1
00:00:02,480 --> 00:00:16,600
Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.

2
00:00:18,000 --> 00:00:21,799
Speaker 2: Hello and welcome to another episode of the Odd Lots podcast.

3
00:00:21,880 --> 00:00:24,360
Speaker 3: I'm Joe Wisenthal and I'm Tracy Alloway.

4
00:00:24,480 --> 00:00:26,720
Speaker 2: Tracy, I just wrote about this in our newsletter like

5
00:00:26,760 --> 00:00:29,600
Speaker 2: five minutes ago. But it drives me nuts. How on

6
00:00:29,720 --> 00:00:34,360
Speaker 2: all of the talk about reindustrialization of America everyone had

7
00:00:34,400 --> 00:00:37,800
Speaker 2: just completely memory hold, like twenty twenty two and twenty

8
00:00:37,840 --> 00:00:38,360
Speaker 2: twenty three.

9
00:00:38,680 --> 00:00:41,120
Speaker 3: Well, this is the amazing thing, right, We did have

10
00:00:41,320 --> 00:00:46,400
Speaker 3: a big investment program actually announced under the Biden administration,

11
00:00:46,560 --> 00:00:51,159
Speaker 3: like huge amounts of money, billions of dollars, and no

12
00:00:51,159 --> 00:00:54,320
Speaker 3: one seems to be talking about it that much, or

13
00:00:54,320 --> 00:00:58,120
Speaker 3: at least a very important segment seems to be ignoring it,

14
00:00:58,160 --> 00:01:01,200
Speaker 3: and that is the Trump administration. Trump. I think he

15
00:01:01,280 --> 00:01:04,200
Speaker 3: said before that he thought it was a horrible policy.

16
00:01:04,360 --> 00:01:04,959
Speaker 2: Yeah.

17
00:01:05,040 --> 00:01:08,280
Speaker 3: I suspect the reason he thinks it's horrible is because

18
00:01:08,920 --> 00:01:12,520
Speaker 3: it was a Biden thing. But it is also amazing

19
00:01:12,520 --> 00:01:17,280
Speaker 3: that like even this, even making more semiconductors in the US,

20
00:01:17,760 --> 00:01:21,800
Speaker 3: ended up being politicized and a sort of culture war issue.

21
00:01:21,840 --> 00:01:22,840
Speaker 4: It's just crazy to me.

22
00:01:23,200 --> 00:01:26,360
Speaker 2: It's totally insane to me, of all these influencers and

23
00:01:26,480 --> 00:01:29,720
Speaker 2: LARPers or so we need to bring back physical manufacturing

24
00:01:29,720 --> 00:01:32,640
Speaker 2: and national security, etc. As if this hasn't been a

25
00:01:32,680 --> 00:01:35,880
Speaker 2: dominant thing in US discourse for years, is if there

26
00:01:35,880 --> 00:01:40,040
Speaker 2: weren't literally battery and chip factories being announced almost every day.

27
00:01:40,080 --> 00:01:42,640
Speaker 2: Throw at twenty twenty two and twenty twenty three, all

28
00:01:42,680 --> 00:01:45,800
Speaker 2: across the US. It was not just a program. It

29
00:01:45,840 --> 00:01:48,760
Speaker 2: was like an actual like breaking ground and new things

30
00:01:48,760 --> 00:01:51,840
Speaker 2: were going up and dollars spent by the private sector

31
00:01:52,240 --> 00:01:56,000
Speaker 2: partially to get public subsidies, et cetera. You could certainly

32
00:01:56,080 --> 00:01:58,360
Speaker 2: say that it was like badly designed, or that it

33
00:01:58,440 --> 00:02:00,960
Speaker 2: was wrong, or there were too many rules whatever, like

34
00:02:01,040 --> 00:02:03,560
Speaker 2: all you know, that's all of this is fair play.

35
00:02:04,000 --> 00:02:06,840
Speaker 2: But the idea that suddenly this is just some new

36
00:02:07,000 --> 00:02:12,480
Speaker 2: impulse and not like something that's real, existing reindustrialization that's

37
00:02:12,520 --> 00:02:16,320
Speaker 2: going on, I find it infuriating or at the very

38
00:02:16,440 --> 00:02:17,200
Speaker 2: least very annoying.

39
00:02:17,480 --> 00:02:19,320
Speaker 3: Shall we fix that, Joe, Let's fix it.

40
00:02:19,360 --> 00:02:21,640
Speaker 2: Well, we should talk about what actually happened, right, because

41
00:02:21,680 --> 00:02:25,639
Speaker 2: it does seem like, either literally or de facto or

42
00:02:25,840 --> 00:02:29,000
Speaker 2: dejerie or whatever, the plug is being pulled on a

43
00:02:29,040 --> 00:02:31,200
Speaker 2: lot of these different programs, and now there's talk about

44
00:02:31,240 --> 00:02:36,120
Speaker 2: industrialization but the hope is that tariffs themselves spur all

45
00:02:36,160 --> 00:02:39,880
Speaker 2: of this domestic investment in physical things for people to

46
00:02:39,960 --> 00:02:43,600
Speaker 2: do assembly line jobs, et cetera. But we should learn

47
00:02:43,600 --> 00:02:44,200
Speaker 2: a little bit more.

48
00:02:44,240 --> 00:02:47,400
Speaker 3: We should talk about what trips actually are as well,

49
00:02:47,480 --> 00:02:51,200
Speaker 3: because you know, yes, boost manufacturing in the US, create

50
00:02:51,320 --> 00:02:55,960
Speaker 3: new jobs, spur some private investment, sort of public private idea,

51
00:02:56,040 --> 00:02:58,720
Speaker 3: But there are a lot of different like threads that

52
00:02:58,760 --> 00:03:01,160
Speaker 3: you can pull here into in terms of the actual goals.

53
00:03:01,360 --> 00:03:03,520
Speaker 2: Well, we should learn a little bit more about what

54
00:03:03,560 --> 00:03:08,040
Speaker 2: the Chips program actually was, and I it does still exist,

55
00:03:08,160 --> 00:03:10,639
Speaker 2: but I'm not really sure if it seems like it's

56
00:03:10,639 --> 00:03:12,679
Speaker 2: more of a husk than it was. We're going to

57
00:03:12,720 --> 00:03:15,119
Speaker 2: be speaking with someone we know very well, someone we've

58
00:03:15,120 --> 00:03:17,160
Speaker 2: known on the internet a long time, someone who even

59
00:03:17,200 --> 00:03:20,160
Speaker 2: came on Odd Lots one several years ago, who actually

60
00:03:20,240 --> 00:03:22,600
Speaker 2: worked in the Chips Program office. We were speaking with

61
00:03:22,680 --> 00:03:26,959
Speaker 2: Hussan Khan. He was the director of Economic Security at

62
00:03:27,000 --> 00:03:30,720
Speaker 2: the Chips Program Office. I believe he's officially left the

63
00:03:30,800 --> 00:03:33,919
Speaker 2: job so he could talk now about what he saw

64
00:03:34,200 --> 00:03:37,000
Speaker 2: inside Hustin. Thank you so much for coming back on

65
00:03:37,040 --> 00:03:39,200
Speaker 2: Odd Lots Joe Tracy.

66
00:03:39,240 --> 00:03:42,400
Speaker 4: It's always a pleasure you know your intro there. I

67
00:03:42,560 --> 00:03:45,640
Speaker 4: feel very similarly. I really do feel like we forgot

68
00:03:45,680 --> 00:03:48,880
Speaker 4: about what was accomplished in honestly less than two years,

69
00:03:49,280 --> 00:03:51,200
Speaker 4: so excited to talk about it. What are you tells us?

70
00:03:51,240 --> 00:03:54,640
Speaker 2: What did you do as the Director of Economic Security

71
00:03:54,680 --> 00:03:56,960
Speaker 2: at the Chips Program Office? What was that job?

72
00:03:57,800 --> 00:04:01,960
Speaker 4: So if you look at why we passed the Chips

73
00:04:01,960 --> 00:04:05,840
Speaker 4: and Science Act, Congress and the President came together and said,

74
00:04:06,480 --> 00:04:11,640
Speaker 4: our reliance on offshore manufacturing for semiconductors presents both an

75
00:04:11,720 --> 00:04:14,360
Speaker 4: economic and national security threat. And we saw that play

76
00:04:14,400 --> 00:04:18,200
Speaker 4: out in real time during the pandemic. When we couldn't

77
00:04:18,200 --> 00:04:20,880
Speaker 4: make cars, we couldn't make a whole host of goods.

78
00:04:21,240 --> 00:04:24,279
Speaker 4: Prices went up that posed an economic security threat because

79
00:04:24,320 --> 00:04:27,080
Speaker 4: people were losing their jobs. Obviously there's a national security

80
00:04:27,120 --> 00:04:30,400
Speaker 4: angle as well, because we were reliant on overseas factories

81
00:04:30,400 --> 00:04:33,480
Speaker 4: for chips that go into military equipment. And as the

82
00:04:33,520 --> 00:04:36,960
Speaker 4: Director of Economic Security, my role was for it was

83
00:04:37,000 --> 00:04:40,440
Speaker 4: sort of twofold first, helping sort of set the strategy.

84
00:04:40,600 --> 00:04:43,440
Speaker 4: What was our vision for what we wanted to accomplish

85
00:04:43,440 --> 00:04:45,479
Speaker 4: with the Chips Program Office. So before I joined, we

86
00:04:45,480 --> 00:04:48,760
Speaker 4: published a vision for success paper in February of twenty

87
00:04:48,760 --> 00:04:51,440
Speaker 4: twenty three. I'm actually quite astonished. I think very few

88
00:04:51,440 --> 00:04:53,600
Speaker 4: people who talk about chips actually read that paper, and

89
00:04:53,640 --> 00:04:55,720
Speaker 4: I still think it's worth reading because it laid out

90
00:04:55,720 --> 00:04:57,640
Speaker 4: a roadmap for what we wanted to do within the

91
00:04:57,680 --> 00:05:00,200
Speaker 4: different categories. And then the second job that I had

92
00:05:00,320 --> 00:05:05,160
Speaker 4: was helping our teams understand the value of each proposed

93
00:05:05,160 --> 00:05:09,560
Speaker 4: project to US economic security. So why would the factory

94
00:05:09,600 --> 00:05:13,800
Speaker 4: that X company is proposing improve our economic security? And

95
00:05:13,839 --> 00:05:15,479
Speaker 4: obviously there are different ways in which you can do that,

96
00:05:15,520 --> 00:05:19,839
Speaker 4: whether that's advancing technological capabilities, improving supply chain resilience, plugging

97
00:05:20,440 --> 00:05:22,560
Speaker 4: various gaps in the supply chain, et cetera, et cetera.

98
00:05:22,600 --> 00:05:24,120
Speaker 4: And that's why we did sort of a deal by

99
00:05:24,160 --> 00:05:26,880
Speaker 4: deal analysis on those metrics. But it was really that

100
00:05:26,960 --> 00:05:30,640
Speaker 4: twofold going not just strategically across the portfolio, but on

101
00:05:30,680 --> 00:05:31,719
Speaker 4: a deal by deal basis.

102
00:05:32,240 --> 00:05:34,840
Speaker 3: I wanted to ask you about exactly this because I

103
00:05:34,839 --> 00:05:38,840
Speaker 3: imagine there are trade offs when you're deciding what or

104
00:05:38,880 --> 00:05:41,680
Speaker 3: who to fund. Do you fund stuff that's going to

105
00:05:41,720 --> 00:05:45,520
Speaker 3: have the most immediate impact make headlines, or do you

106
00:05:45,600 --> 00:05:48,240
Speaker 3: finance stuff that maybe it takes longer to build but

107
00:05:48,320 --> 00:05:50,480
Speaker 3: it's going to have a bigger effect on the economy

108
00:05:50,800 --> 00:05:54,800
Speaker 3: or national security. If you're looking at two pitches on

109
00:05:54,839 --> 00:05:57,720
Speaker 3: your desk or I guess it was an online application

110
00:05:57,839 --> 00:06:00,279
Speaker 3: like a portal, but you're looking at those applications and

111
00:06:00,320 --> 00:06:03,560
Speaker 3: one is for building I don't know, in video GPUs

112
00:06:03,600 --> 00:06:06,960
Speaker 3: and the other is like making an improvement on basic

113
00:06:07,040 --> 00:06:10,320
Speaker 3: chips that go into MCUs and cars or whatever, lagging

114
00:06:10,440 --> 00:06:14,480
Speaker 3: versus leading. How do you decide between those different proposals.

115
00:06:16,120 --> 00:06:18,760
Speaker 4: So, Tracy, that's a great question, and I would say

116
00:06:20,080 --> 00:06:24,400
Speaker 4: what complicated that decision making process was when the bill

117
00:06:24,480 --> 00:06:26,640
Speaker 4: was passed in August of twenty twenty two, we were

118
00:06:27,080 --> 00:06:30,720
Speaker 4: solely focused as a country on the impact of shortages.

119
00:06:31,000 --> 00:06:32,880
Speaker 4: And then it was in November of twenty twenty two

120
00:06:32,920 --> 00:06:36,920
Speaker 4: that chat GPT came out and suddenly the conversation shifted

121
00:06:37,160 --> 00:06:42,000
Speaker 4: very rapidly to AI supremacy. So in real time, you know,

122
00:06:42,000 --> 00:06:44,200
Speaker 4: if you ask Congressman why are you passing this bill,

123
00:06:44,240 --> 00:06:46,240
Speaker 4: they would have said, well, we can't have these car shutdowns,

124
00:06:46,320 --> 00:06:48,520
Speaker 4: or we can't have car factory shutting down. Appliances are

125
00:06:48,520 --> 00:06:51,599
Speaker 4: too expensive. And then by early twenty twenty three, it

126
00:06:51,680 --> 00:06:54,160
Speaker 4: was what we have to win the AI race so

127
00:06:54,200 --> 00:06:56,040
Speaker 4: we sat back as an office and we really said,

128
00:06:56,240 --> 00:07:00,520
Speaker 4: we don't want to be chasing just one category. And

129
00:07:00,560 --> 00:07:02,280
Speaker 4: I think again our strategy was, we want to make

130
00:07:02,279 --> 00:07:05,560
Speaker 4: sure we're making investments across the entire supply chain. So

131
00:07:06,240 --> 00:07:09,680
Speaker 4: we said, hey, we're going to functionally target a majority

132
00:07:09,680 --> 00:07:11,400
Speaker 4: of our funding, the vast majority of our funding towards

133
00:07:11,440 --> 00:07:13,920
Speaker 4: the leading edge. Why those are the most expensive facilities.

134
00:07:13,960 --> 00:07:17,960
Speaker 4: So Intel, TSMC, Samsung and Micron between them got nearly

135
00:07:18,080 --> 00:07:20,440
Speaker 4: twenty eight twenty nine billion dollars and don't you know,

136
00:07:20,480 --> 00:07:24,560
Speaker 4: you can check my math afterwards. Knowing that getting those

137
00:07:24,600 --> 00:07:27,440
Speaker 4: facilities in the United States at the scale that they

138
00:07:27,440 --> 00:07:31,080
Speaker 4: were investing in has downstream consequences too, because now you're

139
00:07:31,080 --> 00:07:34,400
Speaker 4: building out the supply chain necessary for the entire industry,

140
00:07:34,480 --> 00:07:37,160
Speaker 4: and that spills over to some of the other facilities

141
00:07:37,160 --> 00:07:39,200
Speaker 4: that are going to come up online. We did have

142
00:07:39,240 --> 00:07:42,200
Speaker 4: a statutory requirement to invest at least two billion dollars

143
00:07:42,240 --> 00:07:44,400
Speaker 4: in what we're called legacy node chips, and our office

144
00:07:44,400 --> 00:07:47,800
Speaker 4: spend a lot of time trying to understand what our

145
00:07:47,800 --> 00:07:50,720
Speaker 4: strategy could be on shoring up legacy supply. So we

146
00:07:50,800 --> 00:07:53,360
Speaker 4: made investments, you know, large ones in TI and global

147
00:07:53,400 --> 00:07:56,280
Speaker 4: foundries that are in the sort of meat of the

148
00:07:56,320 --> 00:07:59,720
Speaker 4: legacy node supply chain. But we also made actually dozens

149
00:07:59,720 --> 00:08:02,760
Speaker 4: of investments that I think at short shrift because they

150
00:08:02,840 --> 00:08:05,240
Speaker 4: just aren't as headline grabbing, but they plugged up a

151
00:08:05,240 --> 00:08:09,160
Speaker 4: lot of our capabilities in rf in power, summi conductors,

152
00:08:09,400 --> 00:08:11,760
Speaker 4: the sort of un sexy types of electronics that are

153
00:08:11,760 --> 00:08:15,400
Speaker 4: critical not just for infrastructure today but infrastructure in the future.

154
00:08:15,720 --> 00:08:17,240
Speaker 4: And how we thought about trade offs. I think the

155
00:08:17,240 --> 00:08:19,880
Speaker 4: way we tried to think about it was we really

156
00:08:19,880 --> 00:08:22,720
Speaker 4: tried to bucket our funds and say, hey, for the

157
00:08:22,800 --> 00:08:25,720
Speaker 4: leading edge, we want to be able to say, preserve

158
00:08:26,320 --> 00:08:28,000
Speaker 4: x amount of our budget. It was about that twenty

159
00:08:28,000 --> 00:08:31,440
Speaker 4: eight billion dollars for the leading edge and make sure

160
00:08:31,480 --> 00:08:34,240
Speaker 4: that we retain sufficient funding on the back end for

161
00:08:34,880 --> 00:08:38,200
Speaker 4: the legacy nodes, for advanced packaging, for the supply chain,

162
00:08:38,480 --> 00:08:41,000
Speaker 4: because we knew that we needed to make investments across

163
00:08:41,040 --> 00:08:44,240
Speaker 4: the entire supply chain just get to the resilience. That was,

164
00:08:44,920 --> 00:08:46,440
Speaker 4: you know, the reason that the bill was passed.

165
00:08:46,840 --> 00:08:48,840
Speaker 2: All right, I have a question, and you could just

166
00:08:48,880 --> 00:08:51,960
Speaker 2: be totally honest, you know, I'll give it to one

167
00:08:52,000 --> 00:08:55,920
Speaker 2: of the criticisms of Biden era industrial policy that is

168
00:08:55,920 --> 00:09:00,680
Speaker 2: frequently made from our abundance brothers and sisters, is that yes,

169
00:09:00,720 --> 00:09:03,760
Speaker 2: there were all of these efforts, but you know, you

170
00:09:03,760 --> 00:09:06,320
Speaker 2: couldn't get the money unless you had a certain amount

171
00:09:06,320 --> 00:09:08,720
Speaker 2: of workforce diversity, and you had to do a land

172
00:09:08,760 --> 00:09:12,040
Speaker 2: acknowledgment on where you were going to build the factory,

173
00:09:12,679 --> 00:09:15,120
Speaker 2: and also you had to have like childcare, etc. And

174
00:09:15,160 --> 00:09:16,920
Speaker 2: it's like, well, do you want to build the chip

175
00:09:16,920 --> 00:09:19,720
Speaker 2: plant or not? Because if you do, then why did

176
00:09:19,800 --> 00:09:21,959
Speaker 2: you put all of these other burdens that have nothing

177
00:09:22,000 --> 00:09:24,640
Speaker 2: to do with building chips per se onto the money?

178
00:09:24,960 --> 00:09:28,400
Speaker 2: In your experience, what is the role of these other

179
00:09:28,640 --> 00:09:33,679
Speaker 2: elements in the speed of grant programs or project development

180
00:09:33,880 --> 00:09:34,439
Speaker 2: in the US?

181
00:09:35,400 --> 00:09:37,880
Speaker 4: I know this is a topic that gets Frankly, I

182
00:09:37,960 --> 00:09:40,400
Speaker 4: think it gets way too much air time. And I'll

183
00:09:40,440 --> 00:09:43,959
Speaker 4: tell you why. First, there were statutory requirements that came

184
00:09:43,960 --> 00:09:47,480
Speaker 4: from Congress on what the proposals had to be. Right.

185
00:09:47,520 --> 00:09:50,160
Speaker 4: So Congress themselves came and said, hey, if you're making

186
00:09:50,200 --> 00:09:53,200
Speaker 4: a project proposal, you need to have opportunity and inclusion

187
00:09:53,280 --> 00:09:58,120
Speaker 4: language or what your commitments are to community investments. If

188
00:09:58,120 --> 00:10:00,400
Speaker 4: you look at the DFAs that we write, the direct

189
00:10:00,400 --> 00:10:03,360
Speaker 4: funding agreements, the terms that we had around what you

190
00:10:03,440 --> 00:10:08,480
Speaker 4: might call everything. Bagel policy basically codified the commitments the

191
00:10:08,520 --> 00:10:11,480
Speaker 4: firms themselves had made to the communities that they were

192
00:10:11,520 --> 00:10:14,320
Speaker 4: investing in. It essentially said, hey, you told the community

193
00:10:14,360 --> 00:10:16,480
Speaker 4: that you were going to be investing in, you know,

194
00:10:16,640 --> 00:10:20,840
Speaker 4: the schools or water reclamation projects, whatever those community investment

195
00:10:20,840 --> 00:10:24,160
Speaker 4: funds could be. All we're doing is memorializing that commitment

196
00:10:24,160 --> 00:10:29,200
Speaker 4: that you've made. Secondly, on childcare, this is another one

197
00:10:29,240 --> 00:10:31,240
Speaker 4: that first in terms of the amount of funding that

198
00:10:31,280 --> 00:10:33,160
Speaker 4: we put towards it, I think it was a total

199
00:10:33,200 --> 00:10:37,080
Speaker 4: of about ten million dollars across the thirty nine billion, Okay,

200
00:10:37,520 --> 00:10:40,840
Speaker 4: So it was never a focus. It never became in

201
00:10:40,880 --> 00:10:43,600
Speaker 4: any of the negotiations that I set in a discussion

202
00:10:43,600 --> 00:10:45,600
Speaker 4: where the company came back and said, hey, we really

203
00:10:45,640 --> 00:10:47,680
Speaker 4: want to build this plant, but the million dollars that

204
00:10:47,679 --> 00:10:50,240
Speaker 4: you're giving us for childcare and the requirements that you

205
00:10:50,240 --> 00:10:52,840
Speaker 4: have simply aren't enough. Many of these firms are investing

206
00:10:52,880 --> 00:10:55,200
Speaker 4: in child care facilities for their workers anyways, and you

207
00:10:55,240 --> 00:10:57,200
Speaker 4: see it like there's Wall Street Journal report a few

208
00:10:57,200 --> 00:11:00,120
Speaker 4: months ago about a company that wanted to expand and

209
00:11:00,240 --> 00:11:03,000
Speaker 4: with new workers that were mostly coming from like Hispanic background,

210
00:11:03,040 --> 00:11:04,520
Speaker 4: and they found that the biggest thing they could do

211
00:11:04,600 --> 00:11:07,520
Speaker 4: to help bring them on was have childcare on site,

212
00:11:07,600 --> 00:11:10,040
Speaker 4: because their workers were like, I can't come to the

213
00:11:10,040 --> 00:11:11,720
Speaker 4: office because I don't have a place to leave my kids.

214
00:11:11,960 --> 00:11:14,839
Speaker 4: So it's just it's actually what the private sector is

215
00:11:14,880 --> 00:11:17,680
Speaker 4: doing anyway, And oftentimes the funding that we brought to

216
00:11:17,760 --> 00:11:20,560
Speaker 4: those initiatives actually helped them think outside the box and

217
00:11:20,600 --> 00:11:24,640
Speaker 4: think across firms to come up with regional solutions that

218
00:11:24,720 --> 00:11:26,959
Speaker 4: scaled better than they would on a firm by firm basis.

219
00:11:27,320 --> 00:11:30,800
Speaker 4: I will say, however, where I think critics of sort

220
00:11:30,800 --> 00:11:33,400
Speaker 4: of the everything bagel approach do have a point is

221
00:11:33,679 --> 00:11:35,880
Speaker 4: whereas a lot of the terms that I just described

222
00:11:35,960 --> 00:11:39,560
Speaker 4: were not deal stoppers. They didn't slow down negotiations, they

223
00:11:39,559 --> 00:11:42,480
Speaker 4: weren't the points of contention where there are points of

224
00:11:42,480 --> 00:11:46,840
Speaker 4: contention between different stakeholders, I think you need top leadership

225
00:11:46,840 --> 00:11:48,760
Speaker 4: to be able to come and say our number one

226
00:11:48,800 --> 00:11:51,880
Speaker 4: goal is to get the factory built, and various stakeholders

227
00:11:51,920 --> 00:11:54,120
Speaker 4: have to get in line. And where I'm talking about

228
00:11:54,120 --> 00:11:57,600
Speaker 4: stakeholders is where I think the abundance folks also speak

229
00:11:57,600 --> 00:12:00,360
Speaker 4: to them, groups like labor and environment, right, you have

230
00:12:00,400 --> 00:12:03,160
Speaker 4: to come and say, hey, do we want this project

231
00:12:03,160 --> 00:12:06,040
Speaker 4: to happen? There will inevitably be trade offs. There is

232
00:12:06,080 --> 00:12:08,640
Speaker 4: no world in which you can build a massive factory

233
00:12:08,960 --> 00:12:13,120
Speaker 4: and have zero environmental impact. Right. You have to also

234
00:12:13,320 --> 00:12:15,960
Speaker 4: even in the context of labor, we have to understand

235
00:12:15,960 --> 00:12:18,960
Speaker 4: that this is a globally competitive industry, and so the

236
00:12:19,080 --> 00:12:22,199
Speaker 4: demands that labor is making have to be viewed from

237
00:12:22,240 --> 00:12:24,480
Speaker 4: the context of like what does it take for the

238
00:12:24,520 --> 00:12:27,920
Speaker 4: factories in the US to be globally competitive? And I

239
00:12:27,960 --> 00:12:30,920
Speaker 4: think you need top leadership to come and say we're

240
00:12:30,960 --> 00:12:34,880
Speaker 4: not going to allow concerns that are being raised by

241
00:12:34,920 --> 00:12:39,280
Speaker 4: the community to sort of halt negotiation. So there is

242
00:12:39,679 --> 00:12:41,960
Speaker 4: a balance to be struck in terms of what's our

243
00:12:42,040 --> 00:12:44,160
Speaker 4: number one goal. Is it to get the factory done

244
00:12:44,320 --> 00:12:46,000
Speaker 4: or is it to make sure that no one's upset

245
00:12:46,040 --> 00:13:01,800
Speaker 4: at the fact that the factory is getting done.

246
00:13:03,760 --> 00:13:06,920
Speaker 3: Give us a sense of the actual timeline for the

247
00:13:07,000 --> 00:13:11,480
Speaker 3: application process, like how quickly could you actually approve things

248
00:13:11,600 --> 00:13:14,320
Speaker 3: on average? And then I'm curious, like what was the

249
00:13:14,520 --> 00:13:17,720
Speaker 3: longest negotiation that you had and what were the sticking

250
00:13:17,760 --> 00:13:18,400
Speaker 3: points there?

251
00:13:19,280 --> 00:13:22,360
Speaker 4: Okay, so the process the way it worked, you first

252
00:13:22,360 --> 00:13:24,640
Speaker 4: had to submit a what's called the statement of interest,

253
00:13:24,800 --> 00:13:27,640
Speaker 4: and this was honestly like a one to two paragraph

254
00:13:27,720 --> 00:13:32,320
Speaker 4: submission via Salesforce portal that basically said, we are from

255
00:13:32,559 --> 00:13:35,480
Speaker 4: company why, and we want to build a manufacturing plant

256
00:13:35,520 --> 00:13:39,240
Speaker 4: for semiconductors in Excity. It did not require a lot

257
00:13:39,240 --> 00:13:42,400
Speaker 4: of details that basically, you know, it puts you on

258
00:13:42,480 --> 00:13:44,520
Speaker 4: the map of our office to say, hey, we should

259
00:13:44,520 --> 00:13:46,080
Speaker 4: go and talk to these people and understand what they're

260
00:13:46,080 --> 00:13:48,640
Speaker 4: really trying to build. Then we had what we called

261
00:13:48,640 --> 00:13:51,240
Speaker 4: a pre app process, and we can come back to

262
00:13:51,280 --> 00:13:53,360
Speaker 4: that in just a moment my thoughts on the process,

263
00:13:53,400 --> 00:13:57,600
Speaker 4: but it essentially said, hey, submit a simplified version of

264
00:13:57,640 --> 00:14:00,040
Speaker 4: your final application and we'll give you some preliminary a

265
00:14:00,160 --> 00:14:03,559
Speaker 4: feedback kind of like a draft application, and will help

266
00:14:03,640 --> 00:14:07,679
Speaker 4: identify where we think on our scoring rubric you need

267
00:14:07,720 --> 00:14:10,720
Speaker 4: to make adjustments in order to score better. By the way,

268
00:14:10,720 --> 00:14:12,680
Speaker 4: our response to the pre app was non binding, so

269
00:14:12,800 --> 00:14:14,920
Speaker 4: if we basically said hey we don't like your pre app,

270
00:14:14,920 --> 00:14:17,720
Speaker 4: you could still apply and submit a full application. But

271
00:14:17,920 --> 00:14:19,680
Speaker 4: you know, we did take into consideration whether or not

272
00:14:19,720 --> 00:14:22,160
Speaker 4: you responded to the feedback from the pre app. The

273
00:14:22,320 --> 00:14:25,720
Speaker 4: full application was sort of your final submission. We started

274
00:14:25,720 --> 00:14:30,280
Speaker 4: to receive for our first full applications in the late

275
00:14:30,320 --> 00:14:33,240
Speaker 4: summer early fall of twenty twenty three, and so you

276
00:14:33,320 --> 00:14:36,880
Speaker 4: saw we got to a first preliminary announcement by the

277
00:14:37,040 --> 00:14:39,920
Speaker 4: end of twenty twenty three with BAE. So it took us,

278
00:14:40,040 --> 00:14:41,640
Speaker 4: you know, on the order of about a little more

279
00:14:41,640 --> 00:14:45,240
Speaker 4: than a quarter to get through a first full announcement.

280
00:14:45,520 --> 00:14:48,280
Speaker 4: The exact longest negotiations that it took, I have to

281
00:14:49,040 --> 00:14:51,200
Speaker 4: think back for a moment, but we had one final

282
00:14:51,240 --> 00:14:54,240
Speaker 4: step after the preliminary announcement following sort of exactly how

283
00:14:54,280 --> 00:14:55,800
Speaker 4: you do it in the private equity world, you know,

284
00:14:55,800 --> 00:14:59,040
Speaker 4: have a preliminary announcement saying, hey, we intend to make

285
00:14:59,080 --> 00:15:01,000
Speaker 4: this investment, we intend to go forward with this, but

286
00:15:01,040 --> 00:15:02,920
Speaker 4: it's subject to due diligence and i'd be the direct

287
00:15:03,000 --> 00:15:08,760
Speaker 4: funding agreement. Those negotiations did drag on through twenty twenty four,

288
00:15:08,840 --> 00:15:10,560
Speaker 4: and I think a lot of it came down to

289
00:15:10,560 --> 00:15:12,480
Speaker 4: sort of dotting the eyes and crossing the t's on

290
00:15:13,080 --> 00:15:16,720
Speaker 4: what did it mean for the government and semiconductor firms

291
00:15:16,720 --> 00:15:20,440
Speaker 4: to make a commitment to each other on these facilities. Right,

292
00:15:20,520 --> 00:15:23,520
Speaker 4: There was a lot of not on the sort of

293
00:15:23,640 --> 00:15:26,000
Speaker 4: everything bagel terms, but there was a lot of negotiation

294
00:15:26,040 --> 00:15:27,920
Speaker 4: and what does it mean if your company is sold?

295
00:15:27,920 --> 00:15:32,040
Speaker 4: What does it mean if you violate guardrails statutory requirements? Right?

296
00:15:32,040 --> 00:15:33,640
Speaker 4: We really had to work through that because we'd never

297
00:15:33,680 --> 00:15:36,720
Speaker 4: worked through it as a country before with firms at

298
00:15:36,720 --> 00:15:40,200
Speaker 4: this scale. But what you saw routinely was as we

299
00:15:40,320 --> 00:15:43,360
Speaker 4: reached a milestone, So as we reached the first preliminary

300
00:15:43,480 --> 00:15:46,600
Speaker 4: memorandum of terms and we reached the first direct funding agreement,

301
00:15:47,000 --> 00:15:49,680
Speaker 4: the second, third, fourth agreements would happen much faster because

302
00:15:49,720 --> 00:15:51,440
Speaker 4: we at that point had worked out a template and

303
00:15:51,480 --> 00:15:53,720
Speaker 4: could say, hey, here's how other firms are thinking about

304
00:15:53,760 --> 00:15:57,320
Speaker 4: doing it. There's already comfort with this format. Let's try

305
00:15:57,320 --> 00:15:59,720
Speaker 4: and you work off that, and you saw them happen

306
00:15:59,800 --> 00:16:00,720
Speaker 4: in rapid succession.

307
00:16:01,320 --> 00:16:03,160
Speaker 2: I want to go back to what you said we're

308
00:16:03,160 --> 00:16:07,120
Speaker 2: talking about earlier, that the abundance people do have some

309
00:16:07,160 --> 00:16:12,720
Speaker 2: sort of point when it comes to environmental and labor stakeholders.

310
00:16:12,920 --> 00:16:15,800
Speaker 2: What did you see specifically? Now you don't have to

311
00:16:15,840 --> 00:16:18,720
Speaker 2: like identify the names of the projects, but look, these

312
00:16:18,760 --> 00:16:23,720
Speaker 2: are different parts of the Democratic Party constituency. Late, I'll

313
00:16:23,760 --> 00:16:26,120
Speaker 2: say this, the Democratic Party really wants to be liked

314
00:16:26,120 --> 00:16:28,960
Speaker 2: by organized labor. I don't know if the organized labor,

315
00:16:29,360 --> 00:16:32,480
Speaker 2: especially in the private sector, is a big Democratic constituents anymore.

316
00:16:32,480 --> 00:16:36,040
Speaker 2: But Democratic Party certainly wants to be liked by organized labor.

317
00:16:36,360 --> 00:16:39,280
Speaker 2: They certainly want people who concern about the environment talk

318
00:16:39,360 --> 00:16:43,000
Speaker 2: to us about the reality of how these different impulses

319
00:16:43,160 --> 00:16:44,200
Speaker 2: can collide with each other.

320
00:16:44,680 --> 00:16:47,440
Speaker 4: So I think we have to take one step back

321
00:16:47,640 --> 00:16:51,320
Speaker 4: and be honest about where we stand in terms of

322
00:16:51,360 --> 00:16:55,240
Speaker 4: our manufacturing competitiveness. Right. I think they're a broad understanding

323
00:16:55,360 --> 00:16:57,960
Speaker 4: that we are no longer at the frontier in a

324
00:16:58,080 --> 00:17:00,640
Speaker 4: range of industries, and so what is it going to

325
00:17:00,680 --> 00:17:03,040
Speaker 4: take for us to catch up to the frontier and

326
00:17:03,280 --> 00:17:07,120
Speaker 4: be globally competitive again? We have cost disadvantages to operating

327
00:17:07,119 --> 00:17:10,400
Speaker 4: in this country, it takes longer to build. We do have,

328
00:17:10,880 --> 00:17:16,080
Speaker 4: you know, existing regulatory frameworks that can complicate some of

329
00:17:16,119 --> 00:17:19,920
Speaker 4: these projects, right. So, I think one of the consequences

330
00:17:20,160 --> 00:17:23,160
Speaker 4: of this tension of there's an urgency to move fast,

331
00:17:23,200 --> 00:17:27,199
Speaker 4: an urgency to catch up to our geopolitical competitors, but

332
00:17:27,720 --> 00:17:29,600
Speaker 4: not really a readiness to sort of tear down the

333
00:17:29,640 --> 00:17:31,560
Speaker 4: frameworks that we had. And I think for good reason,

334
00:17:31,880 --> 00:17:32,960
Speaker 4: you have to come back and say, well, what is

335
00:17:32,960 --> 00:17:34,240
Speaker 4: it going to take for us to catch up and

336
00:17:34,280 --> 00:17:37,040
Speaker 4: so on. A lot of these projects, you saw environmental

337
00:17:37,080 --> 00:17:40,480
Speaker 4: groups raising concerns on you know, pollution impacts. You saw

338
00:17:40,560 --> 00:17:43,120
Speaker 4: labor groups sort of saying, hey, unions are being left

339
00:17:43,119 --> 00:17:45,960
Speaker 4: out in the cold. And I would come back and say,

340
00:17:46,000 --> 00:17:48,680
Speaker 4: I think a lot of that really was noise because

341
00:17:48,720 --> 00:17:52,000
Speaker 4: there was like an open negotiation going on sometimes through

342
00:17:52,040 --> 00:17:54,960
Speaker 4: the media where these various groups were trying to say, hey,

343
00:17:55,000 --> 00:17:57,240
Speaker 4: make sure you don't forget about us. But I do

344
00:17:57,320 --> 00:18:02,000
Speaker 4: also think for policy, you have to be able to

345
00:18:02,160 --> 00:18:05,400
Speaker 4: come out and say what is the most important thing.

346
00:18:05,720 --> 00:18:07,520
Speaker 4: Is it for the factory to get done on time,

347
00:18:08,200 --> 00:18:12,040
Speaker 4: or is it that we leverage union labor or is

348
00:18:12,080 --> 00:18:15,600
Speaker 4: it that we make no impact to the environment. And

349
00:18:15,640 --> 00:18:19,639
Speaker 4: there will be times in every complex project in the

350
00:18:19,640 --> 00:18:21,840
Speaker 4: public or private sector, you have to make trade offs

351
00:18:21,840 --> 00:18:26,360
Speaker 4: between different objective functions, and I think for what we

352
00:18:26,400 --> 00:18:29,679
Speaker 4: saw was there was like an unwillingness sometimes to really

353
00:18:29,760 --> 00:18:34,440
Speaker 4: say to stakeholders, hey, we hear your needs, but they're

354
00:18:34,480 --> 00:18:37,520
Speaker 4: gonna be second priority in order to get the project

355
00:18:37,520 --> 00:18:42,120
Speaker 4: done right. And that complicates the discussion on how are

356
00:18:42,119 --> 00:18:44,560
Speaker 4: we going to get these things done quickly? And I

357
00:18:44,560 --> 00:18:47,640
Speaker 4: think there was a tension between the urgency that firms

358
00:18:47,840 --> 00:18:51,240
Speaker 4: and folks within the Chips Program Office felt, and outside

359
00:18:51,280 --> 00:18:54,560
Speaker 4: stakeholders who really were saying, well, don't forget about us.

360
00:18:55,880 --> 00:18:59,080
Speaker 3: So you mentioned a bunch of competitive disadvantages that the

361
00:18:59,240 --> 00:19:01,919
Speaker 3: US has, you know, things like we're starting from a

362
00:19:01,960 --> 00:19:06,600
Speaker 3: lower base at least in terms of manufacturing, higher labor costs,

363
00:19:06,800 --> 00:19:10,080
Speaker 3: more rules and regulations, whether it's about the environment or

364
00:19:10,160 --> 00:19:13,680
Speaker 3: something else. Do we have any competitive advantages? I'm actually

365
00:19:13,760 --> 00:19:16,520
Speaker 3: struggling here, but there must be something.

366
00:19:18,720 --> 00:19:22,240
Speaker 4: You know. Okay, so I think maybe not? No, I

367
00:19:22,280 --> 00:19:24,520
Speaker 4: do we do? Right? We have? If you think about it,

368
00:19:25,440 --> 00:19:28,040
Speaker 4: the world's most advanced firms were all designing the best

369
00:19:28,119 --> 00:19:29,600
Speaker 4: chips in the world. They're all based in the US.

370
00:19:29,640 --> 00:19:31,720
Speaker 4: We have the best university system, so we have a

371
00:19:31,760 --> 00:19:35,119
Speaker 4: deep talent pipeline. We have a tech stack than in

372
00:19:35,119 --> 00:19:38,199
Speaker 4: the United States, I think is unparalleled anywhere else. But

373
00:19:38,240 --> 00:19:40,320
Speaker 4: when it comes to being able to build a factory,

374
00:19:41,000 --> 00:19:43,000
Speaker 4: you know, I like to use the analogy of we

375
00:19:43,080 --> 00:19:46,159
Speaker 4: basically stopped going to the gym. Do you know before

376
00:19:46,200 --> 00:19:48,920
Speaker 4: the TSMC fab came online in late twenty twenty four,

377
00:19:49,200 --> 00:19:51,840
Speaker 4: when the last leading edge fab in the United States

378
00:19:51,880 --> 00:19:54,080
Speaker 4: was built, came online, No it's good. What is it?

379
00:19:54,080 --> 00:19:54,800
Speaker 2: What's the answer?

380
00:19:55,200 --> 00:20:00,000
Speaker 4: Twenty thirteen. So for basically a decade, we stopped building large,

381
00:20:00,280 --> 00:20:03,480
Speaker 4: leading edge fabs in the United States, and so the

382
00:20:03,600 --> 00:20:07,320
Speaker 4: muscle for how to build those factories atrophied. And that

383
00:20:07,359 --> 00:20:10,200
Speaker 4: doesn't just mean construction workers, like obviously all those people

384
00:20:10,240 --> 00:20:13,160
Speaker 4: went and probably found jobs elsewhere, but it also means

385
00:20:13,160 --> 00:20:15,440
Speaker 4: for the regulatory apparatus for what does it mean to

386
00:20:15,520 --> 00:20:18,520
Speaker 4: understand the environmental impacts of these facilities? And so when

387
00:20:18,520 --> 00:20:22,040
Speaker 4: you talk about the delays in construction, oftentimes those delays

388
00:20:22,119 --> 00:20:24,399
Speaker 4: are from the permitting processes that are handled at the

389
00:20:24,400 --> 00:20:26,480
Speaker 4: state and local level. Well, in a lot of the

390
00:20:26,480 --> 00:20:29,440
Speaker 4: places that we're building these facilities, state and local regulators

391
00:20:29,520 --> 00:20:32,680
Speaker 4: hadn't seen a facility like this before because we hadn't

392
00:20:32,680 --> 00:20:34,760
Speaker 4: been building them in over a decade, and so they

393
00:20:34,800 --> 00:20:38,240
Speaker 4: didn't know what the impacts were, and you know, it

394
00:20:38,320 --> 00:20:41,320
Speaker 4: required an education process. And I think a lot of

395
00:20:41,440 --> 00:20:44,240
Speaker 4: the noise that we heard in the last two years

396
00:20:44,320 --> 00:20:46,639
Speaker 4: was because we were kind of starting this again after

397
00:20:46,720 --> 00:20:49,119
Speaker 4: not going to the gym for over a decade. And

398
00:20:49,119 --> 00:20:50,440
Speaker 4: you know what happens when you don't go to the gym,

399
00:20:50,480 --> 00:20:52,480
Speaker 4: you go back one time you're really really sore the

400
00:20:52,520 --> 00:20:56,200
Speaker 4: next day, but if you keep going, your body kind

401
00:20:56,200 --> 00:20:58,359
Speaker 4: of gets used to it. And that's why, for example,

402
00:20:58,400 --> 00:21:01,360
Speaker 4: take TSMC's FABS in Arizona, you don't hear the same

403
00:21:01,400 --> 00:21:05,640
Speaker 4: noise about labor unions or permitting concerns over Fab two

404
00:21:06,160 --> 00:21:11,320
Speaker 4: because the entire system sort of got into shape, right.

405
00:21:11,359 --> 00:21:13,399
Speaker 4: And I think if the chips program off is going

406
00:21:13,440 --> 00:21:15,560
Speaker 4: to be looked at as a success, it's going to

407
00:21:15,600 --> 00:21:19,359
Speaker 4: be because the second, third, fourth, fifth facilities that are

408
00:21:19,359 --> 00:21:22,440
Speaker 4: being built at these sites are showing rates of learning

409
00:21:22,920 --> 00:21:26,120
Speaker 4: in how long it takes for them to get brought online,

410
00:21:26,320 --> 00:21:29,520
Speaker 4: brought up to speed, brought up to a similar capacity

411
00:21:29,520 --> 00:21:32,159
Speaker 4: to what they have and their overseas benchmarks. So I

412
00:21:32,160 --> 00:21:34,040
Speaker 4: would look at it's like the first fabs are like

413
00:21:34,080 --> 00:21:36,600
Speaker 4: a proof of concept, can we do this? And it's

414
00:21:36,680 --> 00:21:39,440
Speaker 4: really in the second, third, fourth fabs at these local

415
00:21:39,440 --> 00:21:41,880
Speaker 4: projects that you'll start to see the ecosystems of the church.

416
00:21:57,680 --> 00:22:02,480
Speaker 2: I asked earlier about whether environmentalists in unions are restraint.

417
00:22:02,640 --> 00:22:05,960
Speaker 2: Something else that I'm very interested in is you mentioned,

418
00:22:06,080 --> 00:22:09,000
Speaker 2: you know, the top semiconductor companies in the world are

419
00:22:09,040 --> 00:22:11,560
Speaker 2: actually in the United States. We just don't really make them,

420
00:22:11,600 --> 00:22:14,080
Speaker 2: but we design them, and that's actually much more valuable.

421
00:22:14,119 --> 00:22:18,000
Speaker 2: And in Nvidia is a much more valuable company than TSMC,

422
00:22:18,200 --> 00:22:21,200
Speaker 2: the legendary TSMC. And so, you know, I've been writing

423
00:22:21,200 --> 00:22:23,560
Speaker 2: about for a while like how much of this is

424
00:22:23,600 --> 00:22:29,120
Speaker 2: an issue of capitalism? And investors in semiconductor companies don't

425
00:22:29,160 --> 00:22:34,040
Speaker 2: want US manufacturing because that's lower margins. You move that overseas,

426
00:22:34,200 --> 00:22:38,440
Speaker 2: et cetera. You don't want design and fabrication in house

427
00:22:38,480 --> 00:22:40,560
Speaker 2: together because then you mix a high margin company with

428
00:22:40,640 --> 00:22:43,679
Speaker 2: a low margin company, et cetera. Obviously, to some extent,

429
00:22:43,960 --> 00:22:46,600
Speaker 2: the idea of using public money is to solve this problem.

430
00:22:46,880 --> 00:22:49,240
Speaker 2: But just when you're look in general at the questions

431
00:22:49,280 --> 00:22:52,679
Speaker 2: of US manufacturing and high tech areas or whatever, how

432
00:22:52,760 --> 00:22:55,000
Speaker 2: much is it about capitalist incentives.

433
00:22:55,480 --> 00:22:57,720
Speaker 4: I do think there is a tension here. I know

434
00:22:57,760 --> 00:23:00,359
Speaker 4: you've covered this as well. You saw TI, which is

435
00:23:00,400 --> 00:23:03,399
Speaker 4: engaging in one of the most aggressive expansions in the

436
00:23:03,480 --> 00:23:06,359
Speaker 4: United States, hoping to build seven fabs by the middle

437
00:23:06,400 --> 00:23:10,240
Speaker 4: of next decade. Overall, had activist investors basically pressuring them

438
00:23:10,240 --> 00:23:14,200
Speaker 4: to reduce their capital investments. And there is a tension

439
00:23:14,480 --> 00:23:17,200
Speaker 4: where shareholders are going to say, hey, you could return

440
00:23:17,240 --> 00:23:18,920
Speaker 4: money to me that would have better and I could

441
00:23:18,920 --> 00:23:22,280
Speaker 4: go use it in other use cases. Yeah, I mean famously,

442
00:23:22,320 --> 00:23:24,480
Speaker 4: look at the case of Intel, which for a long

443
00:23:24,560 --> 00:23:28,080
Speaker 4: time was returning a lot of cash to shareholders through

444
00:23:28,280 --> 00:23:32,280
Speaker 4: dividends and stock buybacks and fell behind the leading edge curve.

445
00:23:32,400 --> 00:23:35,120
Speaker 4: So that tension is absolutely real. But I do think

446
00:23:35,720 --> 00:23:39,679
Speaker 4: firms and investors understand the value of having these facilities.

447
00:23:39,760 --> 00:23:44,880
Speaker 4: I think the challenges creating a structure where the government

448
00:23:44,960 --> 00:23:49,399
Speaker 4: can help equalize the returns so that the private value

449
00:23:49,960 --> 00:23:52,000
Speaker 4: is similar to the public value. Let me put it

450
00:23:52,000 --> 00:23:55,840
Speaker 4: in another way, the government highly values these manufacturing facilities being

451
00:23:55,880 --> 00:23:57,959
Speaker 4: in the United States for the economic and national security

452
00:23:58,000 --> 00:24:01,720
Speaker 4: reasons I laid out above, right, But private shareholders don't

453
00:24:01,760 --> 00:24:03,919
Speaker 4: value them as much. But there are levers that we

454
00:24:03,960 --> 00:24:07,480
Speaker 4: can pull to help make them look more attractive. And

455
00:24:07,520 --> 00:24:11,520
Speaker 4: I think the biggest under discuss lever was the Investment

456
00:24:11,520 --> 00:24:14,080
Speaker 4: tax credit. Right. The investment tax credit is a twenty

457
00:24:14,080 --> 00:24:16,840
Speaker 4: five percent tax credit for firms that invest in manufacturing

458
00:24:16,840 --> 00:24:20,080
Speaker 4: in the United States. I think there's a world where

459
00:24:20,080 --> 00:24:23,040
Speaker 4: the future of industrial policy I'm putting quotes around that

460
00:24:23,400 --> 00:24:25,720
Speaker 4: really comes and says, hey, the focus should be on

461
00:24:26,800 --> 00:24:31,600
Speaker 4: tax credits that give firms certainty on what their cost

462
00:24:31,640 --> 00:24:33,760
Speaker 4: structure and return structure is going to look like for

463
00:24:34,440 --> 00:24:37,680
Speaker 4: capital investments made in the United States, and maybe the

464
00:24:37,800 --> 00:24:41,919
Speaker 4: disbursement funding that's subject to review by bureaucrats is a

465
00:24:41,960 --> 00:24:45,240
Speaker 4: smaller pot that is really geared towards firms that have

466
00:24:45,640 --> 00:24:49,600
Speaker 4: capital shortcomings or capital concerns. Right, So, I think you

467
00:24:49,640 --> 00:24:53,240
Speaker 4: could plausibly make the claim that the intels and tsmcs

468
00:24:53,240 --> 00:24:56,400
Speaker 4: of the world don't necessarily need cash from the government

469
00:24:56,680 --> 00:24:59,359
Speaker 4: because what they're optimizing for is like an NPV function

470
00:24:59,600 --> 00:25:02,520
Speaker 4: on their capital investments, and tax credits can solve all

471
00:25:02,520 --> 00:25:05,760
Speaker 4: of that, in fact, can happen with less government intervention.

472
00:25:06,600 --> 00:25:09,000
Speaker 4: But there are smaller firms who really do need cash

473
00:25:09,040 --> 00:25:11,480
Speaker 4: infusions in order to bring, you know, to bridge the

474
00:25:11,560 --> 00:25:13,800
Speaker 4: value of death that we've been talking about for decades

475
00:25:13,840 --> 00:25:16,240
Speaker 4: in this country but never really had an approach to SAULT.

476
00:25:16,640 --> 00:25:18,800
Speaker 4: And I think there's a slim down version of industrial

477
00:25:18,800 --> 00:25:22,160
Speaker 4: policy in the future that really focuses on ay tax

478
00:25:22,160 --> 00:25:25,639
Speaker 4: credits can equalize our cost structure and make investments attractive

479
00:25:25,960 --> 00:25:29,199
Speaker 4: where you know, we take target smaller amounts of funding

480
00:25:29,359 --> 00:25:32,000
Speaker 4: to critical technologies that we want to make sure happen

481
00:25:32,000 --> 00:25:32,679
Speaker 4: in the United States.

482
00:25:33,520 --> 00:25:36,560
Speaker 3: So on this note, I mean one of the discussions

483
00:25:36,560 --> 00:25:39,399
Speaker 3: that inevitably pops up when you're doing this type of

484
00:25:39,440 --> 00:25:43,879
Speaker 3: policy is public versus private and the sort of crowding

485
00:25:43,960 --> 00:25:49,240
Speaker 3: in or crowding out effect on private capital. I imagine

486
00:25:49,280 --> 00:25:51,720
Speaker 3: that part of the intent of the Chips Act was

487
00:25:51,760 --> 00:25:56,719
Speaker 3: to encourage private investors to get excited about not only

488
00:25:56,800 --> 00:25:59,840
Speaker 3: you know, the importance of manufacturing here in the US,

489
00:26:00,160 --> 00:26:03,600
Speaker 3: but also the potential returns. To your point about the

490
00:26:03,640 --> 00:26:07,760
Speaker 3: tax credit, did you see a change in behavior on

491
00:26:07,800 --> 00:26:10,600
Speaker 3: the part of private investors. Did you ever talk to

492
00:26:10,640 --> 00:26:13,080
Speaker 3: them about, you know, what their concerns were or what

493
00:26:13,160 --> 00:26:16,800
Speaker 3: they wanted to see from this program. And were you successful,

494
00:26:16,840 --> 00:26:19,760
Speaker 3: I guess in making chips manufacturing cool again.

495
00:26:20,800 --> 00:26:23,720
Speaker 4: I think we were. I think the Investment Office, led

496
00:26:23,760 --> 00:26:26,239
Speaker 4: by Todd Fisher, did a lot of outreach to the

497
00:26:26,240 --> 00:26:31,360
Speaker 4: investment community broadly to help them understand not just our approach,

498
00:26:31,520 --> 00:26:33,360
Speaker 4: but how we were working with firms to make these

499
00:26:33,359 --> 00:26:37,159
Speaker 4: investments more attractive in the United States. And you know,

500
00:26:37,720 --> 00:26:40,520
Speaker 4: I think there's a broad recognition that being able to

501
00:26:40,880 --> 00:26:45,720
Speaker 4: build industrial capacity in the US has benefits beyond just

502
00:26:45,800 --> 00:26:49,920
Speaker 4: the balance sheet. That being said, I do think it's

503
00:26:49,960 --> 00:26:55,320
Speaker 4: an ongoing discussion with the investment community on how do

504
00:26:55,400 --> 00:26:59,320
Speaker 4: we build certainty in these you know, government programs. Right. So,

505
00:26:59,840 --> 00:27:02,080
Speaker 4: the the biggest thing that the Chips Program Office did

506
00:27:02,240 --> 00:27:06,440
Speaker 4: was it gave firms confidence in what their returns would

507
00:27:06,440 --> 00:27:08,640
Speaker 4: look like if they invested in the US because they

508
00:27:08,680 --> 00:27:12,000
Speaker 4: had a tax credit and award dollars that would come

509
00:27:12,000 --> 00:27:14,359
Speaker 4: to them, and they could go to their investors and say, hey, look,

510
00:27:14,720 --> 00:27:17,359
Speaker 4: there is a cost disadvantage, but we feel confident that

511
00:27:17,359 --> 00:27:19,760
Speaker 4: we'll be able to reduce it with the public dollars

512
00:27:19,800 --> 00:27:23,040
Speaker 4: that are coming in. And I really think the biggest

513
00:27:23,119 --> 00:27:26,320
Speaker 4: lever that the government can pull is giving firms certainty

514
00:27:26,520 --> 00:27:30,440
Speaker 4: when they're making twenty to hundred billion dollar investments, because

515
00:27:30,440 --> 00:27:32,439
Speaker 4: they don't want to be caught on the wrong side

516
00:27:32,480 --> 00:27:36,320
Speaker 4: by a policy change that now gets them underwater on

517
00:27:36,480 --> 00:27:39,960
Speaker 4: a facility that's half done, And the sunk costs of

518
00:27:40,000 --> 00:27:43,240
Speaker 4: building a facility and half getting it half equipped are

519
00:27:43,320 --> 00:27:47,120
Speaker 4: really large, and so I think that is the challenge

520
00:27:47,160 --> 00:27:49,560
Speaker 4: for a lot of these firms and for investors. They

521
00:27:49,600 --> 00:27:51,600
Speaker 4: want to be able to say, hey, is what we're

522
00:27:51,600 --> 00:27:55,120
Speaker 4: modeling really going to hold in the long term from

523
00:27:55,119 --> 00:27:57,240
Speaker 4: a cost structure basis for us to feel comfortable in

524
00:27:57,280 --> 00:27:58,280
Speaker 4: what the returns are going to be.

525
00:27:59,240 --> 00:28:03,000
Speaker 2: I just have one last question myself, is what was accomplished?

526
00:28:03,520 --> 00:28:05,119
Speaker 2: We don't know what the future is or maybe you

527
00:28:05,119 --> 00:28:07,639
Speaker 2: can give some insight into what is going on at

528
00:28:07,720 --> 00:28:11,240
Speaker 2: CHIPS today in April twenty twenty five. But you said

529
00:28:11,240 --> 00:28:13,879
Speaker 2: at the beginning about like what was accomplished during CHIPS

530
00:28:13,880 --> 00:28:16,199
Speaker 2: And I'm aware the projects have been started and some

531
00:28:16,240 --> 00:28:19,760
Speaker 2: have been completed, et cetera. But what did we get

532
00:28:19,920 --> 00:28:22,320
Speaker 2: from all of these efforts and should we be happy

533
00:28:22,359 --> 00:28:22,560
Speaker 2: with it?

534
00:28:23,280 --> 00:28:26,359
Speaker 4: So if the top line number that you know, we

535
00:28:26,480 --> 00:28:29,520
Speaker 4: used while the Biden administration was still around was four

536
00:28:29,600 --> 00:28:31,879
Speaker 4: hundred and fifty billion dollars in announced investment, and you

537
00:28:31,920 --> 00:28:34,800
Speaker 4: started to see this with the data from the Census

538
00:28:34,800 --> 00:28:39,640
Speaker 4: showed that we were making more investments in electronics facilities

539
00:28:39,720 --> 00:28:42,960
Speaker 4: construction spend in twenty twenty three and twenty twenty four

540
00:28:43,000 --> 00:28:45,120
Speaker 4: than we had in the last two decades combined.

541
00:28:45,680 --> 00:28:48,320
Speaker 2: What about like actual like production? What I care about

542
00:28:48,400 --> 00:28:51,840
Speaker 2: is actual things to go into computers, cars.

543
00:28:51,520 --> 00:28:54,440
Speaker 4: And one hundred percent. So we got to recognize too,

544
00:28:54,520 --> 00:28:56,560
Speaker 4: right that these are not going to happen overnight. These

545
00:28:56,560 --> 00:28:58,920
Speaker 4: facilities aren't going to over The bill was passed in

546
00:28:58,960 --> 00:29:02,640
Speaker 4: August of twenty twenty two, right, so within a couple

547
00:29:02,680 --> 00:29:05,400
Speaker 4: of years you had you know, four hundred, like I said,

548
00:29:05,400 --> 00:29:08,280
Speaker 4: four and fifty billion dollars if investments announced. And I

549
00:29:08,280 --> 00:29:10,960
Speaker 4: think the biggest thing is that firms have to feel

550
00:29:11,000 --> 00:29:14,400
Speaker 4: comfortable moving forward with those plans. So let's take TSMC

551
00:29:14,440 --> 00:29:16,280
Speaker 4: as an example. TSMC, by the end of the Biden

552
00:29:16,280 --> 00:29:19,680
Speaker 4: administration has started pumping chips out for Apple and AMD

553
00:29:19,960 --> 00:29:23,760
Speaker 4: out of its facility in Arizona. And as it continues

554
00:29:23,800 --> 00:29:26,480
Speaker 4: to move forward with the second and third facilities, that

555
00:29:26,600 --> 00:29:28,760
Speaker 4: ecosystem is going to mature to the point where the

556
00:29:28,800 --> 00:29:31,720
Speaker 4: cost differentials versus Taiwan are going to be reduced. The

557
00:29:31,800 --> 00:29:35,400
Speaker 4: scale is going to bring more suppliers on shore, so

558
00:29:35,400 --> 00:29:37,360
Speaker 4: they're going to have more of their coems and their

559
00:29:37,400 --> 00:29:40,560
Speaker 4: gases and their you know, consumable materials sourced from the

560
00:29:40,640 --> 00:29:44,520
Speaker 4: United States. And as that happens, you start to you know,

561
00:29:44,640 --> 00:29:48,520
Speaker 4: build out a broader ecosystem because you know, we heard

562
00:29:48,720 --> 00:29:51,720
Speaker 4: all the time from suppliers who were saying, Hey, we're

563
00:29:51,760 --> 00:29:54,680
Speaker 4: building a facility in the United States to service all

564
00:29:54,680 --> 00:29:56,600
Speaker 4: the fabs that are coming online. Because we can now

565
00:29:56,680 --> 00:29:59,560
Speaker 4: justify the investment based off of the number of downstream

566
00:29:59,560 --> 00:30:02,479
Speaker 4: investments that have been made. And as they build out

567
00:30:02,480 --> 00:30:04,400
Speaker 4: their facilities, then their suppliers are going to come here.

568
00:30:04,400 --> 00:30:06,840
Speaker 4: So I think there's going to be an ecosystem maturation

569
00:30:07,000 --> 00:30:10,560
Speaker 4: that's going to continue, hopefully through the rest of the decade.

570
00:30:10,640 --> 00:30:13,520
Speaker 4: That's going to bring not just you know, front end

571
00:30:13,600 --> 00:30:18,360
Speaker 4: fabrication facilities, but their suppliers facilities and then their suppliers

572
00:30:18,360 --> 00:30:20,800
Speaker 4: suppliers facilities, And now you talk about getting the sort

573
00:30:20,800 --> 00:30:24,760
Speaker 4: of industrial ecosystems that really had atrophy in the United States.

574
00:30:25,240 --> 00:30:27,320
Speaker 4: And when you start to go you know, N plus

575
00:30:27,360 --> 00:30:29,440
Speaker 4: two in terms of the supplier level, you're no longer

576
00:30:29,600 --> 00:30:32,959
Speaker 4: just serving the semiconductor industry. You're building fabricated machine parts

577
00:30:33,160 --> 00:30:36,920
Speaker 4: that go into semiconductor manufacturing equipment and also going to

578
00:30:37,160 --> 00:30:41,360
Speaker 4: say airplanes or automobiles, and you now you know, buttress

579
00:30:41,440 --> 00:30:45,720
Speaker 4: the entire industrial ecosystem, even though you're starting from just

580
00:30:45,840 --> 00:30:49,480
Speaker 4: building semiconductor manufacturing plants. Right. So I think that is

581
00:30:49,480 --> 00:30:51,360
Speaker 4: what the long term is going to look like. But

582
00:30:51,440 --> 00:30:53,000
Speaker 4: we have to you know, in this where I have

583
00:30:53,040 --> 00:30:55,920
Speaker 4: to come back to the point on we have to

584
00:30:55,960 --> 00:30:59,040
Speaker 4: also be honest about where we were right. We weren't

585
00:30:59,040 --> 00:31:01,520
Speaker 4: building these fabs. There's a reason it took so long,

586
00:31:01,880 --> 00:31:04,880
Speaker 4: and it's not going to happen overnight. And if we're

587
00:31:04,920 --> 00:31:09,120
Speaker 4: not willing to maintain the investments and the programs that

588
00:31:09,160 --> 00:31:10,880
Speaker 4: we have, I think a lot of firms are going

589
00:31:10,960 --> 00:31:13,320
Speaker 4: to say, Hey, the uncertainty isn't worth it for me

590
00:31:13,360 --> 00:31:16,240
Speaker 4: to continue to invest. Because I can't go to my

591
00:31:16,280 --> 00:31:20,760
Speaker 4: shareholders and say this investment has a solid return. They're

592
00:31:20,760 --> 00:31:22,320
Speaker 4: going to look at it and they're gonna discount it

593
00:31:22,360 --> 00:31:24,920
Speaker 4: with all that uncertainty and pressure me to not make

594
00:31:24,960 --> 00:31:27,760
Speaker 4: these investments, or to reduce the investments I make and

595
00:31:27,760 --> 00:31:30,600
Speaker 4: focus on places where the returns are much more solid.

596
00:31:30,640 --> 00:31:33,040
Speaker 4: I think that's the situation that we absolutely should avoid.

597
00:31:33,400 --> 00:31:36,280
Speaker 4: And you even hear that from the Trump administration, where,

598
00:31:36,320 --> 00:31:38,880
Speaker 4: for example, Jade Vance at a speech at the American

599
00:31:38,960 --> 00:31:42,720
Speaker 4: Dynamism Conference talked about making adjustments to tax credits for

600
00:31:42,760 --> 00:31:44,880
Speaker 4: firms in terms of bonus appreciation and the R and

601
00:31:44,920 --> 00:31:47,920
Speaker 4: D tax credit, those are very much in line with

602
00:31:48,040 --> 00:31:52,000
Speaker 4: making these investments less risky for firms the United States.

603
00:31:52,080 --> 00:31:54,880
Speaker 4: So if the Trump administration continues down that vein, I

604
00:31:54,920 --> 00:31:57,520
Speaker 4: think you'll see firms feel confident that they can expand

605
00:31:57,520 --> 00:32:00,240
Speaker 4: these investments and build out these ecosystems to a a

606
00:32:00,360 --> 00:32:03,920
Speaker 4: size and scale that's globally competitive. Right. And then you

607
00:32:04,000 --> 00:32:07,120
Speaker 4: tap into the broader tech stack that we have here,

608
00:32:07,200 --> 00:32:10,560
Speaker 4: where now the smartest engineers from Nvidia, Apple, and am

609
00:32:10,640 --> 00:32:12,440
Speaker 4: D don't have to fly to Taiwan. They can fly

610
00:32:12,560 --> 00:32:15,719
Speaker 4: to Arizona to make sure that they're getting their designs

611
00:32:15,720 --> 00:32:19,120
Speaker 4: taped out correctly, and they're working with universities all across

612
00:32:19,120 --> 00:32:22,080
Speaker 4: the United States on future designs and technologies. And then

613
00:32:22,080 --> 00:32:27,480
Speaker 4: you get an industrial ecosystem that really leverages our capabilities. Right.

614
00:32:27,840 --> 00:32:29,840
Speaker 4: One last point on this one. I think a lot

615
00:32:29,840 --> 00:32:31,920
Speaker 4: of people made this criticism when the Chips Act was

616
00:32:31,920 --> 00:32:33,800
Speaker 4: passed that the United States should have just continued to

617
00:32:33,800 --> 00:32:36,960
Speaker 4: invest in R and D and that's what we should leverage.

618
00:32:36,960 --> 00:32:40,960
Speaker 4: We should leverage our R and D capabilities. But here's

619
00:32:41,000 --> 00:32:43,120
Speaker 4: another trivia question for the two of you. When was

620
00:32:43,160 --> 00:32:46,400
Speaker 4: the quiz?

621
00:32:46,480 --> 00:32:48,680
Speaker 2: Right now? So actually we're going to use these and

622
00:32:48,800 --> 00:32:50,760
Speaker 2: just we're putting on a trivia event. So we're going

623
00:32:50,800 --> 00:32:52,600
Speaker 2: to use your questions and turn them into questions.

624
00:32:52,640 --> 00:32:54,480
Speaker 4: All right, keep going, I'll send you some When was

625
00:32:54,520 --> 00:33:00,640
Speaker 4: the first EUV machine installed in the United States. It

626
00:33:00,680 --> 00:33:03,400
Speaker 4: was two thousand and six at Sunny Albany, which is

627
00:33:03,400 --> 00:33:07,680
Speaker 4: the nanotech complex in upstate New York. We didn't have

628
00:33:07,880 --> 00:33:12,920
Speaker 4: high volume manufacturing with an EUV machine until December of

629
00:33:12,960 --> 00:33:17,840
Speaker 4: twenty twenty four out of TSMC eighteen years, right, So

630
00:33:18,560 --> 00:33:21,800
Speaker 4: I think the critics who said we should double down

631
00:33:21,840 --> 00:33:24,640
Speaker 4: on R and D actually failed to grapple with the

632
00:33:24,640 --> 00:33:28,840
Speaker 4: fact that the R and D first approach was empirically failing. US.

633
00:33:29,160 --> 00:33:32,880
Speaker 4: We invented EUV technology through our DD National Labs and

634
00:33:33,320 --> 00:33:36,800
Speaker 4: in partnership with ASML, we installed the first alpha tools

635
00:33:36,800 --> 00:33:40,280
Speaker 4: in both Europe and the United States. And then, I

636
00:33:40,320 --> 00:33:43,760
Speaker 4: mean the United States was a half decade behind East

637
00:33:43,760 --> 00:33:49,600
Speaker 4: Asia in bringing EUV manufacturing to scale, right, so that

638
00:33:49,720 --> 00:33:52,760
Speaker 4: formula wasn't working. And one of the shortages that TSMC

639
00:33:52,840 --> 00:33:54,720
Speaker 4: talked about was that they didn't have enough workers who

640
00:33:54,760 --> 00:33:58,000
Speaker 4: knew how to install and bring up EUV machines. So

641
00:33:58,040 --> 00:34:01,720
Speaker 4: you can see how this sort of scades the ecosystem atrophies.

642
00:34:01,760 --> 00:34:03,560
Speaker 4: And then when firms come and try to do foreign

643
00:34:03,600 --> 00:34:05,480
Speaker 4: direct investment, they come and say, well, you don't have

644
00:34:05,520 --> 00:34:08,120
Speaker 4: the skills that we need, even though we can point

645
00:34:08,120 --> 00:34:09,839
Speaker 4: to all the R and D investments, and I think

646
00:34:10,080 --> 00:34:11,719
Speaker 4: the problem was we were sort of making these R

647
00:34:11,760 --> 00:34:14,000
Speaker 4: and D investments in a vacuum and kind of hoping

648
00:34:14,360 --> 00:34:18,279
Speaker 4: that they'd get sucked into an industrial ecosystem that, you know,

649
00:34:18,360 --> 00:34:21,239
Speaker 4: despite what a lot of economists say about America still

650
00:34:21,239 --> 00:34:24,759
Speaker 4: having a very high value add for manufacturing, you look

651
00:34:24,800 --> 00:34:27,200
Speaker 4: on the ground and there are tons of anecdotes that

652
00:34:27,239 --> 00:34:30,200
Speaker 4: the manufacturing ecosystem has atrophied and we have to make

653
00:34:30,239 --> 00:34:32,799
Speaker 4: investments in order to bring it back up to be

654
00:34:32,920 --> 00:34:36,080
Speaker 4: globally competitive. And I think an anecdote exactly like the

655
00:34:36,120 --> 00:34:38,800
Speaker 4: delay in bringing EUV manufacturing to scale in the US,

656
00:34:38,920 --> 00:34:42,359
Speaker 4: exemplifies why the old approach wasn't working. And we can

657
00:34:42,400 --> 00:34:45,120
Speaker 4: debate like what the right ways are and how industrial

658
00:34:45,120 --> 00:34:48,239
Speaker 4: policy should be structured, and what tax credits, etc. Need

659
00:34:48,280 --> 00:34:50,160
Speaker 4: to be done, and trade reforms need to be done,

660
00:34:50,239 --> 00:34:52,080
Speaker 4: but I don't think you can debate whether or not

661
00:34:52,520 --> 00:34:56,040
Speaker 4: the old you know, let's call it pre twenty twenty

662
00:34:56,480 --> 00:35:01,920
Speaker 4: approach was actually maintaining America's industrial competitiveness, because it wasn't.

663
00:35:03,600 --> 00:35:06,200
Speaker 3: I have just one more question, and that is what's

664
00:35:06,280 --> 00:35:10,279
Speaker 3: next for the Chips Program Office itself? Because I mean,

665
00:35:10,360 --> 00:35:14,520
Speaker 3: under the Trump administration, fiscal spending doesn't really seem to

666
00:35:14,560 --> 00:35:17,720
Speaker 3: be very popular, to put it mildly, and there's obviously

667
00:35:17,719 --> 00:35:21,839
Speaker 3: a bon fight over who gets to control the pocketbook

668
00:35:22,000 --> 00:35:24,799
Speaker 3: of America, whether it's Congress or the president. At the

669
00:35:24,840 --> 00:35:29,400
Speaker 3: same time, we have DOGE, which is implementing sweeping changes

670
00:35:29,520 --> 00:35:33,640
Speaker 3: on the government itself, you know, entire agencies going away

671
00:35:33,840 --> 00:35:36,719
Speaker 3: and stuff like that. And then finally, the other thing

672
00:35:36,760 --> 00:35:39,960
Speaker 3: happening which we should definitely ask about, is tariffs. Right,

673
00:35:40,239 --> 00:35:44,280
Speaker 3: and maybe tariffs end up being good for domestic manufacturing

674
00:35:44,400 --> 00:35:47,760
Speaker 3: like semiconductors, but I can imagine that there are also

675
00:35:48,040 --> 00:35:53,840
Speaker 3: still either components or materials that chips manufacturing actually needs

676
00:35:53,920 --> 00:35:56,799
Speaker 3: to import. So I guess my question is, how are

677
00:35:56,800 --> 00:35:59,520
Speaker 3: you weighing all these different things that are going on

678
00:35:59,719 --> 00:36:00,000
Speaker 3: right now?

679
00:36:00,000 --> 00:36:00,200
Speaker 4: Now?

680
00:36:00,320 --> 00:36:02,480
Speaker 3: What do they mean for the actual Chips Act and

681
00:36:02,640 --> 00:36:03,600
Speaker 3: for manufacturing.

682
00:36:04,320 --> 00:36:06,360
Speaker 4: So let me give you one one small anecdote to

683
00:36:06,400 --> 00:36:10,319
Speaker 4: show you how firms are trying to understand what's happening. Right,

684
00:36:10,400 --> 00:36:13,000
Speaker 4: I was talking to a supplier that wants to build

685
00:36:13,160 --> 00:36:18,279
Speaker 4: a facility outside of Arizona. Right, they're exemplifying that ecosystem

686
00:36:18,360 --> 00:36:21,320
Speaker 4: development that I talked about that's coming out of TSMC's investment.

687
00:36:21,800 --> 00:36:23,919
Speaker 4: And I was on a call with them in late

688
00:36:24,000 --> 00:36:27,760
Speaker 4: March and they basically said, we don't understand what's happening.

689
00:36:27,840 --> 00:36:29,600
Speaker 4: We don't know what our cost structure is going to

690
00:36:29,600 --> 00:36:35,080
Speaker 4: look like, and you know, our project is undergoing change

691
00:36:35,120 --> 00:36:39,560
Speaker 4: constantly because our cost structure is undergoing change. So, you know,

692
00:36:39,640 --> 00:36:42,200
Speaker 4: for a lot of these firms, before they're willing to

693
00:36:42,200 --> 00:36:44,040
Speaker 4: make bets that you know, in some of these smaller

694
00:36:44,080 --> 00:36:46,680
Speaker 4: firms can be like, you know, life or death size

695
00:36:46,719 --> 00:36:49,759
Speaker 4: bets for the firm, they really want to have an

696
00:36:49,920 --> 00:36:52,440
Speaker 4: understanding of what the policy framework is going to look like.

697
00:36:52,680 --> 00:36:55,200
Speaker 4: And I think we have to sort of get through

698
00:36:55,239 --> 00:36:59,000
Speaker 4: the period of you know, a new headline rocking markets

699
00:36:59,080 --> 00:37:01,759
Speaker 4: every day or it to shake out to understand how

700
00:37:01,800 --> 00:37:03,840
Speaker 4: it'll affect the long term decisions a lot for a

701
00:37:03,840 --> 00:37:05,440
Speaker 4: lot of these firms. You know, the sense I got

702
00:37:05,480 --> 00:37:07,320
Speaker 4: from talking to that firm and from other firms was

703
00:37:07,360 --> 00:37:08,799
Speaker 4: that they're going to kind of wait it out and

704
00:37:08,840 --> 00:37:10,480
Speaker 4: see They're going to try and buy as much time

705
00:37:10,520 --> 00:37:12,800
Speaker 4: as they can to see where things reach a steady

706
00:37:12,800 --> 00:37:17,400
Speaker 4: state before reevaluating their investment plans. I think on the

707
00:37:17,440 --> 00:37:21,319
Speaker 4: flip side, However, there is a bipartisan agreement on the

708
00:37:21,360 --> 00:37:24,279
Speaker 4: need to bring industrial manufacturing back to the United States, right,

709
00:37:24,680 --> 00:37:27,480
Speaker 4: So I think the question is going to be on

710
00:37:27,520 --> 00:37:29,480
Speaker 4: the methods by which we do it. So you know,

711
00:37:29,520 --> 00:37:32,560
Speaker 4: I go back and you say, is it through tax incentives,

712
00:37:32,640 --> 00:37:36,160
Speaker 4: is it through trade policy? Is it through industrial policy?

713
00:37:36,200 --> 00:37:39,360
Speaker 4: I think all of those tools interact with each other. Obviously,

714
00:37:39,400 --> 00:37:41,799
Speaker 4: different administrations have different approaches, so I don't know where

715
00:37:41,800 --> 00:37:44,480
Speaker 4: we'll end up with that. The last thing I'll say

716
00:37:44,520 --> 00:37:48,120
Speaker 4: is the methods that we developed in the Chips Program

717
00:37:48,120 --> 00:37:51,520
Speaker 4: Office for trying to get firms comfortable with making investments

718
00:37:51,560 --> 00:37:54,400
Speaker 4: in the United States and working to accelerate their investments

719
00:37:54,440 --> 00:37:58,400
Speaker 4: by working with stakeholders across you know, environment, workforce, and

720
00:37:58,440 --> 00:38:01,840
Speaker 4: other policy objectives. I think that is actually going to continue.

721
00:38:01,840 --> 00:38:04,480
Speaker 4: If you look at the Investment Accelerator Executive Order that

722
00:38:04,520 --> 00:38:07,120
Speaker 4: was announced by President Trump a few weeks back, the

723
00:38:07,239 --> 00:38:10,400
Speaker 4: sorts of activities that he's saying, the White Glove Service,

724
00:38:11,040 --> 00:38:14,120
Speaker 4: I think that was pioneered in the Chips Program Office,

725
00:38:14,120 --> 00:38:17,080
Speaker 4: where we worked with firms to get through the labor issues,

726
00:38:17,120 --> 00:38:20,080
Speaker 4: to get through the environmental issues, and permitting questions to

727
00:38:20,120 --> 00:38:22,120
Speaker 4: make sure that these projects could move forward. It's why

728
00:38:22,160 --> 00:38:25,560
Speaker 4: I've said repeatedly that there were no Chips Act construction

729
00:38:25,600 --> 00:38:28,480
Speaker 4: projects that were held up by Neeper review. And I

730
00:38:28,480 --> 00:38:31,080
Speaker 4: think they're going to take that recipe that was developed

731
00:38:31,080 --> 00:38:33,759
Speaker 4: and try to scale it across multiple sectors. You know,

732
00:38:33,920 --> 00:38:36,640
Speaker 4: certainly going to be different contextual challenges. But if they

733
00:38:36,719 --> 00:38:38,640
Speaker 4: do that, I think it's going to be a vote

734
00:38:39,040 --> 00:38:41,719
Speaker 4: in favor of the work that we were doing at

735
00:38:41,719 --> 00:38:44,840
Speaker 4: the policy level to make sure in manufacturing investments in

736
00:38:44,840 --> 00:38:47,680
Speaker 4: the United States are viable for firms, and that's going

737
00:38:47,760 --> 00:38:50,160
Speaker 4: to have to be complemented with a you know, approach

738
00:38:50,200 --> 00:38:52,600
Speaker 4: to make them financially viable. I don't know, and I

739
00:38:52,600 --> 00:38:54,279
Speaker 4: don't know that any of us can say what the

740
00:38:54,320 --> 00:38:57,719
Speaker 4: Trump administration is going to finalize its policy mix on.

741
00:38:58,080 --> 00:38:59,719
Speaker 4: And I think firms are going to wait to see

742
00:38:59,719 --> 00:39:02,000
Speaker 4: what that policy mix looks like from the Trump administration

743
00:39:02,120 --> 00:39:05,160
Speaker 4: before you know, placing further large bets. So if there's

744
00:39:05,160 --> 00:39:07,480
Speaker 4: a lot of policy uncertainty, you may see some companies

745
00:39:07,520 --> 00:39:10,080
Speaker 4: come out and say, hey, we're gonna do price increases

746
00:39:10,200 --> 00:39:14,640
Speaker 4: and we're gonna maybe pause equipment purchases until we really

747
00:39:14,680 --> 00:39:18,160
Speaker 4: know what the fiscal impact of tariffs or other. You know,

748
00:39:18,400 --> 00:39:20,720
Speaker 4: new trade negotiations are going to be for our project.

749
00:39:21,200 --> 00:39:24,040
Speaker 2: Huss and con. Thank you so much for coming back

750
00:39:24,080 --> 00:39:26,960
Speaker 2: on odd Lage, and I'm sharing with us lessons that

751
00:39:27,040 --> 00:39:30,080
Speaker 2: you learned during your stint in the public sector. Thank

752
00:39:30,120 --> 00:39:32,400
Speaker 2: you for your service. I learned a lot, so appreciate

753
00:39:32,440 --> 00:39:33,000
Speaker 2: you coming back on.

754
00:39:33,560 --> 00:39:36,920
Speaker 4: Joe Tracy. Always a pleasure. And the last thing I'll

755
00:39:36,920 --> 00:39:40,160
Speaker 4: say is, I think the CHIP was an experiment in

756
00:39:40,280 --> 00:39:44,200
Speaker 4: what industrial policy could look like. The scoreboard, the early

757
00:39:44,239 --> 00:39:48,080
Speaker 4: returns look good, but I think the real measure of

758
00:39:48,080 --> 00:39:50,120
Speaker 4: whether it was successful we'll know by the end of

759
00:39:50,120 --> 00:39:53,080
Speaker 4: the Trump administration if these other projects come on.

760
00:39:53,120 --> 00:39:55,040
Speaker 2: Fine, all right, well have you.

761
00:40:08,880 --> 00:40:10,000
Speaker 4: Tracy? That was really good.

762
00:40:10,040 --> 00:40:12,640
Speaker 2: It's cool that one of our past guests like started

763
00:40:12,640 --> 00:40:14,919
Speaker 2: this whole other career between the last time we talked

764
00:40:14,920 --> 00:40:17,360
Speaker 2: to them, Yeah, which is like in maybe early twenty

765
00:40:17,400 --> 00:40:20,080
Speaker 2: twenty one, then went and got this job. And then

766
00:40:20,160 --> 00:40:22,000
Speaker 2: we've been doing this a long time and someone had

767
00:40:22,000 --> 00:40:23,759
Speaker 2: like a whole chunk of their career that they could

768
00:40:23,760 --> 00:40:26,399
Speaker 2: fill us in on between times that we talked to them.

769
00:40:26,480 --> 00:40:28,920
Speaker 3: Yeah, that's kind of crazy. So we feel old. Yes,

770
00:40:29,040 --> 00:40:31,480
Speaker 3: On the plus side, we get an inside look at

771
00:40:31,480 --> 00:40:34,480
Speaker 3: the Chips Program Office, which is pretty cool. I do

772
00:40:34,600 --> 00:40:38,279
Speaker 3: take a Hassan's point about I guess like building up

773
00:40:38,320 --> 00:40:43,279
Speaker 3: the muscle of manufacturing and his point that, well, we

774
00:40:43,640 --> 00:40:46,400
Speaker 3: had been doing it a certain way, which is basically

775
00:40:46,440 --> 00:40:49,680
Speaker 3: all through private capital for many many years, and it

776
00:40:49,760 --> 00:40:53,239
Speaker 3: hasn't resulted in the purpose that we now want, which

777
00:40:53,280 --> 00:40:56,400
Speaker 3: is actually building factories to produce these things. And so

778
00:40:56,480 --> 00:41:00,240
Speaker 3: you really need some sort of catalysts to get stuff going,

779
00:41:00,320 --> 00:41:03,239
Speaker 3: to get people excited about it. Yeah, maybe change the

780
00:41:03,440 --> 00:41:07,319
Speaker 3: calculation in terms of profit margins and the result is

781
00:41:07,320 --> 00:41:08,000
Speaker 3: the Chips Act.

782
00:41:08,160 --> 00:41:11,320
Speaker 2: I'm so depressed about the twenty tens and like, seriously,

783
00:41:11,400 --> 00:41:13,640
Speaker 2: just like the way we let everything hollow out, you know,

784
00:41:13,640 --> 00:41:17,200
Speaker 2: we talk about it with housing and sawmills and all

785
00:41:17,239 --> 00:41:20,279
Speaker 2: of this stuff that we just like didn't do when

786
00:41:20,320 --> 00:41:22,799
Speaker 2: we could have, and then the costs that imposes on

787
00:41:22,880 --> 00:41:24,520
Speaker 2: us or we haven't like build a fab in forever

788
00:41:24,560 --> 00:41:26,840
Speaker 2: and we forgot. I do think it's interesting like this

789
00:41:27,000 --> 00:41:30,239
Speaker 2: question of you know, even with TSMC's second fab or

790
00:41:30,480 --> 00:41:32,280
Speaker 2: you know, you don't see any of those same headlines

791
00:41:32,320 --> 00:41:35,040
Speaker 2: that you saw with the first one. That is encouraging.

792
00:41:35,560 --> 00:41:39,000
Speaker 2: Maybe you have a sort of template to quickly navigate

793
00:41:39,040 --> 00:41:43,040
Speaker 2: the state and local issues. Some of the questions around

794
00:41:43,239 --> 00:41:46,640
Speaker 2: you know, the quote stakeholders, et cetera. Which every system

795
00:41:46,680 --> 00:41:49,960
Speaker 2: has stakeholders. If this isn't not unique in that, I mean, obviously,

796
00:41:50,200 --> 00:41:52,360
Speaker 2: you know, every system has to have a way. I

797
00:41:52,360 --> 00:41:55,080
Speaker 2: think what's important, you know some of the I remember

798
00:41:55,120 --> 00:41:58,640
Speaker 2: we did a conversation about nuclear construction in China, and

799
00:41:58,640 --> 00:42:00,200
Speaker 2: it's like they have their own you know, it's not

800
00:42:00,280 --> 00:42:02,560
Speaker 2: like there aren't environmentalists in China, et cetera. What they

801
00:42:02,560 --> 00:42:05,120
Speaker 2: have is like a system for allocating like who wins

802
00:42:05,120 --> 00:42:06,640
Speaker 2: and what the priorities are, et cetera.

803
00:42:07,640 --> 00:42:09,520
Speaker 3: And top down leadership.

804
00:42:09,640 --> 00:42:11,840
Speaker 2: Yeah, there are many. Yeah, a much more sort of

805
00:42:11,880 --> 00:42:14,799
Speaker 2: straightforward system in that respect. But uh no, I thought

806
00:42:14,800 --> 00:42:17,920
Speaker 2: that was interesting, and you know, I'm hopeful that Husson

807
00:42:18,000 --> 00:42:18,920
Speaker 2: wasn't totally dooming.

808
00:42:19,440 --> 00:42:22,279
Speaker 3: You know what they say about factories, Joe, No, the

809
00:42:22,320 --> 00:42:25,239
Speaker 3: best time to build a factory was twenty years ago. Yeah,

810
00:42:25,280 --> 00:42:28,080
Speaker 3: the second best time to build a factory is today.

811
00:42:28,160 --> 00:42:30,640
Speaker 2: All right, Well, you know, I wonder, I wonder we're

812
00:42:30,680 --> 00:42:32,640
Speaker 2: recording this April eighth. I wonder if there's a single

813
00:42:32,719 --> 00:42:35,920
Speaker 2: new factory green broken ground today right now. I kind

814
00:42:35,920 --> 00:42:36,319
Speaker 2: of doubt it.

815
00:42:36,920 --> 00:42:38,440
Speaker 3: Yeah, all right, shall we leave it there?

816
00:42:38,520 --> 00:42:39,279
Speaker 2: Let's leave it there.

817
00:42:39,480 --> 00:42:41,920
Speaker 3: This has been another episode of the odd Lots podcast.

818
00:42:42,080 --> 00:42:45,080
Speaker 3: I'm Tracy Alloway. You can follow me at Tracy Alloway.

819
00:42:45,200 --> 00:42:47,520
Speaker 2: And I'm Joe Wisenthal. You can follow me at the

820
00:42:47,560 --> 00:42:51,239
Speaker 2: Stalwart Fellow Husson Khan. He's at Husson Khan. Follow our

821
00:42:51,280 --> 00:42:54,640
Speaker 2: producers Carman, Rodriguez at Carmen Erman, Dash Ol Bennett at

822
00:42:54,719 --> 00:42:58,880
Speaker 2: dashbod and kel Brooks at cal Brooks. More Odd Laws content,

823
00:42:58,920 --> 00:43:01,319
Speaker 2: go to Bloomberg dot com odd Lots. We have all

824
00:43:01,360 --> 00:43:03,920
Speaker 2: of our episodes in the daily newsletter, and you can

825
00:43:04,000 --> 00:43:07,319
Speaker 2: chat about all of these topics, including semiconductors twenty four

826
00:43:07,360 --> 00:43:11,360
Speaker 2: to seven in our discord discord dot gg slash Oddlins.

827
00:43:11,600 --> 00:43:15,320
Speaker 3: And if you enjoy when we talk about industrial policy

828
00:43:15,400 --> 00:43:18,640
Speaker 3: and remind everyone that the Chips Act actually exists, then

829
00:43:18,680 --> 00:43:22,080
Speaker 3: please leave us a positive review on your favorite podcast platform.

830
00:43:22,440 --> 00:43:25,120
Speaker 3: And remember, if you are a Bloomberg subscriber, you can

831
00:43:25,160 --> 00:43:28,399
Speaker 3: listen to all of our episodes absolutely ad free. All

832
00:43:28,400 --> 00:43:30,279
Speaker 3: you need to do is find the Bloomberg channel on

833
00:43:30,360 --> 00:43:34,080
Speaker 3: Apple Podcasts and follow the instructions there. Thanks for listening,