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Speaker 1: Welcome to Kobe Time, a podcast series on Markets and

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Speaker 1: Economies from D BS Group Research. I'm Tam Rbe, chief economist.

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Speaker 1: Welcoming you to our 135th episode today. We will welcome

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Speaker 1: back Alexander Capri to the podcast. Alex is a writer,

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Speaker 1: academic and former partner in the Asia Pacific Practice of KPMG.

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Speaker 1: He has done a lot of work on global value chains,

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Speaker 1: trade and geopolitics, Global tech, the digital economy and the

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Speaker 1: industries of the future.

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Speaker 1: Alex has recently published a book Techno Nationalism, how it's

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Speaker 1: reshaping trade, geopolitics and society. Alexander Capri, a warm welcome

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Speaker 1: back to Copy time. Thank you. It's great to have you, Alex.

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Speaker 1: We did this once before back in April 2020 just

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Speaker 1: as we were being engulfed by the global pandemic. Alex.

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Speaker 1: When I look at the transcript of that conversation, I

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Speaker 1: think we kind of had it right. We talked over

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Speaker 1: the push and pull factors driving the realignment of the

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Speaker 1: global supply chain.

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Speaker 1: Uh We asserted barely a couple of months into the

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Speaker 1: pandemic that the crisis would provide additional motivation to lean

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Speaker 1: toward resiliency over efficiency. Well, those issues remain alive today, Alex,

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Speaker 1: and you've written a lot rather large book on it.

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Speaker 1: So let's start, how do you define techno nationalism?

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Speaker 2: Good question.

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Speaker 2: Uh II, I would say that we would throw in

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Speaker 2: a few other words. Uh So let, let's start with

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Speaker 2: geo economics, right? If we're thinking about supply chains, let's

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Speaker 2: replace uh just in time with, just in case. Uh

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Speaker 2: you know, if, if we're thinking about a purely cost

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Speaker 2: driven model that seeks efficiencies and hyper rationalized supply chains, now,

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Speaker 2: geo poli geopolitics and other issues stemming from great power

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Speaker 2: competition

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Speaker 2: are now factoring into how a supply chain is structured.

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Speaker 2: Um You know, where a manufacturing process is going to

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Speaker 2: take place, how a strategic partner is chosen. Um So,

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Speaker 2: so I I would break down techno nationalism into six

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Speaker 2: very distinct elements.

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Speaker 2: Um The first is uh supply chains. So supply chain weaponization,

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Speaker 2: governments looking to control or stem the flow of technology

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Speaker 2: to perceived adversaries and that happens through things like export controls,

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Speaker 2: ah the imposition of sanctions. Um Then I would, I

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Speaker 2: would break it down into uh decoupling and Deris. And

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Speaker 2: if decoupling and deris is happening, then we're looking at

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Speaker 2: reshoring near shoring friend, shoring

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Speaker 2: uh from, from a sort of a G to G basis.

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Speaker 2: Um And even a G to B basis. We're looking

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Speaker 2: at government driven innovation, industrial policy if you will. Uh

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Speaker 2: we're also looking at um an increase in basically, frankly,

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Speaker 2: you know, hybrid warfare, right? We're looking at espionage. We're

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Speaker 2: looking at uh elevation of cyber intrusions, that sort of thing.

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Speaker 2: And then the final element would be uh basically what

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Speaker 2: we call tech uh diplomacy, right? So governments working with

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Speaker 2: other governments and working with businesses to forge these new

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Speaker 2: strategic alliances around strategic technologies.

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Speaker 1: Why is it just not nationalism? Why is it techno nationalism?

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Speaker 2: Because uh technology is a power multiplier. And so if

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Speaker 2: we put this in the context of a a nation,

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Speaker 2: a nation state uh technology, I, if we're putting this

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Speaker 2: in the terms of techno nationalism ah is about the

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Speaker 2: linkage between the technological prowess of a particular country or

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Speaker 2: organizations within that country

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Speaker 2: and their ability to project national security and, and, and

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Speaker 2: defense related uh power, uh the linkage to economic strength, prosperity.

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Speaker 2: And then finally, really, there's a third element which is

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Speaker 2: societal and that is uh you know, as technology becomes

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Speaker 2: uh essential to controlling narratives, to releasing information or disinformation

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Speaker 2: uh towards uh in, in uh authoritarian regimes, towards uh

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Speaker 2: suppression of populations, censorship that, that sort of thing. Technology

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Speaker 2: is central to all of that. And so all of

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Speaker 2: these would be power multipliers.

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Speaker 1: Is this a brand new thing that basically goes back

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Speaker 1: to Donald Trump, becoming the president of the United States

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Speaker 1: or it's been going on for long before that,

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Speaker 2: as long as there as there have been nation states,

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Speaker 2: there has been techno nationalism.

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Speaker 2: Ah So, for example, in the book I talk about

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Speaker 2: the founding of the United States. Uh Alexander Hamilton, first

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Speaker 2: Secretary of the Treasury, really one of his top priorities,

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Speaker 2: if not, the top priority was to get access to

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Speaker 2: British technology when it, when it came to the, you know,

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Speaker 2: textile milling machines and, and, and so on. So, um

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Speaker 1: and there were adversaries at that time, so you basically

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Speaker 1: had to steal it

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Speaker 2: and that's precisely what happened. I mean, that was really

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Speaker 2: item number one on the agenda was, you know, steal, acquire,

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Speaker 2: figure out how to get access to technology. So, um

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Speaker 2: that sort of if you want to, let's just stick

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Speaker 2: with the term techno nationalist uh approach to, to real

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Speaker 2: politik and, and, and international relations, ah has been around

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Speaker 2: for a very long time.

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Speaker 1: It's fascinating and I think going back to the Cold

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Speaker 1: War era, some would argue that some of the decoupling

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Speaker 1: that happened between the US and Russia put Russia under

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Speaker 1: a lot of economic strike because they had to sort

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Speaker 1: of create homegrown tech stack, which was never really good.

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Speaker 1: Enough incentives were not aligned. And that was one of

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Speaker 1: the key elements that drove the victory if you will,

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Speaker 1: the Cold War in favor of the West over the

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Speaker 1: Soviet bloc.

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Speaker 2: Yeah, I mean, that's a, that's a widely held view.

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Speaker 2: Um I, I certainly, I, I certainly would, would say

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Speaker 2: that um the amount of, of resources that, that, that

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Speaker 2: needs to go into uh you know, pushing the, the

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Speaker 2: envelope if you will from a technological standpoint and the,

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Speaker 2: the idea that um the, for example, the, the Star

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Speaker 2: Wars system that the Reagan administration uh was pushing whether

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Speaker 2: or not it was e even feasible.

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Speaker 2: Uh you know, the, the theory is, is, is that

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Speaker 2: it bankrupted the, the Soviets because they thought it was,

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Speaker 2: and they were putting a lot of, you know, time

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Speaker 2: and effort and money into it. And, and of course,

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Speaker 2: you know, they, they it, it helped in the collapse. So,

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Speaker 2: um

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Speaker 2: but from a techno nationalist standpoint, uh if you look

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Speaker 2: at really, if you go back 100 years, uh and

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Speaker 2: let's go back to the first World War, right? I mean,

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Speaker 2: there were chemistry wars, right? To figure out how to,

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Speaker 2: how to produce nitrates, to produce uh explosives, for example, right?

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Speaker 2: And that, that was really the war of the scientists,

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Speaker 2: right to come up with those innovations. And if you

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Speaker 2: trace this theme of techno nationalism really back the last

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Speaker 2: 100 years plus, um

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Speaker 2: there really is this very important correlation between the industrial

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Speaker 2: revolutions

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Speaker 2: and uh and what what I call the technology feedback loop,

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Speaker 2: which is essentially this virtuous cycle that exists between um

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Speaker 2: you know, governments, national governments, the defense establishment, academia,

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Speaker 2: private business and or markets. Uh and as they all

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Speaker 2: work together, uh you have this phenomenon where you have

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Speaker 2: innovation taking place, uh it's, it's generating profit, it's generating

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Speaker 2: more innovation, which it becomes a network effect sort of thing.

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Speaker 2: So if you, if, if you look at this, this

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Speaker 2: view of the world that some have described as, um

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Speaker 2: the west versus the rest,

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Speaker 2: uh you know, going back really 3, 400 years. Uh

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Speaker 2: I mean, we could trace this all the way back

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Speaker 2: to the Dutch East India company, right. And that, that

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Speaker 2: sort of symbiotic relationship that emerged between the state and

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Speaker 2: a for profit organization and all those elements in the

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Speaker 2: feedback loop, right? But if you, if you project forward

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Speaker 2: um

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Speaker 2: that has combined with the, now we're in the fourth

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Speaker 2: industrial revolution. But when you, when you, when you look

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Speaker 2: at the fortuitous results of the industrial revolutions, the technology

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Speaker 2: feedback loop

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Speaker 2: uh on a nation state level that has essentially laid the,

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Speaker 2: laid the groundwork for the international system as we see

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Speaker 2: it today,

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Speaker 1: right? Uh Alex, I want to get one thing clear,

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Speaker 1: which is when you are referring to techno nationalism and

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Speaker 1: especially when I think about the totality of the measures

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Speaker 1: that particularly the US has taken against China in the

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Speaker 1: last decade or so. A lot of it is

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Speaker 1: rationalize under the guise of national security. We don't want

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Speaker 1: our data to fall into the wrong hands. We don't

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Speaker 1: want our technology to be weaponized in an armed conflict

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Speaker 1: or something like that by our adversaries. But it seems

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Speaker 1: to me that you, when you take this big historical sweep,

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Speaker 1: you're also putting it in the context of economic security.

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Speaker 1: I don't want you to rise to my level of

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Speaker 1: economic prosperity and I would sort of prevent you from

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Speaker 1: rising to some extent. Yeah,

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Speaker 2: I, I

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Speaker 2: think that's, that's somewhat of a zero sum view. Right? And,

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Speaker 2: and I actually don't think that, that techno nationalism puts

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Speaker 2: us in a world of zero sum. Right? I think

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Speaker 2: the world has become way too complex right now, too

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Speaker 2: many overlapping interests. And, and we're actually in a paradox.

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Speaker 2: So the paradox is this,

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Speaker 2: if you look at the, if you look at the

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Speaker 2: grand sort of the mega trends that are defining the

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Speaker 2: international system today, right? Um you know, you look at

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Speaker 2: uh the fragmentation of a global supply chains because of

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Speaker 2: geopolitical pressures, right? This move towards regionalization, even localization. Um

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Speaker 2: the the the the idea that uh the world is bifurcating,

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Speaker 2: right um around these, these two nodes, right? That basically

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Speaker 2: the GSG G7 US plus plus China, I mean, if

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Speaker 2: if you look at that, um

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Speaker 2: we're not de globalizing, this is not a de globalization process,

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Speaker 2: this is a reorganization process. So the global economy is,

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Speaker 2: is reorganizing itself and it's, it's, it's a correction if

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Speaker 2: you will. Um III I actually refer to it um

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Speaker 2: as a geopolitical version of creative destruction. All right. So

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Speaker 2: there, there is a, there there are many new economic

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Speaker 2: opportunities that are rising as, you know, as a banker.

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Speaker 2: Uh and the work that, that the bank is doing,

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Speaker 2: you know, that, that, that when you have these shifts

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Speaker 2: in supply chains in, in global value chains, um

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Speaker 2: there's rebuilding, there's restructuring, there's, there's the services industry, you know, there, there's, it's,

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Speaker 2: it's a real knock on effect. And I should point

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Speaker 2: out the paradox that I that I refer to is

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Speaker 2: that on one hand, we have all of these things

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Speaker 2: that I've just described happening with strategic technologies. So, so

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Speaker 2: the value chains around there's really 12 core technologies and

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Speaker 2: we can get back into that in a little bit

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Speaker 2: of course, semiconductors, quantum biotech, you know that sort of thing.

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Speaker 2: Um

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Speaker 2: But even as that's happening, even even as we're seeing

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Speaker 2: this bifurcation, we're seeing increases in trade volumes including between

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Speaker 2: the US and China, right? So um

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Speaker 2: the way I look at that, the way I dissect

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Speaker 2: that is I look at global value chains as a,

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Speaker 2: as a sort of a striation like three levels. OK.

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Speaker 2: So on the top level, we have all the strategic goods, right?

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Speaker 2: And that's where that's where the decoupling and the deris

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Speaker 2: is happening, the restructuring and so forth in the middle,

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Speaker 2: the second, the second layer down, we have this nebulous

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Speaker 2: gray area.

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Speaker 2: And uh within that gray area, we have uh dual

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Speaker 2: use goods. So these are commercial goods that are used

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Speaker 2: for a wide array of industries and sectors, you know,

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Speaker 2: everything from a SIM card in your phone, literally to

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Speaker 2: the brake pads in the car you're driving. But they

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Speaker 2: could be considered dual use, meaning they're commercial, but they

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Speaker 2: could be used for military purposes. And therefore, if they're

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Speaker 2: being sent

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Speaker 2: to um you know, an identified entity, a blacklisted entity somewhere,

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Speaker 2: it's going to require an export license or it's just

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Speaker 2: gonna be blocked throughout, that's the real gray area. And

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Speaker 2: that's really where the scenario mapping and the the the

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Speaker 2: really serious analysis has to take place if you're a

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Speaker 2: company

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Speaker 2: and then the and then the third level is just

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Speaker 2: the the rest of the stuff. Uh that is essentially innocuous, right?

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Speaker 2: I mean, do we care where your shoes come from?

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Speaker 2: You know, your bottle of shampoo, you know, that type

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Speaker 2: of thing.

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Speaker 1: But even that evolves Alex, I'll give you an example

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Speaker 1: five years ago. If you bought an Osim massage chair,

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Speaker 1: it'd give you a massage. Today's Osim chairs have Bluetooth

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Speaker 1: capability and you can connect to your phone and you

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Speaker 1: can run the chair through your phone. So all of

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Speaker 1: a sudden now it has

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Speaker 1: mini Bluetooth application and data transmission capabilities. So then it

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Speaker 1: starts going on from the third, completely innocuous. A chair

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Speaker 1: that does no harm. That's right to somewhere in the middle.

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Speaker 1: I guess that's where lawyers and regulators and consultants. Everybody

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Speaker 1: come in and they fight it out to the company

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Speaker 1: gets a buy or not.

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Speaker 2: That's right.

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Speaker 2: And so if you take, uh if you take a

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Speaker 2: dual use technology that's in a, a fairly ubiquitous kind

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Speaker 2: of product that everybody buys. And then there's this uh

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Speaker 2: a sudden geopolitical event, uh an accidental flare up in

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Speaker 2: the South China Sea or some kind of an event.

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Speaker 2: It's quite possible that literally overnight,

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Speaker 2: ah what was a commercial, what was considered purely a

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Speaker 2: commercial good going to a particular importer or buyer in

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Speaker 2: say China um is now off limits,

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Speaker 2: right? And so, I mean, these are the types of

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Speaker 2: things that companies need to be uh mapping out, right?

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Speaker 2: They need to be looking at what parts of their

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Speaker 2: supply chain are in this gray dual use area and

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Speaker 2: given different scenarios in the world, what would happen if

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Speaker 2: you know, scenario one, scenario two, perfect example of that

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Speaker 2: is um electric vehicles

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Speaker 2: and all of the, you know, w what is an

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Speaker 2: electric vehicle, right? It's, it's, it's a computer on wheels, right?

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Speaker 2: And it's, it's, it's sending and receiving information not only

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Speaker 2: about where you're going but everything that's around you. Uh

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Speaker 2: what's coming in on communication networks and other smart devices.

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Speaker 2: And as you saw, I think it was just yesterday

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Speaker 2: that Washington has announced that both the software and the

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Speaker 2: hardware that goes into electric vehicles in the states cannot

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Speaker 2: be of Chinese origin,

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Speaker 1: right? So no export and no import around those things.

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Speaker 2: Yeah, so

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Speaker 2: that's an example of how in anything that's considered strategic,

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Speaker 2: we're going, we're going to continue to see a very

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Speaker 2: clear bifurcation of supply chains, value chains.

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Speaker 1: Uh Maybe this question is too early to ask. But

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Speaker 1: since you were talking about it, it sort of follows

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Speaker 1: to me almost naturally do these restrictions work.

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Speaker 1: You know, a semiconductor is super tiny, a lot of

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Speaker 1: stuff just are uploaded and transmitted through the cloud over

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Speaker 1: the air. It's not a question of a Department of

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Speaker 1: Commerce inspectors sitting in Vietnam or somewhere else and making

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Speaker 1: sure that everything is up and up.

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Speaker 1: Um What has, what is the report card so far?

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Speaker 2: Well, look export controls, le le let's start historically, I'll, I'll,

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Speaker 2: I'll give you the answer historically and then, and then

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Speaker 2: maybe we can apply it to say semiconductor today, right?

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Speaker 2: What's what's going on? So historically,

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Speaker 2: the record shows that um an export control will slow

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Speaker 2: down the transmission or the, you know, the, the the

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Speaker 2: dissemination of a certain kind of technology, but it's not

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Speaker 2: going to stop it eventually. Um You know, it's, it's

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Speaker 2: going to make its way into sort of the, the,

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Speaker 2: the broader environment. Now,

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Speaker 2: we also have to be careful about what kinds of

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Speaker 2: technology we're talking about. So if we're talking about satellite technology,

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Speaker 2: which in the, in the eighties, you know, the eighties

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Speaker 2: and nineties there were controls, but eventually everybody figured out

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Speaker 2: how to make satellites. Um That's one thing. But if

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Speaker 2: we're talking about making a two nanometer chip

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Speaker 2: where the barriers to entry are so incredibly

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Speaker 2: high,

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Speaker 1: basically one company makes it or

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Speaker 2: or you know, it's it's right. So in the case

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Speaker 2: of one company, you're probably talking about a SML which

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Speaker 2: which makes the lithography lithography equipment.

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Speaker 2: But even beyond that, within that, within that value chain,

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Speaker 2: within that fabrication process, the the hyper specialization and the

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Speaker 2: companies that specialize in that. So it's it's essentially with,

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Speaker 2: in that case, we're we're looking at the emergence of

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Speaker 2: a cartel, right. We're looking at the emergence of a

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Speaker 2: chip cartel along geopolitical lines, right? So to answer the question,

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Speaker 2: do do export controls work.

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Speaker 2: Uh it's two fold, it depends how sophisticated the technology

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Speaker 2: is and, and how, how high the barriers to entry are.

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Speaker 2: But it also um it it also comes down to

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Speaker 2: um how can these export controls be circumvented? What are

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Speaker 2: the workarounds? What are the back doors and to that effect,

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Speaker 2: there are quite a few, right? So let's let's talk

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Speaker 2: about NVIDIA, nvidia's A I chips, right?

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Speaker 2: So ex you know, export controls on them. Are they

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Speaker 2: continuing to make their way into China, for example? And

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Speaker 2: the answer is yes um uh you know, are ex

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Speaker 2: and how, how is that happening? There's there's a few

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Speaker 2: ways that's happening. The first is the export control process

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Speaker 2: itself

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Speaker 2: and the way it works is before an export control

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Speaker 2: is actually enforced and it becomes mandatory to get a license.

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Speaker 2: There's this long period where they make an announcement where

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Speaker 2: they say yes, we're uh you know, it's a public,

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Speaker 2: it's a public announcement process. We're, we're going to uh

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Speaker 2: be implementing export controls and it's going to take effect

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Speaker 2: in such and such time. So what does that do?

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Speaker 2: Uh that incites a AAA binge buying sessions, right. So

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Speaker 2: to load all the purchases as much as possible, I mean,

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Speaker 2: just soak up everything that's out on the market, stockpile

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Speaker 2: it and you've got chips for the next two years.

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Speaker 2: That's what Huawei did when they were placed on the

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Speaker 2: entity list, the the the Chinese telecommunications equipment manufacturing company.

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Speaker 2: Um

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Speaker 2: So there's, there's that, so there's the, the issue that

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Speaker 2: everybody goes out in stockpiles. And we're seeing that now

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Speaker 2: with uh DUV uh deep ultraviolet lithography machines uh being stockpiled.

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Speaker 2: Uh you know, in China, right? The huge, huge, you know,

339
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Speaker 2: spikes in, in, in the numbers going up because

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Speaker 1: the EU vs are not available at all. The

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Speaker 2: EU vs which is the extreme ultraviolet. Uh But the

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Speaker 2: Duvs um um are are being basically purchased because

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Speaker 2: um you know, just to divert a little bit. Um So,

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Speaker 2: so Huawei worked with SMIC uh and they came up

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Speaker 2: with a seven nanometer chip using uh imported DUV equipment. Basically,

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Speaker 2: they used that for the, the, the mate 60 phone

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Speaker 2: which was

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Speaker 1: not considered likely, but they pull it off,

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Speaker 2: they, they pulled it off. But again, if you look,

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Speaker 2: I mean, uh I'm kind of detracting but

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Speaker 2: uh I'll come back to the, you know, do the,

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Speaker 2: do export controls work. Um But yeah, so in the

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Speaker 2: case of Huawei, what they did with the, with, with that,

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Speaker 2: with that process is it's a, it's a, it's a

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Speaker 2: much more labor intensive process. You know, when you're in

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Speaker 2: the lithography process, you have to pass over again and

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Speaker 2: again and again,

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Speaker 1: yield, you get a lot of commercial,

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Speaker 2: it costs a lot more money. So unless somebody's basically,

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Speaker 2: you know, reimbursing you for all that, that leakage, that

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Speaker 2: cost leakage, it's not competitive, basically. OK. So, so coming back,

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Speaker 2: so we got binge buying

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Speaker 2: uh which is happening. Um the other is, of course,

364
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Speaker 2: is just black market and gray market, you know, achieving

365
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Speaker 2: chips uh you know, on the black market and the

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Speaker 2: other uh and this is why this is a game

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Speaker 2: of whack a mole, right? When we talk about um

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Speaker 2: the US administration trying to, trying to enforce um

369
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Speaker 2: uh but you know, the the other is when, when

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Speaker 2: we're talking about uh cloud computing, for example, and and

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Speaker 2: accessing the power of those chips to to do whatever

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Speaker 2: computer processing you want, you can access that in the

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Speaker 2: cloud from a third

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Speaker 2: party.

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Speaker 1: So the data center can be in the Middle East,

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Speaker 1: the company could be in China, right? I mean, right,

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Speaker 1: they're accessing all the cutting edge chips being used over there.

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Speaker 2: So, so this is, this is a a game that's

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Speaker 2: in progress.

380
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Speaker 2: And uh you know, we're going to continue to see,

381
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Speaker 2: you know, efforts to sort of uh clamp down on

382
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Speaker 2: these types of, of things. And I think maybe maybe

383
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Speaker 2: another time we can come back and talk about what

384
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Speaker 2: I call the surveillance supply chain. Basically, the the way

385
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Speaker 2: new technologies are going to be used to essentially achieve much,

386
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Speaker 2: much greater transparency and traceability in supply chains, right, to

387
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Speaker 2: trace the actual movement.

388
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Speaker 2: Uh And a lot of this is gonna be focused

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Speaker 2: on A I right on, on A I chips and

390
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Speaker 2: it's gonna be focused on cloud infrastructure. You mentioned uh

391
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Speaker 2: data centers. This is where all this is going to

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Speaker 2: be playing out. So it's

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Speaker 1: not just a question of I buy something from you

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Speaker 1: and then I do whatever I want with it.

395
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Speaker 1: In fact, even after buying it from you, I remain

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Speaker 1: liable to how I use it

397
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Speaker 2: or, or even the the original seller will be able

398
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Speaker 2: to trace where it actually is including embedded in a

399
00:21:35,030 --> 00:21:38,510
Speaker 2: finished product basically. So I think we'll see more of

400
00:21:38,520 --> 00:21:40,510
Speaker 2: that and that is that's going to be a growth industry,

401
00:21:40,520 --> 00:21:42,489
Speaker 2: think about the amount of money that's gonna be made

402
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Speaker 2: just around the compliance like the reg tech that's gonna

403
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Speaker 2: go into that and that's gonna be big

404
00:21:47,979 --> 00:21:52,149
Speaker 1: rec tech huh so many different techs out there. Um

405
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Speaker 1: You know, we began this discussion in a very general term.

406
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Speaker 1: We said techno nationalism define it. I don't think you

407
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Speaker 1: even mentioned the US initially. When you responded to my question,

408
00:22:02,800 --> 00:22:05,199
Speaker 1: you definitely did not touch on China, but we have

409
00:22:05,209 --> 00:22:08,579
Speaker 1: naturally veered toward the US China dynamic because let's be

410
00:22:08,589 --> 00:22:13,170
Speaker 1: clear that is the big story behind techno nationalism. Um

411
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Speaker 1: I want you to talk to me about something that

412
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Speaker 1: you devote quite a bit of space in your book,

413
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Speaker 1: which is the Digital Belt and Road by China.

414
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Speaker 2: Yeah, so, so you know, yes, absolutely. This is all

415
00:22:26,040 --> 00:22:29,869
Speaker 2: about great power competition us China. Um you know, the

416
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Speaker 2: Belt in the Road, the original Belt and Road, of course,

417
00:22:32,500 --> 00:22:35,819
Speaker 2: is a, you know, it's a ma major Chinese initiative

418
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Speaker 2: to essentially connect China to the rest of the world

419
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Speaker 2: through massive infrastructure projects, ports, rail, et cetera, roads, roads

420
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Speaker 2: and and so on.

421
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Speaker 2: Uh And that of course, is beneficial because a it

422
00:22:49,540 --> 00:22:51,989
Speaker 2: connects the Chinese economy to the rest of the world.

423
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Speaker 2: It allows for frankly a lot of excess capacity from

424
00:22:55,869 --> 00:22:58,310
Speaker 2: steel companies and all kinds of other things in China

425
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Speaker 2: to actually go out and build these big projects and

426
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Speaker 2: so forth. But those who have gotten very expensive and,

427
00:23:04,319 --> 00:23:07,069
Speaker 2: and as you know, uh as a banker and you're

428
00:23:07,079 --> 00:23:10,400
Speaker 2: following these things, there are a lot of um countries

429
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Speaker 2: that are on the verge of defaulting,

430
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Speaker 2: uh they can't pay back the money that the Chinese

431
00:23:14,640 --> 00:23:17,359
Speaker 2: lent them and so forth. And then we've had this, this, this, this,

432
00:23:17,369 --> 00:23:20,228
Speaker 2: this notion of, you know, debt diplomacy and that sort

433
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Speaker 2: of thing. So in a geopolitical and techno nationalist context,

434
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Speaker 2: um so China has, has uh really turned its focus

435
00:23:29,760 --> 00:23:33,089
Speaker 2: along the Belt and Road to building digital infrastructure. It's

436
00:23:33,099 --> 00:23:36,109
Speaker 2: not as expensive, but at the same time, you, you

437
00:23:36,119 --> 00:23:40,109
Speaker 2: get more bang for your Renminbi, right? And, and, and

438
00:23:40,119 --> 00:23:41,949
Speaker 2: that is because if you have

439
00:23:42,619 --> 00:23:46,839
Speaker 2: uh Chinese companies like Huawei and, and you have, you know,

440
00:23:46,849 --> 00:23:50,300
Speaker 2: Alibaba cloud and, and, and you know, Tencent and all

441
00:23:50,310 --> 00:23:55,030
Speaker 2: these other companies building the digital infrastructure, you have sense time,

442
00:23:55,040 --> 00:23:58,699
Speaker 2: the the big A I uh software makers hike vision,

443
00:23:58,709 --> 00:24:02,839
Speaker 2: the the uh the the uh the camera surveillance technology,

444
00:24:02,849 --> 00:24:07,739
Speaker 2: facial recognition, you have um Baidu, the the the Chinese

445
00:24:07,750 --> 00:24:11,280
Speaker 2: uh satellite network. So you have this ecosystem of Chinese

446
00:24:11,290 --> 00:24:11,909
Speaker 2: companies

447
00:24:12,270 --> 00:24:16,270
Speaker 2: that are building this digital infrastructure and then you overlay

448
00:24:16,280 --> 00:24:20,750
Speaker 2: on top of that uh Beijing's um you know, Beijing's

449
00:24:20,760 --> 00:24:24,920
Speaker 2: efforts to, to roll out its digital currency for and,

450
00:24:24,930 --> 00:24:26,380
Speaker 2: and of course, this is all part of the de

451
00:24:26,390 --> 00:24:30,250
Speaker 2: dollarization efforts. Uh you know that they've been involved with,

452
00:24:30,260 --> 00:24:32,349
Speaker 2: with other BRICS countries and also with, you know, their

453
00:24:32,359 --> 00:24:35,390
Speaker 2: client states along the Belt and the Road, this becomes a,

454
00:24:35,400 --> 00:24:36,670
Speaker 2: a very, very

455
00:24:37,030 --> 00:24:41,569
Speaker 2: um compelling and very attractive uh formula if you will

456
00:24:41,579 --> 00:24:47,010
Speaker 2: for extending influence economic influence and, and you know, ee

457
00:24:47,020 --> 00:24:51,089
Speaker 2: extending as, as sort of the duality of that is it,

458
00:24:51,099 --> 00:24:52,640
Speaker 2: you know, it doubles as a, as a, as a

459
00:24:52,650 --> 00:24:54,369
Speaker 2: force multiplier and projector.

460
00:24:54,780 --> 00:24:55,050
Speaker 1: I just

461
00:24:55,060 --> 00:24:56,560
Speaker 1: want to ss before I want to talk about the

462
00:24:56,569 --> 00:24:58,169
Speaker 1: digital currency part in a moment, but I just want

463
00:24:58,180 --> 00:25:00,400
Speaker 1: to stay with the digital infrastructure part a little longer.

464
00:25:00,560 --> 00:25:02,290
Speaker 1: Um When we talk about this

465
00:25:02,989 --> 00:25:06,909
Speaker 1: digital stack, if you will coming from the various Chinese

466
00:25:06,920 --> 00:25:13,629
Speaker 1: ah providers of technology, is it ubiquitous? Is it interoperable? So,

467
00:25:13,640 --> 00:25:17,030
Speaker 1: could I have Cisco routers in my country? And routers

468
00:25:17,040 --> 00:25:19,889
Speaker 1: made by I don't know Huawei or something and they

469
00:25:19,900 --> 00:25:22,589
Speaker 1: can all talk to each other or Cisco routers will

470
00:25:22,599 --> 00:25:23,889
Speaker 1: have a problem dealing with

471
00:25:24,390 --> 00:25:26,530
Speaker 1: interoperability with Chinese technology.

472
00:25:26,540 --> 00:25:30,000
Speaker 2: Well, that's a, that's a great question. So, so the

473
00:25:30,010 --> 00:25:33,140
Speaker 2: currently the way things stand, you know, you have very

474
00:25:33,150 --> 00:25:37,199
Speaker 2: few players building this kind of technology. Um There, there

475
00:25:37,209 --> 00:25:39,280
Speaker 2: have been many efforts through the, the O A uh

476
00:25:39,290 --> 00:25:44,599
Speaker 2: network which is essentially efforts to basically open source. A

477
00:25:44,660 --> 00:25:47,430
Speaker 2: lot of the technologies that go into the whole value

478
00:25:47,439 --> 00:25:49,959
Speaker 2: chain around five G wireless. And the the rationale behind

479
00:25:49,969 --> 00:25:50,520
Speaker 2: that is

480
00:25:50,839 --> 00:25:55,050
Speaker 2: you don't just have Ericsson and Nokia and Qualcomm and, and, and,

481
00:25:55,060 --> 00:25:58,020
Speaker 2: and Huawei basically, uh so

482
00:25:58,729 --> 00:26:01,750
Speaker 2: as it stands now, if you have one big provider,

483
00:26:01,760 --> 00:26:05,189
Speaker 2: it's a lot more complicated, right? It's, and, and it's

484
00:26:05,199 --> 00:26:08,589
Speaker 2: very difficult to get these companies to work together. Basically,

485
00:26:08,599 --> 00:26:13,510
Speaker 2: it's almost impossible, basically. Right? Um So um

486
00:26:14,260 --> 00:26:17,659
Speaker 2: the i the answer is it works better. And certainly

487
00:26:17,670 --> 00:26:19,458
Speaker 2: if we're talking about the Digital Belt and Road, and

488
00:26:19,469 --> 00:26:23,639
Speaker 2: we're talking about, you know, um China's China's view and

489
00:26:23,650 --> 00:26:27,520
Speaker 2: China's strategy, it's, it's about having a, a fully Chinese ecosystem.

490
00:26:28,319 --> 00:26:32,609
Speaker 1: I heard this uh onion analogy from an executive recently

491
00:26:32,619 --> 00:26:36,800
Speaker 1: where they said that if you have core infrastructure that

492
00:26:36,810 --> 00:26:40,619
Speaker 1: is very security sensitive of an organization, you tend to

493
00:26:40,630 --> 00:26:43,920
Speaker 1: still stay very Western with respect to buying those technologies

494
00:26:43,930 --> 00:26:48,900
Speaker 1: and capabilities. But if there are outer layers of that

495
00:26:49,739 --> 00:26:54,629
Speaker 1: company's infrastructure, you're OK, buying something rather ubiquitous, which doesn't

496
00:26:54,640 --> 00:26:56,819
Speaker 1: have that much of a tech related sensitivity.

497
00:26:57,050 --> 00:26:59,349
Speaker 1: But it does come with very large scale from the

498
00:26:59,359 --> 00:27:01,969
Speaker 1: Chinese and it's very reasonably priced and it does make

499
00:27:01,979 --> 00:27:04,829
Speaker 1: commercial sense to have the outer layers, having some degree

500
00:27:04,839 --> 00:27:06,839
Speaker 1: of Chinese layering, but not the inner

501
00:27:06,849 --> 00:27:07,270
Speaker 1: layers.

502
00:27:07,280 --> 00:27:09,500
Speaker 2: And, and that's an ongoing debate and it's a very

503
00:27:09,510 --> 00:27:13,949
Speaker 2: contentious debate that is taking place in European countries in particular, right?

504
00:27:13,959 --> 00:27:19,189
Speaker 2: Where um you know, the the consensus is moving though

505
00:27:19,209 --> 00:27:23,750
Speaker 2: uh to the point to where nobody wants potentially adversarial

506
00:27:24,050 --> 00:27:29,670
Speaker 2: uh technology in the core of their networks anywhere uh to,

507
00:27:29,680 --> 00:27:31,890
Speaker 2: you know, uh on if you peel, you know, if

508
00:27:31,900 --> 00:27:33,688
Speaker 2: you have, if you leave the outer layers of the

509
00:27:33,699 --> 00:27:37,209
Speaker 2: onion out there, um there's there's now increasing debate as

510
00:27:37,219 --> 00:27:39,250
Speaker 2: to who should be, who should be providing that kind

511
00:27:39,260 --> 00:27:40,619
Speaker 2: of technology. So

512
00:27:41,119 --> 00:27:41,689
Speaker 2: um that

513
00:27:42,089 --> 00:27:42,359
Speaker 1: is out

514
00:27:43,900 --> 00:27:46,349
Speaker 2: and, and, but that's where the tech diplomacy takes place, right?

515
00:27:46,359 --> 00:27:50,109
Speaker 2: That's where governments, you know, they have, they, they deal

516
00:27:50,119 --> 00:27:53,130
Speaker 2: with pressure from in Washington, in particular, if we're talking

517
00:27:53,140 --> 00:27:53,520
Speaker 2: about Huawei.

518
00:27:54,530 --> 00:27:57,270
Speaker 1: Ok. So now let's come to the digital currency aspect.

519
00:27:57,479 --> 00:28:01,349
Speaker 1: So you see there being two sides of the same coin,

520
00:28:01,359 --> 00:28:06,530
Speaker 1: the digital infrastructure diplomacy and then using the digital currency

521
00:28:06,540 --> 00:28:07,020
Speaker 1: as

522
00:28:07,430 --> 00:28:10,969
Speaker 1: a compliment uh additional offering if you will from the Chinese.

523
00:28:11,400 --> 00:28:15,829
Speaker 2: Well, the the the the issue with, with digital money

524
00:28:15,839 --> 00:28:20,750
Speaker 2: uh or in particularly uh central bank backed digital currencies, right? As, as,

525
00:28:20,760 --> 00:28:25,030
Speaker 2: as they become, as they sort of are rolled out

526
00:28:25,040 --> 00:28:29,179
Speaker 2: if you will. Um is you're, you're dealing with um

527
00:28:29,290 --> 00:28:32,660
Speaker 2: a central bank of a of a sovereign state, basically

528
00:28:32,670 --> 00:28:36,569
Speaker 2: that is overseeing uh this particular currency. So

529
00:28:37,079 --> 00:28:41,780
Speaker 2: uh the question then becomes, is this a democratic state

530
00:28:42,319 --> 00:28:47,989
Speaker 2: that uh adheres to specific kinds of values, privacy values?

531
00:28:48,000 --> 00:28:50,060
Speaker 2: How do you know how to use, how you know what,

532
00:28:50,069 --> 00:28:53,030
Speaker 2: what can be done once somebody's data is harvested to

533
00:28:53,040 --> 00:28:55,780
Speaker 2: what may it be linked and applied? Can it be

534
00:28:55,790 --> 00:28:59,979
Speaker 2: applied to some kind of a social credit system essentially? Right?

535
00:28:59,989 --> 00:29:03,250
Speaker 2: Because our our commercial daily activities

536
00:29:03,689 --> 00:29:06,250
Speaker 2: uh that's our lifeblood, right? And if, if, if you

537
00:29:06,260 --> 00:29:08,239
Speaker 2: know if, if we can't buy a cup of coffee

538
00:29:08,250 --> 00:29:11,790
Speaker 2: or if we can't buy a train ticket because we've

539
00:29:11,800 --> 00:29:15,949
Speaker 2: got a low social credit score, right? You know, that

540
00:29:15,959 --> 00:29:19,479
Speaker 2: is that's, that, that's a problem. Right. And certainly from a,

541
00:29:19,489 --> 00:29:23,260
Speaker 2: from a liberal democratic value standpoint, that's a problem. Right. So,

542
00:29:23,930 --> 00:29:26,770
Speaker 2: so I think we're, when, when we look at different

543
00:29:26,780 --> 00:29:29,670
Speaker 2: systems where we have a potential um

544
00:29:30,660 --> 00:29:35,170
Speaker 2: Chinese hegemony, uh digital money hegemony, particularly around uh around

545
00:29:35,180 --> 00:29:36,589
Speaker 2: the Belt and Road, some of the countries in the

546
00:29:36,599 --> 00:29:40,670
Speaker 2: Belt and Road. Um that's a, that's a, that's a train,

547
00:29:40,869 --> 00:29:44,290
Speaker 2: that's a head, head on train crash, right? Uh With, with,

548
00:29:44,300 --> 00:29:46,400
Speaker 2: with Western values when it comes to what kind of

549
00:29:46,410 --> 00:29:48,209
Speaker 2: money is used and how it's used and how that

550
00:29:48,219 --> 00:29:49,530
Speaker 2: data is used, right?

551
00:29:49,780 --> 00:29:52,750
Speaker 1: But there's so many countries in the world which run

552
00:29:52,760 --> 00:29:54,530
Speaker 1: large trade deficits vis A vis China

553
00:29:55,630 --> 00:29:56,250
Speaker 1: and

554
00:29:56,959 --> 00:29:59,969
Speaker 1: add to that the dynamic of weaponization of the US

555
00:29:59,979 --> 00:30:04,390
Speaker 1: dollar seizing the central bank assets of Afghanistan of Russia.

556
00:30:05,310 --> 00:30:07,729
Speaker 1: I would think that there would be actually increased motivation

557
00:30:07,739 --> 00:30:10,699
Speaker 1: for countries that have pretty deep trade relationship with China

558
00:30:10,709 --> 00:30:12,430
Speaker 1: and are a bit spooked by what the US has

559
00:30:12,439 --> 00:30:14,949
Speaker 1: done in recent years to reduce their reliance on the

560
00:30:14,959 --> 00:30:15,160
Speaker 1: US

561
00:30:15,170 --> 00:30:15,640
Speaker 1: dollar.

562
00:30:15,650 --> 00:30:17,829
Speaker 2: I totally agree. I, I think we're going to see,

563
00:30:17,839 --> 00:30:20,380
Speaker 2: I mean, we're seeing efforts and we're seeing a lot

564
00:30:20,390 --> 00:30:24,130
Speaker 2: of enthusiasm around de dollarization, right? And uh so I,

565
00:30:24,160 --> 00:30:26,719
Speaker 2: I think I, I, well, the green back is going

566
00:30:26,729 --> 00:30:27,239
Speaker 2: to be,

567
00:30:27,650 --> 00:30:32,209
Speaker 2: ah, a very powerful reserve currency for decades to come,

568
00:30:32,319 --> 00:30:34,670
Speaker 2: but there clearly is an impetus right? There clearly is,

569
00:30:34,680 --> 00:30:39,030
Speaker 2: is a very conscious effort to move away. And in

570
00:30:39,040 --> 00:30:40,280
Speaker 2: the process of doing that,

571
00:30:41,140 --> 00:30:44,709
Speaker 2: uh the rise of digital currencies bring, you know, bring

572
00:30:44,719 --> 00:30:47,180
Speaker 2: with them all kinds of issues,

573
00:30:47,189 --> 00:30:47,560
Speaker 1: right?

574
00:30:47,890 --> 00:30:48,079
Speaker 2: So

575
00:30:48,089 --> 00:30:48,150
Speaker 1: the

576
00:30:48,160 --> 00:30:50,530
Speaker 1: funny thing, Alex is that while we're discussing this in

577
00:30:50,540 --> 00:30:52,599
Speaker 1: the context of frontier technology,

578
00:30:52,989 --> 00:30:56,300
Speaker 1: the biggest beneficiary of this motivation to de dollarization is

579
00:30:56,310 --> 00:30:59,310
Speaker 1: actually an old asset, which is gold. That's the thing

580
00:30:59,319 --> 00:31:01,619
Speaker 1: that has rallied in the last couple of years, unlike

581
00:31:01,630 --> 00:31:04,869
Speaker 1: any other things. Whereas you know, cryptos they go up

582
00:31:04,880 --> 00:31:07,469
Speaker 1: and down CBD CS, the things that we you and

583
00:31:07,479 --> 00:31:09,329
Speaker 1: I are talking about is still a work in progress.

584
00:31:09,339 --> 00:31:11,510
Speaker 1: We're not sure whether the Chinese or any other country

585
00:31:11,520 --> 00:31:17,050
Speaker 1: would really be enthusiastically replacing their paper currency with digital currency,

586
00:31:17,060 --> 00:31:18,890
Speaker 1: but the potential is certainly there.

587
00:31:19,300 --> 00:31:25,530
Speaker 1: Um OK, so that takes me to the transatlantic alliance,

588
00:31:25,540 --> 00:31:29,119
Speaker 1: you mentioned earlier that Europe and both at the government

589
00:31:29,130 --> 00:31:31,500
Speaker 1: and corporate level, there is some degree of, you know,

590
00:31:31,510 --> 00:31:35,060
Speaker 1: rethinking about how to engage with China on the US.

591
00:31:35,069 --> 00:31:37,239
Speaker 1: We've seen it already pretty clear there is no daylight

592
00:31:37,250 --> 00:31:41,530
Speaker 1: between the Democrats and Republicans. Everybody is becoming pretty antagonistic

593
00:31:41,540 --> 00:31:45,150
Speaker 1: to Chinese technology. So how are the Europeans thinking? How

594
00:31:45,160 --> 00:31:47,689
Speaker 1: are the Americans thinking in terms of their collaboration?

595
00:31:48,260 --> 00:31:51,310
Speaker 2: Yeah, so there there are different views on this, right?

596
00:31:51,319 --> 00:31:54,569
Speaker 2: So the the the diehard neo li uh you know,

597
00:31:54,579 --> 00:31:57,719
Speaker 2: basically look at all of these, these big initiatives like

598
00:31:57,729 --> 00:32:00,050
Speaker 2: the Chips and Science Act, you know, the chips for

599
00:32:00,060 --> 00:32:04,280
Speaker 2: America Act, which are big subsidies for um the semiconductor

600
00:32:04,290 --> 00:32:07,640
Speaker 2: sector to reso or bring back fabrication to the United

601
00:32:07,650 --> 00:32:11,219
Speaker 2: States government subsidized. Uh They look at things like that,

602
00:32:11,229 --> 00:32:13,040
Speaker 2: they look at things like the um

603
00:32:13,650 --> 00:32:16,560
Speaker 2: the uh the Ira Act, right? Which is, which is the,

604
00:32:17,989 --> 00:32:20,010
Speaker 2: the Inflation Reduction Act, which has a lot of buyer

605
00:32:20,520 --> 00:32:23,400
Speaker 2: and it has a lot of subsidies and sweeteners for

606
00:32:23,410 --> 00:32:26,989
Speaker 2: companies to, to, to move things home and, and, and, and, and, and,

607
00:32:27,000 --> 00:32:31,359
Speaker 2: and do production that otherwise they may have offshored somewhere else.

608
00:32:31,829 --> 00:32:34,640
Speaker 2: So the neo, the, the neo liberal argument says, look,

609
00:32:34,650 --> 00:32:36,569
Speaker 2: this is a race to the bottom, right? Because it's

610
00:32:36,579 --> 00:32:40,270
Speaker 2: not just the US that is offering these kinds of subsidies.

611
00:32:40,430 --> 00:32:42,790
Speaker 2: But now, of course, then the Europeans have to respond

612
00:32:42,800 --> 00:32:44,579
Speaker 2: and like, and the South Koreans have to do the

613
00:32:44,589 --> 00:32:46,530
Speaker 2: same thing. And all of the, you know, all of

614
00:32:46,540 --> 00:32:49,609
Speaker 2: these regions are in fact putting up big, big amounts

615
00:32:49,619 --> 00:32:53,790
Speaker 2: of money, particularly for semiconductors. But I would say that

616
00:32:53,800 --> 00:32:55,849
Speaker 2: that it's not a race to the bottom and that,

617
00:32:55,859 --> 00:32:57,719
Speaker 2: and we have not seen that. Yes, there have been

618
00:32:57,729 --> 00:32:59,920
Speaker 2: European companies that have gone to the US,

619
00:33:00,410 --> 00:33:02,750
Speaker 2: but there are us companies that are still looking to

620
00:33:02,760 --> 00:33:06,489
Speaker 2: invest in Europe, right? We look at Intel, for example,

621
00:33:06,650 --> 00:33:08,579
Speaker 2: you know, Intel is a little bit stalled in some

622
00:33:08,589 --> 00:33:12,869
Speaker 2: of their efforts, but nonetheless, uh they'll get on track, right. They,

623
00:33:12,880 --> 00:33:14,579
Speaker 2: you know, to do a lot of a lot more

624
00:33:14,589 --> 00:33:18,989
Speaker 2: research and development and actually fabrication in in Europe. And they,

625
00:33:19,000 --> 00:33:23,609
Speaker 2: and they will avail themselves of European money basically. So,

626
00:33:23,729 --> 00:33:24,469
Speaker 2: so I think

627
00:33:25,349 --> 00:33:28,359
Speaker 2: that will happen. Um now

628
00:33:29,630 --> 00:33:33,140
Speaker 2: there, there, there's no doubt that that as we see

629
00:33:33,150 --> 00:33:39,599
Speaker 2: this reconfiguration, this restructuring around strategic supply chains, that more

630
00:33:39,609 --> 00:33:43,569
Speaker 2: and more innovation and more and more investment is concentrating

631
00:33:43,689 --> 00:33:46,410
Speaker 2: in these different nodes that otherwise may have been spread

632
00:33:46,420 --> 00:33:48,449
Speaker 2: out a little bit more, you know, in a much

633
00:33:48,459 --> 00:33:52,290
Speaker 2: more open trading, less geo economic paradigm.

634
00:33:52,969 --> 00:33:54,770
Speaker 2: Um So in that respect,

635
00:33:55,359 --> 00:34:00,280
Speaker 2: um certainly developing countries that may have had, you know,

636
00:34:00,290 --> 00:34:03,319
Speaker 2: may have been playing a bigger role in global value chains,

637
00:34:03,329 --> 00:34:07,109
Speaker 2: they're losing out that, that, that clearly is happening. Um

638
00:34:07,119 --> 00:34:11,100
Speaker 2: So the, so the renaissance, if you will uh the

639
00:34:11,110 --> 00:34:14,520
Speaker 2: the technology and the innovation renaissance, which is happening because

640
00:34:14,530 --> 00:34:17,449
Speaker 2: of the public, private partnerships that are being so well

641
00:34:17,459 --> 00:34:21,699
Speaker 2: funded in these nodes, right? That's happening.

642
00:34:22,290 --> 00:34:24,229
Speaker 2: And yes, there is going to be there is going

643
00:34:24,239 --> 00:34:26,870
Speaker 2: to be economic opportunity in those places, but it's going

644
00:34:26,879 --> 00:34:28,189
Speaker 2: to be a lot more uneven,

645
00:34:29,260 --> 00:34:32,319
Speaker 1: right? But is there alignment full alignment between the Americans

646
00:34:32,330 --> 00:34:34,419
Speaker 1: and the Europeans on how to deal with China? No,

647
00:34:34,459 --> 00:34:34,729
Speaker 2: no.

648
00:34:34,739 --> 00:34:38,629
Speaker 1: Has the alignment improved in the last 3.5 years under Biden?

649
00:34:38,649 --> 00:34:39,219
Speaker 1: I I

650
00:34:39,229 --> 00:34:42,020
Speaker 2: think uh I think you have to go country by

651
00:34:42,030 --> 00:34:45,549
Speaker 2: country in Europe, right? The Germans are really struggling, right?

652
00:34:45,560 --> 00:34:49,009
Speaker 2: They're really divided because they've had just a core, small

653
00:34:49,020 --> 00:34:53,949
Speaker 2: group of companies that have invested very, very heavily right in, in,

654
00:34:53,959 --> 00:34:57,919
Speaker 2: in China. Right. Siemens and the auto, the big automotive companies,

655
00:34:58,280 --> 00:35:00,610
Speaker 1: their, their global sales come from China. Yeah, that's right.

656
00:35:00,620 --> 00:35:01,239
Speaker 1: BMW s of

657
00:35:01,250 --> 00:35:05,639
Speaker 2: the world. Exactly. Exactly. They bet big right. Under Chancellor Merkel. Um,

658
00:35:05,649 --> 00:35:08,580
Speaker 2: they really bet big on China and, and, but then

659
00:35:08,590 --> 00:35:12,408
Speaker 2: if you look at sort of the middle tier companies

660
00:35:12,419 --> 00:35:16,330
Speaker 2: in Germany and you look at, you know, uh the labor,

661
00:35:16,340 --> 00:35:19,819
Speaker 2: you know, the the labor pool there, um they want,

662
00:35:20,149 --> 00:35:22,359
Speaker 2: they want jobs to come back to Germany, they want

663
00:35:22,370 --> 00:35:25,299
Speaker 2: more investment to, you know, to, to sort of gravitate

664
00:35:25,310 --> 00:35:28,330
Speaker 2: in the tech sector uh to, to Germany. So that

665
00:35:28,340 --> 00:35:32,629
Speaker 2: Germany is one example. Um So again, I think I

666
00:35:32,639 --> 00:35:35,399
Speaker 2: mentioned early on there is no way to analyze this

667
00:35:35,409 --> 00:35:39,790
Speaker 2: whole situation through a zero sum uh you know, kind

668
00:35:39,800 --> 00:35:42,370
Speaker 2: of lens, right? It's, there's just, there's so many different

669
00:35:42,379 --> 00:35:46,330
Speaker 2: overlapping interests, some peop some lose some win.

670
00:35:46,800 --> 00:35:49,070
Speaker 2: Uh There's a great deal of, of uncertainty, but I

671
00:35:49,080 --> 00:35:55,219
Speaker 2: think in general, I think in general the transatlantic um relationship,

672
00:35:55,389 --> 00:35:57,759
Speaker 2: of course, we have some elections coming up here, right?

673
00:35:58,659 --> 00:36:01,260
Speaker 2: Just a few. Just yes. So we have a big

674
00:36:01,270 --> 00:36:04,669
Speaker 2: presidential election coming up. Uh You know, III I would

675
00:36:04,679 --> 00:36:08,159
Speaker 2: say this uh I think uh uh a Trump two

676
00:36:08,169 --> 00:36:10,899
Speaker 2: term I think would, would put much more strain on

677
00:36:10,909 --> 00:36:14,979
Speaker 2: the transatlantic relationship. Of course, because of his tariff plans

678
00:36:14,989 --> 00:36:15,600
Speaker 2: and so forth

679
00:36:15,919 --> 00:36:21,010
Speaker 2: than a Harris uh administration. But having said that there

680
00:36:21,020 --> 00:36:26,639
Speaker 2: still are too many uh uh mutual interests across the Atlantic.

681
00:36:27,070 --> 00:36:32,260
Speaker 2: Uh you know, uh interests around A I standards, basically

682
00:36:32,270 --> 00:36:37,899
Speaker 2: rule frameworks around tech interests to, to cooper on supply

683
00:36:37,909 --> 00:36:43,260
Speaker 2: chain resilience around critical minerals, rare earths uh

684
00:36:43,639 --> 00:36:48,580
Speaker 2: uh incentives. I think uh I mentioned this a around semiconductors.

685
00:36:48,969 --> 00:36:52,620
Speaker 2: Uh I think there are incentives uh around, you know,

686
00:36:52,629 --> 00:36:56,540
Speaker 2: things like lithium batteries and, and electric vehicles and so forth.

687
00:36:56,550 --> 00:36:58,179
Speaker 2: So I think there are, there still are quite a

688
00:36:58,189 --> 00:37:01,580
Speaker 2: few incentives and then of course, there's the NATO angle

689
00:37:01,590 --> 00:37:03,779
Speaker 2: and the security angle when it comes to Ukraine.

690
00:37:04,389 --> 00:37:08,279
Speaker 2: Um So II, I think, I think the transatlantic relationship will,

691
00:37:08,290 --> 00:37:09,319
Speaker 2: will be just fine.

692
00:37:09,610 --> 00:37:11,469
Speaker 1: I want to stay on that for a second because

693
00:37:11,479 --> 00:37:14,560
Speaker 1: you made a, you know, great premise, which is that

694
00:37:14,570 --> 00:37:16,888
Speaker 1: we should look at country by country. The European Union

695
00:37:16,899 --> 00:37:19,879
Speaker 1: is not a single entity. There are countries, especially on

696
00:37:19,889 --> 00:37:21,820
Speaker 1: the eastern side of the European Union, which are very

697
00:37:21,830 --> 00:37:24,030
Speaker 1: friendly to China and then there are others who are not.

698
00:37:24,449 --> 00:37:27,770
Speaker 1: Um So is there a risk that eu itself could

699
00:37:27,780 --> 00:37:30,919
Speaker 1: fracture as a result of the US China conflict?

700
00:37:31,820 --> 00:37:35,860
Speaker 2: Um There's always a risk that, you know, when you

701
00:37:35,870 --> 00:37:38,969
Speaker 2: have a uh a union or certainly a customs union

702
00:37:38,979 --> 00:37:42,080
Speaker 2: that big uh when, when you have a block of

703
00:37:42,090 --> 00:37:46,080
Speaker 2: countries that big. Yes. Uh There's always a risk of that. And,

704
00:37:46,090 --> 00:37:47,939
Speaker 2: and I totally agree. I mean, I think, you know,

705
00:37:47,949 --> 00:37:51,479
Speaker 2: if you look at the eastern eastern European countries, they're

706
00:37:51,489 --> 00:37:55,389
Speaker 2: very eager to absorb investments, you know, from China, they're

707
00:37:55,399 --> 00:38:00,199
Speaker 2: very eager for infrastructure. Um uh But at the end

708
00:38:00,209 --> 00:38:00,840
Speaker 2: of the day,

709
00:38:02,310 --> 00:38:06,449
Speaker 2: I think there is a tipping point uh even in

710
00:38:06,459 --> 00:38:10,770
Speaker 2: eastern Europe, when uh the view becomes that, that any

711
00:38:10,780 --> 00:38:13,370
Speaker 2: outside power, China or anybody else, in this case, of course,

712
00:38:13,379 --> 00:38:17,199
Speaker 2: it's China is overstepping its bounds when it comes to

713
00:38:17,209 --> 00:38:20,399
Speaker 2: trying to exert influence. And we've seen that we've seen

714
00:38:20,409 --> 00:38:23,889
Speaker 2: that over the last decade, particularly during the COVID crisis, right.

715
00:38:24,399 --> 00:38:28,570
Speaker 2: So uh even that uh I think we, you know,

716
00:38:28,580 --> 00:38:31,129
Speaker 2: we will, we will, we will continue to see,

717
00:38:31,860 --> 00:38:33,540
Speaker 2: you know, if I had to make a prediction of,

718
00:38:33,550 --> 00:38:35,569
Speaker 2: you know, what the global economy is going to look

719
00:38:35,580 --> 00:38:38,399
Speaker 2: like from a supply chain standpoint over the next decade,

720
00:38:38,909 --> 00:38:39,959
Speaker 2: I would say that

721
00:38:40,830 --> 00:38:47,100
Speaker 2: what is deemed desking today uh with from strategic Chinese

722
00:38:47,110 --> 00:38:50,770
Speaker 2: or single source kind of Chinese supply chains that DERIS

723
00:38:51,120 --> 00:38:54,500
Speaker 2: is going to slowly evolve into decoupling

724
00:38:55,199 --> 00:38:59,580
Speaker 2: essentially. And we'll just see those supply chains basically coalesce,

725
00:39:00,360 --> 00:39:02,629
Speaker 2: you know, under different in different regions.

726
00:39:03,280 --> 00:39:05,899
Speaker 1: I'm curious to see what happens to the EV supply chain.

727
00:39:05,939 --> 00:39:11,839
Speaker 1: If Chinese companies invest in Hungary and Poland and Turkey

728
00:39:12,020 --> 00:39:15,790
Speaker 1: and starts making B DS and other cars, they should

729
00:39:15,800 --> 00:39:19,469
Speaker 1: be credible within Europe under eu rules of origin

730
00:39:19,770 --> 00:39:22,560
Speaker 1: and they should be classified as made in Europe cars.

731
00:39:22,770 --> 00:39:26,919
Speaker 1: But clearly in the context of U MC, the Americans

732
00:39:26,929 --> 00:39:28,129
Speaker 1: have said they are not going to accept that, that

733
00:39:28,139 --> 00:39:30,360
Speaker 1: even if we already make something in Mexico, it will

734
00:39:30,370 --> 00:39:34,000
Speaker 1: be considered a made in China car. So I can

735
00:39:34,010 --> 00:39:36,340
Speaker 1: sort of think about this alignment that if you are

736
00:39:36,350 --> 00:39:39,479
Speaker 1: more open to investment in the EU than the US

737
00:39:39,489 --> 00:39:40,790
Speaker 1: is within the U MC A.

738
00:39:41,159 --> 00:39:42,969
Speaker 1: Uh how do these things?

739
00:39:43,260 --> 00:39:46,810
Speaker 2: Yeah, I mean, look there uh this is just playing out. Now, now,

740
00:39:46,820 --> 00:39:50,779
Speaker 2: one thing I would say about um sort of the, the,

741
00:39:50,790 --> 00:39:54,600
Speaker 2: the the the movement of, of, in this case, Chinese

742
00:39:54,610 --> 00:39:59,419
Speaker 2: electric vehicle assembly, uh manufacturing, you know, out of China into,

743
00:39:59,429 --> 00:40:00,739
Speaker 2: into the European Union.

744
00:40:01,510 --> 00:40:04,639
Speaker 2: Um what is still going to be a very contentious issue,

745
00:40:04,649 --> 00:40:07,709
Speaker 2: there is going to be the fact that they may

746
00:40:07,719 --> 00:40:10,649
Speaker 2: be assembling the cars there. But if all the parts

747
00:40:10,659 --> 00:40:15,189
Speaker 2: and components are also still coming from China, then I

748
00:40:15,199 --> 00:40:17,770
Speaker 2: think we're going to run into issues around local content

749
00:40:17,780 --> 00:40:21,830
Speaker 2: requirements and we're already hearing about that, right? So, you know,

750
00:40:21,840 --> 00:40:23,639
Speaker 2: if you look at uh if you look at a

751
00:40:23,649 --> 00:40:28,370
Speaker 2: typical uh free trade agreement that in that involves automotive,

752
00:40:28,379 --> 00:40:30,290
Speaker 2: um they're usually pretty high

753
00:40:30,800 --> 00:40:34,699
Speaker 2: local content requirements or even local labor, uh you know,

754
00:40:34,709 --> 00:40:37,639
Speaker 2: the US MC A which is the, you know, us,

755
00:40:37,649 --> 00:40:42,850
Speaker 2: Canada Mexico replacement of what was used with NAFTA. Um

756
00:40:43,179 --> 00:40:46,529
Speaker 2: I mean, they've, they've, they've got in very, very high,

757
00:40:46,540 --> 00:40:52,229
Speaker 2: um you know, local origin content, uh requirements that even include,

758
00:40:52,479 --> 00:40:55,959
Speaker 2: you know, you know, proving that uh that, that labor

759
00:40:55,969 --> 00:40:59,260
Speaker 2: was paid a certain wage. Right. So I, I think

760
00:40:59,590 --> 00:41:01,610
Speaker 2: you, you might call it a non tariff barrier if

761
00:41:01,620 --> 00:41:04,729
Speaker 2: you want. You know, technically, but II, I think

762
00:41:05,590 --> 00:41:07,750
Speaker 2: no matter what happens in eastern Europe, as long as

763
00:41:07,760 --> 00:41:10,669
Speaker 2: it's part of the, the union, um there's going to

764
00:41:10,679 --> 00:41:16,010
Speaker 2: be pretty strong push back uh about about moving uh

765
00:41:16,030 --> 00:41:17,429
Speaker 2: you know Chinese uh

766
00:41:17,929 --> 00:41:20,760
Speaker 2: Chinese cars into that into that

767
00:41:20,770 --> 00:41:21,100
Speaker 2: region,

768
00:41:21,110 --> 00:41:24,399
Speaker 1: right? So there is like general assembly, there is full

769
00:41:24,409 --> 00:41:27,070
Speaker 1: kit assembly and there is manufacturing. I'm learning about this

770
00:41:27,080 --> 00:41:30,549
Speaker 1: because I'm thinking about phone Apple phones being made in

771
00:41:30,560 --> 00:41:33,590
Speaker 1: India or assembled in India debate. Uh And and I'm

772
00:41:33,600 --> 00:41:36,639
Speaker 1: sure for the EV same thing comes up. Uh Alex,

773
00:41:36,649 --> 00:41:39,060
Speaker 1: I want to talk about substation in India momentarily, but

774
00:41:39,070 --> 00:41:42,669
Speaker 1: just a couple of words on this race for innovation.

775
00:41:43,620 --> 00:41:47,609
Speaker 1: So chips, for example, the US remains the undisputed leader

776
00:41:47,620 --> 00:41:50,909
Speaker 1: in the world in chip design, East Asia is the

777
00:41:50,919 --> 00:41:53,679
Speaker 1: undisputed leader in the world in chip manufacturing. But the

778
00:41:53,689 --> 00:41:56,399
Speaker 1: design which is the highest value added comes from the US.

779
00:41:56,409 --> 00:41:58,459
Speaker 1: The best innovation on the chip side come from the

780
00:41:58,469 --> 00:41:58,929
Speaker 1: US

781
00:41:59,689 --> 00:42:02,830
Speaker 1: Europe has pockets of excellence. You talked about a SML earlier.

782
00:42:02,840 --> 00:42:04,560
Speaker 1: A SML itself is a function of a bunch of

783
00:42:04,570 --> 00:42:08,580
Speaker 1: other excellent companies, you know, Carl Zeiss Lens and Siemens Laser.

784
00:42:08,590 --> 00:42:13,229
Speaker 1: All going into the capabilities that A SML develops. Um

785
00:42:13,239 --> 00:42:16,989
Speaker 1: We don't hear as much about cutting edge innovation coming

786
00:42:17,000 --> 00:42:21,350
Speaker 1: out of China in green transition. Some uh and to

787
00:42:21,360 --> 00:42:22,709
Speaker 1: your point earlier that

788
00:42:23,179 --> 00:42:28,100
Speaker 1: buying up lots of dvs and then making up to

789
00:42:28,110 --> 00:42:30,780
Speaker 1: seven nanometers perhaps in five can be done by the

790
00:42:30,790 --> 00:42:34,439
Speaker 1: Chinese at a low year nonetheless. But has this, this

791
00:42:34,449 --> 00:42:38,370
Speaker 1: entire trade tech war led to widening of the tech

792
00:42:38,379 --> 00:42:40,800
Speaker 1: gap between the US and Chinese already?

793
00:42:41,879 --> 00:42:45,520
Speaker 2: Uh Well, let's let's stick with the semiconductor uh discussion, right?

794
00:42:45,530 --> 00:42:47,040
Speaker 2: I think it's good. So I, I think when you

795
00:42:47,050 --> 00:42:50,799
Speaker 2: talk about semiconductors, you really have to be careful to

796
00:42:50,810 --> 00:42:55,129
Speaker 2: make that distinction between advanced semiconductors and sort of

797
00:42:56,169 --> 00:42:58,239
Speaker 2: for lack of a better term, we'll call it legacy.

798
00:42:58,300 --> 00:42:59,820
Speaker 1: So leading versus lagging

799
00:43:00,060 --> 00:43:02,299
Speaker 2: edge versus lagging edge and some people don't like the

800
00:43:02,310 --> 00:43:05,110
Speaker 2: term lagging edge, especially, you know, big, even big Western

801
00:43:05,120 --> 00:43:08,129
Speaker 2: companies that are making so called lagging edge. So, but

802
00:43:08,370 --> 00:43:12,239
Speaker 2: um so I think that's a really important distinction. Um

803
00:43:12,250 --> 00:43:16,879
Speaker 2: So if, if we're talking about um China or anyone

804
00:43:16,889 --> 00:43:19,580
Speaker 2: else being anywhere near what a SML can do when

805
00:43:19,590 --> 00:43:21,459
Speaker 2: it comes to extreme ultraviolet,

806
00:43:22,969 --> 00:43:27,879
Speaker 2: a decade, two decades, maybe never, right? Because you know,

807
00:43:27,889 --> 00:43:30,159
Speaker 2: this is not a, this is not a stationary target,

808
00:43:30,479 --> 00:43:33,219
Speaker 2: this is, you know, Moore's law is still alive, right?

809
00:43:33,610 --> 00:43:37,169
Speaker 2: Uh uh And, and so it's just so incredibly complex

810
00:43:37,179 --> 00:43:39,060
Speaker 2: and hard and you need to have the right partners.

811
00:43:39,409 --> 00:43:41,810
Speaker 2: It's that ecosystem, right? And if you can't get that

812
00:43:41,820 --> 00:43:42,899
Speaker 2: full ecosystem,

813
00:43:43,320 --> 00:43:47,879
Speaker 2: it's almost an impossibility. But if we're talking about trailing edge,

814
00:43:48,189 --> 00:43:52,540
Speaker 2: um then, then I think China uh is uh uh

815
00:43:52,550 --> 00:43:55,340
Speaker 2: already a player and is going to be a much,

816
00:43:55,350 --> 00:43:58,610
Speaker 2: much bigger player in terms of global supply. Uh And

817
00:43:58,620 --> 00:43:59,520
Speaker 2: if you think about it,

818
00:44:00,110 --> 00:44:02,439
Speaker 2: um the innovation that you talked about, there is a

819
00:44:02,449 --> 00:44:04,770
Speaker 2: lot of innovation taking place in China. There's no question

820
00:44:04,780 --> 00:44:05,489
Speaker 2: about it. So

821
00:44:05,500 --> 00:44:06,199
Speaker 1: you don't have

822
00:44:06,209 --> 00:44:09,830
Speaker 1: to have leading edge processors to do innovation.

823
00:44:09,840 --> 00:44:10,179
Speaker 2: Not

824
00:44:10,189 --> 00:44:12,139
Speaker 2: at all, not at all. I mean, you need it

825
00:44:12,149 --> 00:44:14,379
Speaker 2: for leading edge A I, right? So if you want

826
00:44:14,389 --> 00:44:17,040
Speaker 2: to do machine learning and like large language models and

827
00:44:17,050 --> 00:44:19,699
Speaker 2: that sort of thing, you need to have cutting edge

828
00:44:19,709 --> 00:44:22,090
Speaker 2: A I, right? And you need cutting edge A I but,

829
00:44:22,300 --> 00:44:26,649
Speaker 2: but for even relatively sophisticated weapons systems,

830
00:44:26,929 --> 00:44:32,009
Speaker 2: uh for almost all consumer electronics, you don't need leading edge, right?

831
00:44:32,020 --> 00:44:34,899
Speaker 2: I mean, and so Apple, you know, the, the, you know,

832
00:44:34,909 --> 00:44:37,560
Speaker 2: a as it pushes the, the, the, the the boundaries

833
00:44:37,570 --> 00:44:41,850
Speaker 2: with its iphone, uh a Tesla, for example, you know, you,

834
00:44:41,860 --> 00:44:44,149
Speaker 2: I guess you can put in more and more advanced

835
00:44:44,159 --> 00:44:46,580
Speaker 2: technology because it's a computer on wheels, right? Depending on

836
00:44:46,590 --> 00:44:48,510
Speaker 2: what you want it to do other than just drive around.

837
00:44:48,949 --> 00:44:51,840
Speaker 2: But um but, but you know, if you look at,

838
00:44:52,439 --> 00:44:54,799
Speaker 2: if you look at medicine, uh you know, he medicine

839
00:44:54,810 --> 00:44:57,719
Speaker 2: and health care, if you look at basic communications. If

840
00:44:57,729 --> 00:45:00,669
Speaker 2: you look at most consumer electronics, most of that, there's

841
00:45:00,679 --> 00:45:04,138
Speaker 2: a huge market for lagging edge tips.

842
00:45:05,510 --> 00:45:08,199
Speaker 1: And I think the lighting it chips are also a

843
00:45:08,209 --> 00:45:11,179
Speaker 1: pretty important component of the entire green transition wave that

844
00:45:11,189 --> 00:45:16,350
Speaker 1: we're seeing. So building smart wind turbines, building new age

845
00:45:16,360 --> 00:45:19,120
Speaker 1: solar cells. Again, you don't need three nanometer chips for them,

846
00:45:19,300 --> 00:45:22,909
Speaker 1: but you can have tremendous value addition and sources of

847
00:45:22,979 --> 00:45:27,889
Speaker 1: jobs and profitability and market share just through pushing that

848
00:45:28,280 --> 00:45:31,179
Speaker 1: that line of technology. Um

849
00:45:32,620 --> 00:45:35,729
Speaker 1: in terms of Southeast Asia, you know, that our mutual

850
00:45:35,739 --> 00:45:37,939
Speaker 1: friend Charlie Ormiston and I, we worked on a project

851
00:45:37,949 --> 00:45:40,070
Speaker 1: together with a bunch of analysts from D BS and

852
00:45:40,080 --> 00:45:43,040
Speaker 1: Bain and company. Uh and we wrote a report on

853
00:45:43,050 --> 00:45:44,179
Speaker 1: Southeast Asia's outlook.

854
00:45:44,840 --> 00:45:47,580
Speaker 1: So I want to hear your view on subs Asia

855
00:45:47,590 --> 00:45:51,408
Speaker 1: as you know, we feel that the techno nationalism will

856
00:45:51,419 --> 00:45:54,149
Speaker 1: have some winners and losers to your point earlier. And

857
00:45:54,159 --> 00:45:57,529
Speaker 1: we can we see this region being a winner? Do

858
00:45:57,540 --> 00:46:00,189
Speaker 1: you see that as an unqualified argument or do you

859
00:46:00,199 --> 00:46:01,669
Speaker 1: think that there are some ifs and buts around

860
00:46:01,679 --> 00:46:02,030
Speaker 1: that?

861
00:46:02,189 --> 00:46:03,979
Speaker 2: II, I would agree and I thought it was a

862
00:46:03,989 --> 00:46:06,529
Speaker 2: good report, of course. And I went to the presentation,

863
00:46:06,540 --> 00:46:08,510
Speaker 2: I did listen to your presentation.

864
00:46:09,520 --> 00:46:12,169
Speaker 2: Yes, I, I would absolutely agree with it because of course,

865
00:46:12,179 --> 00:46:16,219
Speaker 2: Southeast Asia is a very uneven economic landscape right there.

866
00:46:16,229 --> 00:46:19,830
Speaker 2: You know, you've got the, the original four right countries, Singapore,

867
00:46:19,840 --> 00:46:22,859
Speaker 2: of course, you know, being right at the top. Um

868
00:46:23,149 --> 00:46:24,909
Speaker 2: so it will be uneven. So if you look at

869
00:46:24,919 --> 00:46:27,840
Speaker 2: uh in the electronic sector, for example, um you know,

870
00:46:27,850 --> 00:46:33,810
Speaker 2: where they're uh interestingly enough as these uh these as

871
00:46:33,820 --> 00:46:35,969
Speaker 2: supply chains um

872
00:46:36,520 --> 00:46:39,399
Speaker 2: move or, you know, derisk or decouple out of China,

873
00:46:39,409 --> 00:46:41,649
Speaker 2: you know, they're going to, of course, Vietnam, right, they're

874
00:46:41,659 --> 00:46:45,139
Speaker 2: going to Malaysia, some of it's coming to Singapore uh

875
00:46:45,149 --> 00:46:45,560
Speaker 2: and so

876
00:46:45,570 --> 00:46:45,739
Speaker 2: on,

877
00:46:45,750 --> 00:46:48,429
Speaker 1: surprising amount coming to Singapore. So

878
00:46:48,709 --> 00:46:52,649
Speaker 2: not so surprising. Uh, you know, III I think Singapore certainly,

879
00:46:53,040 --> 00:46:53,739
Speaker 2: um

880
00:46:54,709 --> 00:46:57,770
Speaker 2: you know, provides a good environment uh for some of

881
00:46:57,780 --> 00:47:00,469
Speaker 2: the high end, you know, certainly memory chips and sort

882
00:47:00,479 --> 00:47:03,429
Speaker 2: of expanding the, the, the chip, the chip sector. Although

883
00:47:03,439 --> 00:47:06,770
Speaker 2: that's a very, uh that's a, that's a very discreet

884
00:47:06,780 --> 00:47:10,010
Speaker 2: topic here, right? Uh Nobody wants to really admit that that,

885
00:47:10,020 --> 00:47:11,989
Speaker 2: you know, a lot of that is coming to Singapore

886
00:47:12,000 --> 00:47:13,609
Speaker 2: because nobody wants to really offend

887
00:47:14,169 --> 00:47:16,110
Speaker 2: the Chinese in particular, but the

888
00:47:16,120 --> 00:47:18,750
Speaker 1: country remains one of the major players in lagging edge,

889
00:47:18,760 --> 00:47:19,909
Speaker 1: manufacturing and exports.

890
00:47:19,919 --> 00:47:20,069
Speaker 2: That's,

891
00:47:20,080 --> 00:47:21,989
Speaker 2: that's exactly right. So I think there's gonna be more

892
00:47:22,000 --> 00:47:24,810
Speaker 2: activity there, certainly around A I, that's a big part

893
00:47:24,820 --> 00:47:29,469
Speaker 2: of Singapore's uh future, right? They're, they're, they're, they're hedging

894
00:47:29,699 --> 00:47:32,340
Speaker 2: or they're, they're betting I should say big on, on

895
00:47:32,350 --> 00:47:35,350
Speaker 2: being a player in that regard. Um Yeah, so I,

896
00:47:35,360 --> 00:47:36,790
Speaker 2: I think I, I think

897
00:47:37,469 --> 00:47:44,009
Speaker 2: the necessity to, um to derisk Taiwan from a chip

898
00:47:44,020 --> 00:47:47,770
Speaker 2: perspective where you have literally one company, one company making 90%

899
00:47:47,780 --> 00:47:51,529
Speaker 2: of the world's most advanced chips as a subcontractor and 60%

900
00:47:51,659 --> 00:47:54,229
Speaker 2: of all of the world's chips. I mean, that's just not,

901
00:47:54,280 --> 00:47:57,610
Speaker 2: that's just simply not sustainable, right? That just can't be.

902
00:47:57,820 --> 00:47:59,729
Speaker 1: So we can talk about Apple, we can talk about.

903
00:48:00,159 --> 00:48:03,819
Speaker 1: But Maiden Taiwan made by TS MC, made by

904
00:48:03,830 --> 00:48:06,270
Speaker 2: TS MC, I mean, that's, you know, so, so the

905
00:48:06,280 --> 00:48:10,020
Speaker 2: tech diplomacy that I mentioned earlier is about, you know,

906
00:48:10,030 --> 00:48:13,290
Speaker 2: getting them to build plants, not just in Arizona, but

907
00:48:13,300 --> 00:48:15,719
Speaker 2: in Germany and other parts of the world. And I

908
00:48:15,729 --> 00:48:16,178
Speaker 2: think

909
00:48:16,800 --> 00:48:20,929
Speaker 2: um the uh from the the lagging edge side, uh

910
00:48:20,939 --> 00:48:24,500
Speaker 2: we'll see more and more of that again, being restored

911
00:48:24,790 --> 00:48:29,000
Speaker 2: uh again within II I hate this term friend shoring, right?

912
00:48:29,310 --> 00:48:31,979
Speaker 2: But e essentially what it means is a much more

913
00:48:31,989 --> 00:48:37,110
Speaker 2: reliable uh partnership, right? Um So, uh but so, so

914
00:48:37,120 --> 00:48:39,979
Speaker 2: Southeast Asia, I think it's, it's gonna be very uneven

915
00:48:40,409 --> 00:48:43,520
Speaker 2: from a, from a, from a tech standpoint. Um And

916
00:48:43,530 --> 00:48:43,860
Speaker 2: then

917
00:48:44,250 --> 00:48:46,590
Speaker 2: I know you want to talk about this. Um You know,

918
00:48:46,600 --> 00:48:50,638
Speaker 2: is there a linkage to India? Right? Is there, is

919
00:48:50,649 --> 00:48:54,739
Speaker 2: there a corridor that links Southeast Asia more to India, right?

920
00:48:54,750 --> 00:48:57,929
Speaker 2: When it comes to again, trailing edge chips and there,

921
00:48:57,939 --> 00:49:01,089
Speaker 2: I think uh Malaysia is a very interesting country and

922
00:49:01,100 --> 00:49:03,669
Speaker 2: I think if there is um if, if India is

923
00:49:03,679 --> 00:49:08,250
Speaker 2: gonna have competition, if India is able to pursue its

924
00:49:08,260 --> 00:49:12,030
Speaker 2: hopes and dreams of establishing a, a trailing edge,

925
00:49:12,379 --> 00:49:16,179
Speaker 2: uh sort of manufacturing base and they, there's activity going

926
00:49:16,189 --> 00:49:18,479
Speaker 2: on in that area. I think Malaysia is going to

927
00:49:18,489 --> 00:49:20,459
Speaker 2: give them a run for their money. Alex.

928
00:49:20,469 --> 00:49:23,889
Speaker 1: I'm really surprised by the developments out of Malaysia. I

929
00:49:23,899 --> 00:49:26,409
Speaker 1: think when we started writing our Southeast Asia report at

930
00:49:26,419 --> 00:49:27,399
Speaker 1: the beginning of this year,

931
00:49:28,100 --> 00:49:31,439
Speaker 1: I wasn't that seriously taking Malaysia's prospects. I have changed

932
00:49:31,449 --> 00:49:35,399
Speaker 1: my mind dramatically over the last 89 months. And in

933
00:49:35,409 --> 00:49:38,340
Speaker 1: my recent trip to Kuala Lumpur also reinforced that view

934
00:49:38,350 --> 00:49:43,270
Speaker 1: that you actually have now interregional competition within Malaysia from

935
00:49:43,280 --> 00:49:45,600
Speaker 1: Penang to Cyberjaya to Johor. They are all

936
00:49:45,675 --> 00:49:50,274
Speaker 1: competing for the tech dollars and you have now the

937
00:49:50,284 --> 00:49:54,175
Speaker 1: Western companies, the Chinese companies and the Indians, everybody is

938
00:49:54,185 --> 00:49:57,274
Speaker 1: sort of flocking to Malaysia for the know how for

939
00:49:57,284 --> 00:50:00,475
Speaker 1: their abandoned land and water and electricity. It seemed like

940
00:50:00,485 --> 00:50:05,895
Speaker 1: a very fertile ground for data centers and fabs. And

941
00:50:05,905 --> 00:50:08,294
Speaker 1: I thought that this was going to be for the

942
00:50:08,304 --> 00:50:11,405
Speaker 1: Vietnam and Indonesia to pick. But I think Malaysia is

943
00:50:11,415 --> 00:50:13,465
Speaker 1: going to be a very formidable player in this area.

944
00:50:13,475 --> 00:50:14,495
Speaker 2: Absolutely.

945
00:50:14,800 --> 00:50:19,429
Speaker 2: Now, we do have another development uh happening across Southeast Asia,

946
00:50:19,439 --> 00:50:22,939
Speaker 2: which is, which is a sort of a, an extension

947
00:50:22,949 --> 00:50:28,270
Speaker 2: of the original uh you know, export control uh environment.

948
00:50:28,560 --> 00:50:33,080
Speaker 2: Uh and that is that as many Chinese companies pick

949
00:50:33,090 --> 00:50:37,939
Speaker 2: up and move right to, to circumvent export controls, et

950
00:50:37,949 --> 00:50:40,679
Speaker 2: cetera or to, you know, to, to, to get out

951
00:50:40,689 --> 00:50:43,399
Speaker 2: from under that, that that umbrella if you will

952
00:50:43,689 --> 00:50:47,330
Speaker 2: um you know that that's been placed over them by

953
00:50:47,340 --> 00:50:49,780
Speaker 2: uh by the Department of Commerce and the US Bureau

954
00:50:49,790 --> 00:50:53,350
Speaker 2: of Industry and Security which enforces export controls.

955
00:50:54,010 --> 00:50:56,500
Speaker 2: A lot of the, a lot of that um supply

956
00:50:56,510 --> 00:50:59,529
Speaker 2: chain activity that was in China is just picking up

957
00:50:59,540 --> 00:51:00,229
Speaker 2: and moving

958
00:51:01,149 --> 00:51:05,820
Speaker 2: to Southeast Asia. So the question then becomes um do

959
00:51:05,830 --> 00:51:09,959
Speaker 2: the export controls and the licensing requirements simply follow them, right? Does,

960
00:51:09,969 --> 00:51:13,000
Speaker 2: does Washington turn around and say, oh, ok. So you've relocated,

961
00:51:13,229 --> 00:51:17,330
Speaker 2: you know, uh a factory from, from China to Vietnam.

962
00:51:17,739 --> 00:51:21,850
Speaker 2: Uh It's, it's basically a transshipment exercise, right? Or it's, it's,

963
00:51:21,860 --> 00:51:25,290
Speaker 2: it's like we were discussing with Eastern Europe. Um Now

964
00:51:25,300 --> 00:51:28,370
Speaker 2: we're going to start, you know, imposing once again,

965
00:51:30,100 --> 00:51:33,709
Speaker 2: you know, security requirements coming out of Vietnam or coming

966
00:51:33,719 --> 00:51:35,409
Speaker 2: out of Malaysia or even Singapore.

967
00:51:35,860 --> 00:51:38,909
Speaker 1: I understand this is already happening. It's already happening even

968
00:51:38,919 --> 00:51:41,229
Speaker 1: during the Trump years. And certainly during the Biden years,

969
00:51:41,239 --> 00:51:44,469
Speaker 1: we've had Department of Commerce officials go repeatedly to Vietnam

970
00:51:44,479 --> 00:51:46,560
Speaker 1: precisely to investigate issues like that.

971
00:51:47,120 --> 00:51:50,649
Speaker 1: But you know, it's challenging. Um I don't think anybody

972
00:51:50,659 --> 00:51:54,409
Speaker 1: moves one for one, a company from country to Country B.

973
00:51:54,870 --> 00:51:57,110
Speaker 1: There is always some implement creation, some value creation in

974
00:51:57,120 --> 00:51:59,669
Speaker 1: country B. So then it becomes a question of gradation,

975
00:51:59,679 --> 00:52:02,120
Speaker 1: the gray area that you are talking about, right? What

976
00:52:02,129 --> 00:52:05,429
Speaker 1: percent of value added from China is acceptable? Is it zero?

977
00:52:05,439 --> 00:52:08,520
Speaker 1: Is it 10? Is it 20? And then how much,

978
00:52:08,530 --> 00:52:10,399
Speaker 1: you know, forensic investigation do you have to do with

979
00:52:10,409 --> 00:52:14,850
Speaker 1: the paperwork and the actual hardware to ascertain those claims?

980
00:52:14,860 --> 00:52:15,489
Speaker 2: Absolutely.

981
00:52:15,959 --> 00:52:20,020
Speaker 2: So, the, so, you know, this is an absolute bonanza, right?

982
00:52:20,030 --> 00:52:22,610
Speaker 2: For the consulting firms, lawyers. Uh, you know,

983
00:52:23,250 --> 00:52:23,699
Speaker 1: as you said,

984
00:52:24,389 --> 00:52:26,649
Speaker 2: tech, I mean, this is a great time to be, uh,

985
00:52:26,659 --> 00:52:29,879
Speaker 2: you know, a big four or mckenzie or, you know, um,

986
00:52:29,909 --> 00:52:31,620
Speaker 1: stuff that you did in your previous life,

987
00:52:31,629 --> 00:52:32,020
Speaker 2: stuff

988
00:52:32,030 --> 00:52:33,459
Speaker 2: that I did in my previous, I'm wondering if I

989
00:52:33,469 --> 00:52:36,279
Speaker 2: should go back. Uh But yeah, definitely.

990
00:52:36,290 --> 00:52:39,489
Speaker 1: Um finally, uh we just touched on India, let's talk

991
00:52:39,500 --> 00:52:42,489
Speaker 1: a little more about India because India has also been

992
00:52:42,500 --> 00:52:44,419
Speaker 1: pursuing what is known as making in India

993
00:52:45,020 --> 00:52:48,320
Speaker 1: for the last decade or so. And India has ruled

994
00:52:48,330 --> 00:52:50,030
Speaker 1: out what is known as production link and send a

995
00:52:50,040 --> 00:52:52,649
Speaker 1: PL scheme and not small a chain. I mean, we're

996
00:52:52,659 --> 00:52:55,620
Speaker 1: talking about 20 something odd billion dollars worth of pl

997
00:52:55,739 --> 00:52:59,469
Speaker 1: have been offered. It hasn't been taken up 100% but some,

998
00:52:59,479 --> 00:53:02,699
Speaker 1: some has been and there are large Indian conglomerates who

999
00:53:02,709 --> 00:53:05,780
Speaker 1: are now joining the fray in raising capital to build

1000
00:53:05,790 --> 00:53:06,739
Speaker 1: fabs in India.

1001
00:53:07,489 --> 00:53:11,569
Speaker 1: Is it a worthy goal to create a big manufacturing

1002
00:53:11,580 --> 00:53:15,330
Speaker 1: footprint when you have a hyper competitor like China, when

1003
00:53:15,340 --> 00:53:18,689
Speaker 1: you have Southeast Asia, just around the corner, should all

1004
00:53:18,699 --> 00:53:20,939
Speaker 1: countries that are large enough, try to build their own

1005
00:53:20,949 --> 00:53:23,429
Speaker 1: supply chain for certain levels of technology?

1006
00:53:23,560 --> 00:53:26,479
Speaker 2: Yeah, so I think so, India is such a unique case.

1007
00:53:26,489 --> 00:53:30,129
Speaker 2: I mean, India has not had great success with industrial

1008
00:53:30,139 --> 00:53:31,310
Speaker 2: policy in the past.

1009
00:53:32,250 --> 00:53:36,199
Speaker 2: It's always the same, same reasons. Right. It's, it's, it's, it's, uh,

1010
00:53:36,560 --> 00:53:41,790
Speaker 2: you know, too many taxes, it's over regulation, it's bad infrastructure,

1011
00:53:41,800 --> 00:53:44,540
Speaker 2: it's corruption, it's, you know, a lot of things that

1012
00:53:44,550 --> 00:53:47,350
Speaker 2: are big, you know, that are big challenges. So the

1013
00:53:47,360 --> 00:53:53,699
Speaker 2: question is now, you know, can India move from what

1014
00:53:53,709 --> 00:53:57,050
Speaker 2: it's doing now? Well, which is basically R and D

1015
00:53:57,060 --> 00:54:00,909
Speaker 2: and engineering centers that, you know, you know, companies have

1016
00:54:00,919 --> 00:54:01,580
Speaker 2: set up,

1017
00:54:01,889 --> 00:54:04,888
Speaker 2: uh it does software very well. It's got a lot

1018
00:54:04,899 --> 00:54:06,388
Speaker 2: of engineers, that sort of thing.

1019
00:54:06,939 --> 00:54:09,090
Speaker 2: Can they move it to a man? Can they move

1020
00:54:09,100 --> 00:54:13,169
Speaker 2: that to more of a manufacturing focused endeavor? Right. And

1021
00:54:13,179 --> 00:54:15,899
Speaker 2: that's hard, that's, that's, that's been very, very hard

1022
00:54:15,909 --> 00:54:18,350
Speaker 1: for that also somewhat unique because you go from agriculture,

1023
00:54:18,360 --> 00:54:20,709
Speaker 1: you leapfrog into services and now you're gonna go back

1024
00:54:20,719 --> 00:54:21,949
Speaker 1: to the mid point to the mid

1025
00:54:22,060 --> 00:54:22,299
Speaker 1: point.

1026
00:54:22,310 --> 00:54:24,459
Speaker 2: And, and I mean, you know, if, if you look

1027
00:54:24,469 --> 00:54:26,949
Speaker 2: at the numbers, some numbers show that actually manufacturing is

1028
00:54:26,959 --> 00:54:31,030
Speaker 2: actually shrunk in India, uh you know, even during this

1029
00:54:31,040 --> 00:54:33,259
Speaker 2: period where it's been emphasized, right? So

1030
00:54:34,000 --> 00:54:38,790
Speaker 2: I don't think it's gonna happen unless you have, you know, a,

1031
00:54:38,800 --> 00:54:42,888
Speaker 2: a situation like Apple and Foxconn basically moving and just

1032
00:54:42,899 --> 00:54:46,570
Speaker 2: putting billions of dollars into an ecosystem and bringing 2nd

1033
00:54:46,580 --> 00:54:50,229
Speaker 2: and 3rd tier suppliers. And even then you have, you

1034
00:54:50,239 --> 00:54:55,830
Speaker 2: have these um these isolated hubs across India. You know,

1035
00:54:56,139 --> 00:54:59,250
Speaker 2: you know, that, that, that are potentially these hotbeds.

1036
00:54:59,840 --> 00:55:02,310
Speaker 2: The other thing is, and, and I write about this in,

1037
00:55:02,320 --> 00:55:05,419
Speaker 2: in my book is, you know, what India really wants

1038
00:55:05,429 --> 00:55:07,629
Speaker 2: to do is it wants to, it wants to grow

1039
00:55:07,639 --> 00:55:11,669
Speaker 2: an indigenous um sort of cell phone, uh you know,

1040
00:55:11,679 --> 00:55:15,620
Speaker 2: mobile phone, uh sort of kind of ecosystem that then

1041
00:55:15,919 --> 00:55:20,250
Speaker 2: uh grows out into uh infrastructure for wireless and that

1042
00:55:20,260 --> 00:55:21,779
Speaker 2: type of thing. Um

1043
00:55:22,290 --> 00:55:25,189
Speaker 2: And that to do that you need you, you, you

1044
00:55:25,199 --> 00:55:28,870
Speaker 2: need uh certain kinds of technology, right? So, you know,

1045
00:55:28,879 --> 00:55:31,109
Speaker 2: obviously you need chips, right? So if you can, if

1046
00:55:31,120 --> 00:55:34,550
Speaker 2: you can bring foreign investment in and you can get

1047
00:55:34,949 --> 00:55:37,770
Speaker 2: the right companies to come in and, and build those

1048
00:55:37,780 --> 00:55:42,279
Speaker 2: lagging edge chips and, and, and so on. Um Then

1049
00:55:42,290 --> 00:55:44,300
Speaker 2: that I, I think that's, that's gonna be critical and

1050
00:55:44,310 --> 00:55:45,979
Speaker 2: I think it's gonna be a big challenge. And as

1051
00:55:45,989 --> 00:55:50,060
Speaker 2: I mentioned, I think Malaysia will probably uh probably do that.

1052
00:55:50,629 --> 00:55:53,330
Speaker 2: They are doing that and they will do that pretty well.

1053
00:55:53,729 --> 00:55:56,379
Speaker 2: Um And so, II, I really, I think this is

1054
00:55:56,389 --> 00:55:58,689
Speaker 2: a wait and see. And as one of my, and

1055
00:55:59,139 --> 00:56:01,840
Speaker 2: I'm not saying that I believe this is going to happen. I, I,

1056
00:56:01,850 --> 00:56:06,609
Speaker 2: you know, uh but you know, not to say this glibly, but,

1057
00:56:06,620 --> 00:56:09,500
Speaker 2: you know, India has missed a lot of opportunities, right?

1058
00:56:10,250 --> 00:56:12,729
Speaker 2: Uh And the question is, are we going to see

1059
00:56:12,739 --> 00:56:15,590
Speaker 2: a repeat of that, or is this,

1060
00:56:16,510 --> 00:56:19,388
Speaker 2: is this period in history right now where we have

1061
00:56:19,399 --> 00:56:21,699
Speaker 2: this massive paradigm shift in the West and we have

1062
00:56:21,709 --> 00:56:24,069
Speaker 2: all these things that we've been talking about the reorganization,

1063
00:56:24,080 --> 00:56:25,370
Speaker 2: the bifurcation, all of that

1064
00:56:26,000 --> 00:56:28,810
Speaker 2: is, is this going to put them over the hump? Right?

1065
00:56:28,820 --> 00:56:30,379
Speaker 2: Is this, and

1066
00:56:31,350 --> 00:56:33,449
Speaker 2: you know, if I'm, if I'm putting money on it,

1067
00:56:33,679 --> 00:56:35,600
Speaker 2: it's not good money at this point. Right. I mean,

1068
00:56:35,610 --> 00:56:36,830
Speaker 2: it is still a wait and see.

1069
00:56:37,350 --> 00:56:38,649
Speaker 1: Well, at least the window is there,

1070
00:56:39,370 --> 00:56:40,159
Speaker 2: is there no doubt.

1071
00:56:40,270 --> 00:56:43,500
Speaker 1: And now it's really up to the policymakers to come

1072
00:56:43,510 --> 00:56:46,649
Speaker 1: up with the right policy environment and a stable regulatory

1073
00:56:46,659 --> 00:56:48,370
Speaker 1: environment to to make it happen.

1074
00:56:49,090 --> 00:56:51,959
Speaker 1: Alexander Caffrey. This has been fantastic. Thank you very much

1075
00:56:51,969 --> 00:56:53,049
Speaker 1: for your time and insights.

1076
00:56:53,419 --> 00:56:54,779
Speaker 2: Pleasure. Enjoyed it.

1077
00:56:55,020 --> 00:56:59,229
Speaker 1: Great as always. Thanks to our listeners as well. Copy

1078
00:56:59,239 --> 00:57:02,659
Speaker 1: Time was produced by Ken Delbridge Violet, Lee and Daisy

1079
00:57:02,669 --> 00:57:07,510
Speaker 1: Sherma provided additional assistance. All 135 episodes of copy time

1080
00:57:07,520 --> 00:57:11,780
Speaker 1: are available on youtube and on major podcast platforms like

1081
00:57:11,790 --> 00:57:15,580
Speaker 1: Apple and Spotify. It is for information only and does

1082
00:57:15,590 --> 00:57:17,659
Speaker 1: not constitute any investment advice

1083
00:57:18,030 --> 00:57:21,219
Speaker 1: for our research publications and webinars. You can find them

1084
00:57:21,229 --> 00:57:24,449
Speaker 1: all by Googling D BS Research Library. Have a great day.