WEBVTT - This Is What President Biden's CHIPS Office Actually Did 0:00:02.480 --> 0:00:16.600 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:18.000 --> 0:00:21.799 Hello and welcome to another episode of the Odd Lots podcast. 0:00:21.880 --> 0:00:24.360 I'm Joe Wisenthal and I'm Tracy Alloway. 0:00:24.480 --> 0:00:26.720 Tracy, I just wrote about this in our newsletter like 0:00:26.760 --> 0:00:29.600 five minutes ago. But it drives me nuts. How on 0:00:29.720 --> 0:00:34.360 all of the talk about reindustrialization of America everyone had 0:00:34.400 --> 0:00:37.800 just completely memory hold, like twenty twenty two and twenty 0:00:37.840 --> 0:00:38.360 twenty three. 0:00:38.680 --> 0:00:41.120 Well, this is the amazing thing, right, We did have 0:00:41.320 --> 0:00:46.400 a big investment program actually announced under the Biden administration, 0:00:46.560 --> 0:00:51.159 like huge amounts of money, billions of dollars, and no 0:00:51.159 --> 0:00:54.320 one seems to be talking about it that much, or 0:00:54.320 --> 0:00:58.120 at least a very important segment seems to be ignoring it, 0:00:58.160 --> 0:01:01.200 and that is the Trump administration. Trump. I think he 0:01:01.280 --> 0:01:04.200 said before that he thought it was a horrible policy. 0:01:04.360 --> 0:01:04.959 Yeah. 0:01:05.040 --> 0:01:08.280 I suspect the reason he thinks it's horrible is because 0:01:08.920 --> 0:01:12.520 it was a Biden thing. But it is also amazing 0:01:12.520 --> 0:01:17.280 that like even this, even making more semiconductors in the US, 0:01:17.760 --> 0:01:21.800 ended up being politicized and a sort of culture war issue. 0:01:21.840 --> 0:01:22.840 It's just crazy to me. 0:01:23.200 --> 0:01:26.360 It's totally insane to me, of all these influencers and 0:01:26.480 --> 0:01:29.720 LARPers or so we need to bring back physical manufacturing 0:01:29.720 --> 0:01:32.640 and national security, etc. As if this hasn't been a 0:01:32.680 --> 0:01:35.880 dominant thing in US discourse for years, is if there 0:01:35.880 --> 0:01:40.040 weren't literally battery and chip factories being announced almost every day. 0:01:40.080 --> 0:01:42.640 Throw at twenty twenty two and twenty twenty three, all 0:01:42.680 --> 0:01:45.800 across the US. It was not just a program. It 0:01:45.840 --> 0:01:48.760 was like an actual like breaking ground and new things 0:01:48.760 --> 0:01:51.840 were going up and dollars spent by the private sector 0:01:52.240 --> 0:01:56.000 partially to get public subsidies, et cetera. You could certainly 0:01:56.080 --> 0:01:58.360 say that it was like badly designed, or that it 0:01:58.440 --> 0:02:00.960 was wrong, or there were too many rules whatever, like 0:02:01.040 --> 0:02:03.560 all you know, that's all of this is fair play. 0:02:04.000 --> 0:02:06.840 But the idea that suddenly this is just some new 0:02:07.000 --> 0:02:12.480 impulse and not like something that's real, existing reindustrialization that's 0:02:12.520 --> 0:02:16.320 going on, I find it infuriating or at the very 0:02:16.440 --> 0:02:17.200 least very annoying. 0:02:17.480 --> 0:02:19.320 Shall we fix that, Joe, Let's fix it. 0:02:19.360 --> 0:02:21.640 Well, we should talk about what actually happened, right, because 0:02:21.680 --> 0:02:25.639 it does seem like, either literally or de facto or 0:02:25.840 --> 0:02:29.000 dejerie or whatever, the plug is being pulled on a 0:02:29.040 --> 0:02:31.200 lot of these different programs, and now there's talk about 0:02:31.240 --> 0:02:36.120 industrialization but the hope is that tariffs themselves spur all 0:02:36.160 --> 0:02:39.880 of this domestic investment in physical things for people to 0:02:39.960 --> 0:02:43.600 do assembly line jobs, et cetera. But we should learn 0:02:43.600 --> 0:02:44.200 a little bit more. 0:02:44.240 --> 0:02:47.400 We should talk about what trips actually are as well, 0:02:47.480 --> 0:02:51.200 because you know, yes, boost manufacturing in the US, create 0:02:51.320 --> 0:02:55.960 new jobs, spur some private investment, sort of public private idea, 0:02:56.040 --> 0:02:58.720 But there are a lot of different like threads that 0:02:58.760 --> 0:03:01.160 you can pull here into in terms of the actual goals. 0:03:01.360 --> 0:03:03.520 Well, we should learn a little bit more about what 0:03:03.560 --> 0:03:08.040 the Chips program actually was, and I it does still exist, 0:03:08.160 --> 0:03:10.639 but I'm not really sure if it seems like it's 0:03:10.639 --> 0:03:12.679 more of a husk than it was. We're going to 0:03:12.720 --> 0:03:15.119 be speaking with someone we know very well, someone we've 0:03:15.120 --> 0:03:17.160 known on the internet a long time, someone who even 0:03:17.200 --> 0:03:20.160 came on Odd Lots one several years ago, who actually 0:03:20.240 --> 0:03:22.600 worked in the Chips Program office. We were speaking with 0:03:22.680 --> 0:03:26.959 Hussan Khan. He was the director of Economic Security at 0:03:27.000 --> 0:03:30.720 the Chips Program Office. I believe he's officially left the 0:03:30.800 --> 0:03:33.919 job so he could talk now about what he saw 0:03:34.200 --> 0:03:37.000 inside Hustin. Thank you so much for coming back on 0:03:37.040 --> 0:03:39.200 Odd Lots Joe Tracy. 0:03:39.240 --> 0:03:42.400 It's always a pleasure you know your intro there. I 0:03:42.560 --> 0:03:45.640 feel very similarly. I really do feel like we forgot 0:03:45.680 --> 0:03:48.880 about what was accomplished in honestly less than two years, 0:03:49.280 --> 0:03:51.200 so excited to talk about it. What are you tells us? 0:03:51.240 --> 0:03:54.640 What did you do as the Director of Economic Security 0:03:54.680 --> 0:03:56.960 at the Chips Program Office? What was that job? 0:03:57.800 --> 0:04:01.960 So if you look at why we passed the Chips 0:04:01.960 --> 0:04:05.840 and Science Act, Congress and the President came together and said, 0:04:06.480 --> 0:04:11.640 our reliance on offshore manufacturing for semiconductors presents both an 0:04:11.720 --> 0:04:14.360 economic and national security threat. And we saw that play 0:04:14.400 --> 0:04:18.200 out in real time during the pandemic. When we couldn't 0:04:18.200 --> 0:04:20.880 make cars, we couldn't make a whole host of goods. 0:04:21.240 --> 0:04:24.279 Prices went up that posed an economic security threat because 0:04:24.320 --> 0:04:27.080 people were losing their jobs. Obviously there's a national security 0:04:27.120 --> 0:04:30.400 angle as well, because we were reliant on overseas factories 0:04:30.400 --> 0:04:33.480 for chips that go into military equipment. And as the 0:04:33.520 --> 0:04:36.960 Director of Economic Security, my role was for it was 0:04:37.000 --> 0:04:40.440 sort of twofold first, helping sort of set the strategy. 0:04:40.600 --> 0:04:43.440 What was our vision for what we wanted to accomplish 0:04:43.440 --> 0:04:45.479 with the Chips Program Office. So before I joined, we 0:04:45.480 --> 0:04:48.760 published a vision for success paper in February of twenty 0:04:48.760 --> 0:04:51.440 twenty three. I'm actually quite astonished. I think very few 0:04:51.440 --> 0:04:53.600 people who talk about chips actually read that paper, and 0:04:53.640 --> 0:04:55.720 I still think it's worth reading because it laid out 0:04:55.720 --> 0:04:57.640 a roadmap for what we wanted to do within the 0:04:57.680 --> 0:05:00.200 different categories. And then the second job that I had 0:05:00.320 --> 0:05:05.160 was helping our teams understand the value of each proposed 0:05:05.160 --> 0:05:09.560 project to US economic security. So why would the factory 0:05:09.600 --> 0:05:13.800 that X company is proposing improve our economic security? And 0:05:13.839 --> 0:05:15.479 obviously there are different ways in which you can do that, 0:05:15.520 --> 0:05:19.839 whether that's advancing technological capabilities, improving supply chain resilience, plugging 0:05:20.440 --> 0:05:22.560 various gaps in the supply chain, et cetera, et cetera. 0:05:22.600 --> 0:05:24.120 And that's why we did sort of a deal by 0:05:24.160 --> 0:05:26.880 deal analysis on those metrics. But it was really that 0:05:26.960 --> 0:05:30.640 twofold going not just strategically across the portfolio, but on 0:05:30.680 --> 0:05:31.719 a deal by deal basis. 0:05:32.240 --> 0:05:34.840 I wanted to ask you about exactly this because I 0:05:34.839 --> 0:05:38.840 imagine there are trade offs when you're deciding what or 0:05:38.880 --> 0:05:41.680 who to fund. Do you fund stuff that's going to 0:05:41.720 --> 0:05:45.520 have the most immediate impact make headlines, or do you 0:05:45.600 --> 0:05:48.240 finance stuff that maybe it takes longer to build but 0:05:48.320 --> 0:05:50.480 it's going to have a bigger effect on the economy 0:05:50.800 --> 0:05:54.800 or national security. If you're looking at two pitches on 0:05:54.839 --> 0:05:57.720 your desk or I guess it was an online application 0:05:57.839 --> 0:06:00.279 like a portal, but you're looking at those applications and 0:06:00.320 --> 0:06:03.560 one is for building I don't know, in video GPUs 0:06:03.600 --> 0:06:06.960 and the other is like making an improvement on basic 0:06:07.040 --> 0:06:10.320 chips that go into MCUs and cars or whatever, lagging 0:06:10.440 --> 0:06:14.480 versus leading. How do you decide between those different proposals. 0:06:16.120 --> 0:06:18.760 So, Tracy, that's a great question, and I would say 0:06:20.080 --> 0:06:24.400 what complicated that decision making process was when the bill 0:06:24.480 --> 0:06:26.640 was passed in August of twenty twenty two, we were 0:06:27.080 --> 0:06:30.720 solely focused as a country on the impact of shortages. 0:06:31.000 --> 0:06:32.880 And then it was in November of twenty twenty two 0:06:32.920 --> 0:06:36.920 that chat GPT came out and suddenly the conversation shifted 0:06:37.160 --> 0:06:42.000 very rapidly to AI supremacy. So in real time, you know, 0:06:42.000 --> 0:06:44.200 if you ask Congressman why are you passing this bill, 0:06:44.240 --> 0:06:46.240 they would have said, well, we can't have these car shutdowns, 0:06:46.320 --> 0:06:48.520 or we can't have car factory shutting down. Appliances are 0:06:48.520 --> 0:06:51.599 too expensive. And then by early twenty twenty three, it 0:06:51.680 --> 0:06:54.160 was what we have to win the AI race so 0:06:54.200 --> 0:06:56.040 we sat back as an office and we really said, 0:06:56.240 --> 0:07:00.520 we don't want to be chasing just one category. And 0:07:00.560 --> 0:07:02.280 I think again our strategy was, we want to make 0:07:02.279 --> 0:07:05.560 sure we're making investments across the entire supply chain. So 0:07:06.240 --> 0:07:09.680 we said, hey, we're going to functionally target a majority 0:07:09.680 --> 0:07:11.400 of our funding, the vast majority of our funding towards 0:07:11.440 --> 0:07:13.920 the leading edge. Why those are the most expensive facilities. 0:07:13.960 --> 0:07:17.960 So Intel, TSMC, Samsung and Micron between them got nearly 0:07:18.080 --> 0:07:20.440 twenty eight twenty nine billion dollars and don't you know, 0:07:20.480 --> 0:07:24.560 you can check my math afterwards. Knowing that getting those 0:07:24.600 --> 0:07:27.440 facilities in the United States at the scale that they 0:07:27.440 --> 0:07:31.080 were investing in has downstream consequences too, because now you're 0:07:31.080 --> 0:07:34.400 building out the supply chain necessary for the entire industry, 0:07:34.480 --> 0:07:37.160 and that spills over to some of the other facilities 0:07:37.160 --> 0:07:39.200 that are going to come up online. We did have 0:07:39.240 --> 0:07:42.200 a statutory requirement to invest at least two billion dollars 0:07:42.240 --> 0:07:44.400 in what we're called legacy node chips, and our office 0:07:44.400 --> 0:07:47.800 spend a lot of time trying to understand what our 0:07:47.800 --> 0:07:50.720 strategy could be on shoring up legacy supply. So we 0:07:50.800 --> 0:07:53.360 made investments, you know, large ones in TI and global 0:07:53.400 --> 0:07:56.280 foundries that are in the sort of meat of the 0:07:56.320 --> 0:07:59.720 legacy node supply chain. But we also made actually dozens 0:07:59.720 --> 0:08:02.760 of investments that I think at short shrift because they 0:08:02.840 --> 0:08:05.240 just aren't as headline grabbing, but they plugged up a 0:08:05.240 --> 0:08:09.160 lot of our capabilities in rf in power, summi conductors, 0:08:09.400 --> 0:08:11.760 the sort of un sexy types of electronics that are 0:08:11.760 --> 0:08:15.400 critical not just for infrastructure today but infrastructure in the future. 0:08:15.720 --> 0:08:17.240 And how we thought about trade offs. I think the 0:08:17.240 --> 0:08:19.880 way we tried to think about it was we really 0:08:19.880 --> 0:08:22.720 tried to bucket our funds and say, hey, for the 0:08:22.800 --> 0:08:25.720 leading edge, we want to be able to say, preserve 0:08:26.320 --> 0:08:28.000 x amount of our budget. It was about that twenty 0:08:28.000 --> 0:08:31.440 eight billion dollars for the leading edge and make sure 0:08:31.480 --> 0:08:34.240 that we retain sufficient funding on the back end for 0:08:34.880 --> 0:08:38.200 the legacy nodes, for advanced packaging, for the supply chain, 0:08:38.480 --> 0:08:41.000 because we knew that we needed to make investments across 0:08:41.040 --> 0:08:44.240 the entire supply chain just get to the resilience. That was, 0:08:44.920 --> 0:08:46.440 you know, the reason that the bill was passed. 0:08:46.840 --> 0:08:48.840 All right, I have a question, and you could just 0:08:48.880 --> 0:08:51.960 be totally honest, you know, I'll give it to one 0:08:52.000 --> 0:08:55.920 of the criticisms of Biden era industrial policy that is 0:08:55.920 --> 0:09:00.680 frequently made from our abundance brothers and sisters, is that yes, 0:09:00.720 --> 0:09:03.760 there were all of these efforts, but you know, you 0:09:03.760 --> 0:09:06.320 couldn't get the money unless you had a certain amount 0:09:06.320 --> 0:09:08.720 of workforce diversity, and you had to do a land 0:09:08.760 --> 0:09:12.040 acknowledgment on where you were going to build the factory, 0:09:12.679 --> 0:09:15.120 and also you had to have like childcare, etc. And 0:09:15.160 --> 0:09:16.920 it's like, well, do you want to build the chip 0:09:16.920 --> 0:09:19.720 plant or not? Because if you do, then why did 0:09:19.800 --> 0:09:21.959 you put all of these other burdens that have nothing 0:09:22.000 --> 0:09:24.640 to do with building chips per se onto the money? 0:09:24.960 --> 0:09:28.400 In your experience, what is the role of these other 0:09:28.640 --> 0:09:33.679 elements in the speed of grant programs or project development 0:09:33.880 --> 0:09:34.439 in the US? 0:09:35.400 --> 0:09:37.880 I know this is a topic that gets Frankly, I 0:09:37.960 --> 0:09:40.400 think it gets way too much air time. And I'll 0:09:40.440 --> 0:09:43.959 tell you why. First, there were statutory requirements that came 0:09:43.960 --> 0:09:47.480 from Congress on what the proposals had to be. Right. 0:09:47.520 --> 0:09:50.160 So Congress themselves came and said, hey, if you're making 0:09:50.200 --> 0:09:53.200 a project proposal, you need to have opportunity and inclusion 0:09:53.280 --> 0:09:58.120 language or what your commitments are to community investments. If 0:09:58.120 --> 0:10:00.400 you look at the DFAs that we write, the direct 0:10:00.400 --> 0:10:03.360 funding agreements, the terms that we had around what you 0:10:03.440 --> 0:10:08.480 might call everything. Bagel policy basically codified the commitments the 0:10:08.520 --> 0:10:11.480 firms themselves had made to the communities that they were 0:10:11.520 --> 0:10:14.320 investing in. It essentially said, hey, you told the community 0:10:14.360 --> 0:10:16.480 that you were going to be investing in, you know, 0:10:16.640 --> 0:10:20.840 the schools or water reclamation projects, whatever those community investment 0:10:20.840 --> 0:10:24.160 funds could be. All we're doing is memorializing that commitment 0:10:24.160 --> 0:10:29.200 that you've made. Secondly, on childcare, this is another one 0:10:29.240 --> 0:10:31.240 that first in terms of the amount of funding that 0:10:31.280 --> 0:10:33.160 we put towards it, I think it was a total 0:10:33.200 --> 0:10:37.080 of about ten million dollars across the thirty nine billion, Okay, 0:10:37.520 --> 0:10:40.840 So it was never a focus. It never became in 0:10:40.880 --> 0:10:43.600 any of the negotiations that I set in a discussion 0:10:43.600 --> 0:10:45.600 where the company came back and said, hey, we really 0:10:45.640 --> 0:10:47.680 want to build this plant, but the million dollars that 0:10:47.679 --> 0:10:50.240 you're giving us for childcare and the requirements that you 0:10:50.240 --> 0:10:52.840 have simply aren't enough. Many of these firms are investing 0:10:52.880 --> 0:10:55.200 in child care facilities for their workers anyways, and you 0:10:55.240 --> 0:10:57.200 see it like there's Wall Street Journal report a few 0:10:57.200 --> 0:11:00.120 months ago about a company that wanted to expand and 0:11:00.240 --> 0:11:03.000 with new workers that were mostly coming from like Hispanic background, 0:11:03.040 --> 0:11:04.520 and they found that the biggest thing they could do 0:11:04.600 --> 0:11:07.520 to help bring them on was have childcare on site, 0:11:07.600 --> 0:11:10.040 because their workers were like, I can't come to the 0:11:10.040 --> 0:11:11.720 office because I don't have a place to leave my kids. 0:11:11.960 --> 0:11:14.839 So it's just it's actually what the private sector is 0:11:14.880 --> 0:11:17.680 doing anyway, And oftentimes the funding that we brought to 0:11:17.760 --> 0:11:20.560 those initiatives actually helped them think outside the box and 0:11:20.600 --> 0:11:24.640 think across firms to come up with regional solutions that 0:11:24.720 --> 0:11:26.959 scaled better than they would on a firm by firm basis. 0:11:27.320 --> 0:11:30.800 I will say, however, where I think critics of sort 0:11:30.800 --> 0:11:33.400 of the everything bagel approach do have a point is 0:11:33.679 --> 0:11:35.880 whereas a lot of the terms that I just described 0:11:35.960 --> 0:11:39.560 were not deal stoppers. They didn't slow down negotiations, they 0:11:39.559 --> 0:11:42.480 weren't the points of contention where there are points of 0:11:42.480 --> 0:11:46.840 contention between different stakeholders, I think you need top leadership 0:11:46.840 --> 0:11:48.760 to be able to come and say our number one 0:11:48.800 --> 0:11:51.880 goal is to get the factory built, and various stakeholders 0:11:51.920 --> 0:11:54.120 have to get in line. And where I'm talking about 0:11:54.120 --> 0:11:57.600 stakeholders is where I think the abundance folks also speak 0:11:57.600 --> 0:12:00.360 to them, groups like labor and environment, right, you have 0:12:00.400 --> 0:12:03.160 to come and say, hey, do we want this project 0:12:03.160 --> 0:12:06.040 to happen? There will inevitably be trade offs. There is 0:12:06.080 --> 0:12:08.640 no world in which you can build a massive factory 0:12:08.960 --> 0:12:13.120 and have zero environmental impact. Right. You have to also 0:12:13.320 --> 0:12:15.960 even in the context of labor, we have to understand 0:12:15.960 --> 0:12:18.960 that this is a globally competitive industry, and so the 0:12:19.080 --> 0:12:22.199 demands that labor is making have to be viewed from 0:12:22.240 --> 0:12:24.480 the context of like what does it take for the 0:12:24.520 --> 0:12:27.920 factories in the US to be globally competitive? And I 0:12:27.960 --> 0:12:30.920 think you need top leadership to come and say we're 0:12:30.960 --> 0:12:34.880 not going to allow concerns that are being raised by 0:12:34.920 --> 0:12:39.280 the community to sort of halt negotiation. So there is 0:12:39.679 --> 0:12:41.960 a balance to be struck in terms of what's our 0:12:42.040 --> 0:12:44.160 number one goal. Is it to get the factory done 0:12:44.320 --> 0:12:46.000 or is it to make sure that no one's upset 0:12:46.040 --> 0:13:01.800 at the fact that the factory is getting done. 0:13:03.760 --> 0:13:06.920 Give us a sense of the actual timeline for the 0:13:07.000 --> 0:13:11.480 application process, like how quickly could you actually approve things 0:13:11.600 --> 0:13:14.320 on average? And then I'm curious, like what was the 0:13:14.520 --> 0:13:17.720 longest negotiation that you had and what were the sticking 0:13:17.760 --> 0:13:18.400 points there? 0:13:19.280 --> 0:13:22.360 Okay, so the process the way it worked, you first 0:13:22.360 --> 0:13:24.640 had to submit a what's called the statement of interest, 0:13:24.800 --> 0:13:27.640 and this was honestly like a one to two paragraph 0:13:27.720 --> 0:13:32.320 submission via Salesforce portal that basically said, we are from 0:13:32.559 --> 0:13:35.480 company why, and we want to build a manufacturing plant 0:13:35.520 --> 0:13:39.240 for semiconductors in Excity. It did not require a lot 0:13:39.240 --> 0:13:42.400 of details that basically, you know, it puts you on 0:13:42.480 --> 0:13:44.520 the map of our office to say, hey, we should 0:13:44.520 --> 0:13:46.080 go and talk to these people and understand what they're 0:13:46.080 --> 0:13:48.640 really trying to build. Then we had what we called 0:13:48.640 --> 0:13:51.240 a pre app process, and we can come back to 0:13:51.280 --> 0:13:53.360 that in just a moment my thoughts on the process, 0:13:53.400 --> 0:13:57.600 but it essentially said, hey, submit a simplified version of 0:13:57.640 --> 0:14:00.040 your final application and we'll give you some preliminary a 0:14:00.160 --> 0:14:03.559 feedback kind of like a draft application, and will help 0:14:03.640 --> 0:14:07.679 identify where we think on our scoring rubric you need 0:14:07.720 --> 0:14:10.720 to make adjustments in order to score better. By the way, 0:14:10.720 --> 0:14:12.680 our response to the pre app was non binding, so 0:14:12.800 --> 0:14:14.920 if we basically said hey we don't like your pre app, 0:14:14.920 --> 0:14:17.720 you could still apply and submit a full application. But 0:14:17.920 --> 0:14:19.680 you know, we did take into consideration whether or not 0:14:19.720 --> 0:14:22.160 you responded to the feedback from the pre app. The 0:14:22.320 --> 0:14:25.720 full application was sort of your final submission. We started 0:14:25.720 --> 0:14:30.280 to receive for our first full applications in the late 0:14:30.320 --> 0:14:33.240 summer early fall of twenty twenty three, and so you 0:14:33.320 --> 0:14:36.880 saw we got to a first preliminary announcement by the 0:14:37.040 --> 0:14:39.920 end of twenty twenty three with BAE. So it took us, 0:14:40.040 --> 0:14:41.640 you know, on the order of about a little more 0:14:41.640 --> 0:14:45.240 than a quarter to get through a first full announcement. 0:14:45.520 --> 0:14:48.280 The exact longest negotiations that it took, I have to 0:14:49.040 --> 0:14:51.200 think back for a moment, but we had one final 0:14:51.240 --> 0:14:54.240 step after the preliminary announcement following sort of exactly how 0:14:54.280 --> 0:14:55.800 you do it in the private equity world, you know, 0:14:55.800 --> 0:14:59.040 have a preliminary announcement saying, hey, we intend to make 0:14:59.080 --> 0:15:01.000 this investment, we intend to go forward with this, but 0:15:01.040 --> 0:15:02.920 it's subject to due diligence and i'd be the direct 0:15:03.000 --> 0:15:08.760 funding agreement. Those negotiations did drag on through twenty twenty four, 0:15:08.840 --> 0:15:10.560 and I think a lot of it came down to 0:15:10.560 --> 0:15:12.480 sort of dotting the eyes and crossing the t's on 0:15:13.080 --> 0:15:16.720 what did it mean for the government and semiconductor firms 0:15:16.720 --> 0:15:20.440 to make a commitment to each other on these facilities. Right, 0:15:20.520 --> 0:15:23.520 There was a lot of not on the sort of 0:15:23.640 --> 0:15:26.000 everything bagel terms, but there was a lot of negotiation 0:15:26.040 --> 0:15:27.920 and what does it mean if your company is sold? 0:15:27.920 --> 0:15:32.040 What does it mean if you violate guardrails statutory requirements? Right? 0:15:32.040 --> 0:15:33.640 We really had to work through that because we'd never 0:15:33.680 --> 0:15:36.720 worked through it as a country before with firms at 0:15:36.720 --> 0:15:40.200 this scale. But what you saw routinely was as we 0:15:40.320 --> 0:15:43.360 reached a milestone, So as we reached the first preliminary 0:15:43.480 --> 0:15:46.600 memorandum of terms and we reached the first direct funding agreement, 0:15:47.000 --> 0:15:49.680 the second, third, fourth agreements would happen much faster because 0:15:49.720 --> 0:15:51.440 we at that point had worked out a template and 0:15:51.480 --> 0:15:53.720 could say, hey, here's how other firms are thinking about 0:15:53.760 --> 0:15:57.320 doing it. There's already comfort with this format. Let's try 0:15:57.320 --> 0:15:59.720 and you work off that, and you saw them happen 0:15:59.800 --> 0:16:00.720 in rapid succession. 0:16:01.320 --> 0:16:03.160 I want to go back to what you said we're 0:16:03.160 --> 0:16:07.120 talking about earlier, that the abundance people do have some 0:16:07.160 --> 0:16:12.720 sort of point when it comes to environmental and labor stakeholders. 0:16:12.920 --> 0:16:15.800 What did you see specifically? Now you don't have to 0:16:15.840 --> 0:16:18.720 like identify the names of the projects, but look, these 0:16:18.760 --> 0:16:23.720 are different parts of the Democratic Party constituency. Late, I'll 0:16:23.760 --> 0:16:26.120 say this, the Democratic Party really wants to be liked 0:16:26.120 --> 0:16:28.960 by organized labor. I don't know if the organized labor, 0:16:29.360 --> 0:16:32.480 especially in the private sector, is a big Democratic constituents anymore. 0:16:32.480 --> 0:16:36.040 But Democratic Party certainly wants to be liked by organized labor. 0:16:36.360 --> 0:16:39.280 They certainly want people who concern about the environment talk 0:16:39.360 --> 0:16:43.000 to us about the reality of how these different impulses 0:16:43.160 --> 0:16:44.200 can collide with each other. 0:16:44.680 --> 0:16:47.440 So I think we have to take one step back 0:16:47.640 --> 0:16:51.320 and be honest about where we stand in terms of 0:16:51.360 --> 0:16:55.240 our manufacturing competitiveness. Right. I think they're a broad understanding 0:16:55.360 --> 0:16:57.960 that we are no longer at the frontier in a 0:16:58.080 --> 0:17:00.640 range of industries, and so what is it going to 0:17:00.680 --> 0:17:03.040 take for us to catch up to the frontier and 0:17:03.280 --> 0:17:07.120 be globally competitive again? We have cost disadvantages to operating 0:17:07.119 --> 0:17:10.400 in this country, it takes longer to build. We do have, 0:17:10.880 --> 0:17:16.080 you know, existing regulatory frameworks that can complicate some of 0:17:16.119 --> 0:17:19.920 these projects, right. So, I think one of the consequences 0:17:20.160 --> 0:17:23.160 of this tension of there's an urgency to move fast, 0:17:23.200 --> 0:17:27.199 an urgency to catch up to our geopolitical competitors, but 0:17:27.720 --> 0:17:29.600 not really a readiness to sort of tear down the 0:17:29.640 --> 0:17:31.560 frameworks that we had. And I think for good reason, 0:17:31.880 --> 0:17:32.960 you have to come back and say, well, what is 0:17:32.960 --> 0:17:34.240 it going to take for us to catch up and 0:17:34.280 --> 0:17:37.040 so on. A lot of these projects, you saw environmental 0:17:37.080 --> 0:17:40.480 groups raising concerns on you know, pollution impacts. You saw 0:17:40.560 --> 0:17:43.120 labor groups sort of saying, hey, unions are being left 0:17:43.119 --> 0:17:45.960 out in the cold. And I would come back and say, 0:17:46.000 --> 0:17:48.680 I think a lot of that really was noise because 0:17:48.720 --> 0:17:52.000 there was like an open negotiation going on sometimes through 0:17:52.040 --> 0:17:54.960 the media where these various groups were trying to say, hey, 0:17:55.000 --> 0:17:57.240 make sure you don't forget about us. But I do 0:17:57.320 --> 0:18:02.000 also think for policy, you have to be able to 0:18:02.160 --> 0:18:05.400 come out and say what is the most important thing. 0:18:05.720 --> 0:18:07.520 Is it for the factory to get done on time, 0:18:08.200 --> 0:18:12.040 or is it that we leverage union labor or is 0:18:12.080 --> 0:18:15.600 it that we make no impact to the environment. And 0:18:15.640 --> 0:18:19.639 there will be times in every complex project in the 0:18:19.640 --> 0:18:21.840 public or private sector, you have to make trade offs 0:18:21.840 --> 0:18:26.360 between different objective functions, and I think for what we 0:18:26.400 --> 0:18:29.679 saw was there was like an unwillingness sometimes to really 0:18:29.760 --> 0:18:34.440 say to stakeholders, hey, we hear your needs, but they're 0:18:34.480 --> 0:18:37.520 gonna be second priority in order to get the project 0:18:37.520 --> 0:18:42.120 done right. And that complicates the discussion on how are 0:18:42.119 --> 0:18:44.560 we going to get these things done quickly? And I 0:18:44.560 --> 0:18:47.640 think there was a tension between the urgency that firms 0:18:47.840 --> 0:18:51.240 and folks within the Chips Program Office felt, and outside 0:18:51.280 --> 0:18:54.560 stakeholders who really were saying, well, don't forget about us. 0:18:55.880 --> 0:18:59.080 So you mentioned a bunch of competitive disadvantages that the 0:18:59.240 --> 0:19:01.919 US has, you know, things like we're starting from a 0:19:01.960 --> 0:19:06.600 lower base at least in terms of manufacturing, higher labor costs, 0:19:06.800 --> 0:19:10.080 more rules and regulations, whether it's about the environment or 0:19:10.160 --> 0:19:13.680 something else. Do we have any competitive advantages? I'm actually 0:19:13.760 --> 0:19:16.520 struggling here, but there must be something. 0:19:18.720 --> 0:19:22.240 You know. Okay, so I think maybe not? No, I 0:19:22.280 --> 0:19:24.520 do we do? Right? We have? If you think about it, 0:19:25.440 --> 0:19:28.040 the world's most advanced firms were all designing the best 0:19:28.119 --> 0:19:29.600 chips in the world. They're all based in the US. 0:19:29.640 --> 0:19:31.720 We have the best university system, so we have a 0:19:31.760 --> 0:19:35.119 deep talent pipeline. We have a tech stack than in 0:19:35.119 --> 0:19:38.199 the United States, I think is unparalleled anywhere else. But 0:19:38.240 --> 0:19:40.320 when it comes to being able to build a factory, 0:19:41.000 --> 0:19:43.000 you know, I like to use the analogy of we 0:19:43.080 --> 0:19:46.159 basically stopped going to the gym. Do you know before 0:19:46.200 --> 0:19:48.920 the TSMC fab came online in late twenty twenty four, 0:19:49.200 --> 0:19:51.840 when the last leading edge fab in the United States 0:19:51.880 --> 0:19:54.080 was built, came online, No it's good. What is it? 0:19:54.080 --> 0:19:54.800 What's the answer? 0:19:55.200 --> 0:20:00.000 Twenty thirteen. So for basically a decade, we stopped building large, 0:20:00.280 --> 0:20:03.480 leading edge fabs in the United States, and so the 0:20:03.600 --> 0:20:07.320 muscle for how to build those factories atrophied. And that 0:20:07.359 --> 0:20:10.200 doesn't just mean construction workers, like obviously all those people 0:20:10.240 --> 0:20:13.160 went and probably found jobs elsewhere, but it also means 0:20:13.160 --> 0:20:15.440 for the regulatory apparatus for what does it mean to 0:20:15.520 --> 0:20:18.520 understand the environmental impacts of these facilities? And so when 0:20:18.520 --> 0:20:22.040 you talk about the delays in construction, oftentimes those delays 0:20:22.119 --> 0:20:24.399 are from the permitting processes that are handled at the 0:20:24.400 --> 0:20:26.480 state and local level. Well, in a lot of the 0:20:26.480 --> 0:20:29.440 places that we're building these facilities, state and local regulators 0:20:29.520 --> 0:20:32.680 hadn't seen a facility like this before because we hadn't 0:20:32.680 --> 0:20:34.760 been building them in over a decade, and so they 0:20:34.800 --> 0:20:38.240 didn't know what the impacts were, and you know, it 0:20:38.320 --> 0:20:41.320 required an education process. And I think a lot of 0:20:41.440 --> 0:20:44.240 the noise that we heard in the last two years 0:20:44.320 --> 0:20:46.639 was because we were kind of starting this again after 0:20:46.720 --> 0:20:49.119 not going to the gym for over a decade. And 0:20:49.119 --> 0:20:50.440 you know what happens when you don't go to the gym, 0:20:50.480 --> 0:20:52.480 you go back one time you're really really sore the 0:20:52.520 --> 0:20:56.200 next day, but if you keep going, your body kind 0:20:56.200 --> 0:20:58.359