendas. If you take a look um Ali, Baba

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Speaker 1: and ten Cent in Huawei have always been using very

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Speaker 1: substantial amounts of US technologies because they've always been the

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Speaker 1: best in class. But now they have a great incentive

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Speaker 1: to try to, you know, build up the technological ecosystem

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Speaker 1: in China. And to editorialize a little bit here, you know,

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Speaker 1: I think the US reacted to the technological rise of

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Speaker 1: the U S s R in Japan mostly by trying

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Speaker 1: to invest more in itself and building up more of

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Speaker 1: its own industries, and it's reacting to the technological rise

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Speaker 1: of China mostly by trying to kneecap China's leading firms.

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Speaker 1: So instead of realizing it's the splitinic moment, it's really

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Speaker 1: triggering one in China. And just to extend the space

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Speaker 1: analogy just a little bit further, I think the US

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Speaker 1: government has put Huawei into the position that NASA was

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Speaker 1: in the nineteen sixties when it was the main buyer

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Speaker 1: for semiconductors UH and it was buying chips only on

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Speaker 1: the basis of performance, not cost, And so Huawei now

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Speaker 1: is a very cash rich, very competent firm that is

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Speaker 1: trying to get its hands on Chinese semi conductors just

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Speaker 1: as long as they work, without spending too much time

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Speaker 1: thinking about, you know, whether this is a launch room

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Speaker 1: company or not, simply because it really wants to build

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Speaker 1: up more of a reliable ecosystem. That's fascinating. Is there

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Speaker 1: some reason why that one can point to to talk

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Speaker 1: about the success China has had in solar and high

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Speaker 1: speed rail that hasn't translated into semi conductors and aviation

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Speaker 1: in terms of what it was about industrial policy or

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Speaker 1: demand side policies that made those areas different. Well, Joe,

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Speaker 1: a lot of the academics who have un studied this

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Speaker 1: exact question have I'm sort of come to the conclusion

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Speaker 1: that it's really hard to find patterns here when you

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Speaker 1: take a look at Chinese policies in things that include

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Speaker 1: you know, the electrical grid and things that include you know,

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Speaker 1: solar panels, in high speed rail, which are relative successes,

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Speaker 1: and in semiconductors and aviations where they've been a failures.

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Speaker 1: It's been a lot of the same policies, including a

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Speaker 1: lot of the same people, So it's really difficult to

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Speaker 1: figure out you know exactly what's going on here, you can,

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Speaker 1: you know, spin out a wonderful story in every particular case. Uh,

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Speaker 1: maybe there is just some complexity criterion, which I completely

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Speaker 1: believe in taking a look at how complex the semiconductor

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Speaker 1: supply chain is. Um. But it's very difficult to find

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Speaker 1: easy answers here, Dan, I wanted to go back to

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Speaker 1: something you said. You you highlighted this irony. It's pretty

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Speaker 1: big irony that almost all the major tech companies in

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Speaker 1: China have had some sort of US restriction imposed on

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Speaker 1: them in recent years, except for Ali Baba. But of

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Speaker 1: course now Beijing has basically done that, done the U

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Speaker 1: s S job for it, and and imposed a bunch

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Speaker 1: of limitations on the business. Uh, there's some reports of

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Speaker 1: Jack Ma having gone missing. People aren't really sure what's

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Speaker 1: going on with him. Is that another headwind for Chinese

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Speaker 1: tech or would you imagine that that would have a

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Speaker 1: sort of cooling effect on entrepreneurs Well, certainly the equity market,

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Speaker 1: he has believed. So I believe Ali Baba has at

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Speaker 1: this point lost aroundent of its value throughout the year

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Speaker 1: as it's been continuously beaten up by the Chinese government.

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Speaker 1: Whereas a Tencent has lost around ten percent of its value. Now,

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Speaker 1: whether this has a substantial cooling effect on entrepreneurs as well.

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Speaker 1: You know, a lot of the aging line is that

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Speaker 1: we need to create effective antitrust. This antitrust debate is

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Speaker 1: happening very substantially also in uh, you know, Europe as

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Speaker 1: well as in the US. We need to regulate marketplace

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Speaker 1: that makes life easier for a lot of smaller businesses.

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Speaker 1: There's a lot of you know, these financial issues that

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Speaker 1: we are concerned about, these financial risks with and financial

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Speaker 1: The difficulty for US is to you know, sort of

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Speaker 1: disentangle that with UH and obviously in politic speech that

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Speaker 1: Jack Moth gave, and so you know, there's probably both

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Speaker 1: a component of effective regulatory response to you know, uh

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Speaker 1: more complex and more domineering private firms as well as

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Speaker 1: this personal issue. So it's it's pretty difficult to disentangle

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Speaker 1: these things. Now, to answer your question a little bit

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Speaker 1: more directly, what I would generally say is that Chinese

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Speaker 1: state has generally been pretty well aware that it's private

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Speaker 1: sector has been much more dynamic than this uh, you know,

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Speaker 1: stodgy moribon state sector, and it has not shown a

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Speaker 1: huge amount of interest yet and really trying to stifle

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Speaker 1: out basically a lot of entrepreneurial activity. Now, the Sea

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Speaker 1: regime has been continuously more repressive, and it is signaled

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Speaker 1: that there are certain things that I will control very strictly.

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Speaker 1: But for the most part, I would not say that

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Speaker 1: we're in this part of the world where China is

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Speaker 1: completely ready now to force the entrepreneurs to be state actors.

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Speaker 1: I think we're not quite there yet. I want to

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Speaker 1: get in you know, we've obviously been talking a lot

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Speaker 1: about semis on the show, and I want to sort

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Speaker 1: of get to that specifically soon and the state of

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Speaker 1: the state of the art of Chinese semiconductor manufacturing. But

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Speaker 1: before we do, I mean, you know, I think one

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Speaker 1: of our recent guests talked about chips is sort of

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Speaker 1: this obviously incredibly complicated, extremely expensive marriage of chemistry and physics,

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Speaker 1: and so before we talk about that, I want to

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Speaker 1: get into the point you made about there's still like

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Speaker 1: the limits of Chinese um the scientific community or the scientists,

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Speaker 1: the leading edge of science in China, and you mentioned

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Speaker 1: the US edge, the clear edge that the US has

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Speaker 1: had even throughout all this in making vaccines, which of

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Speaker 1: course is you know, indicative of the strong U S

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Speaker 1: science position. What are what what do you what are

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Speaker 1: your observations, what do you perceive as academic observations about

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Speaker 1: what it takes and what what it will need for

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Speaker 1: that to really grow and become cutting edge in China. Well,

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Speaker 1: the first thing I would like to do is I'm

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Speaker 1: always trying to beat up on the consumer internet sector

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Speaker 1: because I'm not sure how much of that is real technology.

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Speaker 1: So many of the consumer internet names that were all

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Speaker 1: familiar with, including in China, especially Hollibob and ten Cent,

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Speaker 1: seem more to me to be companies that are really

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Speaker 1: exploiting network effects, that are innovating on business models that

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Speaker 1: are not necessarily creating a great deal of I P.

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Speaker 1: And if you take a look at the broader scientific

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Speaker 1: establishment in China, basically, you know, according to the government's

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Speaker 1: own data, around about five to ten percent of all

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Speaker 1: of its R and D spending is going towards fundamental

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Speaker 1: scientific research, which is around as a share about I

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Speaker 1: think um less than a half or about a third

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Speaker 1: of US levels. So it's a completely different scale ball

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Speaker 1: park here. I'm not sure how much Chinese firms are

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Speaker 1: really doing substantial amounts of very cutting edge technology. According

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Speaker 1: to some of the academic studies I've seen, basically the

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Speaker 1: only area where China Chinese scientists are publishing the majority

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Speaker 1: of the top one percent of scientifically cited papers is

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Speaker 1: in materials sciences, where China has always taken a keen

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Speaker 1: interest because it feeds into things like semiconductors as well

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Speaker 1: as aviation. Um. But what Chinese researchers do have, but

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Speaker 1: you know, university cities would tell me is that they

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Speaker 1: have a substantial amount of money being thrown at them

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Speaker 1: basically to do work. Where Yes, when I talk to

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Speaker 1: American researchers, what they would tell me is that, well, look,

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Speaker 1: we're spending all of our time filling grants. We are

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Speaker 1: spending all of our time preparing very detailed proposals to

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Speaker 1: the National Science Foundation, which is pretty conservative and only

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Speaker 1: funds very well established our researchers. UM. So you know,

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Speaker 1: I think, you know, structurally, I think one of the

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Speaker 1: ad mantagers that China would have, if you had to

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Speaker 1: push me to say, is that, well, it sort of

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Speaker 1: showers money a little bit randomly. Um. But you know,

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Speaker 1: top scientists don't really have to keep wondering about whether

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Speaker 1: this um, a committee of bureaucrats is going to approve

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Speaker 1: their scientific project. So just on that note, one of

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Speaker 1: the themes that keeps coming out of our discussions on

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Speaker 1: the semiconductor industry specifically is just the amount of money

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Speaker 1: it takes to build those factories. UM. I mean, it

434
00:25:10,400 --> 00:25:12,200
Speaker 1: takes a lot of expertise as well. So you can't

435
00:25:12,240 --> 00:25:14,840
Speaker 1: just throw money at the problem, obviously, but when the

436
00:25:14,880 --> 00:25:17,320
Speaker 1: cost of building a new foundry is something like ten

437
00:25:17,320 --> 00:25:21,080
Speaker 1: billion dollars, clearly you need some sort of capital at hand.

438
00:25:21,760 --> 00:25:26,680
Speaker 1: And in certain places the government has really encouraged that

439
00:25:27,359 --> 00:25:33,719
Speaker 1: domestic industry to build up by investing, subsidizing in some way.

440
00:25:34,040 --> 00:25:39,399
Speaker 1: How has China approached the semiconductor industry and what are

441
00:25:39,440 --> 00:25:43,120
Speaker 1: the sort of avenues it can pursue in order to

442
00:25:43,160 --> 00:25:48,760
Speaker 1: boost domestic capacity, mostly in the only way that the

443
00:25:48,840 --> 00:25:51,840
Speaker 1: Chinese government knows how, which is by shoveling a lot

444
00:25:51,880 --> 00:25:56,800
Speaker 1: of subsidy funds on towards state owned companies. That's usually

445
00:25:56,800 --> 00:25:59,920
Speaker 1: been the story that China wants on into order to

446
00:26:00,119 --> 00:26:04,120
Speaker 1: have success. And you know, you're right that semiconductors now

447
00:26:04,200 --> 00:26:08,119
Speaker 1: are incredibly capital intensive. I saw, you know in today

448
00:26:08,160 --> 00:26:11,040
Speaker 1: in the day of recording TSMC has just released its

449
00:26:11,080 --> 00:26:14,800
Speaker 1: latest quarterly results. It's committing something like twenty seven billion

450
00:26:14,840 --> 00:26:18,520
Speaker 1: dollars within this year to basically do more capacts, which

451
00:26:18,560 --> 00:26:21,040
Speaker 1: I think is just an astonishing figure, you know, for

452
00:26:21,160 --> 00:26:24,600
Speaker 1: a single company to commit over the course of one year.

453
00:26:25,040 --> 00:26:27,920
Speaker 1: And so you know, the Chinese industry has never really

454
00:26:27,960 --> 00:26:30,479
Speaker 1: been able to match that, and the I think the

455
00:26:30,560 --> 00:26:33,720
Speaker 1: Chinese government funds have never really been able to push

456
00:26:33,720 --> 00:26:37,000
Speaker 1: these companies to be very competitive. They are still very

457
00:26:37,040 --> 00:26:41,880
Speaker 1: reliant on subsidies in order to have more production. So

458
00:26:42,280 --> 00:26:44,960
Speaker 1: we're talking about the we talked about the Chinese semiconductor

459
00:26:45,000 --> 00:26:48,440
Speaker 1: industry not being top flight. Yet what is the state

460
00:26:48,480 --> 00:26:51,400
Speaker 1: of it? What does it look like, How many important

461
00:26:51,440 --> 00:26:53,880
Speaker 1: companies are there to watch, how advanced are they, how

462
00:26:53,880 --> 00:26:56,080
Speaker 1: many years behind? Like, give us sort of just your

463
00:26:56,119 --> 00:26:58,520
Speaker 1: assessment of worth things stand right now relative to the

464
00:26:58,520 --> 00:27:01,160
Speaker 1: rest of the world. Well, you really had to push

465
00:27:01,200 --> 00:27:03,520
Speaker 1: me to give a single metric um. You know, this

466
00:27:03,560 --> 00:27:06,120
Speaker 1: would broadly be unfair to the industry, but I would say,

467
00:27:06,280 --> 00:27:09,560
Speaker 1: you know, broadly speaking, I would say that China, Chinese

468
00:27:09,560 --> 00:27:13,040
Speaker 1: firms are at the very least five years behind um

469
00:27:13,080 --> 00:27:16,440
Speaker 1: the cutting edge, if not something like closer to fifteen.

470
00:27:16,480 --> 00:27:20,160
Speaker 1: If you know, if you take a look at certain segments. Now,

471
00:27:20,600 --> 00:27:24,080
Speaker 1: my assessment in general of the Chinese semiconductor industry is

472
00:27:24,119 --> 00:27:26,800
Speaker 1: that China has figured out sort of the basics of

473
00:27:26,840 --> 00:27:32,040
Speaker 1: competing in pretty much every segment of the semiconductor value chain,

474
00:27:32,240 --> 00:27:34,919
Speaker 1: but it is leading in none of them. Where it

475
00:27:35,000 --> 00:27:37,719
Speaker 1: is close to being the market leader is something like

476
00:27:37,760 --> 00:27:40,480
Speaker 1: assembling and packaging, which is pretty low value. It's a

477
00:27:40,680 --> 00:27:45,200
Speaker 1: relatively labor intensive UM. There are some successes like Huawei,

478
00:27:45,240 --> 00:27:49,000
Speaker 1: which designs its own phone processors just as Apple does.

479
00:27:49,080 --> 00:27:52,359
Speaker 1: It is putting out some really cutting edge processors. There

480
00:27:52,400 --> 00:27:55,120
Speaker 1: are a lot of Chinese design firms now that are

481
00:27:55,280 --> 00:27:58,200
Speaker 1: designing pretty capable chips as best as I can tell.

482
00:27:58,560 --> 00:28:00,200
Speaker 1: But if you take a look at the act full

483
00:28:00,280 --> 00:28:04,040
Speaker 1: manufacturing of chips, UM, China's leading semiconductor maker has always

484
00:28:04,119 --> 00:28:07,440
Speaker 1: persistently been about five years behind t SMC, and this

485
00:28:07,480 --> 00:28:10,959
Speaker 1: is before it was sanctioned UM earlier last month onto

486
00:28:11,280 --> 00:28:14,280
Speaker 1: the commerce departments and t list. And if you take

487
00:28:14,280 --> 00:28:16,680
Speaker 1: a look basically at all of the inputs that China

488
00:28:16,760 --> 00:28:19,280
Speaker 1: needs to make semi conductors, you know, some of the

489
00:28:19,320 --> 00:28:21,560
Speaker 1: chemicals that can do maybe some of the wafers that

490
00:28:21,600 --> 00:28:24,520
Speaker 1: can do, But where it is very substantially behind is

491
00:28:24,560 --> 00:28:27,080
Speaker 1: in something called E d A tools, which is the

492
00:28:27,200 --> 00:28:30,400
Speaker 1: software that you need to actually design a semiconductor, as

493
00:28:30,400 --> 00:28:34,040
Speaker 1: well as the actual manufacturing equipment, So the lithography machines,

494
00:28:34,119 --> 00:28:37,160
Speaker 1: basically a lot of the testing machines. China is pretty

495
00:28:37,240 --> 00:28:40,240
Speaker 1: much nowhere in a lot of these different segments. So

496
00:28:40,360 --> 00:28:44,360
Speaker 1: China has managed to be UM very far behind Western

497
00:28:44,440 --> 00:28:48,040
Speaker 1: as well as Japanese Howdy's um Korean firms, even when

498
00:28:48,040 --> 00:28:51,400
Speaker 1: it had access to leading tools. Now, when the US

499
00:28:51,480 --> 00:28:54,239
Speaker 1: government has been much more active with sanctions, it's going

500
00:28:54,280 --> 00:28:57,239
Speaker 1: to be much more difficult for them to stay, you know,

501
00:28:57,320 --> 00:29:00,240
Speaker 1: even competitive at this point because they have to wait

502
00:29:00,280 --> 00:29:02,520
Speaker 1: for the rest of the ecosystem to catch up to

503
00:29:02,920 --> 00:29:07,000
Speaker 1: basic competence, which is not white there yet. So a

504
00:29:07,040 --> 00:29:11,920
Speaker 1: lot of your writing UM sort of focused on the

505
00:29:12,040 --> 00:29:16,560
Speaker 1: dynamic between performance and cost when it comes to technology

506
00:29:16,600 --> 00:29:20,080
Speaker 1: and how companies and governments might treat that. Can you

507
00:29:20,160 --> 00:29:22,600
Speaker 1: can you dive into that thesis force because I think

508
00:29:22,600 --> 00:29:25,360
Speaker 1: it explains a lot of what's going in on in

509
00:29:25,720 --> 00:29:29,200
Speaker 1: semiconductors at the moment. So if you take a look

510
00:29:29,320 --> 00:29:33,320
Speaker 1: at a lot of the early products of the technology industry.

511
00:29:33,640 --> 00:29:36,400
Speaker 1: You know a lot of early things simply don't work.

512
00:29:36,600 --> 00:29:40,280
Speaker 1: So you know, the first ever iPhone, people would say

513
00:29:40,280 --> 00:29:43,640
Speaker 1: at this point was barely functional as a phone. Um,

514
00:29:43,720 --> 00:29:46,440
Speaker 1: if you take a look at the earlier semiconductors, you know,

515
00:29:46,480 --> 00:29:50,200
Speaker 1: the early integrated circuits, they had basically a higher failure

516
00:29:50,280 --> 00:29:56,000
Speaker 1: rates than older technology transistor based. But what actually matters

517
00:29:56,160 --> 00:29:58,600
Speaker 1: is that you need to continue investing in these new

518
00:29:58,600 --> 00:30:01,520
Speaker 1: technologies if you have of a bigger market to address

519
00:30:01,640 --> 00:30:03,600
Speaker 1: and you have more money to apply into R and

520
00:30:03,680 --> 00:30:07,240
Speaker 1: D and a lot of this just takes a very serious,

521
00:30:07,600 --> 00:30:11,120
Speaker 1: long term effort to build out basically a lot of

522
00:30:11,120 --> 00:30:14,200
Speaker 1: these capabilities. Now, what the U. S Government has done

523
00:30:14,320 --> 00:30:16,320
Speaker 1: is that it has turned a lot of its firms

524
00:30:16,400 --> 00:30:21,800
Speaker 1: into unreliable suppliers out of I think highly legitimate security concerns.

525
00:30:22,120 --> 00:30:24,720
Speaker 1: The U. S Government has said we don't want Haawei

526
00:30:24,840 --> 00:30:28,120
Speaker 1: uh equipment in our networks. But also it's gone quite

527
00:30:28,160 --> 00:30:30,640
Speaker 1: a lot further by denying a lot of the critical

528
00:30:30,680 --> 00:30:34,280
Speaker 1: components which are mostly made by American companies. To take

529
00:30:34,320 --> 00:30:38,920
Speaker 1: down Huawei, the U S Government has really significantly escalated

530
00:30:39,040 --> 00:30:42,600
Speaker 1: this attack on what I think is China's most important

531
00:30:42,760 --> 00:30:46,240
Speaker 1: technology company, and so Haawei is now in this position

532
00:30:46,400 --> 00:30:50,400
Speaker 1: of trying to find alternative suppliers, whether they are in

533
00:30:50,480 --> 00:30:53,640
Speaker 1: Japan or Korea, or Taiwan or Europe. Best of all,

534
00:30:53,720 --> 00:30:56,520
Speaker 1: there ought to be Chinese and so a lot of

535
00:30:56,520 --> 00:30:59,040
Speaker 1: these smaller suppliers that couldn't have the time of day

536
00:30:59,440 --> 00:31:03,560
Speaker 1: from Haawe are now becoming suppliers to this big company.

537
00:31:03,640 --> 00:31:05,280
Speaker 1: And I think this is going to play out in

538
00:31:05,320 --> 00:31:07,480
Speaker 1: a way that you know, you have a lot of

539
00:31:07,520 --> 00:31:10,680
Speaker 1: just this very patient funding to bring up a lot

540
00:31:10,720 --> 00:31:14,120
Speaker 1: of technology companies up to speed onto you know, the

541
00:31:14,160 --> 00:31:17,320
Speaker 1: technology leaders, and this is going to play out in

542
00:31:17,640 --> 00:31:20,600
Speaker 1: for a lot of these different technologies because China is

543
00:31:20,640 --> 00:31:25,680
Speaker 1: taking this self sufficiency quel much more seriously now. Something

544
00:31:25,720 --> 00:31:27,800
Speaker 1: that interests me, and it goes back to one of

545
00:31:27,840 --> 00:31:30,880
Speaker 1: your first answers, and it's sort of still scratching my

546
00:31:30,920 --> 00:31:32,800
Speaker 1: head on this a lot. Is you know, when you

547
00:31:32,840 --> 00:31:36,600
Speaker 1: were talking about say Um the mask manufacturing in China,

548
00:31:36,720 --> 00:31:39,960
Speaker 1: one of the reasons that it was successful is the

549
00:31:40,040 --> 00:31:43,680
Speaker 1: Chinese government established very early on the profit potential that

550
00:31:43,720 --> 00:31:47,200
Speaker 1: they were a buyer, that there would be buyers of masks.

551
00:31:47,400 --> 00:31:50,280
Speaker 1: You could say one of the reasons that the vaccine

552
00:31:50,560 --> 00:31:54,440
Speaker 1: um rollout in the US or the vaccine development happened

553
00:31:54,480 --> 00:31:58,760
Speaker 1: so fast is operation operation warp speed de risking the process?

554
00:31:59,080 --> 00:32:02,680
Speaker 1: The government risking the process by promising to buy vaccines

555
00:32:03,240 --> 00:32:04,960
Speaker 1: and then going back to chips. As you point out,

556
00:32:04,960 --> 00:32:09,200
Speaker 1: like one of the historical strategies has been the government's

557
00:32:09,240 --> 00:32:10,600
Speaker 1: going to buy a lot, and then of course if

558
00:32:10,600 --> 00:32:14,040
Speaker 1: you look at the US historical semiconductor industry, you came

559
00:32:14,080 --> 00:32:17,120
Speaker 1: out of d O D buying. So obviously the demand

560
00:32:17,280 --> 00:32:20,400
Speaker 1: side is a really important part of the equation, whether

561
00:32:20,440 --> 00:32:22,840
Speaker 1: we're talking about masks, whether we're talking about vaccines, whether

562
00:32:22,880 --> 00:32:26,600
Speaker 1: we're talking about chips. But it doesn't sound like that's enough.

563
00:32:26,920 --> 00:32:31,440
Speaker 1: So what what more needs to be done beyond just

564
00:32:31,760 --> 00:32:34,720
Speaker 1: the sort of getting the demand side right to really

565
00:32:34,960 --> 00:32:40,760
Speaker 1: catalyze the expansion and innovation and develop that. No, how well,

566
00:32:40,800 --> 00:32:44,520
Speaker 1: if you're China, view don't really have to be bound

567
00:32:44,560 --> 00:32:47,240
Speaker 1: by the demand side. You you have the luxury of

568
00:32:47,320 --> 00:32:51,560
Speaker 1: thought not having to choose. Because China doesn't simply manage

569
00:32:51,600 --> 00:32:54,840
Speaker 1: the demand side, it also encourages a lot of producers

570
00:32:54,840 --> 00:32:58,560
Speaker 1: side subsidies. China is very much a supply side economy.

571
00:32:58,960 --> 00:33:02,240
Speaker 1: So the really I can think to me economically in

572
00:33:03,240 --> 00:33:06,760
Speaker 1: was that a lot of Western countries directed a stimulus

573
00:33:06,800 --> 00:33:10,479
Speaker 1: to basically households in the form of checks from the

574
00:33:10,480 --> 00:33:14,240
Speaker 1: government sort of to stimulate consumption. And if you take

575
00:33:14,240 --> 00:33:17,080
Speaker 1: a look at China's government spending this year, it's a

576
00:33:17,200 --> 00:33:20,600
Speaker 1: fiscal stimulus two households has been absolutely minimal. UM. It's

577
00:33:20,640 --> 00:33:24,880
Speaker 1: interest rate cuts has been also minimal, and it focused

578
00:33:24,920 --> 00:33:27,640
Speaker 1: a lot on just getting production back online and then

579
00:33:27,640 --> 00:33:30,840
Speaker 1: trying to you know, focus on helping manufacturers get back

580
00:33:30,880 --> 00:33:33,360
Speaker 1: to their feet. Over the first half of the year,

581
00:33:33,400 --> 00:33:36,600
Speaker 1: I had basically a lot of conversations about how local

582
00:33:36,640 --> 00:33:39,840
Speaker 1: governments as well as the central government were very intimately

583
00:33:39,880 --> 00:33:43,320
Speaker 1: involved and basically trying to scale up and to rebuild

584
00:33:43,400 --> 00:33:45,280
Speaker 1: a lot of these supply chains. And I think that

585
00:33:45,360 --> 00:33:48,200
Speaker 1: effort has continuously paid off if you take a look

586
00:33:48,200 --> 00:33:52,680
Speaker 1: at the continued strength of China's exports. Now China is

587
00:33:52,960 --> 00:33:54,840
Speaker 1: you know, again doesn't have to choose. It is now

588
00:33:54,920 --> 00:33:58,160
Speaker 1: really intent on doing technology. What it has is a

589
00:33:58,200 --> 00:34:00,240
Speaker 1: lot of scale in a way that for example, whole

590
00:34:00,480 --> 00:34:03,600
Speaker 1: Denmark does not. You know, China has a very large

591
00:34:03,600 --> 00:34:06,640
Speaker 1: market to play in UM. They are able to build

592
00:34:06,840 --> 00:34:11,480
Speaker 1: very substantial companies, not necessarily leading companies out of population

593
00:34:11,520 --> 00:34:14,120
Speaker 1: of one point three billion people. And what's been quite

594
00:34:14,120 --> 00:34:17,680
Speaker 1: striking to me the last year was that seeing how

595
00:34:17,840 --> 00:34:22,319
Speaker 1: the Central Party leadership, especially President Seezing King, continuously emphasized

596
00:34:22,360 --> 00:34:25,480
Speaker 1: that China needs to do a lot more technology. So

597
00:34:25,840 --> 00:34:29,240
Speaker 1: he has UH continuously said that we need a secure

598
00:34:29,239 --> 00:34:32,040
Speaker 1: and controllable supply chain, We need to innovate our way

599
00:34:32,080 --> 00:34:35,960
Speaker 1: out of choke point technologies. Um, the most astonishing government

600
00:34:36,000 --> 00:34:38,400
Speaker 1: directive I thought of last year was that at the

601
00:34:38,480 --> 00:34:40,960
Speaker 1: end of the year, UH folks gather and paiging for

602
00:34:41,200 --> 00:34:44,800
Speaker 1: the Central Economic Work Conference, which lists out the economic

603
00:34:44,880 --> 00:34:49,360
Speaker 1: priorities for the next year and in twenty Basically in December,

604
00:34:49,440 --> 00:34:53,480
Speaker 1: the highest economic officials said, our top priority in twenty

605
00:34:53,640 --> 00:34:56,400
Speaker 1: one will be science and technology. As far as I

606
00:34:56,440 --> 00:34:59,279
Speaker 1: can tell, science and technology has never been broken out

607
00:34:59,360 --> 00:35:02,160
Speaker 1: as one of the eight independent items that China will

608
00:35:02,160 --> 00:35:04,839
Speaker 1: really need to figure out and to say, you know,

609
00:35:04,920 --> 00:35:09,200
Speaker 1: and this topped the item for the last major work directive.

610
00:35:09,280 --> 00:35:12,160
Speaker 1: So this is a pretty big whole of society effort

611
00:35:12,239 --> 00:35:16,319
Speaker 1: to figure out a lot more technology. So on that note,

612
00:35:16,440 --> 00:35:19,960
Speaker 1: how do you see this developing in one Are we

613
00:35:20,000 --> 00:35:24,200
Speaker 1: going to see a continuation of China's dedication to building

614
00:35:24,200 --> 00:35:28,200
Speaker 1: out its tech expertise, or perhaps you know, we have

615
00:35:28,280 --> 00:35:31,200
Speaker 1: Joe Biden coming in as the president, a new administration,

616
00:35:31,400 --> 00:35:35,080
Speaker 1: perhaps that takes some of the pressure off. Or is

617
00:35:35,080 --> 00:35:36,759
Speaker 1: this a dynamic that you think is going to be

618
00:35:36,800 --> 00:35:40,759
Speaker 1: going on for a long time. I think it's going

619
00:35:41,040 --> 00:35:44,120
Speaker 1: going to go on for a very long time. And

620
00:35:44,200 --> 00:35:47,680
Speaker 1: I think the Chinese government has realized that it really

621
00:35:47,760 --> 00:35:51,120
Speaker 1: needs to figure out a lot of the indigenous innovation

622
00:35:51,160 --> 00:35:54,240
Speaker 1: projects that it hasn't parked on so that it can't

623
00:35:54,280 --> 00:35:57,800
Speaker 1: be very easily choked off by capricious, soft foreign governments

624
00:35:57,840 --> 00:36:01,319
Speaker 1: on critical technologies. At the same time, I don't necessarily

625
00:36:01,360 --> 00:36:04,680
Speaker 1: think that China will make any immediate breakthroughs um in

626
00:36:05,120 --> 00:36:07,440
Speaker 1: anything like the short term and anything like the next

627
00:36:07,760 --> 00:36:10,000
Speaker 1: two to three years, although there there could be, you know,

628
00:36:10,160 --> 00:36:13,960
Speaker 1: a company level, I'll breakthroughs on smaller technologies, because the

629
00:36:14,000 --> 00:36:17,480
Speaker 1: general trend that I see in China is that you know,

630
00:36:17,880 --> 00:36:20,439
Speaker 1: things get better op but at a very slow rate.

631
00:36:20,920 --> 00:36:24,360
Speaker 1: So if you take a look at you know, the iPhone,

632
00:36:24,480 --> 00:36:27,719
Speaker 1: the very first iPhone um you know, very famously is

633
00:36:28,320 --> 00:36:32,920
Speaker 1: assembled in China and designed in California. The first iPhone

634
00:36:32,960 --> 00:36:36,440
Speaker 1: incorporated something like two percent of Chinese value add in

635
00:36:36,920 --> 00:36:40,960
Speaker 1: its hardware, and that was basically the value of the

636
00:36:41,040 --> 00:36:44,759
Speaker 1: labor in China that gathered to really put together this phone.

637
00:36:44,760 --> 00:36:47,759
Speaker 1: Components that were that came from places like the US

638
00:36:47,840 --> 00:36:51,200
Speaker 1: and Japan and Germany in other places. And now an

639
00:36:51,239 --> 00:36:55,520
Speaker 1: academic that determined the original two percent figure also, uh,

640
00:36:55,600 --> 00:36:58,960
Speaker 1: you know, did an update of the study in twenty eighteen.

641
00:36:59,200 --> 00:37:02,359
Speaker 1: She took apart and iPhone ten and then found that

642
00:37:02,560 --> 00:37:05,800
Speaker 1: the iPhone ten's share of Chinese value added had increased

643
00:37:05,840 --> 00:37:08,840
Speaker 1: to something like twenty five percent. So you had a

644
00:37:08,880 --> 00:37:12,560
Speaker 1: growth of two percent over ten years of a much

645
00:37:12,640 --> 00:37:15,480
Speaker 1: higher value phone. And so you know, that's sort of

646
00:37:15,760 --> 00:37:18,800
Speaker 1: the paradigmatic story to me of a lot of Chinese progress,

647
00:37:18,840 --> 00:37:21,200
Speaker 1: you know, innovating on what is one of the hardest

648
00:37:21,480 --> 00:37:24,480
Speaker 1: electronics products in the world, but at a pretty slow

649
00:37:24,600 --> 00:37:27,960
Speaker 1: and steady pace, um, not necessarily in big breakthroughs, and

650
00:37:28,000 --> 00:37:31,000
Speaker 1: sort of see this Chinese patients sort of you know,

651
00:37:31,239 --> 00:37:34,840
Speaker 1: not overrunning the U semi conductor industry any soon, but

652
00:37:34,920 --> 00:37:39,960
Speaker 1: steadily making a better progress. Why can't China just hire

653
00:37:39,960 --> 00:37:42,960
Speaker 1: the number two person in Taiwan semi conductor who that is?

654
00:37:43,320 --> 00:37:47,280
Speaker 1: Whoever that is? Like, why is it not that easy? Well,

655
00:37:47,320 --> 00:37:50,160
Speaker 1: They certainly have spent quite a lot of effort trying

656
00:37:50,200 --> 00:37:54,239
Speaker 1: to recruit a lot of engineers from especially Taiwan as

657
00:37:54,239 --> 00:37:58,480
Speaker 1: well as Korea. Remember staying at a hotel up close

658
00:37:58,520 --> 00:38:01,960
Speaker 1: to a Chinese um memory chip plant. Koreans are really

659
00:38:02,000 --> 00:38:05,240
Speaker 1: dominant in memory and then the hotel staff told me, well,

660
00:38:05,280 --> 00:38:08,480
Speaker 1: you know, most of our residents are Korean engineers. They

661
00:38:08,520 --> 00:38:11,640
Speaker 1: all have their own private drivers and they get to

662
00:38:11,640 --> 00:38:15,720
Speaker 1: fly home to Seoul on the weekends. I'm currently sitting

663
00:38:15,760 --> 00:38:19,920
Speaker 1: in Shanghai, which is the site of China's most advanced

664
00:38:20,040 --> 00:38:24,360
Speaker 1: semiconductor maker, Smike. I'm told that Smike built a church

665
00:38:24,640 --> 00:38:27,239
Speaker 1: for one of its first executives, which came from t

666
00:38:27,400 --> 00:38:30,279
Speaker 1: SMC in fact, and it's built a street called a

667
00:38:30,320 --> 00:38:33,200
Speaker 1: Little Taipei where you can get really good beef noodles

668
00:38:33,280 --> 00:38:35,640
Speaker 1: as well as bubble tea. So they can constantly make

669
00:38:35,680 --> 00:38:39,840
Speaker 1: efforts to I hire particular people. The issue is that

670
00:38:39,880 --> 00:38:42,440
Speaker 1: you need to hire not just one person, but you

671
00:38:42,480 --> 00:38:46,200
Speaker 1: need to hire entire teams and entire divisions of staff,

672
00:38:46,400 --> 00:38:48,799
Speaker 1: and you also need the cooperation of all of your

673
00:38:48,840 --> 00:38:51,880
Speaker 1: suppliers in order to continue innovating here. And that's not

674
00:38:51,960 --> 00:38:56,279
Speaker 1: really something that Chinese firms have really well established, So

675
00:38:56,360 --> 00:38:58,520
Speaker 1: I have a related question. But we've been talking a

676
00:38:58,560 --> 00:39:02,160
Speaker 1: lot about what China is doing domestically to build up

677
00:39:02,320 --> 00:39:06,120
Speaker 1: its tech expertise, we haven't been talking a lot about

678
00:39:06,200 --> 00:39:10,040
Speaker 1: what it's doing externally. Is there any do you think

679
00:39:10,040 --> 00:39:13,640
Speaker 1: there's any desire or appetite on the part of China

680
00:39:13,800 --> 00:39:18,520
Speaker 1: to try to I guess um complicate other countries tech

681
00:39:18,600 --> 00:39:22,279
Speaker 1: ambitions basically retaliate against the US in the way that

682
00:39:22,320 --> 00:39:27,799
Speaker 1: the US has imposed restrictions on Chinese tech tracy. One

683
00:39:27,840 --> 00:39:30,400
Speaker 1: of these things that we've been thinking about very actively

684
00:39:30,520 --> 00:39:33,719
Speaker 1: is when China, when Beijing would be ready to retaliate

685
00:39:33,760 --> 00:39:37,040
Speaker 1: against US firms. And I've been consistently taking the view

686
00:39:37,160 --> 00:39:41,160
Speaker 1: that China will not broadly retaliate against US firms, and

687
00:39:41,320 --> 00:39:44,319
Speaker 1: so far, I think my view has generally held up

688
00:39:44,360 --> 00:39:47,840
Speaker 1: pretty well. Now, every time the U s Department of

689
00:39:47,880 --> 00:39:50,880
Speaker 1: Commerce does something really mean against Lahwei, I have a

690
00:39:50,920 --> 00:39:53,000
Speaker 1: bunch of folks asking me, well, you know who is

691
00:39:53,000 --> 00:39:57,320
Speaker 1: Beijing going to punish next. It doesn't really calm minds

692
00:39:57,360 --> 00:40:00,640
Speaker 1: in the US. When Global Times, one of the nationalists

693
00:40:00,760 --> 00:40:04,319
Speaker 1: state owned papers, um every time lists a list of

694
00:40:04,640 --> 00:40:09,880
Speaker 1: abc Q of retaliation, it's going to be Apple, Boeing, Cisco,

695
00:40:10,000 --> 00:40:13,279
Speaker 1: and Qualcom that our targets for retaliation, and in fact,

696
00:40:13,320 --> 00:40:18,200
Speaker 1: we haven't really seen any highly visible instances of retaliation

697
00:40:18,280 --> 00:40:20,680
Speaker 1: against US firms. And I think that comes down to

698
00:40:21,160 --> 00:40:24,680
Speaker 1: a couple of different reasons, and broadly speaking, first of all,

699
00:40:25,080 --> 00:40:29,160
Speaker 1: that China really needs American technology, which is highly evident

700
00:40:29,480 --> 00:40:32,279
Speaker 1: in always current struggles because it hasn't been able to

701
00:40:32,280 --> 00:40:36,399
Speaker 1: get its hands on American semiconductors. So US technology firms

702
00:40:36,400 --> 00:40:39,640
Speaker 1: are very important China and you can't lose them. You

703
00:40:39,719 --> 00:40:43,680
Speaker 1: also have basically U S employers, US companies being major

704
00:40:43,719 --> 00:40:47,200
Speaker 1: employers in the Chinese market. Apple employees, you know, over

705
00:40:47,239 --> 00:40:51,480
Speaker 1: a million people directly through manufacturing and retail in China,

706
00:40:51,960 --> 00:40:55,319
Speaker 1: uh through also through contract manufacturers like Fox Con. You

707
00:40:55,400 --> 00:41:00,000
Speaker 1: have American companies like General Motors hiring basically tens of thousands,

708
00:41:00,040 --> 00:41:03,400
Speaker 1: two hundreds of thousands of people. Even Starbucks and McDonald's,

709
00:41:03,400 --> 00:41:06,200
Speaker 1: who are pretty important for urban youth employment, which had

710
00:41:06,239 --> 00:41:09,040
Speaker 1: been looking even a bit shaky before the pandemic. Now,

711
00:41:09,040 --> 00:41:11,600
Speaker 1: folks in Beijing used to tell me that, well, a

712
00:41:11,680 --> 00:41:13,960
Speaker 1: lot of the people who work at Starbucks can just

713
00:41:14,000 --> 00:41:16,239
Speaker 1: go work for luck and coffee instead. But now that

714
00:41:16,280 --> 00:41:18,160
Speaker 1: we all know that Luck and Coffee is a big fraud,

715
00:41:18,360 --> 00:41:20,560
Speaker 1: you know, I think folks are not saying that so

716
00:41:20,640 --> 00:41:23,400
Speaker 1: much anymore. And you know, I think the other reason

717
00:41:23,520 --> 00:41:27,040
Speaker 1: that Beijing has mostly been restrained is that it has

718
00:41:27,440 --> 00:41:30,680
Speaker 1: perceived that, uh it um, you know, the best way

719
00:41:30,680 --> 00:41:34,359
Speaker 1: to retaliate against American firms is not to play into

720
00:41:34,400 --> 00:41:36,960
Speaker 1: the hands of hardliners at the White House or National

721
00:41:37,000 --> 00:41:40,400
Speaker 1: Security Council would like nothing better for American companies to

722
00:41:40,480 --> 00:41:43,120
Speaker 1: pull up their stakes and then move production, if not

723
00:41:43,239 --> 00:41:46,000
Speaker 1: back to the US, then to Vietnam or India or Mexico.

724
00:41:46,440 --> 00:41:49,160
Speaker 1: It is better to um, you know, hug them even closer,

725
00:41:49,200 --> 00:41:52,240
Speaker 1: which is uh the attitude that has been pretty apparent

726
00:41:52,400 --> 00:41:56,080
Speaker 1: under presidency to really try to engage much more with

727
00:41:56,400 --> 00:42:00,920
Speaker 1: American businesses, who are, after all, effectively lobbying Washington d C.

728
00:42:01,200 --> 00:42:04,000
Speaker 1: In order to preserve access to China, which for so

729
00:42:04,040 --> 00:42:07,680
Speaker 1: many companies is their fastest scoring market or expect to

730
00:42:07,719 --> 00:42:10,000
Speaker 1: be one of their largest markets in the next couple

731
00:42:10,040 --> 00:42:12,320
Speaker 1: of years. And broadly, I don't get the sense of

732
00:42:12,400 --> 00:42:17,040
Speaker 1: Aging that they are ready to retaliate against any big

733
00:42:17,040 --> 00:42:20,719
Speaker 1: American company like Apple. Otherwise, you know, a lot of

734
00:42:20,719 --> 00:42:24,239
Speaker 1: the entire business community might leave, and that's not the

735
00:42:24,239 --> 00:42:43,760
Speaker 1: outcome that Aging is ready for it. Yet, the fact

736
00:42:43,800 --> 00:42:47,080
Speaker 1: that you know, talk about replicating Taiwan Semi in China,

737
00:42:47,520 --> 00:42:51,400
Speaker 1: that China can't even replicate Starbucks, that the homegrown Starbucks

738
00:42:51,440 --> 00:42:55,080
Speaker 1: alternative turned out to go proof sort of sort of

739
00:42:55,080 --> 00:42:57,719
Speaker 1: tells you something. Well, you know, so we we haven't

740
00:42:57,760 --> 00:43:00,480
Speaker 1: really talked about Taiwan Semi that much on this episode,

741
00:43:00,480 --> 00:43:01,880
Speaker 1: but of course we've been talking about a lot on

742
00:43:01,920 --> 00:43:04,799
Speaker 1: recent episodes. But talk to us about your view of

743
00:43:04,840 --> 00:43:07,920
Speaker 1: the sort of Chinese government view of the company and

744
00:43:08,040 --> 00:43:14,879
Speaker 1: how that plays into the broader tension over taiwanail Right, Well, Joe,

745
00:43:15,000 --> 00:43:17,880
Speaker 1: one of the frequent questions I got with you know

746
00:43:18,200 --> 00:43:22,160
Speaker 1: Beijing's attitude to t SMC is whether you know there

747
00:43:22,239 --> 00:43:25,960
Speaker 1: might be some sort of hot conflict ur military conflict

748
00:43:26,280 --> 00:43:30,839
Speaker 1: with t s MC if Beijing tries to initiate something. Now,

749
00:43:30,880 --> 00:43:33,399
Speaker 1: I think there might be other reasons to expect that

750
00:43:33,719 --> 00:43:37,200
Speaker 1: Beijing will have military action, but I'm always very skeptical

751
00:43:37,360 --> 00:43:40,920
Speaker 1: that Beijing will take military action over Taiwan for this

752
00:43:41,000 --> 00:43:44,640
Speaker 1: particular reason. And I think the thinking here is that, um,

753
00:43:44,680 --> 00:43:47,960
Speaker 1: you know, first of all, technology exists in people's heads.

754
00:43:48,000 --> 00:43:50,759
Speaker 1: It's not just about the machinery. And if you have

755
00:43:50,960 --> 00:43:55,960
Speaker 1: basically anything like a nasty conflict over Taiwan, I think

756
00:43:56,000 --> 00:43:59,000
Speaker 1: you can't guarantee that a lot of critical engineers won't

757
00:43:59,040 --> 00:44:02,320
Speaker 1: be evacuated ahead of time or will always be perfectly

758
00:44:02,360 --> 00:44:06,440
Speaker 1: safe during you know, some sort of hot conflict. Second

759
00:44:06,440 --> 00:44:08,279
Speaker 1: of all, you know, if you have some sort of

760
00:44:08,520 --> 00:44:11,000
Speaker 1: you know, bigger action, some sort of hot conflict, can

761
00:44:11,040 --> 00:44:14,719
Speaker 1: you really guarantee that these big factories that cost you know,

762
00:44:14,760 --> 00:44:17,480
Speaker 1: tens of billions of dollars now really can be you know,

763
00:44:17,600 --> 00:44:20,319
Speaker 1: safe from some sort of damage. And I think the

764
00:44:20,320 --> 00:44:24,280
Speaker 1: most important factor here is that if Beijing ever escalates

765
00:44:24,280 --> 00:44:27,840
Speaker 1: into you know, any sort of very violine action against Taiwan,

766
00:44:28,160 --> 00:44:31,600
Speaker 1: it will be sanctioned by every Western government that provides it.

767
00:44:31,719 --> 00:44:35,560
Speaker 1: The technology that both the Chinese industry as well as

768
00:44:35,800 --> 00:44:39,000
Speaker 1: t SMC and the Taiwanese industry would need to continue growing.

769
00:44:39,320 --> 00:44:41,600
Speaker 1: So much of the equipment to make some many conductors

770
00:44:41,840 --> 00:44:44,760
Speaker 1: comes from the United States as well as from the Netherlands,

771
00:44:44,840 --> 00:44:47,400
Speaker 1: as well as from Japan, and I think that China

772
00:44:47,400 --> 00:44:49,400
Speaker 1: would not be able to get its hands on pretty

773
00:44:49,480 --> 00:44:53,279
Speaker 1: much so many crucial components. Past that point because the

774
00:44:53,840 --> 00:44:58,680
Speaker 1: foreign governments will just impose a pretty comprehensive embargo or

775
00:44:59,000 --> 00:45:02,480
Speaker 1: you know, highly targeted and margo are semiconductors if the

776
00:45:02,520 --> 00:45:05,640
Speaker 1: situation ever got to that point, so I would I'm

777
00:45:05,640 --> 00:45:08,600
Speaker 1: always very skeptical that this would be a particular reason

778
00:45:08,640 --> 00:45:13,879
Speaker 1: to act. How long can t SMC maintain its lead

779
00:45:14,080 --> 00:45:19,279
Speaker 1: in semiconductor manufacturing. I think that t SMC will have

780
00:45:19,560 --> 00:45:22,839
Speaker 1: a very substantial lead for a pretty long time. But

781
00:45:22,960 --> 00:45:26,120
Speaker 1: you know, I think the comfort for Chinese firms is

782
00:45:26,160 --> 00:45:29,200
Speaker 1: that technology might be moving to a point where you

783
00:45:29,239 --> 00:45:33,120
Speaker 1: don't necessarily always need the cutting edge to you know,

784
00:45:33,360 --> 00:45:36,719
Speaker 1: be a very to be a very successful firm. Now,

785
00:45:36,760 --> 00:45:38,759
Speaker 1: if you take a look at what has driven a

786
00:45:38,800 --> 00:45:43,120
Speaker 1: lot of the technological advancements from you know, fourteen animeters

787
00:45:43,360 --> 00:45:46,040
Speaker 1: to seven animeters to five animeters to three n animeters

788
00:45:46,360 --> 00:45:51,160
Speaker 1: in semiconductor process notes has been the sale of smartphones,

789
00:45:51,400 --> 00:45:53,719
Speaker 1: and smartphones for the last three years has been a

790
00:45:53,760 --> 00:45:57,440
Speaker 1: declining market, which shows that you know, there isn't necessarily

791
00:45:57,480 --> 00:46:00,000
Speaker 1: a huge amount of demand at the very top leve

792
00:46:00,000 --> 00:46:04,640
Speaker 1: holes of technology beyond basically you know, certain iPhone, Apple

793
00:46:04,719 --> 00:46:07,719
Speaker 1: and Qualcom processors. You know, if you believe in all

794
00:46:07,760 --> 00:46:09,719
Speaker 1: of the hype around FI GI, and I'm not sure

795
00:46:09,760 --> 00:46:12,279
Speaker 1: that I do. You know, if we have you know,

796
00:46:12,640 --> 00:46:16,600
Speaker 1: semiconductors in every traffic light, if you have semi conductors

797
00:46:16,680 --> 00:46:19,799
Speaker 1: in um you know, every bookshelf, if I'm having semi

798
00:46:19,800 --> 00:46:23,360
Speaker 1: conductors in my coffee, basically, you know, it doesn't necessarily

799
00:46:23,400 --> 00:46:26,080
Speaker 1: have to be you know, leading edge semiconductors in the

800
00:46:26,160 --> 00:46:28,680
Speaker 1: traffic light. A lot of it will be you know,

801
00:46:28,760 --> 00:46:31,440
Speaker 1: pretty simple stuff of the type that China can mostly

802
00:46:31,480 --> 00:46:34,400
Speaker 1: manufacture today. And even if you take a look at

803
00:46:34,400 --> 00:46:37,120
Speaker 1: the most advanced AI chips, they're not necessarily on the

804
00:46:37,120 --> 00:46:39,480
Speaker 1: cutting edge of five or three natometers. A lot of

805
00:46:39,520 --> 00:46:41,480
Speaker 1: them are trailing edge chips. If you take a look

806
00:46:41,560 --> 00:46:45,160
Speaker 1: at the cloud server chips, these are not necessarily again

807
00:46:45,440 --> 00:46:48,279
Speaker 1: five or three. And so I think the you know,

808
00:46:48,400 --> 00:46:51,000
Speaker 1: the case that China can be a little bit happier

809
00:46:51,000 --> 00:46:53,680
Speaker 1: about is that technology is moving to a point where,

810
00:46:54,080 --> 00:46:56,239
Speaker 1: you know, the whole thing is maturing, but you may

811
00:46:56,280 --> 00:47:01,359
Speaker 1: not necessarily need cutting edge and everything for from now on. Yeah,

812
00:47:01,440 --> 00:47:05,279
Speaker 1: this was something our last guest talking about this also mentioned,

813
00:47:05,840 --> 00:47:08,279
Speaker 1: and so essentially in your view, I mean, we could

814
00:47:08,320 --> 00:47:11,600
Speaker 1: talk a lot about you know, you mentioned earlier t

815
00:47:11,800 --> 00:47:16,000
Speaker 1: SMC spending billion dollars in capex in one year. But

816
00:47:16,080 --> 00:47:22,480
Speaker 1: the risk then is that technological dominance manufacturing dominance is

817
00:47:22,560 --> 00:47:26,000
Speaker 1: not the business that it does not necessarily translate into

818
00:47:26,320 --> 00:47:30,279
Speaker 1: the current into business dominance. A lot of things are

819
00:47:30,360 --> 00:47:33,279
Speaker 1: leading edge once and then commoditized, which is, you know

820
00:47:33,320 --> 00:47:35,799
Speaker 1: where trying to can catch up. And it's possible that

821
00:47:35,840 --> 00:47:39,279
Speaker 1: this will also happen to semiconductors. I want to I

822
00:47:39,280 --> 00:47:41,319
Speaker 1: want to take a different turn. I mean, so much

823
00:47:41,360 --> 00:47:44,000
Speaker 1: of this conversation and something we've talked about, and I'm

824
00:47:44,040 --> 00:47:45,600
Speaker 1: really curious to get your take. I mean, some of

825
00:47:45,640 --> 00:47:50,200
Speaker 1: this conversation is about past chats we've had are about

826
00:47:50,200 --> 00:47:56,960
Speaker 1: this sort of like scientific communities, network effects of tech hubs,

827
00:47:57,239 --> 00:48:00,319
Speaker 1: so to speak, and that that debate is happening here

828
00:48:00,400 --> 00:48:02,360
Speaker 1: in the US quite a bit. And you hear a

829
00:48:02,360 --> 00:48:05,439
Speaker 1: lot of US tech and start up people talking about

830
00:48:05,520 --> 00:48:10,680
Speaker 1: replicating Silicon Valley Silicon Valley elsewhere, whether it's somewhere in

831
00:48:10,760 --> 00:48:13,320
Speaker 1: Texas or Miami, and you have all these vcs tweeting

832
00:48:13,360 --> 00:48:15,080
Speaker 1: about how they're going to move and I know, some

833
00:48:15,120 --> 00:48:17,279
Speaker 1: of the stuff that they're into, as you point out,

834
00:48:17,640 --> 00:48:21,480
Speaker 1: isn't even really technology, especially especially if it's just software,

835
00:48:21,520 --> 00:48:25,279
Speaker 1: internet consumer or exploiting network effects, it's not really tech

836
00:48:25,360 --> 00:48:28,280
Speaker 1: per se. But I am curious what you think about,

837
00:48:28,360 --> 00:48:32,520
Speaker 1: like the prospects of new Silicon valleys opening up somewhere

838
00:48:32,680 --> 00:48:36,279
Speaker 1: in the US, especially planned one. Oh, we're all going

839
00:48:36,320 --> 00:48:39,160
Speaker 1: to move to Miami, Like, how are you thinking about

840
00:48:39,239 --> 00:48:42,360
Speaker 1: some of these these questions future of Silicon Valley and

841
00:48:42,560 --> 00:48:45,920
Speaker 1: future of other U s tech cubs are elsewhere. Well.

842
00:48:45,960 --> 00:48:48,719
Speaker 1: A lot of the thinking about how what makes the

843
00:48:48,800 --> 00:48:51,960
Speaker 1: current Silicon valley work has always been a bit of

844
00:48:51,960 --> 00:48:53,920
Speaker 1: a mystery. Um. You know, I used to live in

845
00:48:53,960 --> 00:48:57,200
Speaker 1: San Francisco. At this point, most of my friends who

846
00:48:57,280 --> 00:49:00,319
Speaker 1: live in San Francisco are quite key to leave, um

847
00:49:00,360 --> 00:49:04,200
Speaker 1: not necessarily to Austin or Miami, but people have always

848
00:49:04,239 --> 00:49:07,040
Speaker 1: dreamed a dreamt about, you know, moving down to Los

849
00:49:07,080 --> 00:49:10,800
Speaker 1: Angeles because of you know, the housing issue in uh

850
00:49:10,960 --> 00:49:14,360
Speaker 1: San Francisco, the higher rate of property crime, the human

851
00:49:14,360 --> 00:49:17,520
Speaker 1: waste on the streets. It's always been a pretty frustrating

852
00:49:17,640 --> 00:49:19,879
Speaker 1: place to live in. But on the other hand, it's

853
00:49:19,880 --> 00:49:22,799
Speaker 1: also where you have fantastic universities doing a lot of

854
00:49:22,800 --> 00:49:26,400
Speaker 1: cutting edge research. It's where the current UM nodes in

855
00:49:26,480 --> 00:49:29,520
Speaker 1: this network are and maybe you know, it has a

856
00:49:29,520 --> 00:49:32,399
Speaker 1: lot to do with whether So you know, Miami and

857
00:49:32,680 --> 00:49:35,640
Speaker 1: Austin in the summer are not necessarily very pleasant places.

858
00:49:35,760 --> 00:49:37,520
Speaker 1: Maybe you know, it all comes down to having a

859
00:49:37,600 --> 00:49:42,160
Speaker 1: cool and pleasant, sunny whether um, I think whether Miami

860
00:49:42,320 --> 00:49:45,280
Speaker 1: or Austin really make it really depends on how quickly

861
00:49:45,360 --> 00:49:48,600
Speaker 1: Silicon Valley and its current form in San Francisco can unravel.

862
00:49:50,440 --> 00:49:53,160
Speaker 1: Does it matter that some of this isn't real tech,

863
00:49:53,520 --> 00:49:56,319
Speaker 1: that a lot of it is not particularly A lot

864
00:49:56,360 --> 00:49:57,840
Speaker 1: of the things that people are excited about are not

865
00:49:57,880 --> 00:50:02,400
Speaker 1: really science based. I don't not necessarily, I think, you know,

866
00:50:02,480 --> 00:50:05,279
Speaker 1: there is a lot of skills involved in building a

867
00:50:05,320 --> 00:50:09,600
Speaker 1: really functional app, and a lot of most other um cities,

868
00:50:09,840 --> 00:50:11,960
Speaker 1: to say nothing of most other countries in the world,

869
00:50:12,040 --> 00:50:14,279
Speaker 1: have not figured out how to build a really good

870
00:50:14,280 --> 00:50:16,880
Speaker 1: intuitive app that consumers are really love to use. And

871
00:50:16,920 --> 00:50:19,319
Speaker 1: so there is quite a lot of process knowledge. There's

872
00:50:19,320 --> 00:50:21,359
Speaker 1: a lot of task and knowledge that goes into how

873
00:50:21,440 --> 00:50:24,360
Speaker 1: to create these wonderful products. There's but you know, I

874
00:50:24,400 --> 00:50:26,560
Speaker 1: would also say there's a lot of marketing involved in

875
00:50:26,640 --> 00:50:29,440
Speaker 1: Silicon Valley to really try to have used for adoption.

876
00:50:29,760 --> 00:50:32,319
Speaker 1: Maybe that sort of sales culture pays off a little

877
00:50:32,360 --> 00:50:36,120
Speaker 1: bit more in Austin or in Miami. UM, But certainly

878
00:50:36,120 --> 00:50:39,040
Speaker 1: there is still quite a lot of real engineering expertise

879
00:50:39,239 --> 00:50:44,040
Speaker 1: in building these different software businesses. What really excites you

880
00:50:44,280 --> 00:50:50,680
Speaker 1: in tech at the moment, semi conductor is Tracy, Okay,

881
00:50:50,719 --> 00:50:54,000
Speaker 1: I'll rephrase it. What's the next big thing in semiconductors?

882
00:50:54,400 --> 00:50:55,759
Speaker 1: And what are we going to be talking to you

883
00:50:55,800 --> 00:51:01,400
Speaker 1: about in January? Well, you know, I think there is

884
00:51:01,560 --> 00:51:05,040
Speaker 1: a lot of very exciting things going on now actually

885
00:51:05,440 --> 00:51:09,720
Speaker 1: outside of semiconductors. UM. So you know, UM, Tyler Cowen,

886
00:51:09,760 --> 00:51:14,399
Speaker 1: who's a Bloomberg columnists, has speculated that maybe the great

887
00:51:14,400 --> 00:51:19,560
Speaker 1: stagnation processes outlined as you know, broadly technological stagnation over

888
00:51:19,600 --> 00:51:22,800
Speaker 1: the last few years, maybe ending. And so he's excited

889
00:51:22,840 --> 00:51:26,959
Speaker 1: about things like the mRNA vaccine being developed in record time,

890
00:51:27,040 --> 00:51:30,759
Speaker 1: the space launches from SpaceX, UM. You know, the lot

891
00:51:30,800 --> 00:51:35,719
Speaker 1: of things have gone very quickly in the US in science,

892
00:51:36,120 --> 00:51:38,959
Speaker 1: you know, And so I'm excited about those things too.

893
00:51:39,280 --> 00:51:42,120
Speaker 1: And it's possible that the Chinese now have some form

894
00:51:42,239 --> 00:51:46,319
Speaker 1: of a proven quantum computing supremacy and not something I

895
00:51:46,360 --> 00:51:49,200
Speaker 1: really understand about. UM. There's also a claim that they

896
00:51:49,200 --> 00:51:52,880
Speaker 1: figured out some aspect of nuclear fusion here. Um, but

897
00:51:52,920 --> 00:51:55,760
Speaker 1: I encourage you to, uh, you know, look at Tyler

898
00:51:55,800 --> 00:51:57,680
Speaker 1: Cowen's work and let's see, you know, maybe we can

899
00:51:57,719 --> 00:52:01,239
Speaker 1: chat about those topics in a follow up episode. You know,

900
00:52:01,280 --> 00:52:03,440
Speaker 1: I realized there's all kinds of when you mentioned that,

901
00:52:03,480 --> 00:52:05,480
Speaker 1: there's all kinds of follow up questions, like we could

902
00:52:05,520 --> 00:52:08,960
Speaker 1: also talk about your view on automotive tech and so forth.

903
00:52:09,239 --> 00:52:12,000
Speaker 1: One quick thing before we go that I realized it

904
00:52:12,040 --> 00:52:14,280
Speaker 1: is kind of big and we haven't really talked about.

905
00:52:15,120 --> 00:52:18,160
Speaker 1: TikTok was a huge thing. I mean, it was kind

906
00:52:18,160 --> 00:52:21,040
Speaker 1: of one of the tech stories of and it seemed

907
00:52:21,080 --> 00:52:25,960
Speaker 1: like the first real like Chinese consumer app that took

908
00:52:25,960 --> 00:52:28,879
Speaker 1: the world by storm and stands toe to toe with

909
00:52:28,960 --> 00:52:32,359
Speaker 1: the consumer apps like Facebook and other stuff. Is that

910
00:52:32,520 --> 00:52:34,279
Speaker 1: How big of a deal is that? And what does

911
00:52:34,320 --> 00:52:37,920
Speaker 1: that tell you about a sort of Chinese consumer internet

912
00:52:37,960 --> 00:52:41,120
Speaker 1: company being able to play on the global scale in

913
00:52:41,120 --> 00:52:44,680
Speaker 1: the way I don't think we've really seen before. I

914
00:52:44,719 --> 00:52:48,120
Speaker 1: think TikTok is a highly innovative company that's done a

915
00:52:48,200 --> 00:52:50,280
Speaker 1: lot of great things, and I'm not sure if China

916
00:52:50,320 --> 00:52:53,839
Speaker 1: will be able to replicate that success saw anytime soon. Now,

917
00:52:53,880 --> 00:52:56,440
Speaker 1: if you take a look at the essays in particular

918
00:52:56,560 --> 00:52:59,759
Speaker 1: of Echen way Um. You know, he's really analyzed a

919
00:52:59,760 --> 00:53:03,680
Speaker 1: lot of the factors of TikTok success, including by trying

920
00:53:03,680 --> 00:53:05,960
Speaker 1: to grab a lot of users and then figuring out

921
00:53:06,000 --> 00:53:09,239
Speaker 1: the right algorithms to recommend the next videos. Certainly, there's

922
00:53:09,280 --> 00:53:13,600
Speaker 1: been a huge amount of consumer Internet innovation there. Now,

923
00:53:13,760 --> 00:53:16,719
Speaker 1: the question for me that's quite interesting with TikTok for

924
00:53:16,800 --> 00:53:20,000
Speaker 1: China is that if TikTok will be the start of

925
00:53:20,040 --> 00:53:24,239
Speaker 1: a trend of just basically marvelous Chinese cultural creations that

926
00:53:24,560 --> 00:53:26,200
Speaker 1: you know, a lot of folks really want to use

927
00:53:26,280 --> 00:53:29,560
Speaker 1: around the world like TikTok, or whether it's more of

928
00:53:29,600 --> 00:53:32,680
Speaker 1: an exception that was able to escape the system in

929
00:53:32,680 --> 00:53:35,400
Speaker 1: a way that China has not produced very compelling cultural

930
00:53:35,400 --> 00:53:38,360
Speaker 1: products over the last four years outside of a few

931
00:53:39,080 --> 00:53:42,440
Speaker 1: art house movies outside of you know, the Three Body Problem,

932
00:53:42,440 --> 00:53:44,719
Speaker 1: which is still again kind of a niche product, and

933
00:53:44,719 --> 00:53:48,160
Speaker 1: I'm not sure that there has been many cultural Chinese successes.

934
00:53:48,480 --> 00:53:51,880
Speaker 1: And I'm sort of leaning towards the way that TikTok

935
00:53:51,960 --> 00:53:55,000
Speaker 1: was something that was able to escape a censorious and

936
00:53:55,040 --> 00:53:58,160
Speaker 1: repressive system instead of, you know, the start of a great,

937
00:53:58,160 --> 00:54:02,239
Speaker 1: big trend of Chinese cultural all outpouring and to you know,

938
00:54:02,320 --> 00:54:05,480
Speaker 1: just to note that Pew surveys of China over the

939
00:54:05,560 --> 00:54:09,480
Speaker 1: last year has really starts, you know, spiked sharply negative

940
00:54:09,680 --> 00:54:12,759
Speaker 1: in pretty much all Western countries, including the US, when

941
00:54:12,760 --> 00:54:17,040
Speaker 1: you have basically a lot of comments from senior US

942
00:54:17,080 --> 00:54:21,360
Speaker 1: officials now designating China as a strategic competitor, when you

943
00:54:21,440 --> 00:54:24,360
Speaker 1: have basically a lot of Western countries closing their markets

944
00:54:24,360 --> 00:54:27,440
Speaker 1: off to Chinese firms, which deprives them of a lot

945
00:54:27,480 --> 00:54:30,040
Speaker 1: of the richest and most disserting customers in the world.

946
00:54:30,320 --> 00:54:34,240
Speaker 1: I think the prospects for generating a splendid Chinese success,

947
00:54:34,640 --> 00:54:37,040
Speaker 1: I would say are are not very high. But let's say,

948
00:54:37,160 --> 00:54:39,600
Speaker 1: let's see how the next decade plays out. We'll have

949
00:54:39,680 --> 00:54:44,480
Speaker 1: to have you on again in a decade. Wonderful looking

950
00:54:44,520 --> 00:54:48,120
Speaker 1: forward to it. Thanks Dad. Yeah, that was great. It's

951
00:54:48,160 --> 00:54:50,080
Speaker 1: always such a it's always such a pleasure to talk

952
00:54:50,160 --> 00:54:53,080
Speaker 1: to and that was it a treat great. Well, thank

953
00:54:53,120 --> 00:55:17,600
Speaker 1: you very much again for the invitation. Tracy. All I'll

954
00:55:17,640 --> 00:55:21,120
Speaker 1: say is there's a reason why I think Dan is

955
00:55:21,160 --> 00:55:24,000
Speaker 1: one of the most requested guests that we have on

956
00:55:24,040 --> 00:55:27,879
Speaker 1: the show. I think there's two reasons. So I think

957
00:55:27,920 --> 00:55:30,439
Speaker 1: one is that he does come up with the very

958
00:55:30,480 --> 00:55:34,239
Speaker 1: original ideas. So his idea about why can't China be

959
00:55:34,440 --> 00:55:37,000
Speaker 1: cool is something that I don't think a lot of

960
00:55:37,000 --> 00:55:40,880
Speaker 1: people necessarily think about. But when it comes to consumer tech,

961
00:55:41,480 --> 00:55:44,400
Speaker 1: coolness is sort of wrapped up in it, right, People

962
00:55:44,560 --> 00:55:48,240
Speaker 1: want a certain smartphone or they want a certain product

963
00:55:48,320 --> 00:55:50,640
Speaker 1: because it's kind of cool. And then the second thing

964
00:55:50,680 --> 00:55:53,120
Speaker 1: about Dan, of course, is that he just explains everything

965
00:55:53,440 --> 00:55:56,600
Speaker 1: very very clearly. You know, sometimes like we wrap things up,

966
00:55:56,640 --> 00:55:58,200
Speaker 1: but it was like a summary of what they said.

967
00:55:58,200 --> 00:56:00,120
Speaker 1: But it's like Dana is so clear, I feel like

968
00:56:00,160 --> 00:56:02,400
Speaker 1: I don't have anything to add, Like it is the

969
00:56:02,400 --> 00:56:06,360
Speaker 1: way he describes the different dynamics going on in different industries.

970
00:56:06,400 --> 00:56:08,600
Speaker 1: It's like I feel like I learned so much so

971
00:56:08,719 --> 00:56:11,960
Speaker 1: I don't even have that much to say. No, neither, joy,

972
00:56:12,000 --> 00:56:13,719
Speaker 1: I feel like what's Dan? The only thing you can

973
00:56:13,800 --> 00:56:17,560
Speaker 1: kind of do is just keep asking him about different topics,

974
00:56:17,600 --> 00:56:19,640
Speaker 1: like just tell me your thoughts on this and then

975
00:56:19,640 --> 00:56:22,640
Speaker 1: this and this. Yeah, that's exactly right. Like at the end,

976
00:56:22,640 --> 00:56:24,560
Speaker 1: I was like, well, we should do get a take

977
00:56:24,680 --> 00:56:27,400
Speaker 1: on automotive tech, and we should get his take on

978
00:56:27,760 --> 00:56:30,319
Speaker 1: space tech and all kinds of stuff like that, because

979
00:56:30,360 --> 00:56:32,960
Speaker 1: I could have just listened to him for a lot longer,

980
00:56:33,000 --> 00:56:36,000
Speaker 1: but I don't have anything to add to add to dance. Well,

981
00:56:36,040 --> 00:56:39,040
Speaker 1: don't worry, Joe, we will have him on again next

982
00:56:39,120 --> 00:56:43,120
Speaker 1: year and probably in ten years as well. Great, Okay,

983
00:56:43,160 --> 00:56:46,800
Speaker 1: shall we leave it there. This has been another episode

984
00:56:46,800 --> 00:56:49,640
Speaker 1: of the All Thoughts Podcast. I'm Tracy Alloway. You can

985
00:56:49,680 --> 00:56:53,520
Speaker 1: follow me on Twitter at Tracy Alloway and I'm Joe

986
00:56:53,560 --> 00:56:55,960
Speaker 1: Why Isn't All? You can follow me on Twitter at

987
00:56:55,960 --> 00:56:59,640
Speaker 1: the Stalwart. Definitely follow our guest Dan Loong, He's at

988
00:56:59,719 --> 00:57:02,839
Speaker 1: Dan w Wong. Also check out his website, dan wog

989
00:57:02,880 --> 00:57:06,480
Speaker 1: dot c O. He writes a really great annual essay

990
00:57:07,080 --> 00:57:09,000
Speaker 1: about all the things and books she read in the

991
00:57:09,120 --> 00:57:13,080
Speaker 1: last year. This one's the one for really spectacular, so

992
00:57:13,200 --> 00:57:16,920
Speaker 1: check it out. Follow our producer Laura Carlson. She's at

993
00:57:17,000 --> 00:57:20,640
Speaker 1: Laura M. Carlson. Follow the Bloomberg head of podcast Francesco

994
00:57:20,720 --> 00:57:23,680
Speaker 1: Levi at Francesco Today, and check out all of our

995
00:57:23,720 --> 00:57:28,160
Speaker 1: podcasts at Bloomberg under the handle add Podcasts. Thanks for listening.

996
00:58:00,080 --> 00:58:00,240
Speaker 1: Nine