WEBVTT - Semiconductor Chip Shortage – Lab 071 0:00:00.520 --> 0:00:02.880 Have you been seeing all these shortages. It feels like 0:00:03.120 --> 0:00:05.119 there's a shortage of everything. 0:00:05.840 --> 0:00:09.240 Yes, there's a shortage on baby formula, there's a shortage 0:00:09.280 --> 0:00:14.120 on tampons. I saw something about olive oil shortage olive oil, 0:00:14.240 --> 0:00:15.880 which is creeping very close to there be. 0:00:15.880 --> 0:00:17.320 A shortage of my patients. 0:00:17.760 --> 0:00:21.319 I am very tired of all of these shortages because 0:00:21.360 --> 0:00:23.520 as soon as something there's not enough of something, that 0:00:23.520 --> 0:00:24.920 means people are going to start panicking. 0:00:25.320 --> 0:00:26.120 We saw that in the. 0:00:26.079 --> 0:00:29.120 Pandemic when there was a shortage of toilet paper and 0:00:29.200 --> 0:00:33.440 hand sanitizer and chlorox wipes. And one thing that has 0:00:33.520 --> 0:00:36.559 come across our radar but isn't really that new, is 0:00:36.600 --> 0:00:41.240 the semiconductor chip shortage. Yes, and I feel like Christopher 0:00:41.240 --> 0:00:43.760 Mims gave us a little bit of a heads up, like, hey, 0:00:44.120 --> 0:00:45.919 some of these things are happening, but it's getting out 0:00:45.920 --> 0:00:46.280 of control. 0:00:46.360 --> 0:00:46.560 Now. 0:00:46.760 --> 0:00:48.960 I want to know why we're still dealing with this 0:00:49.000 --> 0:00:50.760 shortage and what's next? What are we going to do 0:00:50.800 --> 0:00:54.160 about it? What's the plant? I'm Tti and I'm Zakiath 0:00:54.520 --> 0:00:55.440 and from Spotify. 0:00:55.640 --> 0:01:14.319 This is Dope Labs. 0:01:15.240 --> 0:01:18.520 Welcome to Dope Labs, a weekly podcast that mixes hardcore 0:01:18.600 --> 0:01:21.800 science pop culture and a healthy dost of friendship. So, 0:01:21.959 --> 0:01:23.919 like we just said, there's been a lot of shortages, 0:01:24.120 --> 0:01:25.360 one being the chip shortage. 0:01:25.360 --> 0:01:28.480 But the chip shortage is a little bit more complicated, 0:01:28.840 --> 0:01:29.560 changing a lot. 0:01:29.680 --> 0:01:30.720 I guess whether or. 0:01:30.760 --> 0:01:33.120 Not there is a shortage. It depends on what you 0:01:33.240 --> 0:01:34.039 type into Google. 0:01:34.120 --> 0:01:36.039 It seems like in some countries they got a lot 0:01:36.040 --> 0:01:38.360 of chips, but in the US we might not have enough. 0:01:38.760 --> 0:01:41.880 At some points, you know there's not enough chips, and 0:01:41.920 --> 0:01:43.960 then at another point you got too much dip on 0:01:44.040 --> 0:01:44.400 your chip. 0:01:45.440 --> 0:01:48.840 This week, we're talking all about computer chips, or specifically 0:01:48.880 --> 0:01:52.400 semiconductor chips. These tiny pieces of equipment that are in 0:01:52.520 --> 0:01:55.400 every computing device out there. They're vital to how our 0:01:55.400 --> 0:01:58.920 world runs, and right now there's a major shortage. We 0:01:59.000 --> 0:02:01.360 wanted to know more about what's caused a chip shortage, 0:02:01.360 --> 0:02:03.480 how it's affecting our lives, and what people are doing 0:02:03.520 --> 0:02:03.960 about it. 0:02:04.280 --> 0:02:18.160 Let's get into the recitation. So what do we know? 0:02:18.480 --> 0:02:22.160 Chips, chips, chips everywhere. They're in everything. 0:02:22.600 --> 0:02:27.239 Literally, they're in everything. Any device that operates on its 0:02:27.240 --> 0:02:30.600 own without you having a cranket, it has a semiconductor 0:02:30.680 --> 0:02:33.080 chip inside of it. And so when you stop and 0:02:33.160 --> 0:02:36.320 think about that. Almost everything except like a table, and 0:02:36.400 --> 0:02:37.880 some of these tables have chips in them too. 0:02:38.040 --> 0:02:40.120 My desk was going up and down. It probably has 0:02:40.160 --> 0:02:40.520 a chip. 0:02:40.840 --> 0:02:42.040 It does have a chip. 0:02:42.160 --> 0:02:45.160 They're in our refrigerators, they're in our cars, they're in 0:02:45.320 --> 0:02:46.280 military equipment. 0:02:46.400 --> 0:02:48.120 Almost everything you touch has a chip in it. 0:02:48.240 --> 0:02:50.880 We know that there's a shortage and it's having an 0:02:50.880 --> 0:02:52.120 effect on the economy. 0:02:52.480 --> 0:02:54.720 So what do we want to know? Where are we 0:02:54.760 --> 0:02:55.320 in the shortage? 0:02:55.320 --> 0:02:57.800 Because I thought we have reached the heights of the 0:02:57.800 --> 0:03:01.000 shortage in twenty twenty Right then it's twenty twenty one. 0:03:01.000 --> 0:03:02.960 We went over what I thought the high was, and 0:03:03.000 --> 0:03:06.720 so here we are now the shortiest of shortages. Okay, 0:03:07.120 --> 0:03:09.360 I thought shortage meant we got a little bit. Y'all 0:03:09.400 --> 0:03:11.600 still saying shortage? How we stealing out a little bit? 0:03:11.639 --> 0:03:12.280 What's happening? 0:03:12.680 --> 0:03:17.680 And what is anybody doing about it? What are manufacturers 0:03:17.720 --> 0:03:21.080 doing about it? What kind of policy is around hopefully 0:03:21.200 --> 0:03:23.760 relieving some of the pressures here? What's going on? 0:03:24.000 --> 0:03:26.239 I think something that would be important for people to 0:03:26.320 --> 0:03:29.960 understand is the importance of semiconductor chips, So how they work, 0:03:30.639 --> 0:03:33.280 why they're so important, and why we should be worried 0:03:33.320 --> 0:03:33.760 about it. 0:03:34.120 --> 0:03:35.360 Let's jump into the dissection. 0:03:44.280 --> 0:03:46.680 Our guest for today's lab is Al Thompson. 0:03:47.040 --> 0:03:49.760 I'm Al Thompson. I'm the vice president of US and 0:03:49.840 --> 0:03:51.400 Canadian Government Affairs at Intel. 0:03:52.000 --> 0:03:54.480 Intel is one of the major players in the semiconductor 0:03:54.560 --> 0:03:57.160 chip industry, and because these chips are in so many 0:03:57.200 --> 0:04:01.360 things that we rely on, that industry is shaping our lives. 0:04:01.680 --> 0:04:03.520 Ow broke down what a chip is. 0:04:03.920 --> 0:04:07.360 It's a complex device that forms the brains of anything 0:04:07.440 --> 0:04:08.920 that involves computing. 0:04:09.280 --> 0:04:13.320 That includes phones, medical devices, cars, more and more modern 0:04:13.360 --> 0:04:16.320 appliances have chips, and most of those chips are made 0:04:16.320 --> 0:04:18.880 in Taiwan, South Korea and China. 0:04:18.920 --> 0:04:22.599 It's one of the most complex products manufacturing in the world. 0:04:22.760 --> 0:04:25.680 They're small as a fingernail. They're flat, but on the 0:04:25.760 --> 0:04:30.120 surface you generally have three dimensional structures that can include 0:04:30.160 --> 0:04:33.000 up the thirty layers of different circuitry on them. 0:04:34.240 --> 0:04:35.840 So what's a chip made of? 0:04:36.279 --> 0:04:38.800 The basis for every chip is that it's built on 0:04:38.880 --> 0:04:42.080 a piece of silicon, and then on each piece of 0:04:42.080 --> 0:04:46.120 silicon there are these things called transistors, and transistors are 0:04:46.200 --> 0:04:50.760 what the device uses to function. It has switches and 0:04:50.880 --> 0:04:54.560 amplifiers and things like that different chips have different responsibilities, 0:04:54.560 --> 0:04:57.560 so not all chips are created equal. Some are used 0:04:57.560 --> 0:05:01.279 for storing data, so if you think about your those 0:05:01.440 --> 0:05:04.440 chips store data so you can access it whenever you 0:05:04.480 --> 0:05:08.960 want to. Some chips are called microprocessors, so they perform 0:05:09.120 --> 0:05:11.320 most of a computer's calculating functions. 0:05:11.560 --> 0:05:13.320 You know, back in the day, chips weren't what we 0:05:13.400 --> 0:05:13.880 know chips to. 0:05:13.880 --> 0:05:17.400 Be now, where you can have thin laptops, AirPods that 0:05:17.440 --> 0:05:20.840 don't have a cord, and all these different things. Fifty 0:05:20.920 --> 0:05:24.200 years ago they would take up entire rooms, Like when 0:05:24.200 --> 0:05:26.520 you're talking about the first computer, it took up an 0:05:26.800 --> 0:05:30.280 entire room, and even things like oh, you know how 0:05:30.279 --> 0:05:30.960 we say, oh, if. 0:05:30.839 --> 0:05:33.599 There's a bug in my computer. Back then, it was 0:05:33.680 --> 0:05:34.560 literal bugs. 0:05:34.680 --> 0:05:37.599 That's where we get the terminology from the first computer. 0:05:37.680 --> 0:05:40.479 Rug was a moth inside of this side of this 0:05:40.520 --> 0:05:43.000 computer that took up a whole room. Everything is so 0:05:43.160 --> 0:05:45.640 thin and so small because there have been so many 0:05:45.680 --> 0:05:47.520 advances in chip technology. 0:05:47.760 --> 0:05:51.240 The microprocessor was first created well over fifty years ago. 0:05:51.800 --> 0:05:55.240 But you know, now the technology has evolved in terms 0:05:55.279 --> 0:05:58.760 of the manufacturing process where you can stack different components 0:05:58.800 --> 0:06:01.360 on top of each other. Even know the surface of 0:06:01.400 --> 0:06:03.839 the chip itself is still pretty that so. 0:06:03.800 --> 0:06:08.719 There's all of these pathways for electricity to move around 0:06:08.760 --> 0:06:12.000 the chip and perform different functions. And also the most 0:06:12.000 --> 0:06:17.080 sophisticated chips have hundreds of millions or billions of these 0:06:17.520 --> 0:06:21.279 circuitries on them and that are interconnected by fine wires 0:06:21.320 --> 0:06:21.880 and copper. 0:06:22.240 --> 0:06:25.839 So on that small little piece of equipment you have 0:06:25.960 --> 0:06:29.960 the ability to do everything from either store information and 0:06:30.000 --> 0:06:33.919 those are called memory chips, or actually compute and make decisions. 0:06:33.960 --> 0:06:35.279 We call those logic chips. 0:06:36.000 --> 0:06:39.360 So chips have been getting smaller and smaller, but their 0:06:39.400 --> 0:06:42.720 capabilities are increasing. To understand how that's happened, we need 0:06:42.760 --> 0:06:44.880 to understand how the chip is kind of evolved. 0:06:45.360 --> 0:06:50.160 The evolution of the semiconductor chip is defined by a 0:06:50.200 --> 0:06:52.960 prediction that was actually made in nineteen sixty five by 0:06:53.000 --> 0:06:56.359 one of the co founders of Intel, Gordon Moore, and 0:06:56.440 --> 0:07:00.479 the prediction is called Moore's laws. He says that the 0:07:00.600 --> 0:07:04.760 number of transistors on a semiconductor chip will double every 0:07:04.800 --> 0:07:07.920 two years. If you have a semiconductor chip and there's 0:07:07.960 --> 0:07:11.000 ten transistors on it, two years from then, there'll be twenty, 0:07:11.480 --> 0:07:14.440 and two years from then there'll be forty two years 0:07:14.440 --> 0:07:17.040 from then, it'll be eighty and so on and. 0:07:16.960 --> 0:07:20.520 So forth, and that is continued to this point. What 0:07:20.560 --> 0:07:23.680 More's Law has done is has allowed chips to basically 0:07:23.720 --> 0:07:26.240 evolve and be able to go from what used to 0:07:26.280 --> 0:07:30.440 be very large computer mainframes to your iPhone. And it's 0:07:30.480 --> 0:07:33.080 an continual process that allows us to try to get 0:07:33.120 --> 0:07:36.200 more transistors on a chip, that makes a chip more 0:07:36.320 --> 0:07:39.679 energy efficient yet powerful from a computing standpoint, but making 0:07:39.720 --> 0:07:41.760 the size smaller all at the same time. 0:07:42.000 --> 0:07:45.160 I think the common misconception when people here computing is 0:07:45.200 --> 0:07:48.360 to think only about computers. But like you said earlier, 0:07:48.520 --> 0:07:52.600 chips are in everything. Your refrigerator, your car, for example, 0:07:52.640 --> 0:07:56.080 brand new cars now are about four percent chip. That's 0:07:56.080 --> 0:07:58.160 a lot. It's not just older as one chip. If 0:07:58.200 --> 0:08:00.840 you had car problems, you know about the chips, okay, 0:08:02.280 --> 0:08:04.560 and it's only expected to continue to increase. 0:08:04.760 --> 0:08:07.840 There's really no aspect of our lives that's becoming less digital. 0:08:07.880 --> 0:08:10.720 If you think about it, everything is becoming more and 0:08:10.760 --> 0:08:15.000 more digitized. Like as we see advancement in any technology. Now, 0:08:15.040 --> 0:08:16.800 I can't even think of something that doesn't have a chip. 0:08:16.840 --> 0:08:17.119 Truly. 0:08:17.240 --> 0:08:19.160 Your glass is the only thing I seen without a chip, 0:08:19.200 --> 0:08:21.520 but those about to start clipping over Google. 0:08:21.200 --> 0:08:24.520 Glass and everything like that. Mm hmm, I'm ready for that. 0:08:24.760 --> 0:08:26.480 My friend want to be a I want to be 0:08:26.520 --> 0:08:28.720 a robot. Put the chips in me, put it in me. 0:08:28.920 --> 0:08:29.679 That's what I want. 0:08:30.120 --> 0:08:31.560 Is that the goal for everything. 0:08:31.200 --> 0:08:32.040 To be chip based? 0:08:32.240 --> 0:08:34.880 I feel like that's possible and that is what we're 0:08:34.920 --> 0:08:35.600 creeping towards. 0:08:35.640 --> 0:08:37.160 But what is the ultimate goal? 0:08:37.640 --> 0:08:41.199 So we asked l and he said, while COVID accelerated 0:08:41.200 --> 0:08:43.920 digitization in a lot of ways, it's great because it 0:08:43.960 --> 0:08:46.199 makes a lot of things more accessible for a lot 0:08:46.240 --> 0:08:46.720 more people. 0:08:47.400 --> 0:08:51.240 Technology allows people to have flexibility they didn't have twenty 0:08:51.320 --> 0:08:53.360 years ago. I grew up in the eighties. There was 0:08:53.400 --> 0:08:56.640 no cell phone. We had a landline. Did I have 0:08:56.679 --> 0:08:59.719 a computer system, Yeah, but it was huge. There was 0:08:59.760 --> 0:09:03.319 no such thing as putting an infotainment system in your automobile. 0:09:03.400 --> 0:09:06.360 The infotainment system was the radio based on the intenna 0:09:06.480 --> 0:09:09.080 signal that you got when you drove. So think about 0:09:09.080 --> 0:09:11.839 all the things that we're able to do now due 0:09:11.880 --> 0:09:16.720 to the improvement that the semiconductors made on everyday life. 0:09:16.800 --> 0:09:19.280 There was no such thing as telehealth when I was 0:09:19.320 --> 0:09:22.319 a kid. The ability to actually do your doctor's appointment 0:09:22.720 --> 0:09:26.080 on a computer screen. And so when I say everything's 0:09:26.160 --> 0:09:29.319 more and more digital, it's more the fact that technology 0:09:29.920 --> 0:09:33.360 is enabling us to do things now in ways we 0:09:33.400 --> 0:09:36.160 couldn't do ten or fifteen or twenty years ago. 0:09:37.640 --> 0:09:41.439 Yeah, these things are a really huge part of our lives, 0:09:42.000 --> 0:09:45.800 personally at work, just moving around in public spaces. But 0:09:45.960 --> 0:09:49.360 how has the shortage affected those areas of our lives? 0:09:49.600 --> 0:09:52.079 Well, because so much of our life has become digitized, 0:09:52.280 --> 0:09:55.240 the chip shortage has kind of had waves of effects. 0:09:55.440 --> 0:09:58.400 So you think back TT when people were saying they 0:09:58.400 --> 0:10:00.439 couldn't get cars, or was taking U so long to 0:10:00.480 --> 0:10:05.360 get laptops early in the pandemic. Yeah, chip shortage, But 0:10:05.480 --> 0:10:07.720 now it just feels like there's a shortage of everything 0:10:07.960 --> 0:10:10.559 which could be related to the chip shortage. 0:10:10.920 --> 0:10:12.760 So we've touched on some of the factors in the 0:10:12.840 --> 0:10:16.360 chip shortage, but what we really need to understand is 0:10:16.400 --> 0:10:18.080 how this even started. 0:10:18.640 --> 0:10:20.920 All said is all about supply and demand. 0:10:21.440 --> 0:10:24.280 So I would say, at the big picture, high increased 0:10:24.360 --> 0:10:28.560 demand capacity that had increased, and then other components of 0:10:28.600 --> 0:10:31.760 the supply chain had their own set of unique challenges 0:10:31.800 --> 0:10:34.360 with made it harder to produce those components. All of 0:10:34.400 --> 0:10:37.600 those things happening at the same time is what led 0:10:37.640 --> 0:10:39.840 to the chip shortage that we face today. 0:10:40.480 --> 0:10:43.800 Just like we've highlighted in a lot of other labs, 0:10:44.120 --> 0:10:48.280 when COVID hit, it changed everything, and that is true 0:10:48.320 --> 0:10:50.520 for this as well. A lot of things moved to 0:10:50.640 --> 0:10:53.640 digital platforms in a really short. 0:10:53.320 --> 0:10:55.040 Amount of time. Al said. 0:10:55.080 --> 0:10:58.640 The supply chain shortages meant that there was about five 0:10:58.679 --> 0:11:04.359 percent more demand then manufacturers could supply, but the pandemic 0:11:04.440 --> 0:11:06.600 took that and pushed it to twenty percent. 0:11:06.679 --> 0:11:08.640 That is four times larger. 0:11:08.880 --> 0:11:12.120 People move so many things online, work, meeting, school, and 0:11:12.640 --> 0:11:14.959 everybody needs to have a device, and then you need 0:11:15.000 --> 0:11:17.080 better routeries, and then you need more and more and 0:11:17.120 --> 0:11:20.400 more accessories, all of these things that were just driving 0:11:20.520 --> 0:11:24.800 demand through the roof, but manufacturers of chips didn't have 0:11:24.840 --> 0:11:28.240 the opportunity to increase output just as fast. So there's 0:11:28.280 --> 0:11:31.080 this incredible imbalance. And then on top of that, in 0:11:31.160 --> 0:11:34.400 different places, as the pandemic is ripping through the population, 0:11:34.920 --> 0:11:37.680 there's worker shortages. Then there were companies having issues with 0:11:37.800 --> 0:11:40.920 components having trouble keeping up with the demand to make chips. 0:11:41.240 --> 0:11:43.640 Companies are dealing with this in a few different ways. 0:11:44.040 --> 0:11:48.199 Intel specifically is spending between seventy to seventy five billion 0:11:48.320 --> 0:11:52.400 dollars globally to increase their ability to produce chips, but 0:11:52.440 --> 0:11:54.080 he says it takes time to do that. 0:11:54.600 --> 0:11:58.560 It takes three years to build a semiconductor fab three years. 0:11:58.640 --> 0:12:02.920 A semiconductor fab is a semiconductor fabrication plant, so it 0:12:03.000 --> 0:12:07.080 is a special facility with the specific purpose of making 0:12:07.120 --> 0:12:08.360 semiconductor chips. 0:12:08.600 --> 0:12:11.760 So everything that we've announced within the last year or 0:12:11.800 --> 0:12:15.160 two won't not be online until twenty twenty four to 0:12:15.200 --> 0:12:18.599 twenty twenty five because the scale and the size of 0:12:18.640 --> 0:12:22.120 the facilities are just so large that they take a 0:12:22.160 --> 0:12:23.559 while to build and equip. 0:12:23.920 --> 0:12:26.600 I understand to specialize, but I also feel like people 0:12:26.600 --> 0:12:28.599 have thrown up apartment buildings and things like this. Is 0:12:28.640 --> 0:12:31.920 that facility taking so long? Those things are going up fast. 0:12:32.480 --> 0:12:35.679 It's like, Oh, they're breaking ground. Oh they're accepting applications 0:12:35.760 --> 0:12:37.680 for lease that. 0:12:38.400 --> 0:12:40.559 Pool and everything. How did you get that water up there? 0:12:43.080 --> 0:12:46.280 Your first step is to build the facility itself, and 0:12:46.360 --> 0:12:49.800 you're talking about something the size of four or more 0:12:49.840 --> 0:12:54.199 football fields, so you're building out that actual physical structure. 0:12:54.400 --> 0:12:57.400 The next component comes. You have to equip it, so 0:12:57.600 --> 0:13:03.440 all that floor space generally has very sophisticated and large 0:13:03.600 --> 0:13:07.480 pieces of equipment that either do things from using white 0:13:07.640 --> 0:13:13.640 to essentially print the circuitry pattern on a wafer. That 0:13:13.760 --> 0:13:17.760 includes the machines that move the wafers all around. There's 0:13:17.840 --> 0:13:23.559 a huge amount of equipment that actually goes into the building. 0:13:23.160 --> 0:13:26.640 Of the facility, and beyond just the physical facility. You 0:13:26.720 --> 0:13:29.320 need people in the facilities to actually do the work 0:13:29.360 --> 0:13:30.960 putting these chips together. 0:13:30.880 --> 0:13:33.800 And then while you're also doing that, you're hiring the 0:13:33.840 --> 0:13:36.720 workforce to be able to come in and manage it. 0:13:37.200 --> 0:13:41.280 That workforce includes significant amount of engineering talent at the bachelor, 0:13:41.360 --> 0:13:42.800 master's and PhD. 0:13:42.559 --> 0:13:45.400 Level as well, and companies are trying to find different 0:13:45.400 --> 0:13:48.440 ways to find workers because you need a lot of 0:13:48.480 --> 0:13:50.960 different skill sets to make more chips. 0:13:51.280 --> 0:13:53.760 We have to have construction workers, and those construction workers 0:13:53.800 --> 0:13:57.040 have to be specialized welders and electricians to actually build 0:13:57.080 --> 0:13:59.160 the facilities. Then if we get there, we have to 0:13:59.200 --> 0:14:01.720 be able to staff them. Some of those workers could 0:14:01.760 --> 0:14:06.200 be ensuring that engineering talent in the United States, most 0:14:06.200 --> 0:14:08.600 of which come from foreign countries. If those folks want 0:14:08.640 --> 0:14:11.520 to work in the US as engineers, at our companies. 0:14:11.840 --> 0:14:15.120 We should hopefully have an immigration system that allows them 0:14:15.400 --> 0:14:16.240 to do that. 0:14:16.240 --> 0:14:19.120 That's such a great point. You need people. I think 0:14:19.160 --> 0:14:21.720 a lot of folks when they think about semiconductor fabrication. 0:14:21.920 --> 0:14:24.480 If they're thinking about it, they're thinking about machines, make 0:14:24.520 --> 0:14:28.560 more machines. But you need talented individuals to do that work. 0:14:29.280 --> 0:14:31.840 We're going to take a quick break, but after the break, 0:14:31.880 --> 0:14:35.520 we're going to get into the policy behind chip manufacturing. 0:14:55.120 --> 0:14:58.560 We're back and next week we're talking all about the 0:14:58.640 --> 0:15:02.320 digital divide with a Cold Turner lead. We're gonna talk 0:15:02.360 --> 0:15:05.640 all about who has access to Internet, who doesn't, and 0:15:05.680 --> 0:15:09.560 how the gap disproportionately affects low income people and. 0:15:09.560 --> 0:15:10.360 People of color. 0:15:11.880 --> 0:15:14.480 We've been talking with Al Thompson, the vice president of 0:15:14.760 --> 0:15:18.440 US and Canadian Government Affairs at Intel. So far we've 0:15:18.520 --> 0:15:21.080 learned what a chip is, what it's made of, and 0:15:21.120 --> 0:15:24.960 how basically everything in our lives is becoming more and 0:15:25.040 --> 0:15:28.240 more digitized, which means more chips. Now, we want to 0:15:28.240 --> 0:15:31.720 talk about the cost difference between manufacturing in the US 0:15:31.760 --> 0:15:35.200 and in countries like China, Taiwan, South Korea, and Japan, 0:15:35.280 --> 0:15:38.560 where we know they're doing a lot of chip fabrication. 0:15:38.960 --> 0:15:41.520 This means we kind of have to understand the history 0:15:41.640 --> 0:15:44.440 of chip making and some of the policy that's surrounded. 0:15:45.160 --> 0:15:48.040 In nineteen ninety, the United States made around thirty seven 0:15:48.080 --> 0:15:51.080 percent of the semiconductor chips in the world. Fast forward 0:15:51.120 --> 0:15:54.400 to twenty twenty two and we now make around twelve percent. 0:15:54.760 --> 0:15:58.160 Europe also saw a similar shift from making forty four 0:15:58.240 --> 0:16:01.560 percent of the semiconductor chips to now only nine percent. 0:16:02.000 --> 0:16:04.720 So thirty years ago, close to eighty percent of the 0:16:04.760 --> 0:16:08.200 world semiconductors or manufactured in the United States and Europe, 0:16:08.600 --> 0:16:11.480 and twenty percent or so were manufactured in Asia. It 0:16:11.560 --> 0:16:15.600 is now completely reversed. Eighty percent of the world semiconductors 0:16:15.680 --> 0:16:20.480 are manufactured in Asia, divided between Japan, South Korea, Taiwan, 0:16:20.560 --> 0:16:25.280 and China. Why did that happen. That happened because foreign governments, 0:16:25.880 --> 0:16:32.480 recognizing the foundational nature of semiconductors and their value, created 0:16:32.600 --> 0:16:39.080 policies to attract manufacturing in those geographic locations, and the 0:16:39.200 --> 0:16:40.680 United States didn't do the same. 0:16:41.240 --> 0:16:44.320 So what China did is they made it more appealing, 0:16:44.360 --> 0:16:46.920 and the way that they did that was by creating 0:16:46.960 --> 0:16:51.360 these tax and tariff exemptions to sustain and develop its 0:16:51.400 --> 0:16:55.440 chip industry. Tariffs are for the important exports of goods, 0:16:55.480 --> 0:16:57.320 and so if there are exemptions that means that you 0:16:57.400 --> 0:17:01.600 don't got to pay so much to or export goods, 0:17:01.760 --> 0:17:03.240 that is very appealing. 0:17:03.480 --> 0:17:07.840 You're basically subsidizing the cost to manufacture something. If it's 0:17:07.920 --> 0:17:11.080 cheaper for me to make my chips in China, I'm 0:17:11.119 --> 0:17:13.840 making the chips in China. And so it's advantageous for China, 0:17:13.920 --> 0:17:15.399 right because you may say, well, why would they make 0:17:15.440 --> 0:17:17.680 such a deal. Not only are the chips being made 0:17:17.680 --> 0:17:21.240 in China in their country, that also reduces China's reliance 0:17:21.320 --> 0:17:23.320 on chips from other countries, so they don't have to 0:17:23.320 --> 0:17:26.159 look to Taiwan or you know, any other country to 0:17:26.200 --> 0:17:29.280 do this. We've seen this recently in India, Japan, and 0:17:29.320 --> 0:17:33.159 South Korea. They've all passed tax credits and subsidies for 0:17:33.359 --> 0:17:36.639 chip makers. Recently, the European Union has been looking at 0:17:36.680 --> 0:17:40.560 finalizing its own Chips Act legislation, which will hold billions 0:17:40.560 --> 0:17:43.760 of dollars in funding to make up for that large 0:17:43.920 --> 0:17:47.000 drop in chip production. So that created a huge gap 0:17:47.080 --> 0:17:51.080 in the cost of operating and manufacturing in these different places. 0:17:51.200 --> 0:17:53.560 At the end of the day, there's a thirty percent 0:17:53.600 --> 0:17:58.240 cost difference between building and operating factories in Asia compared 0:17:58.280 --> 0:17:59.160 to the United States. 0:18:00.040 --> 0:18:02.639 Thirty percent feels big to me, So what are we 0:18:02.680 --> 0:18:05.320 going to do to close that gap. Congress actually passed 0:18:05.359 --> 0:18:08.160 the Chips Act that's part of the National Defense Authorization 0:18:08.359 --> 0:18:09.640 Act in twenty twenty one. 0:18:09.880 --> 0:18:13.280 The bill has around fifty two point five billion dollars 0:18:13.320 --> 0:18:15.240 in funding for the semiconductor industry. 0:18:15.480 --> 0:18:18.479 But passing isn't the end all, be all. They haven't 0:18:18.560 --> 0:18:22.080 formally budgeted out any of that funding. In order to 0:18:22.160 --> 0:18:26.280 actually put the dollars behind the Act, we need to 0:18:26.440 --> 0:18:31.080 fund the Bipartisan Innovation Act. Alice saying companies want Congress 0:18:31.080 --> 0:18:32.919 to pass that bill so that they can get the 0:18:33.000 --> 0:18:36.719 money the fifty two point five billion that people said 0:18:37.119 --> 0:18:39.000 when we would get in twenty twenty one with the 0:18:39.040 --> 0:18:39.600 Chips Act. 0:18:39.800 --> 0:18:43.560 What the Bipartisan Innovation Act would do is eliminate that 0:18:43.600 --> 0:18:47.000 cost delta a thirty percent. If you take away that 0:18:47.080 --> 0:18:51.200 cost delta, it's much easier to drive investment here. That 0:18:51.240 --> 0:18:53.719 has two benefits, not in terms of just job creation, 0:18:54.160 --> 0:18:58.280 but it improves supply chain resiliency because over the last 0:18:58.520 --> 0:19:02.440 half a century, company rewarded for the efficiency of their 0:19:02.440 --> 0:19:06.640 supply chain, not necessarily the resiliency of their supply chain. 0:19:07.080 --> 0:19:09.800 Our CEO pac Ellsinger always says that we've need a 0:19:09.880 --> 0:19:13.000 transition from a just in time delivery system to a 0:19:13.240 --> 0:19:17.720 just in case delivery system in supply chain, and the 0:19:17.760 --> 0:19:23.200 Bipartisan Innovation Act is designed to support industry by removing 0:19:23.200 --> 0:19:26.200 that thirty percent cost gap, so it's much more cost 0:19:26.240 --> 0:19:28.639 competitive to build facilities. In the United States. 0:19:28.960 --> 0:19:31.840 All said, the way for companies to shift to a 0:19:31.880 --> 0:19:34.720 more resilient supply chain is to go from a just 0:19:34.800 --> 0:19:38.800 in time manufacturing model, which is when companies create items 0:19:38.840 --> 0:19:43.719 as needed to adjust in case model, where companies do 0:19:43.760 --> 0:19:47.320 the opposite of that, where they make enough product in 0:19:47.440 --> 0:19:49.520 advance and have it in excess. 0:19:49.880 --> 0:19:52.720 It feels like we're hitting on this distinction between efficiency 0:19:52.840 --> 0:19:56.360 and resiliency, and so when it comes to chip manufacturing, 0:19:56.400 --> 0:19:57.440 what does it actually mean. 0:19:57.760 --> 0:20:00.520 A big part of this is having a more diverse 0:20:00.560 --> 0:20:04.399 supply chain so production doesn't stop if one part of 0:20:04.440 --> 0:20:08.560 that production process is compromised. 0:20:07.960 --> 0:20:10.240 And that's part of what this push for chip factories 0:20:10.240 --> 0:20:12.840 in the United States is about. But funding for those 0:20:12.880 --> 0:20:17.320 factories installed in Congress in June. Global Wafers a Taiwanese 0:20:17.320 --> 0:20:21.120 semiconductor maker, the third largest one in the world, said 0:20:21.160 --> 0:20:23.480 they would build a five billion dollar factory in the 0:20:23.600 --> 0:20:27.560 United States, but only if the government helps pay for it. 0:20:27.640 --> 0:20:29.479 They're going to put a twelve billion dollar plant in 0:20:29.480 --> 0:20:32.919 Phoenix to produce the most advanced chips, but the CEO 0:20:33.240 --> 0:20:36.280 Mark Lucid. Development would only move forward if the government 0:20:36.320 --> 0:20:39.280 would make up for TSMC's running costs difference between the 0:20:39.359 --> 0:20:43.080 United States and Taiwan. And although Intel had previously had 0:20:43.119 --> 0:20:45.280 plans to have a twenty billion dollar factory in Ohio, 0:20:45.359 --> 0:20:48.080 because those funds haven't been distributed, Intel put a freeze 0:20:48.119 --> 0:20:52.160 on construction and postponed its groundbreaking ceremony not a week, 0:20:52.240 --> 0:20:55.919 but indefinitely until Congress funds the chip pack. There are 0:20:55.960 --> 0:20:58.920 a lot of roadblocks to even starting to address this shortage. 0:20:59.080 --> 0:21:01.800 We asked ol what other ways the supply chain could 0:21:01.840 --> 0:21:02.440 look different. 0:21:02.760 --> 0:21:06.080 Instead of having a supply chain where eighty percent of 0:21:06.119 --> 0:21:08.399 it is concentrated in one part of the world, and 0:21:08.480 --> 0:21:11.720 of that half that eighty percent is concentrated in two countries, 0:21:11.760 --> 0:21:14.520