okay morning everybody uh first I have a couple of formal announcements to make and then some comments uh before I turn over to our colleagues first the ash center acknowledges the land on which Harvard University sits is the traditional territory of the Massachusetts people we also recognize the continuing presence of the neighboring and npuk Nations Nations sorry so uh just so as people are aware to today's discussions are on the record and they're being recorded we do have some uh virtual participants for this event was watching and listening on YouTube that means that all the remarks that people make need to be addressed to a microphone so it can be picked up uh for those uh online next I'd like to acknowledge our co-sponsors the Roger W Foundation Institute for Asia here at the Harvard Kennedy School Fairbank Center for Chinese studies of Harvard University and the mosar Romani Center for business in government also here at the Harvard Kennedy School but I particularly want to express uh our thanks and gratitude because without their support and their help this event would not have been possible so I really want to thank especially the advice we've received and the support that we've received of the Tai Bay School of economics and political science at the National chingua University and the taibe uh School of economics and Political Science Foundation uh when I think about this topic uh four issues came to mind for me and uh time is short so I don't have time to go into them detail but let me just outline some key points around them first uh for us here at the Kennedy School this uh Workshop is part of a broader set of activities to analyze how the US China tensions are impacting on Supply chains trade and investment and how this is going to play out in other countries especially those in East and South East Asia it seems to me very clearly that the approaches that drove International economic policy through the turn of the century WTO free trade agreements Etc are in Retreat driven by the fusion of security concerns with economic policy so now we see other phrases economic revital Iz ation supply chain resilience uh friend Shoring drisking or as the Chinese Communist party is posited dual circulation now turning specifically on semiconductors on the one hand the proposed Biden Administration chip 4 Alliance us Japan South Korea and Taiwan with a strong nod to the Netherlands has the clear objective of securing access to vital chips while denying access to China and Russia to advance Technologies under the flag of National Security however it seems to me that the chips and science act make it very clear that the US purpose is to boost domestic capacity and to restore us pre preeminence as a global leader thus there'll be support for groups like Micron Qualcomm Intel Global foundaries but I think what kind of a message does this send to other partners something that we will look at many of those Partners already have concerns about us Market regulation secondly I think the October 2022 Security review and the restrictions on export around certain aspects of semiconductor related products was a clear statement of intent by the United States but I think the interesting question is what is the endgame in Washington does actually Washington have an end game does it know what its end game is because there are many more levers that Washington can pull to hamper for example the Chinese economy despite what President Biden may have said in the press conference yesterday but both Japan and South Korea for example find themselves having to deal with navigating the discords created by a security Asia which still has the United States at the core and an economic Asia which in recent decades has had china at its core Japan and South Korea as everyone here knows are heavily invested in the development of the Chinese economy not only in the field of Chip production us measures have impacted on Japan's export of semiconductor manufacturing equipment to China I saw some figures that it was down 30% by volume in the first half of 2023 but we have a specialist here who will inform us better on this and of course that has led to complaints from China about the ban on chip exports but of course China remains Japan's leading trade partner same picture is true for South Korea where it's tied in both to the security and the economic Asia but interestingly last year for the first time for 15 16 years the United States regains its position as the main export to a destination thirdly what that implies is it will require very careful politics from the United States to fortify any arrangement of the current regime is putting in place in addition as Chris Miller who is with us today has demonstrated the value chain is distributed geographically and developments in one country can impact adversely on the developments in others the Netherlands has a virtual monopoly on lithography machines tsmc is a leader in contract chip manufacturing for global companies Japanese companies have developed Niche roles to provide critical input such as specialized gases and equipment to tsmc Samsung is a leader in chip design for example so that e ecosystem which has developed can easily be upset if countries seek to fortify their own positions to capture more of the value chain domestically under the name of national security for example just to give one Japan's proposed investment plans would provide a challenge to Samsung and others if it develops self-sufficiency across the value chain it would also duplicate much much of what is already available in Taiwan so National strategies and Global interests May well come into conflict I think that would be very difficult for the Biden Administration and or successor Administration to manage coordination is hard enough within the US let alone globally and then the last issue I wanted to raise is that China is in the process of developing an alternate semiconductor chain but it still lacks some of the Cutting Edge technology in the past it is compensated for this by its Global engagement either through its own overseas Acquisitions and Investments by companies such as the semiconductor manufacturing international corporation the exploitation of dual use Technologies or simply theft of intellectual property all Partners to the chip Alliance and the Netherlands have been heavily involved in Partnerships with Chinese groups and some of them are heavily invested in China itself so I think to conclude on this last point I think the important question is whether China has the domestic capabilities to provide sufficient innovation in this field to keep its domestic industry up to date and provide breakthrough Technologies if China is shut out of the advanced Global Research n network does it have sufficient domestic capability it's not shown itself to be particularly strong in other areas to date so with that I now have the pleasure to introduce the president of National chingua University Dr John gal who is ideal for our event as he has a strong track record in organizing large scale multidisciplinary multinational projects and also devising effective strategies for industry uh University or collaborations especially uh with relationship to his own fields of medical education and biomedical engineering I turn the floor over to you Dr gal um thank you Tony for that wonderful overview of today's event um welcome welcome um everybody for joining us uh today either in person or online on behalf of the uh delegation from Taiwan we are delighted that you're able to make time to hear our side of the story um a quick history on the National chinua University the University was started about 112 years ago as a result of a w um reparation paid to the US government by the Ching Dynasty and that money was used to set up a chinua Academy to train the very finest and then over time a lot of things happened within that past 100 years the world have seen tremendous progress in terms of Technology have seen uh Cil Wars and also peace and uh one thing that was important to uh nthu is that we moved from Beijing to Shinu where we are today so with that history uh it is quite important for us to think about what semiconductor actually means to us as individuals on a daily basis and we're very pleased to have two new members of our University community that will share their um their story one as as uh Tony already mentioned is the uh taipe School of economics and political science and very very uh honored that um Mr Wong was able the chairman of the foundation was able to work tirelessly and passionately alongside with our think to set up the new College uh to to look at very timely topic from the Taiwanese perspective at the same time we also have a new College of semiconductor research led by Professor burn burn Lan who is a Pioneer in the semiconductor industry and also a tremendous leader in the uh the University and semiconduct community so we're hoping today's event will give everybody a unique perspective from Taiwan on looking at semiconductor not only on the technical level but also on political economics and we also have professors on our University working on the social sciences aspect of how semiconductor have transformed the Taiwanese Society so um I hope everybody will find today's uh Symposium as worthwhile and as enlightening as I will so once again on behalf of the University thank you and uh I just want to make one final acknowledgement is uh the tremendous support of tsf on providing a a very generous financial support for us to travel from Taiwan and to join today's uh discussion so thank you very much I think I already introduced uh Professor Lane and uh he is a tsmc x exact and super engineers and I was told that he will touch on some technical aspect of his research and his contribution but at the same time looking at the larger picture from his unique vintage please Tony and John well I will touch I will touch some technical aspects there will be two slides out of my 16 slides technical exps all right can I have the first well to get it started oh there oh okay I can see them all right okay all right uh the title of my short uh uh talk is uh called chip pece it's a quite contrary to what Chris Miller has done he has written a book little thick on chip wall okay uh even though our peace and War seems to be opposite but actually our thoughts are very very well lined so let me go through it uh first of all what what is what are chips uh nowadays when we talk about chips we're talking about billions of semiconductor integrated circuits uh and it will enhance human intelligence by billions of times okay well it can be used in two ways first is to kill and destroy uh that's what we observe that it can do uh fortunately it can also improve the quality of life and ensure Perpetual Peace by responsible humans all right it all depends on the user if the user is selfish he can destroy the world if is um him oriented is globally oriented he will uh asure peret piece all right uh Miller did a very good uh uh uh very good report on the uh history of the chips and I just um briefly mention those um we got the inventor of the semiconductor we got the inventor of the integrated circuits uh and we also got a good uh uh good uh visionist that predict the exponential IC growth all these are Americans from American companies so in the in the starting phase of this technology everything is 100% uh American well uh initially yes they are all Americans however nowadays IC has involved in the multi- nation Enterprise uh I mentioned two slides here are my two slides uh the I I like to introduce the complexity of uh the complexity of integrated circuits using this two slides first of all you see the keyword layer because it's built by many layers and you can see that we have uh critical layers we have non-critical layers and all those things uh when we build the IC we'll do it layer by layer and the on the on the uh upper right hand side is that a problem okay all right all right okay here we see that so we see the many layers and then we have the uh isol isolation layer as an example you can see the top view if you look from top down you see the IC design you know different shapes in there if you look at the cross-section you can see the different layers here we have two layers we have the uh oxide layer we have the nitri layer and we have a photo resistor layer we we use these things to open up the area who where we want to open up and we want to protect the areas that we don't want it opened so um why are they so difficult because in terms of layers uh in a in a uh 130 nanometer device we have about we have about 30 layers uh in a mod device when we're talking about 5 nanometer or so it will be more than 100 layers in each layer then the requirement on each layer is on the critical Dimension we're now talking about three nanometer device uh the critical Dimension has to be 3 nanometer but then it has to maintain within 10% of that uh that would mean 0.3 nanometer or three anoms okay uh and then we have to Overlay these layers these 30 or 100 layers within uh 0.1 nanometer within one anrom okay um all right so I just count the number of of processing steps for one layer here is one layer I have I have at least I have at least what 19 liography steps in the in the layer so you multiply them together and you you can can work on all the interaction between them is a very complex thing and that lead to my comment that semiconductor technology is too complex to be to be promoted by single country it used to be starting from one single country now it's become so complex if you really want to do it with one country you're going to sacrifice a lot of those uh advancements all right so what are the keys in this IC industry uh of course you have to be able to do better performance at lower cost to to grow the industry for each generation you you need to have better performance and you need to have lower cost and that will translate to larger quantity because it's cheaper you can afford to buy more and use more it result in larger quantity and quick learning debuging I think it's very important you need the quantity to make a profit also you need the quantity to learn so that you can uh have a better year and all those good things all right so if you have achieved all that then you have more applications and the application will drive credity and cost so it goes in the circle and that's is what the spirit of Mor law okay uh well uh how do you achieve that you need you need the expertise you need the uh the mixture of expertise is no longer being able to be provided by a single country and then you need heavy Capital outlet that that also goes back to your quantity and all those things and you need a large variety of talents you need a lot of very uh smart people and dedicated people and hardworking people to uh to work on this I'm giving you an example of uh of the talents we need let's say I I divide the uh the techn techology in the five disciplines in the design phase manufacturing phase material phase equipment phase and design right I'm assuming for each principle you need about 25,000 people in each principle to make this whole technology and now we have a we have a we have a shortage of by about 10% of those uh of those needs uh okay let's see yeah we we have a shortage of of those needs that is already a problem 10% 10% need all right then now we want to we want to localize it into different we call it we call it single country sufficiency if we want to go into single country sufficiency now we still need those five disciplines and and I cut down the number by fact of two all right so we need maybe only uh 100 we need only uh initially what did I it okay yeah we we need only 25,000 initially it was 125 was it was 125,000 now it's 25,000 so we cut down the the N the need of the people people by by effect of two and I assume that if have you now have five countries who want to do the same thing all right then you how many people you need you need 625,000 people to do the same thing that is a factor of 25 more than what we need nowadays okay now we said no no no we don't have five countries maybe you only need two countries to do that separately if I reduce the number into two countries then we still need 10 times more people to to carry these things out okay so we already have a shortage of talent by 10% now we have to multiply the 10% we need a shortage of 100% okay uh let's talk about the contrast military and civilian applications uh it's very important to have National Security and that's the main thing that we want to to to to fulfill the need of the military uh for civilians we also we need that for economy we need that for environment and we need for better livings and all those good things uh well um they both are very important but we are pretty sure that the civilian need is much higher quantity than the military need and now if we focus on Military we emphasize the military and it will disrupt the uh the the civilian applications but if you focus on the civilian applications then it also help the industry uh it also help the military okay um I I have to qualify that but let let me go uh gradually so I I think I think uh we can have both you can have you can satisfy the military and you can also satisfy the civilian um by doing what um well uh for the military you can you can compete you can compete I think it's a it's a type of there isn't compete in design using common devices the common devices are developed for civilian use it's a large quantity because of a large quantity you can debug you can do all those good things and you can lower the cost and improve the performance and then you have a common vehicle that common vehicle can be design can be used for military and can be used for civilian applications okay but how do you differentiate that you differentiate in the design of the common vehicle well I'm taking an example here we all know about the recent news that the May 60 Pro of the uh Huawei smartphone uh they use a domestic engine they you they use to use tsmc engine right uh now it's a domestic engine uh for their 5G smartphone and they s sold it very well it's 12 million units that they sold using domestic chips uh well the chips are slightly less in performance than the tsmc 5 Nom chip uh by by what I'm probably have okay uh is slightly slower it has takes a little bit larger area and and they consume a bit more power okay but it's good enough for 5G applications uh we also estimate that because that that that uh that uh domestic supplier doesn't have very high yield as compared to tsmc yields so it's so uh this there is a u i have that okay uh the speed is 80% uh of the tsmc Chip And the area is uh 1.3 times the uh tsmc chip and the power is 1.5 times yield we assume that the yield is reaching 50% from a start of 15% now they have they have quantity right so they improve the yield to about 50% uh well still inferior to the the uh tsmc chip but passable in history there are Decades of history that when when that domestic company compete with tsmc they always lost the battle tsmc always wins the uh the the sell and say a lot of of uh of units and that domestic uh company never had the chance to really have quantity to improve their product now this is golden chance right TSM say is block cannot cannot compete the only choice is that domestic company so they got at least an order of 12 million chips right they got a lot of opportunity to improve that um uh so my my my thought is that actually what we did is we we try to stop them we try to keep them and then it actually helped them to have to develop their self dependency and um because because they just help them to compete against uh foreign suppliers because the overseas suppliers even though it's so much better doesn't doesn't matter they have to resort to the uh single domestic supplier so the lesson learned is uh you know um blockage is not the best way to to make to to to uh give them trouble all right another example is strong I I'm saying that right now the technology is very Advanced you can use existing technology actually to to make a lot of weapons okay and we want see the the drones the weaponized drones are very cheap and they're very destructive very effective and those technology are currently available in whatever level of country um well right now you cannot not stop them because it's already there existing technology easy technology can make all those chips for you all right so however there's a way to differentiate them the design of those chips right you use the same technology 5 nanometer 60 nanometer 100 nanometer doesn't matter uh you use the same vehicle but if you you can differ in the design and here the US has a clear advantage in design uh cleverness and so forth so that is one key Advantage you want to keep and also uh the US students like to go for design right so you don't have to uh do anything special they like to do design and they they are very smart to do that why don't we use that all right so we also learned from the Vietnam War the Vietnam War was very simple there was a justifier goal to keep half of Vietnam free okay very good goal and then the country commit a lot of resources to reach that goal however we didn't reach that we sacrific a lot we didn't reach that uh however look at Vietnam now Vietnam is a very good free country well at least in in in free economy and so forth you don't have to make that happen with any sacrifice or any any uh price that you pay is there okay uh so what we learned from that is with Chip War we are getting ready to pay a huge price to do that Chip War however uh we are we are causing the world economy at a very high cost and we don't know whether we can reach that goal we I I would as I assume that we is an impossible goal to reach look at the example of the drones and look at the example of the uh of the Huawei chip well the other question is is nuclear war evil right we always think it is well yes it's evil if it actually happened it has not happened and there's a very good reason because that destructive power will scare people away they will never really use it they just uses as a d d let's come back to the chips how about Chip War the en the enormous power of Chip will also enable weapons that can destroy the world many times uh if the nation is a selfish Nation however if you focus on the chips enabling power and the to to make the world prosper and to help the economy is tremendous and you can use it you can use the power in both ways you can use the power to improve the economy and improve people's life and all those good things and you can also use the power as a detr to prevent War all right so let me show two piece finish this to thank [Applause] you all right so uh welcome welcome again everybody I'm Edward Cunningham I work here at the Ken school with our great team and Tony mostly on issues related to Asia particularly um Mainland uh China but also Vietnam so so in some ways I I look at Professor Lynn and I wonder are you truly a lithographer are you a political scientist because your timing of Vietnam was quite I think quite apt while our US president is currently in Vietnam in fact working with some of our colleagues uh and presenting some of the documents from our project there so well timed excellent positioning I think um what I'll do is simply um we I invite our next panelists up here and I just want to quickly introduce Chris Miller in many ways Professor Miller does not require an introduction I think most of you know who are interested in this topic um that he is a New York Times uh bestseller associate professor of international history over in tus uh he focus on technology geopolitics economics um International Affairs he's obviously the the author of Chip War which you now heard a little bit about from burn but he's also very importantly a Russia specialist I think many people Now link his name to Taiwan and to tsmc and to chips but he also is a real comparativist um he's written SE three other books uh on Russia including Putin namics power and money in resurge in Russia we shall be Masters Russia's pivots to East Asia from Peter the Great to Putin and the struggle to save the Soviet economy Mel gorbachov and the collapse of the USSR so he's done many things I won't go through that um but he received his PhD and ma from Yale and his ba um here at Harvard Harvard always is good at taking credit so I'm sure it will do that here as well in terms of starting him on his academic path so if you could please come up uh that's the introduction to Chris Chris will then introduce our panelists our panelists please come up to the stage and we will move right along lastly Chris must must leave at 10:30 has a 12 o'clock flight to DC so he has we have aligned incentives he will get this panel moving quickly and ending on time well thank thank you very much for that that introduction we've got a very exciting uh panel ahead of us uh and I'd like to maybe start by thanking also uh Professor Lynn for kicking off our conversation today it's I think difficult for all of us to follow the remarks of Professor Lynn who has played such a fundamental role uh in uh not only building taiwan's semiconductor industry but the entire world's uh semiconductor industry as many of you probably know he's one of the founding fathers if you will of the modern field of lithography uh and so it's a real honor to have him share uh thoughts on the challenges to uh chip piece as he uh sets it out I think several of the issues that he raised are topics that we'll be able to touch on in our panel uh today first off the the multinational nature of the chip industry is in some ways represented by the multinational nature of our panel uh today and certainly I think he's right to say that there's not a single country today that can produce semiconductors in a self-sufficient way nor is there a single country that has a realistic Prospect for doing so at least over the the short term and I think that's one issue the balancing multinational interests that we'll uh discuss over the next hour and a half I think second is the interplay between security concerns and Commercial concerns because as Professor Lynn noted most semiconductors produced today are used in civilian markets 98% uh is is the estimate with only one or two percent going to uh government or security purposes and that's of course a big change from the early days of the chip industry when it was only the defense department in NASA being customers of chips today it's mostly smartphone makers and data center uh companies with defense Ministries playing a very small role and so today that Dynamic is actually that compared to Apple CEO Tim Cook Joe Biden has a much smaller influence on the supply chain uh than one uh might think so that's a second issue I think we'll uh discuss and then third looking at the entire value chain uh in the semiconductor industry is a issue I'd like to delve into as well course of our panel Professor Lynn remarked on that multiple steps that are required to produce a semiconductor not just in the manufacturing process itself but the design that comes before that the ultra specialized materials that are necessary the packaging and then finally the device assembly supply chain which is itself distributed between many different countries with different companies and different countries specializing in uh different aspects of the supply chain so there are many moving Parts in this industry which I think is uh one of the incentives for cooperation but also I think one of the challenges and uh setting up the goal of of Chip piece which I think Professor Lynn uh so accurately State should be our goal uh and so we'll dive into some of the challenges in reaching that goal in our panel we've got three very distinguished panelists to discuss uh this topic um from the perspective of multiple different countries director mikawa uh from Japan's Ministry of Economics trade and industry has been a leader probably the leader if I can say so uh in the ministry uh in putting semiconductors at the center of uh Japanese policymaking both on the promote side but also on the protect side uh to use the the lingo that use in Washington ON Semiconductor policy so it'll be very interested to hear from him on way Japan is thinking about semiconductors today Professor Chi has been a uh both a employee in the electronics Industry and the semiconductor industry and the computer industry and then now a very distinguished analyst of these topics writing recently both on um on Industrial policy for example in the chip industry and also in adjacent spheres like panels which we had a chance to discuss over breakfast and then finally uh Professor Shi from chinga University uh is also here uh not only a distinguished academic but someone who built the semiconductor industry in Taiwan uh to a substantial degree so there's no one I think uh who has a better grasp of the way taiwan's industry has developed over the past half century and who can shed light in some of the opportunities and challenges that it faes uh today so what we'll do is start with uh about 10 minutes of comments from each of our panelists uh and then I might have a couple of questions provoked by Professor Lyn's opening remarks and then turn it over to you in the audience for Q&A uh for the remainder of our time so I think you can do it right here whichever you prefer no so thank you thank you Professor Mira and good morning everyone my name is Nish Kawa I'm from the ministry of economic trade and industries to be very Frank with you my background is lawyer I'm not engineers and actually I'm I'm one of the beginner in this room about semu and to be very Frank is it was just three or four years ago when I realized the very importance of the Semiconductor in my Ministry and in Tokyo I have you know seven comments here using the 10 minutes the no rise however the one first point starting from the uh what happened in last three years four years in Japan we have the three big uh issues regarding the semiconduct wies and geopolitical considerations 10 years ago no one have to had to think about the geopolitical consideration the where to produce where to procure the semiconductor the every even the you know us companies established the semiconductor factories all over the world including the China however the uh us China tensions there some you know the how other people says the uh and like the the you know the necessity to think about geopolitical consideration of the semiconductor supply chain this is not you know you know happy things however this is a reality so therefore that this is one and also the uh various kind of you know disruption of the supply chain the uh outside of the National Security which means that for example coid 19s that disrupted a lot about supply chain in the not only the semiconductor but also the you know the medical equipment everything the actually also the uh fire accident or the you know electricity shortage lot of events have happened in last three years especially in 2020 to throughout to the 2021 uh I as a director of semiconductor IT industry Division I really realized importance of the to think about the supply chain things that in very you know the forward looking manner the more than that the disruption of the inov disruptive innovation happens a lot speed is very fast so therefore the we cannot wait the you know the disrupted supply chain to catch up the Next Generation Innovation so we have to consider geopolitical things and non- geopolitical issues as well as than Innovation things these three changed the Japanese policy toward semiconductor drastically that this is second point we changed the semiconductor policy from traditional so-called industrial policy to the economic security policy the traditional industrial policy which Ministry of international trade and industries meeted the 20th century Japanese industry are you know the strategy uh I believe is you know analyzed in har as well in 20 centuries but that industrial policy was very simple you know if I exaggerate that to create some good Japanese companies to export the uh Goods to all over the world to earn foreign currency this is a typical so-called industrial policy but the economic security policy is different the you know semiconduct is like and food or the you know oil essential Goods for the society economy and democracy we need semiconductor to maintain our society and our democracy so therefore that like the policy toward you know the how to secure the energy how to secure the food we started to you know that do to do that policy how to secure the semiconductor let's think about that even in Japan or in us the tremendous amount of the taxpayers money poured into energy Industries or Food Industries and every Japanese or us uh you know people who focusing on the market economy agreed about it because it's necessary so therefore the semiconductor changed the you know the that strategic you know the how can I say the nature from just a Goods to the Strategic goods necessary for the daily life and also the we let's think about the 30 years ago uh Japan was very strong about semiconductor uh in 1985 the in 1980s the more than the 50% of the semiconductor production was from Japan uh many people pointed out that why Japan you know uh lost their way I am to say uh if I you know exaggerate again know Japan was not so smart to understand Professor lind's things complimentary manner no one country can clear create everything so the but in 20 centuries if I dare to say the Japan tried to dominate the supply chain it was bad things so therefore this time the we created that we need complemental Mana uh strategies together with allies and likan countries and regions the friends is very important to secure the semiconductor PR change this is a very important thing and these policy change uh created our you know the actual actions the for the one is then supply side we employed three-step approach to be very Frank with you the uh the three years ago and even now you know Japan's semiconductor technology especially the production technology is very behind the I I have to say say you know the the what Japan can create in the logic is then just 40 nanometers 4 Z nanometers the far behind from Taiwan or the Korea or the US every you know production uh countries that so therefore that we have to learn from other friends um we have to create catch up the current existing current you know the semic Condor Supply semiconductor supply chain with the help of existing technology and with the help of that friend this is step one so that tsmc kindly came to uh uh kushu I will explain later but this is a symbol of how we can get Japan can get fet technology thanks to the TSM Taiwan but second thing is again the disruptive innovation you know that just as you know Professor what you know many Taiwan friends is saying the Innovation is going on that we need Next Generation semiconductor Technologies and the future Technologies uh the speed is very fast so therefore the simultaneously with the step one that to secure the current supply chain we are to provide we are to decide invest a lot to the Next Generation semiconductor that is then front end and back end beyond the two nomers GA Technologies type trans uh new architecture as well as an advanced packaging is a very key this technology is should be you know realized within s years or the next years two years three years four years five years very fast so that in within 2020s the many Industries many countries needs the actual the Next Generation Technologies the but this the you know next Generation Technologies is can breach that to the Future Technologies like the quantum Computing and AI or the neural network architecture new Computing that to be very Frank is in Tokyo you know the uh especially the Ordinary People ordinary Media or the ordinary politicians understand you know semiconductor is different from Quantum computing Quantum Computing is different from AI things AI is totally different from semiconductor this is an ordinary understanding of the ordinary people but from engineer point of view this is the same things so therefore without securing Next Generation semiconductor Technologies we cannot reach to the Future Technologies like the quantum Computing or the let's say photonics electric integration and everything so therefore we think that this is very important things to invest the future things this is a second step two and step three we are doing this simultaneously was then Japanese version chips compared to the US one is relatively small but two trillion Japanese already secured the resources in last two years and in Japanese in Japanese style we are trying to accumulate the resources year by year the ordance with the actual advancement of the production you know uh uh programs I had better stop another three minutes can I use it please yes that's fine so the uh and also as for the for m is the demand side the uh many people thinks including the tsmc or the Intel or many people says Japan lacks the cut engage semiconductor customers or users yes uh currently we have no single Nano you know the smartphone users like apple in Japan but flip side is it that we need we means Japanese Industries like the automobile or the machineries or the medical equipment variety of Industries needs cutting Ed Tech semiconductor technology to realize actual digital transformation to create new Services New added barers so therefore the what Japanese government is trying to do is then to educate not to educate to share the importance of the semiconductor to the variety of Industries including for example Toyota or the Hitachi these companies are very appetite to run and to to use the cutting semiconductors the of course then in addition in addition the green transformation is a very very very very very important for us not only the you know the energy or the you know environmental things but also the National Security energy Securities energy resiliencies as well as then you know the uh to create how can I say the energy efficient the Computing resources necessary for the AI Generations so the green trans green transformation actually needs The Cutting Edge semiconductor so therefore that in Japan we started DX and GX use digital transformation green transformation using uh green transformation fund the which is uh we we are to use 20 trillion yen in next 10 years to transform the uh industry fifth one and sixth one is then my comment to the application to the Taiwan and us uh like as a friend actually the tsmc as I said are kindly established invested uh their factories in kushu it changes a lot uh in Japanese uh mindset ecosystem and that of course the semiconduct Technologies everything but TM kindly you know educated is educating Japanese uh technology peoples and Enlighten the academia's mindset and changing ecosystems local ecosystem including smmes uh who support the semiconductors uh the 20 years ago or in 20 centuries the kushu island which the Kumamoto is located was called at least in Japan you know digital uh you know silicon Island silicon Island C at least in Japan we are we called it but U now the SE island is the Taiwan so therefore that we are trying to the bridge the between in the Taiwan and kushu and Japan as a Shon Islands so we are learning from Taiwan how to create semiconductor ecosystem right now so so far so good but we are trying to you know the integrate the both supply chain with the help of various government Industries and you know financial peopers and everything we appreciate uh United States especially the East Coast New York this is not New York however the uh the 20 years ago the uh I heard after the 911 the uh New York uh orbani uh enlarged their semiconductor Rd facilities the with the help of the uh government budget and ibms and also the US companies and Japanese equipment companies European equipment companies Korean companies that have established all complex the New York creates did very great jobs to uh you know provide cutting semiconductor Technologies and thanks for the uh us the a new Venture called lapidas was established uh they are trying to uh create a pilot line using then you know the New York Technologies uh with the health of the European companies and the US companies and Japanese companies conglomerate uh combined in hokido areas the the hokido is the you know northern part of the Japan the closest Islands to United States so the uh Japan are trying to you know connect the Hokkaido us Europe as well as now of course Taiwan kushu and all over the Japan by doing that we are trying to create friend uh you know the connections uh throughout the uh uh silicon uh this is my you know six point and finally the geopolitical things or or the you know Economic Securities um just as professor said the uh semiconductor can be utilized for good manner but can be utilized for bad maners so therefore that we have to think about the how to control the we we have an obligation to control the cutting Technologies so therefore the uh uh what we are trying to do is then to take a balance to have more Innovation for world peace and World civilian use simultaneously we are very carefully thinking about the uh to taking care of the controlling B Cutting Edge Technologies uh so therefore the now uh we need strong ties um between government and businesses uh in order to secure the balance between the sh and the military use we need strategic talk between the government and businesses in this regard we should be very careful transparency of the rules regardless of it is a promotion side of the prodection side that we are democracies Japan is a democracy Taiwan is democracy and us is democracy transparency under the democracy is a very key to take a balance between the you know the promotion side and prom you civilian and the military that is why the we are establishing new initiatives for the economic security that but maybe I had better stop here uh so the thank you for the uh listening very happy to answer any questions thank you turn from the Silicon island of kushu to the Silicon island of of taiwwan Professor uh thank you for giving me this opportunity to here to share the discussion with the uh distinguished panel CH minor of course is now this book bring us here so thank you and UHA to talk about the Silicon Island although he's talking about Japan but it's very similar that Taiwan is also called silicon Island then uh Professor WC we share a lot of common interest long time ago and we actually um last time and the only time that uh was in uh our campus to talk to the student was because he the invitation for me to come that was about 15 years ago so thank you for this opportunity and also thanks to the previous uh speakers particularly Bern Lin he outline uh some of the challenges that also uh talking about the good thing about the semiconductor industry the interesting uh or the changes and the shift of the center of all this um uh industry it's moving from Japan uh us and Japan in the 80s and now in Asia particularly Taiwan now is the Hot Spot I'd like to uh share although I also have a lot of slides but I was prepared probably to talk about hour at least entire semester lectures but in the sake of the time that I would uh also only mention some of the uh important point I would quickly uh scan because people already touched those point so I don't spend time on that but I let you see how uh why is um um led to this situation why is Japan and now why is Taiwan now I would as I said I uh you can see that I put on four point it's uh all this implication of the us semiconductor policy and particularly now this big impact for Taiwan and the second of course we are not talking about uh geopolitical or chap War that's not uh what I try to cover here uh I will try to cover on the uh peace part of uh Bur that is we focus on how we can really uh Revitalize the semicon supply chain for the good of the world economy okay and that's what I spent my last 40 years 50 years working on that in Taiwan and so I would also cover a little bit on the Taiwan history of developing the the semicon industry because Taiwan is a very poor uh uh resource uh no resource Island uh but because certain U hard work and as Chinese always said when the uh the location is right the people is right in the timing is right since that make Taiwan achieve today's uh situation and finally of course I would summarize some of the lessons that we learned from Taiwan to uh how to really develop the uh probably not self-sufficient uh supply chain but it's a partial supply chain but integrate into the world supply chain so if you want to friends you want to make Friends Taiwan is the best part of making friends because we are small and from the day one we realize that we cannot dep depend on ourselves need all the friends around the world uh in terms of uh resources but also in terms of innovation that we need for this industry quickly run through this now this is what St this geopolitical things is because uh 19 just about the beginning of the pandemic uh Japan uh us also uh put a lot of restrictions sanctions and also try to uh come up with a industry policy to build uh Stronger American uh manufacturing capacity capability here uh then of course uh a lot of other things that software equipment materials chips and also people American people canot now go work for uh Chinese companies okay so this has started this uh uh Interruption with the semiconductor supply chain uh but the in disruption of the same surprise chain is not only because this we already uh experience during the pandemic actually there's itself without talking about Geo political complicate it's already started because some some area uh when you have a Interruption on point then it affect the whole supply chain we all know that uh particular there also uh some example like U earthquake uh Landslide uh flooding somewhere fire uh so a lot of things can happen to the supp chain then uh not only uh us but also uh the alliance of us like Japan or Korea or other country also follows you come up with some industrial policy to strengthen their local uh industrial semiconductor capability well that may be good but if you want to self-sufficient as Lim uh burn point out it's probably uh wishful thinking okay uh the founder of tsmc Dr Morris has warn many times that it's going to be cost a lot probably not achieving your goal so we this means that we need a friends so the structure is complicate as you can see roughly from here there are many many sections okay and uh uh the design or the IDM uh company are the real uh uh company that making the product that influence the application okay all the others is actually uh helping to make it happen like software they help the design uh the equipment the F the uh the assembly and test they are not counting into the final product but they are uh essential part of the supply chain to make it happen so so that we are talking about a trillion Us St business nowadays oh if you everybody contribute to this then you can see that us still dominate because they make most of the final product and also important part of software equipment any other things Taiwan is only good at manufacturing part the supply chain country uh probably the uh packaging and test but interesting enough is Taiwan has a unique position when tsmc was founded it also stimulate the local design firm so now us is number one in design but Taiwan is number two in design so it's very very uh good uh things happen for Taiwan see so well those are the point that the the people already mentioned and I just emphasize reemphasize the importance implication of this uh policy for and other countries the second since that uh I also like to report what happened after all this industrial policy of this us Japan Europe happen it's actually really stimulate a lot of investment in different location so many things happen it's going to be influence the change of the global supply chain uh allocation it will but we don't know what it would lead to C issue Effectiveness and uh U what good for one country or one segment may not be good for other countries but there's a lot of uh concern already being raised particularly supporting uh uh segment of the entire value chain for example material and equipment that is just represented by the semi semi and semi just had a very uh big and large exhibition in Taiwan last week many many people went to Taiwan and who looking for the opportunity for the future how to because there are still a lot of opportunity like just mentioned about artificial intelligent automobile autonomous vehicle or Industrial Automation those are good things for for uh the business okay so the the semi already uh concern Express the concern that the sem industry supply chain the lies of on the interconnectivity of all this Global uh economy so many count and also the uh relies on the free flow of goods data across border so you cannot build a high fence right now you need a very very uh limited constraint on that otherwise it would impose a lot of extra cost for the business and also maybe hurt the development of the economy well this uh uh I think just mentioned about Japan government so I would just mention that and as uh this show just just uh uh try to elaborate why is All Connect together because you we are not just talking about the chips but we are also talking about the product or the system that use the chip because you make the chip but you also need to assemble it then you need to accumulate all different kind of component together to make it work and where are those place to to do this I would say it's complicate uh work probably the uh us company the so-called brain company they don't want to do it because it's costly and it require a lot of Labor so those uh was given to the uh Asia country because they are poor they are in the development stage when when we are poor we like all this opportunity and that's why the developing country the so-call uh in in the 80s there's a good name for four lit Dragon okay they are all booming because this Outsourcing to to Asia and that also lay the foundation for this country to bring up their technology later on it's very complicated application as uh Chris mentioned um the original purpose or using this technology for military purpose was very big part of business in 60 7 but nowadays consumer the cilian application that's how it broaden the market now occupy 98% that's why you have a powerful as a super computer in the 60s in your pocket cell phone very very powerful but now it's very cheap affordable for all of us why because the global make it happen and as I also mention because some work is just you need a lot of people labor and you need to spend a lot of capital investment but maybe the return of investment is not compared to if you just focus on one area particularly focus on design chips product special product That's Why Us is very dominant and very good at design because they make most of the profit in the '90s I think when Taiwan make a lot of computer in the World Expo maybe I don't know maybe 80% or 90% and one American Scholar make a research report saying that all the supply chain the uh R name company make 90% of the profit one the Asia country share and divided the rest 10% of the with so much hard work so much so many people working on that so it's good for us it's also good for Asia country they need this job they also need this Capital to build up their industrial P so it's it's good it's win-win situation for for the whole world why you want to change it so that's why the semiconductor all conen in Asia because the component the chip everything has to go into Asia assemble in the back to them talking about uh China we particular worry about China but if you look at the China uh there is a huge market for all this application so their demand for the semicond going up very quickly however their capability okay it rather depends on the available tsmc or other country make it a good ship for them but there are sell uh local content actually is very low for a country uh their developing they always want to have some security well how can we increase our profit dur for for this long supply chain we need go up local content i w do that I didn't do that many many country doing that so with all this uh export control this report also predict this Market will still going up the local content will be still up but even in 2027 the local content is only still 20 something so that's a summary here I let's talk about Taiwan now Taiwan when we started actually nothing but in 1960 and 70 we welcome the US and European company to set up a assembly facility in why take advantage of the excess labor from agricultur we have access to diation it's good for the this company Western company but also good for Taiwan bring up the local uh salary job and also taian can accumulate oing reserve the capital required to invest into upgrading the Industrial Level so when in uh 197 mid 1970 because the First Energy shock Taiwan was really concerned because Taiwan has nothing and the the the energy crisis give a government really worry and they said well Taiwan has nothing but people okay we need to really uh invest on human resource the talent education is important and upgrading the technology base is important 1970 mid 1970 Taiwan had a opportunity to have a Dr s the minister of economic Affair is some Chinese American expert go to Taiwan and said well you want to do that you need to invest in infrastructure you need to uh invest in uh technology build up so lucky that we find us company because they are the best in the world RCA willing to sign a country with taian taian start importing the technology to build the first layer of foundation now people don't want do it the the the private sector they view semiconductor is only a business for the very very ad Advanced leading company country like us but maybe at that time Japan is that's coming up so nobody want to invest it because very risky and you don't know when to get the return money invested return the best return business is on Land Development Land Development building and uh maybe some Light Industry second the government also established a very important uh Research Institute called the it Industrial technal Research Institute this uh organization later on play a very very important role for Taiwan to import technology advest technology improve it and then diff use to the very important because Taiwan don't have any large corporation like Japan and Korea their structure is very different Taiwan is all small mediumsized Enterprise a lot of them were family owned so they do not invest heavily on Capital based they are small but they are uh fible they are very very innovate using very limit Capital so interesting that structure industry structure different than Korea and Japan that's how Korea and Japan do not have a Foundry since the beginning they all Target on the memory ship so Japan dominate The War by memory I just mentioned one time maybe 80 90% D dominated by Japan following Korea again now is dominated D because they are big they are not afraid of putting capital okay but they lost the uh advantage of being small small medium siiz Enterprise there as U kawasan just mentioned if you need the friend you need the S because they by Nature need the friends they cannot survive alone so that's very interesting leads to the different devel model of career Japan and Taiwan oh and also in the uh' 70s now it3 has that demonstration then they diffus out to the private sector the first one was UMC United micro they following the model idea re integrate man but taiwan's technology at the time still far far L behind industry level us so this is not a really uh good choice but as I said there's no choice because you are underdeveloped and then you have only a all of Labor people doing some things you build up the technology level bra and even without a Leading Age Technology you can still doing some service or the company that are making the consumer product we we make a product which doesn't require really Leading Age Technology music card a telephone dial make all all this very suitable for Asia Market American company Japan Korea at that time they wanted shooting at a big one big one is Leading Age Technology use large commodity Ur memory that's probably about one thir of the Taiwan means small care choose oh interesting why tsmc come come about in the uh late 70s actually the idea also initiate from Professor AB work for APPA because he saw the evolution of the chip small integration medium integration large integration very large integration okay so um the require for the IDM cannot just Mo they need a separation that's how the concept of separate design Tai one because we already have some Foundation build on that Foundation we choose to take because the time uh imitation I will jump to the final two slides listen a faulty semiconductor okay uh so like I said uh just I gave you the disclaimer uh thank you to my colleagues who covered a lot of these points I I would say SE semiconductor value chain historically has been built on the assumptions of free and open trading environment uh I guess th that episode is over okay but uh what it has done is what we've seen is that is has enabled specialization uh and especially when we are at the frontiers of uh what is possible technologically you know you really need that hyp specialization in somebody like asml who can make uh extreme UV tools who also relies on a chain of Specialists whether it's Zeiss for the optical engine or Simer for the lasers and or what have you okay uh it's also has enabled as my uh friend and longtime friend and colleague uh professor she has said it's also enabled exploitation of different uh values in different countries okay and the way I frame this is in the US investors I've told people investors would rather invest in the next matching platform to match dog walkers with dog owners than they would in the chip Fab because the chip Fab has a high variability return it has a a long time to a return whereas if you do software or SAS startups you can turn over your money 20 times in the same period okay so uh there's another type of globalization that has come about in different terms of business models now if we really are in a chip war and as has been pointed out Chris this a great title for a book is I think it's really uh an unfortunate name uh I I would agree with what's been said there's still great benefit to be derived from this Global effort which enabled uh by specialization because as we know nobody has a monopoly on good ideas and inventions as we've seen if anything I would argue that a lot of the issues that we uh see now could have been uh avoided if manufacturers had been a little more Diversified in the first place okay and the focus on that has really been uh the focus on that lack of diversification in Supply chains has really been uh accentuated by uh Russia's invasion of Ukraine although we also saw that lack of diversification of the impact during coid now what I would point out to my colleague uh uh Japan is that I would argue toyot Toyota learned that lesson during 2011 in the tohoku East Japan earthquake and tsunami when they said ah we rely on chips produced around the ring of fire in uh geologically and politically unstable areas okay and what they did is they redefined uh the notion of lead time that says if we're going to Source chips from some of these areas then we need to have more inventory on hand okay and they really rethought that and it's what we saw during the pandemic when uh a lot of for example us automakers uh saw sudden precipitous uh declines in demand and they cut all their orders okay Toyota took a much more even-handed approach in terms of managing their inventory and they fared much better than everybody else okay so what what it says is you know uh that the lack of diversity in Supply chains you know you can manage around it but I would argue if we had a more diversified manufacturing footprint there would be less angst uh today about well so much production is concentrated in one Island okay now on top of that I would uh uh add to the comments previously about the Le the production the leverage in learning continues to be production scaling okay and where you get that learning uh and I I think that's another area of concern that we see because people are now saying wait a minute I'm now looking at for example if I go to tsmc and I'm going to use their uh process design kit to design stuff in your process now I'm suddenly Bound by confidentiality restrictions I can't go work on stuff at another Foundry and what it's really showing is that uh that expertise in the chip design is advancing into you know basic device physics and all all that area right and so I think the other concern in the US then tends to be is like well wait a minute uh we don't have those skills even if we had to reproduce it in an emergency we would not be able to do that but at the core of it I would argue that it's because the supply base is uh undiversified okay now talking moving over to Industrial policy briefly you know we see a lot of policy initiatives in a lot of uh countries I think people don't really appreciate how long this transition uh or rebuilding of us capability will take as uh Professor shei has uh highlighted you know it took tai1 35 years to get to the point where it did right and so the question is can we do it in one election cycle do full can we do it in four election Cycles uh we're talking about you know to rebuild capabilities like that in the us if we wanted to do it all ourselves I'd say it uh takes 10 years to climb back into the ring and then maybe after that a couple more decades to get get back to that uh one other thing I'd like to highlight and then uh maybe we can uh well to to additional points listening to the comments okay one of them is the importance of having customers uh uh n kisan highlighted that you know we I I would argue that Apple was an essential customer for tsmc advancing because they were willing to finance a lot of those risks and in fact encouraged tsmc to take a lot of those risks and they provide a customer what are they 26% of tsmc's Revenue today or something like like that okay uh current industrial policies particularly in the US in the chips act does not recognize that okay and and I think that's uh that's a major issue in my mind inflation reduction act in cont in contrast does recognize that and I think uh you know we'll see a lot of differences that China's policies in these areas uh often recognize it not of not always though uh uh comment uh I think about how industrial policies have stimulated a lot of expansion that's that's all also one of my worries and I know there's going to be a session on employment uh uh next okay and developing skills but uh my caution is we're seeing tremendous additions of capacity okay and we see trade trade restrictions have led to tremendous additions of capacity in kind and mature nodes what we need to be thinking about is like if you want to get people to work in that industry is you need to have you need to have some Prospect of a stable career okay this has always been a cyclical industry one of my worries is when we're adding all this capacity like this uh I don't know may not be a pretty picture in a couple years okay so just a couple quick comments I'll turn it back over to First fantastic well thank you very much I know we only have 15 minut minutes uh left so perhaps I'll table my questions for a moment and see if there are questions from the audience to start and if not I've got a large set of questions for each of our panelists please getting the end user to the discussion table is really spot on because I was looking at all the public policies driving this uh reconfiguration of the supply chain I rarely see the end user in the discussion and you mentioned um the importance of investors and because at the end of the day this has to be in in a market driven economy investment is quite important in my area about technology um it would be wonderful to to be part of that discussion um and and Manufacturing because you know as we know digitalization is going to transform Healthcare so my question is this public policy driven uh environment how do you get the enduser uh to the table especially in the global supply chain rearrangement if you wanted to use an industrial policy tool my answer would be demand side incentives okay demand side incentives for example if you look at the inflation reduction act it says I will give this amount of credit if you buy an electric vehicle that has all these uh it has domestic content now I have a lot of issues with this policy right because in my view the theory would be I am going to subsidize you with demand side incentives so that you come down the learning curve faster and eventually you can stand on your own and be globally competitive I would argue that's exactly what China did quite deliberately around electric vehicles and now you look at companies like catl and byd who are way down the learning curve in batteries compared to anybody else okay so that's an example of success six uh you know I've proposed demand side incentives uh you know on on on the chip side again that's with that theor with with that condition that these things cannot be permanent okay unless unless you want to go to a world of tariffs which that would essentially become if if you had those types of Demands but that's my short answer it's not so short but it was that's my answer and you want as well I know careful about that question yeah of course the demand side approach is very important uh but uh of course we have to think about you know uh let's say how can I say l or l or you know free trade the local content requirement is U you know the not adequate from the point of the free trade but the demand side you know the uh incentive can be you know the designed in the very more smarter way uh to uh uh ignite the future Innovation as well not to the zero sum game but to the if we design in the smarter way we can expand market toward the future that is what we are doing we are trying to do in the green transformation things as well as a digital transformation now let's think about the green transformation then you know we have to reduce c2s right but more technology is needed to realize the CO2 reductions that some demand side incentives to ignite to create new market for such such kind of things and also the let's think about digital transformation someone you know Professor mentioned about drone you know in aging Society like in Japan or you even the Taiwan that we can rely on the more usage of the Drone for daily life but no drone is going back and forth outside the windows here so the maybe that some kind of the demand side incentives uh is very important to you know socialize drone usage in the world so that is what we are doing in the in Japan discussing that's my thank you any questions from the audience Christina Davis Harvard thanks so much for a fascinating presentation as you're thinking about how to secure Supply chains both in the location of production and avoiding end users through screening out who gets the highest end techn emphasis on friends so how do you decide who is a friend Japan and Korea had a very nasty dispute over semiconductor issues that went back to who could be trusted and thankfully that was resolved but now we have issues about is Vietnam it's part of cptpp a trade friend but makes deals with Russia can there be relocation of production and sales to all countries how narrow would you define the friend Circle I put an even finer point on that question which was phrased by Morris Chong the founder of tsmc said the US is trying to diversify away from Taiwan isn't Taiwan also a friend which I think is a good question to ask Will would you like to well all right so of course Taiwan is a friend but I think the insecurity is around what could H happen Okay and now uh we were discussing at breakfast I said you know I I wrote a piece couple months ago but my editor changed the title the original title was you know if you're going to frore then you better wa you you better worry about the health of your friends right because if your friends turn unhealthy then that was kind of a feudal exercise okay and then I gave examples I don't know if we want to go into it now but you know you want the example if you'd like to please okay well let's look at flat panel displays things like this okay uh Japan was the Pioneer uh sharp company is a Pioneer they they got squeezed out by the Koreans okay Koreans and Taiwanese sharp is still there uh and the Chinese are poised to dominate it okay so we assume well we can Source the uh flat panel displays for our next iPhone or for our Tesla in the case of Tesla they Source it in Taiwan from Au auo okay or we can support Source from Japan display who I understand is not so healthy right now and LG is uh struggling Samsung has already exited uh LCD displays because they cannot compete against Chinese industrial policy where you know if it cost $6 billion to uh put up a Fab you can well I went to one of these Fab commissionings in China it's like gen 10.5 Fab that cost $6 billion to build why is this Fab in hu China in the middle of nowhere well we only build Fabs because the local government will subsidize the construction cost how much was the construction cost 85% of 6 bill I okay what is my cost of depreciation as a component of cost of good sold 50% nobody anywhere in the world can compete against that okay so we say well will friend Shore displays for your Tesla or for your Volkswagen or your Ford F-150 Lightning from friends they aren't healthy that's the problem with fren Shoring a problem with FR Shoring sorry my personal view this not Japanese government view but but I think you know the the just as I said transparency is very important because then you know the uh for example with regard to the promotion like then you know chips act or the tax deductions no some countries like the us or Japan I think are very transparent because we are democratic we have to pass the ideas Congress or Diet so that we have to explain to our peoples which means then explain to the people equal to the explain to the world so therefore that some kind of the balance should be taken uh but on the other hand that you know some countries not countri some countries are not transparent to decide policy to implement a policy so that no one can predict the future the not only the business not only the government but also business cannot predict future Supply CH resence so therefore the in my personal view transparency under the democracy is a most important things thank you please I am Daniel Fu I'm Professor Bill Kirby's research associate at HBS um my question is for you Mr nishikawa um on chip 4 the chip 4 Alliance apart from an inaugural meeting and the promulgation of an ear for chips there doesn't seem to be that much reported progress on the initiative uh could you elaborate a bit about Japan's vision for chip 4 and whether it's optimistic about it going forward and second there's a lot of uh up uh kind of coverage in Chinese media about how Nikon is increasing its export of duv lithography machines to China despite the ban on 23 types of semiconductor um equipment imposed in earlier this year um could you speak a bit about the challenges of enforcing that ban and the position of private Japanese companies in the context of semiconductor disputes thank you uh thank you as for the chips fall the so-call the chips fall that uh maybe that you know as a government offical I have to say that there is no diplomatic relationships between the Taiwan and Japan so therefore no official chips for the things in that sense however the the regardless of that between the you know Korean Japan and us but also the with other countries as well we have the pragmatic you know relationships business relationships business or the government you know the Cooperative relationships the between the countries so therefore the like now so sys or you know the supply chain reaction to reaction some Cooperative reactions to the you know supply chain disruption uh is being done you know the uh you know the in various way so therefore let's think about for example that you know the Russian invasion to the Ukraine created the the sudden disruption of the L gases every semiconductor factories regardless of the nationality suffered from it in such cases we we we means you know everyone should jointly tackle with the issues so that we are very keen to do such kind of things and as 40 you know 23 the Japanese export control things just as I said the the how can I say the uh of course we we prefer the you know the chip piece however the the it is reality the chip can be utilized for the you know military use so therefore the asand you know the uh responsible countries we are responsible for the you know the export controls but please think about that export control is not ban to the you know export we will check whether the export is adequate in the sense of the military use nonmilitary use was not so therefore the we we took relatively and we are confident about the transparency of the rules so uh that is what we are doing thank you I wonder whether I can a question to our moderator uh Professor chrisme because you're living uh the other day the chairman of tsmc Mark de said in about the one part of you your book toward the end of the book you were mentioning Pastor possible scenario that China May wanted to take over tsmc for the reason of of controlling this key technology for some political or the other purposes and Mr Lee was saying that China will never invade Taiwan because of tsmc he also said that if China decided to invade Taiwan it will not stop because of tsmc uh the reasoning is quite clear or he did mention and that is the the the the the issue of Taiwan in the Chinese government's mind is way above technology issues uh so I just want whether do you have a comment uh to his Sol remark I completely agree with that and it's it's worth noting that the disputes between Beijing and the Taiwanese government as well as the uh the US participation in those disputes pre-exist the invention of the integrated circuit the the key points of tension in the late 1950s for example when there was the most active uh fighting were just as the first chips were being invented chronologically it's just a fact act that tensions predate the chip industry and so I think Mark is right when he says that actually the key drivers of tension today are not semiconductors semiconductors have been entangled in the tensions uh but they're not primarily driving I think one Nuance is that unlike in the 1950s and unlike in the 1980s and even unlike a decade ago the level of technology that China can bring to the table is much higher and that's true both in a civilian sense as we see on a regular basis but also in a milary sense and so if you talk to us defense planners why they're much more concerned about their ability to defend Taiwan today than two decad to go precisely because of technological upgrading in China's so that that's the way that the technological balance feeds back into the military balance I think but Mark is certainly right to suggest that the primary driver is not semiconductor issues but political issues between China and Taiwan us one more question from the audience wrap up thank you Dan Murphy Harvard Kennedy School uh I want to just draw on um a contrast that I've heard on the one hand I've heard that blockage of China I think that was the word used blockage could spur uh domestic Innovation within China on the other hand we're hearing about this very complex Global supply chain that requires all this talent and all these different players so I'd like to ask our panelists and our moderator on a scale of 1 to 10 with 10 being and 10 being one being least confident how confident are you that China can develop a successful semiconductor industry and please comment on your score thank you it's a very specific task for our panelists um would anyone like to what numerically or qualitatively uh try to answer that question really well well I would uh say uh between seven or eight thereabouts okay and I think uh there's one there's a broader technology Trend which is in their favor right which is nanometer you know seven nanometer if they can make seven nanometer for the Huawei phone that is good enough for an awful lot of applications okay and and we uh heard some of those differences so uh I I'm I'm not a fan of these export controls as a way of doing this because uh as we saw with GPS they give additional impetus to the people who don't have access I mean they they're they're on a mission to develop it right so I I'm I think they're very capable we should not estimate that respond to that well um China is not like other small country they are very big in terms of population so uh talent and also they are over the last 30 years uh after they been more free access to the uh entire War so they already have that basic capability and they are up to it's no longer a poor country okay they are they stand up living now and in many uh location they are actually uh much better than many other countries so I think it's only a time better if this continue the separation continue now they have a determination to do that so I think it's eventually you get there it's just depending on how how uh how long it takes any final [Music] coms uh I agree with the two professionals about you know the uh that probability of the China to realize that you know cutting semiconductor uh but what we think I think import is important is that you know the future of the computation is more important than the the simple semiconductor development let's think about what H happened in the and nand memories that 2D nand is you know when the you know the K or Toba or the Western digit or the Micon m is trying to Samsung SK tried to the 2D n that they are focusing on the narrow node however the 3D n change the DraStic change the competitions and also for let's think about AI gen AI the CL GPU is focusing on the you know how much the small node is can create better gpus however let's think about the neuromorphic architecture Computing chip is will provide totally different structure and also Quantum computing provide total different structures photonic electric integration will create more energy efficient chips or the computation so therefore the in the sense of the you know to create better Innovation the future Innovations I think again the semiconductor principles that do Professor being said that no one country can achieve such kind of future big innovation that's my great well let me thank all of our panelists for kicking off this day of discussions I think many questions were put in the table probably not completely answered but we have now two more days to discuss them and so uh I'd like to thank all the panelists and thank the audience for engaging discussion um thank you everyone again for joining us now what we're going to do is after laying the sort of landscape of some of the major issues uh is start to dig down and so what this next panel focuses on is ecosystems and talent right so so we talked a bit this morning about the complexity of the issue the cyclicality of the issue um and the capital intensity of the issue as well as clearly the political aspects uh but this panel is more trying to dig a bit deeper to look at what are the key challenges um for the pipeline of talent but also the pipeline uh of of of an ecosystem that actually works um we have two wonderful speakers um I'll start with Liz Reynolds we uh we overlap she's another part of the uh my MIT Mafia so I always try to bring in MIT Mafia When I can uh we overlapped uh at a wonderful place when we were doctoral students an MIT called the industrial performance center that was set up in the 1980s uh nishik kawasan probably has heard of it it was really designed actually to to deal with a similar challenge at the time from Japan so the industrial performance center was trying to figure out well the US seems to be losing so we need to figure out how do we what is industrial performance what is industrial performance in terms of the automotive industry a whole bunch of Industries um and so Liz and I very much uh have in our DNA we've that Center which she was the executive director of eventually even are you now currently no right no she was at one point um really taught us a lot about systems about ecosystems about the role of industrial policy and about competitiveness um and I'm very excited to have her join us because not only do we share that uh background but we also she's also worked um in Industry she's also been a Special Assistant uh to the to the uh president for manufacturing and economic development uh in the white house um and is a lectur now at the uh Department of urban studies uh planning um and for me at least she's a great example of the ways in which people can jump and integrate from industry to government back to Academia um so I think we're quite lucky to have her uh Professor Lynn you all know I will not reintroduce him just for time um but what I really appreciate about burn is that he is uh really a master lithographer so you're getting someone who has really built the industry uh also saw a lot of the limits of Moore's Law early on um and is now the dean of the school of semiconductor industry at National Chingo University role among many again also like Liz from corporate the corporate part at tsmc IBM originally his role now returning to Academia is to actually build out this Talent so he is currently as the head of that school uh at the effectively at the center of gravity for building of Engineers and and that Talent pipeline at uh National chingua University in Taiwan so let me just um make a few uh comments and then turn it over uh to our to our panelists just to sort of set the scene one is what really what is it that we I think we should be focusing on in the next um you know 90 minutes what quantity right so so there's been a lot written excellent you know McKenzie reports um semiconductor industry Association report all of these studies that just in the United States about the shortage right when it comes to Engineers so 300,000 Engineers 990,000 skilled technicians the problem is it's not just a shortage in the United States it's a shortage in the region it's a shortage uh globally because that um fundamental Point that's been made many times which is this and Ronnie chattery will later make himself here uh it's not going to be all built in the United States right so the White House is pretty clear about that but the problem of course is there may 2 million workers that are is the estimated stock um uh of of shortage by 2030 so about a 50% increase is needed Regional Talent shortage so one about quantity other is about quality right because it's not the shortage is not really only Engineers that burn is focused on uh producing but companies are battling shortfalls in lots of things I mean in the United States particularly skilled construction workers ERS that's an issue uh facility Logistics coordinators that's another issue so these cut across a range of professions and specializations I'm excited as sort of the academic part of my brain is excited about what the US is attempting to do because big push big push industrial policy we haven't seen for a long time and this is in some ways a a traditional approach it's it's it's sophisticated it's integrated but it's in the end it's Supply big push right as a as opposed to what uh Willie Professor sh was talking about which was around the demand side and the lack thereof um so at least for me the that La that third challenge is it's not look step in the supply chain right because you need chip design you need the Fab construction you need operation manufacturing R&D assembly Advanced packaging testing all have shortages right the fourth is technology as we all know is a moving Target so they exact nature of those needs are going to change over time um and Industry is all already struggling in that area right so the kinds of over time that our uh student here Hugh did a great job he wrote A Few um short briefs for this um conference and he looked at that where you know facility construction is most important now but that eventually will not be uh the the the shortage it'll be it'll then move right into um manufacturing and then into even packaging and other uh Downstream segments there's also automation trains trends of course that that will complicate that so last two points five is you know I'm most interested actually not in the sexy White House Federal policies I'm actually more interested in what's happening at the state at the local level I think what's going to H here in the US at least um much of the work is actually at the state and local level and I've dealt a lot with certain aspects of those economic development organizations um for example in the South uh where you had BMW and other major foreign players who came in and they themselves had to go through this so the automotive industry recently has tried to remake ecosystems BMW did it quite well in South Carolina so there's models we can talk about um but in a in a industry like semiconductors I think there's another piece that's ecosystem not just talent and that's around uh the startup community and so local the Lo two local challenges the way the state government is able to manage this and the other is around the startup Community that's so critical uh in a region a part a place like sju for example in Taiwan the last thing I want to say before I turn over to our our lovely speakers is when we were at MIT one of the things that we did is we conducted this globalization study and for me it was great I get to I got to travel around Taiwan quite a bit we ended up writing a book multiple books one was called Global Taiwan so I was running around interviewing semiconductor firms Auto firms many different Industries and for me one of the takeaways that I think continues to be the case when I returned to Taiwan is that particularly in highly competitive Industries a lot of the knowledge is tacit knowledge right so it's learning by doing and not always completely packaged perfectly so that you can fully understand as an outsider what's happening between the lead firm and the suppliers so one of the things that also interests me as we me deal with this challenge globally regionally nationally is Taiwan Taiwanese ecosystems to me were very just in time they were evolving frequently they recent discussion we had uh someone in the audience now is saying that they're Scrappy that was a good word I felt that as well even in high very high tech industries um and these big firms like tsmc iterate so closely with their suppliers often family-owned very small that that knowledge is by by doing they don't necessarily document it in a way that's that's scalable and transportable cross border so that's what interest me as well as how are we going to deal with that issue and how are the lead firms dealing with that issue because of course many toese firms are Global in a way right so I like the way we turn you know turn that title of the book made sense but they actually wenter that Global they were actually highly Regional in the end of the day they were really China and Taiwan right um and I think now for many of these firms it's a real Global challenge to truly diversify as as Willie stated I'll turn over maybe first to Liz uh give some comments and then to uh to burn well thank you all very much um am I being heard well okay um it's a pleasure to be here and thank you uh Edward and to others for inviting me um I'm always excited to be on a a panel in which the term in which federal policy is put next to the term sexy so thank you Edward because as part of the Biden Administration in 2021 2022 I was deeply involved in what we Now understand a major shift in US economic policy toward um very explicit industrial strategies and I think um it's important to see the chips act I think in the broader context of what's what's just um been occurred in the last year year or two with uh with us policy under the B Administration but I agree uh with your point which is in the end as we discuss at least from a context of the you know of the US and how we're going to make this transformation in the context of all the complexity that was just discussed in the last in the last panel it is about how we're going to do this on the ground how do we I keep saying how do we land the plane with a tremendous amount of uh you know uphill um uphill ble coming off the pandemic uh and a steep learning curve for the US really Taiwan is the crown jewel in the globally on on semiconduct production and the US is you know getting back on a a train perhaps or a train that's never been on before to try and and uh emulate this and capabilities in the country so let me just start by putting the the chips act and um and and what we're trying to do on the semiconductor front in the context of the in all of the legislation the three major bills that have happened the last in the last couple years so one is the infrastructure Bill uh one is the obviously the inflation reduction act and of course chips all of of those represent a massive reinvestment in the US industrial one that everyone knows has been essentially hollowed out over several decades and I think this is happening at a point in time also in which we see TR technological change in advanced manufacturing and capabilities which now make it possible to bring back a lot of manufacturing to the states and a a reshak of of Global Supply chains whether it's the pandemic whether it's climate whether it's geopolitics we're at what I would say is probably a 20 or 30y year uh cycle for an industrial transformation and so chips is in the context of that in a in a context in which we're trying to rebuild capabilities in which we're trying to rebuild a Workforce uh that um that has not existed and also in in the context of of in one of the more complex uh clusters one of the more complex Technologies you know building from scratch building from denovo you know the US has tremendous experience for example in biotech uh in building out these ecosystems um can you can we rep that process in semiconductors um second I just want to say that I think that um when we think about how we're going to land the plane regionally and I take this from um Danny rodri uh here at the at the Kenny school and others it is we have to be focused here on process more so than outcomes of course outcomes uh are critical but we're in a 10 to 20 year um you know Pro Journey uh with with where we will not we will not know whether we're successful for a long period of time so we it's critically important we set up a process that helps us stay on track and measure progress and understand how we're doing this and to your point about what were some of the you know what are some of the ways we do that I I think that the Biden Administration has been practicing what I call a 21st century industrial policy with some principles that are you know worthy of uh worthy of learning from or emulation or um build on what we've learned over the years so one of course crowding in private sector um investment that is the ultimate goal here you know the government can't do it and and by all stretches that they say so far so good with announcements by the private over 200 billion in investments in conduct um second you want competition in the process so set up a process in chips in which we're going to have at least two centers of excellence that we're trying to develop actually we now see signs that there are six that are emerging that's good for the semiconductor industry that's good for the US and that's a that I think is a distinct distinctly us approach to Industrial strategy um third a portfolio approach so of course the concerns with industrial policy are always that we pick winners or you're trying to you know create a national champion even in an industry where there's only a few leading firms it's still a competitive process we still are looking at multiple leading firms um and an approach that allows many companies to apply uh and even has a you know has a a tax credit $25 billion tax credit that's that's open to anyone who's investing in in manufacturing semiconduct and then fourth to your point uh Edward is the learning by doing you have to build in flexibility that's allows us to Pivot allow you know maybe reverse course these are these are programs that will be um evaluated and and evolve over time and that's the way they have to be designed and I think that uh the Commerce department has has really done a good job um on on laying that out um there are a whole host of things I would say about what the challenges are that I think our panel will get into you know it's labor its costs it's specialized equipment it's regional ecosystems and how they work at the state level its Innovation um and this broader challenge of future demand um but I'll stop there and and uh and we'll get into those topics hopefully in the panel Professor Lynn over to you well take either one either one thing you start to show my uh yes I have a short one it's only about eight slides that's how much time I take all right uh I like to talk about Talent shortage for chips and I'm reusing some of my slides in the previous uh show this is one of the reused one uh the root cause of the talent shortage okay we're looking at uh shortage but what's the root course the root course is again semiconductor technology is too compax to be promoted by single country okay if we want to do that uh then we have a real shortage uh this I I said before I don't have to go back there uh we need the quantity quantity was very important if you don't have a quantity uh the technology cannot Advance because you cannot debug your process you cannot make enough process profit and so forth all right so uh my last bullet which is not the least is that uh we need a lot of talents now I make a uh very simple calculation I assume that for each area now there are five areas in there I assume that for each area you need 50,000 people and that's based on how big tsmc is tsmc is about 40,000 people and then you add other people for infrastructure for one area right so for each area we have 50,000 people and the need is about 10% because the industry is growing it's growing so I assume that we need 10% of each sector and that is a total need of 25,000 people okay now from that basis now if we assume that we want to create some new completely self-sufficient uh countries so to speak I calculate two cases one is five countries and the other one is two countries for five countries if you if I cut down the 50,000 people I said that now let's go back to the minimum say 25,000 people for each area in the country country so we have again five areas each which need 25,000 people uh and if you multiply by five countries and so forth we need a total of 625k people th 625,000 people and that's 25 times than what we need previously if you will use take the harmonous view of the of the technology uh with countries providing their expertise and and so forth but don't have to be self-sufficient uh we need only 25,000 people now we need 6 25,000 people but I don't think in reality there are five countries which are that ambitious but at least there will be two countries one is China they have a need to do that and the other is USA they have the ambition to do that okay uh and you may want to add Japan or Korea whatever but at least at least we got two countries if we count those two countries uh then you count the number of people that they need on and those it turned out that you need 10 times what we what our need is nowadays we have difficulty filling that 10% 10% now we have we have even uh impossibility to fill up that 10x more all right so um we we have a we have a talent we have a talent strage issue uh what is it well just uh Ed was was talking about not only those phds or Masters we need a lot of people in the in all faces but let me address we need some people special people then uh you know that that's well trained in a scientific or engineering area for those people now we we need to have attractive choices for those students it's the same for Taiwan and for us as well they have so many choices they go to the political sector economic sector Financial sectors and then the then in the technology one they may go to Google and they may go to Apple okay uh so there are so many attractive choices for this so for for the students and the the semiconductor students now within the semiconductor students they would primarily choose design right it's true for us it's true for also for Taiwan in the college that that I'm leading um we divide into four areas and and the design area is a predominant one we have to cut off so many people from design because everyone wants to be in design uh and it's it's well UND well understood and and well popularized design is a clean profession and then you make more money and all those things all right so uh and uh also most of the semiconductor students stop at master's degree they don't want to go to phds because because they make enough they make enough profit a high salary uh much earlier than the phds uh and the industry is grabbing them okay very soon after The Graduate get a master degree they grab them just prevent them from getting into phds that is a problem for the future because we need faculties right we we need young people like this guy to all right to to continue with the torch right you there there's the university cannot live without faculties okay but where are the source of those faculties um okay then uh the difference between us and T and and and and Taiwan is that in Taiwan tsmc is probably one of the most desirable Employers in there we we are supposed to be able to grab all the best students in Taiwan okay but it's different you put it put a TS plan in Phoenix or in Washington okay it probably in Taiwan it probably ranked five stars and in Phoenix it probably only ranked three three stars okay the competition for talent is even more severe um here all right so what do we do in our College we would like to have highly qualified phds um so some of the boot Force approach is that you give higher scholarship for PhD students okay uh actually more than effect of two to attract them so that they feel uh a little bit more secure when they were studying and the other thing is we want to limit the the graduation time we hope to keep them only for five years not six or seven this way they can go out to make money more and also uh earlier and then they they don't because otherwise you need two or three years or Master right so that that that showing the Gap and so we like to uh ask the faculties not to keep their students too long uh but to to have a plan you know when I accept any P students I would ask the faculty do you have a plan to graduate him in five years and ask the student do you have the desire to graduate in five years okay at least they have to have that mindset when they study uh for PhD and uh and and now the other thing is if if you want the Contin the The Faculty to continue you want the students to go to PhD into academic world and then they feel comfortable for their career you have to increase the stripen for the faculty right and right now I think it's similar in the US your faculty members makes much more smaller money than the your student your Bachelor student that go to Google whatever okay so that has to be changed there's a lot of inertia in changing that because if you try to increase the salary of certain uh area of the faculty The Faculty of the other areas will complain right how come we are all we are all we all are full professors how come is making two or three times more salary than I do but that Professor is making maybe half of the salary that his pH his pH PhD students are making all right so how do you how do you solve that problem uh certain way to shorten the time for PhD uh for example um we have create incentive for students and professors to shorten their time for example we give some kind of a uh award and whatever to the professors right so the more graduate students they they graduate you know the more more return they get financially and the other thing is that we try to Advocate a degree program that people can directly go to from from Bachelor to PhD without taking the Masters but this way they they save save writing thesis writing and research for master they just go straight to research for PhD and so forth short end of time uh another way we found that very effective is that when we recruit the students most good students go for Masters only some left over student would go for PhD right so the best way is to convince those good students for master degree to go to PhD and we have been quite successful in doing that the Departments and other areas are being quite effective in there all right so uh yeah before this last line before this last line uh I would like to uh emphas this emphasize this line that I used before I think we can meet the need of military and civilian together okay one one's concern is National Security the other concern is the global economy environment Better Living and all those good things we can do that because uh because the uh the uh military does not need to emphas emphasize milit and disrupt the civilian applications on the other hand civilian applications can actually bring the uh bring the technology forward much faster than the need of the military okay so you bring on the common vehicle for people to use for military or civilian and then the military will compete in their design in their creativity in the anyway because the the leading countries the most of students want to go to design anyway you get the best students your best potential to go to design and just compete there and let the world have the economy and let the military have the design okay so that's all my comments so Liz do you have um do you have thoughts in in comparative Sense on the US Labor Market and the challenges you see here before we turn great um yeah just to give a few statistics from the US perspective right now um and this is analysis recently done um by Oxford and the semiconductor industry here in the US essentially what's estimated that we the semiconductor uh industry is going to be need about over a 100,000 new workers in the next six years by 2030 last year alone we saw announcements for over essentially 45,000 new jobs in this industry uh so that's a 33% growth from the current Supply in the industry and you know we have to ask ourselves what is the most efficient and effective way for us to start meeting that demand because in there's in no circumstance are we going to see a I think an immediate respones as burn said we have tremendous amount of competition for the talent that actually could could respond to those jobs uh approximately 60% of the new jobs right now will be unfulfilled if we do not change our current training system in the country and about of those 100,000 about 40% are technicians that need a two-year certificate or two-year associates degree whereas about 35% are in the engineering uh category which is more Masters and PhD so I think I think of that as uh you know obviously a challenge but also an opportunity that this is across the board in terms of a US education system in terms of filling those jobs we have a we have a very fragmented education system Workforce training system from uh from our community colleges to to four-year college degrees Etc um but that also that fragmentation allows for a lot of experimentation and a lot of opportunities to build models that can then actually be readily scaled um so I think it also aligns as I said before with the broader Advanced manufacturing agenda right now that we're seeing kind of be rebuilt and where um certainly at the community college level and elsewhere there's a rein reinvestment in advanced manufacturing skills and bringing what has been a shortage of workers really for years um to the four and making that a priority for uh for the country chips of course provides funding um and has been accelerated in terms of trying to get out in front and insist for any of the lead companies they must provide a Workforce Development training program so you see Intel in Columbus uh or Micron and Syracuse partnering with regional institutions to to try and build that that capacity um and also there'll be significant there'll be a center of excellence that's um built into the national um semiconductor technology Center which again is the R&D side of the chips act I think it's important though um and I should mentioned that right now what the the tracking in the country is that since the passage of the chips there have been about 50 to 60 new programs announced in the US doesn't sound like enough to meet that 100,000 uh go uh goal but in fact I think again from a regional ecosystem point of view uh we start to see new programs put in place and uh and shared learning and and sort of acceleration of of uh of our system I do want to say that I think it's it's a necessary strategy but not sufficient that in fact a critical part of the strategy for meeting our talent goals in this country is going to be uh skilled immigration uh we have currently every year about 16,000 students um educated in stem foreign students who leave the country and that is uh that is problematic for the semiconductor industry and for many other Industries um about half of those those about half of the master students in the US uh and 60% of PhD students are international students and if we don't find a way in the US to actually attract those students to stay and to build careers here and have a path forward uh you know shame on us and we know we have a lot of Allied countries uh the Canadians and others who are who are quite you know have moved forward on this so I think we have to bring skilled immigration uh into the equation uh as part of our strategy um and you know as we've seen I should also mention I think one of the more um one of the one of the areas that's gotten a lot of attention recently is tsmc's efforts to import specialized construction workers for for the construction of their Fabs in Arizona and the tension that's raised with local unions um you know I I think I we can appreciate the tension for for workers um it's been a long time coming that that we in the US have been importing skilled Workforce to teach the us about you know Advanced Technologies most of what we've seen in recent years is workers training Chinese and Mexican workers as they watch their jobs get offshore so this is a real uh shift it's a real opportunity I think for building a collaboration that provides a path forward where of course you need that specialized construction work we see that in biotech if you're building Labs there's no question you need that but an opportunity for local workers to also learn because of course we're hoping we're we're in this for the Long Haul so we need that Workforce over the next 20 plus years and so hopefully there's a pathway forward with tsmc to um to um to negotiate something that works for for both sides thanks LZ um I before I turn over to the audience it's interesting I have a bias you know when I look at these types of challenges I'm not a semiconductor person but I'm basically an energy person right so I come from looking and working in the energy industry that energy industry is highly cyclical and it's Capital intensive so there's two issues of cyclicality that that that for me are very deep structural problems right and it's something that maybe the two of you can think about as we turn to the the group here one is the cyclicality economically of this industry right Willie touch on it but think it's a big issue it's really hard to look students in the eye or uh and I think for semiconductors certainly I saw this in for example oil and gas and say you should come into our industry when you knew that there was a big overhang an over Supply that was coming let's say for specifically around oil as one example so that seems to be the case with semiconductors it seems to me that it's highly cyclical um there will be a downturn there could be a significant over Supply how do you how do you really get Talent particularly the Young Generation involved to me is a big one the second cyclicality is not economic but is political and this was also touched upon a bit which is for this is a challenge I think for all of us but particularly US Government which is when you look to allies and to uh aligned Powers we our own politics are cyclical and so how do we what is it that we should be doing to either measure or better tell that Narrative of the ways in which the US commitment will not change or at least not appreciably change in the long run if our own um Administration changes right so a lot of this is congressionally is is is done through Congress that's great the chips Act was Congress that's so inefficient that it's actually stable so that's a good thing but um but executive powers are very important as well so there's two types of cylic e e economic and political that I guess that I tend to sort of focus on just because I'm coming from a very similar industry many ways um so with that let me turn it over to the the audience uh questions for our our panelists we have our lovely weni U who is going to be joining us in another panel as a chair so weni um uh if if you could just quickly intr say who you you are uh and then well thank you I'm a big supporter of uh Tony's and Edward that's my uh affiliation and a fellow um at ash center and originally from Taiwan so a question um we've talked a lot about Taiwan and the US in terms of how to address the talent shortage issue do we know what China is doing on the talent side right want me do you wanna maybe let's collect let me collect a couple chai chai and then Chang from the University of Chicago just quick quick um uh suggestion why isn't the obvious solution to a talent shortage just to raise wages I mean that that's I mean in almost every single skill every single industry that's the way it really happens uh and and I know that business is resist it but if you don't do it then it it doesn't happen or if you or if you can't afford it then it's not worth it and let me do one more there was uh yeah Jason then we'll have some respon that Jason shw from Harvard Kennedy School thank you for being here uh my question is to uh uh burn uh Mr bernin so I'm curious about the uh the the AI and Automation and how much of that development of Technology will replace the type of a Manpower that semiconductor Workforce can replace if laid out a number of the work workers requirement in the next five five years and with the advancement of AI and automation I know it's been deployed in tsmc's current uh work for workflow and would that help solve some of the issue and if yes what would the future road map look like thank you wants to start okay all right uh well AI is uh is one of the Innovations and that uh can be uh detrimental uh for it will replace a lot of uh job as people are worry about well actually it can also create a lot of jobs okay uh any technology needs a lot of uh human uh Innovations and human creativity to uh to grow and so to speak so I wouldn't worry about it because first of all uh well somebody has to design all those AI activities and so forth and then because of AI we need a lot of chips right and you need a lot of people to to make those chips so it is a shift of jobs but it's not a a a elimination of jobs just like any good old industry you know some new industry will come and we will eliminate some jobs but then it will create new jobs to replace those loss and I look at it as as a sign of uh the Improvement of our civilization so why don't I talk about the on the wage Point um yeah Theory would say just raise the wages and uh that's certainly been um the discussion in some of the manufacturing um space but frankly I think we're in a place already where wages have been rising at a pretty um you know pretty steady pace and what I understand is that in these Regional markets and again you know labor markets are Regional by definition that um as tsmc has tried to find workers in the Arizona space uh competing firms have been very competitive with their wages bonuses in in in uh you know in a sixf fig range a whole host of ways in which they've actually been competing on wages in Regional markets at least for the for the higher Talent um the other part that I think is is the reality is we actually need the skilled workers like we it's you we're not talking about training on the job I think that folks believe that we need actually some investment in the training first so the wage premium is hopefully there at the end of the training um but it's uh it's not going to necessarily you know be the fix right now and I will say I don't know what China is doing about training its Workforce and semiconductors yeah maybe we can come back to that President gal do you wantan to you have a question yeah yeah just elaborate on the wage thing as uh Ken as burn was talking about raising the stien and the salary of the faculty I was noticing he was looking at this direction right I wonder who the audience was for that particular comment audience of one no pressure no pressure at all um I just want to share with the audience what we are doing to to help to raise the rage and create incentive for student interested in S&T uh one thing that seemed to work fairly well in the past couple years is we partner up with industry to create incentives uh because eventually the money has to come from somewhere and we know being a public university fundraising of course is part of my job but then the government um you know their their pocket is not as deep as we would like so we turn to Industry to create a PPP platform in a way that they bring in the financial incentives as well as the real world problems at the same time I think Edward mentioned a lot of these technology jobs is kind of training on the job so that provide that training opportunity for the students and then obviously after they finish their PHD in five years um they already have a fo in the door and then they can you know start working with these companies so it's a win-win win for everybody and we're taking that model to an international level working particularly in the past few months with the uh state of Illinois and States uh building capacity for their University um bringing in Industry Partners to all this so it's PPP model at the international level so I guess it's I PPP and I think one interesting thing through this collaboration is I think Elizabeth uh pointed out is the capacity building and also talents going Beyond just technical because once you have the American student coming to nthu they learn not only the technical bit but the Taiwanese culture and the ways of doing business which would be very critical for the likes of tmmc to operate in the US and vice versa for the for the Taiwan student to come to the states and to understand American culture why football is such a big deal and then when they work um either in the states or go back to Taiwan there can be these Natural Bridges so we're at adding value to their education and trying to minimize on our financial burden so a bit of elaboration thank you other questions maybe we'll start with you and then TJ and then John yeah that's right the mic I think the mic is coming up yeah one two okay I'm HD Kong I'm I'm teaching at Harvard actually I think we're doing very well because 50% of students in engineering computer science are doing AI are doing semiconduct related science and engineering what else you want us to do you want to make the whole engineering department to be designing chips I I don't understand the question we are already doing very well then what else you want us to do all right TJ and John he after him my question is Professor Reno yeah my question related to what Professor uh Kong has just say the American education system is the best in the world I still believe so uh including this institution here you're training the best students and all the best students are coming from different part of world to receive training so these guys are expect to work for the most prestigious company with the most demanding job for Innovation designing and so on I really don't see that people are coming for study in the US to be working in a factory uh manufacturing job but I really have the qu the problem that the key the key question I have is what is the US government is really up to you know creating jobs or creating industry or bring the manufacturing industry back to the US that's really confusing so I just want to take this opportunity to ask Professor Ros about it you know the the the the problem tsmc is encountering in Arizona is exactly the same kind of thing you know the the kind of workers they really need is not available here but you have much better people who can do something uh the tsmc really needed uh so that that's kind of question I hope you can clarify that thank you we just bring that mic over to John Hay oh great perfect hopefully it works yes grab the third one couple of Dimensions first of all I'm John he I co-direct the most of our Center for business and government um here at Harvard at the Kennedy School so there there a couple Dimensions that I want to try to understand how they kind of fit together and it's this question of one why don't you just pay more the wage question but then the conversation we were just having about the overlay of culture and norms and whether you can transfer knowledge and it's what's the real skill set that you need to have to be successful and Professor Lynn focused on phds but Liz gave us a segmentation that was much more there different skill sets at different levels and and how do you build that system and if you go back and look at tsmc for example it originally started because um one of the companies TI basically went and looked in Hong Kong they looked Taiwan and they said oh there are a number of women who are working on farms that are highly skilled and intelligent we can bring them into the cities we can train them and they'll be fantastic working in these foundaries um that's a very different skill set and a very different cultural norm so how much of the real question for me is how much of this skill set can be handled through labor costs and wages wage structure how much of it is culture and how much are we going to have to live with just a segmentation that's going to require This Global Production system This Global set of Supply chains because no matter how much we train it's not going to change some of those other dimensions y easy questions Liz why don't you start really where start why you were the Special Assistant to the president now you get now you get the honor of solving all these yeah exactly well but the this um uh this first question about what you know what is the goal of this of of this right um of the industrial strategy and I think um to narrowly take uh the chips piece uh the secretary rundo and the president would would ground it and ground our work in the a comment around National Security that that is actually of all the industrial strategies that are in in play right now uh the chips Act is the one that you could I think most directly having said that the if the goal of this was only to build you know Cutting Edge Frontier chips and we didn't care how it was done or what it looked like in the end you we would end up in a place in which we are still vulnerable to a lot of areas where there's vulnerability in the US economy so what we found through the pandemic National Security and economic security both at risk and that is that is about production of chips and I and I want to make clear that this is a ve very clearly a both end strategy by the us there is no possible way the us is going to be building uh manufacturing chips to meet even a small portion of the demand nationally so it has to be done in partnership with others um but if we do this and we do not address uh issues if in the process we just exacerbate uh poor job poor jobs uh income inequality you know the things that have put actually our political system at risk uh democracy and other things we will not have actually built a stronger National and economic security so while I believe that our our industrial strategy has led with the most important pieces of h a national security process and as I said a process that I think is legitimate we've also um introduced conditionalities that say it matters how we are the journey matters it matters how we get to the endgame and so we want to see uh uh some change es to things that matter as to the Biden Administration and to the country as a whole so I do not think anyone has suggested that any of the industrial strategy is purely a jobs a jobs play that is actually not what we're trying to do we're trying to build globally competitive semiconductors centers we're trying to build a renewable energy industry that helps you know reduce our dependence on fossil fuels in the process we want to see quality jobs and shared prosperity and you know areas that have frankly put you know been really um problematic over the last 40 years I also just want to mention on the um before getting to John's question maybe I'll I'll I'll let burn speak first but I do want on this issue of Supply uh for in our school system we have the best uh you know one of the best education systems in the world uh particularly at the fouryear level we have a terrible system when it comes to access access I mean just a a problematic system for Access um and there are ways to address that and I just want to highlight one which is mit's e Master's training online and a wait and and there's you know a new micr Masters program where folks are in accepted into the program it's mostly online then they come on campus for a certain period of time and they receive uh the Masters and it just allows for a much greater you know impact and and I think we need to be seeing all of our higher education instit ways to to make access um a priority did you want it did you want a quick quick response over here okay Sor well talking about access um is uh not simply access is also depending on the on the source right there are so many so many young people that reach their college age every year uh and only a fixed percentage of them are good okay all right so that number seems to be fixed no matter how you open up the access there's a limited Supply right there so I think it's a it's a matter of how do you Channel those uh how do you div I you know put the right people on the right job okay so that they will optimize their their effectiveness now on on the on the uh on on the training program in mainland China I I think uh we we are not uh an encycopedia on on every question okay so actually the audience you can if you know better again Supply some of the information that you know about training or people's training in in in mainland China but before that want do you want to talk a little bit about John's question around culture nor I mean and the big issue around labor unions obviously you I mean one of the reasons that some of these big mnc's go down to certain parts of the South is obviously to avoid labor unions um so that's that's difficult from a political perspective and so how how is it's tough right because in some ways labor union are quite important labor unions also are critical for Quality um on the other hand a lot of the capital is trying to get around labor unions awful often plus there's John's point I think which is embedded in I I see scenes from um uh the movie uh American Factory where you see the just the approach that Mainland Chinese firms take to hierarchical relationships to importing labor to the role of a labor union in a in a corporation that are so vastly different than the American Workforce uh and which is why it fascinates me to no end I mean this big push right because of of those cultural but also labor organizations themselves right they're highly political so that that's again very easy turn it over to you where to start so I wanna I want to work backwards um perhaps to from demand which is uh the previous panel and Willie spoke to this concern about the demand side that this is essentially a supply side push and indeed we have to be concerned about demand and and and why is that it's because customers aren't interested in switching factories right once you've got something working particularly in a high intense uh skilled um uh industry like this in which you have R&D and Manufacturing tightly tied so you're not you're you're there's a lot of disincentive to actually switch your production system which which means there's a lot of disincentive for lead companies to use new suppliers you want to bring in your team you want to have your suppliers this is what we're seeing in Arizona and elsewhere and why is that you want your workers who know exactly how to make things work and you know keep keep uh um keep the levels of Excellence you need in semiconductor um production so that is so that so the idea of building a new Workforce uh in an industry in which we do not have a long uh history deep skill set in this country has a you know has a steep learning curve there and so it is going to take more time and it's going to and we're seeing already that the costs you know to that are um you know are not negligible or you know will are part of the the strategy going forward so I completely agree there's a um I don't know if it's cultural but it's a whole new uh skill set and in terms of um unions unions have not historically um been very present in high-tech Industries as we know um the fact that they're we're building out this new industry here in the in the country along with energy provides an opportunity I think for better management Labor Relations and for opportunities in terms of training and and elsewhere and you know unions certainly what the president has wanted is that unions are at the table they have historically not been at the table in a lot of these conversations so I think that's you know that's a TBD as to how that's going to play out um but certainly There's an opportunity here when it comes to the technician level train you know technician level trainer um employee for building out um a a a class of work workers before but that exist in other types of manufacturing you know that the sort of basic technician job and so I suspect we're going to learn we're going to see sort of um models and uh Union representation Etc jumping from some Industries to into semiconductors at certain levels I'm not sure we're going to see it across the board but I suspect we'll see you know uh that play out going forward I don't know John that's a hard not a good adequate answer but it's um best so one don't we take um so we have we have time so three more questions another round I'm trying to get people who haven't asked first go I see you CH as well so so why don't we go Michael um and then you would be so one this oppressor Tai here Laura and then Michael and then Margaret the next round uh I really appreciate that the this platform uh give us kind of interaction uh between the United States Taiwan Japan and so on so forth I'm response to the uh one of the uh uh question about the China um a future development of this uh Talent education and so human the human resources uh focus on this kind of uh uh semi doctors chips so on so forth I'm not the expert in the chips uh I'm the lawyers myself but at this study some of the Chinese report uh for many years uh for the last few years China emphasiz very much on the M military use and the uh just like uh the professor berine talking about the uh the uh military use and civilian use the channel emphasized very much on the military use for this uh uh semiconductors so they are using this military use application in the uh uh in many military areas such as uh supersonic uh Buist buddhistic missile they're testing for the last two or three years uh they have the long range capability to to lunch this SC missile over the 8,000 kilometer even further and the last nember uh xinping a Chinese uh leaders in his report uh for the National Security he say uh by the 2027 the China should be self-sufficient uh in the Hightech uh development uh particular in the uh long range uh missile developments and also submarine and also AI so there I would assume that in the next few year China will put their lot of efforts emphasized in this kind of uh uh Advanced uh pration uh chap development uh that's what I I would uh I would offer for your consideration uh I also respond to the burn uh he you just mentioned the uh military use and civan use I think the China in their internal report indicate that 90% of the advanced Precision uh uh chips or come from the uh their import or or or from the foreign foreign countries or the uh or the foreign corporation invest and operate in China the usess advance uh chips to for their military use that's what their internal report say that therefore uh we are talking about human development for the uh application into the military can we can the government in the United State and in Japan and also in Taiwan and some other country can have some control over of this chip application in this particular area uh that's what I I I would raise the question to the uh to the uh to the presenter also as the moderator what is the government in this area military use for development of human resource development in the uh in the chip development okay thanks Michael and that's again just a reminder to say who you are so that's Professor Michael Sai from National Defense University Taiwan hi hi I'm I'm T Fang um I'm a research scientist from Harvard Medical School um so I have a one question for uh Elizabeth so uh as you mentioned uh so the US has a problem of the lose of the brains um like every year here we lose a bunch of half of the like stem educated International students so uh among them uh I think uh Le a big ratio of them are the originally conf from China those International students so the reason why they live the country of course they will lay some poing factors so um I'm not sure if you uh you definitely may know already so the Chinese government they have a program what they call the Sal Talent program so it's already imposed like it's not uh it's not they have already have that in then over like one decades so they would you know provide a very uh abundant of funding and also very competitive salaries to attract those PhD graduates uh even some from some of them are faculty members uh coming back to China um they are specifically Target for the uh uh specific spefic industrial sectors that they are interested in the China is most needed for example the semiconductor industry so um my question is what would the American do in response to uh to the human talance uh program imposed by the Chinese government thanks and then in the back we've got Margaret uh y who might need a mic hi thank you so much uh Margaret I'm from Harvard Law School um so tsmc has been emphasizing quite a bit that uh the specialized workers coming in uh to Arizona are temporary and there to train others Professor Reynolds um you mentioned that there's quite a labor shortage and I recognized the debate over providing H1B visas uh to these specialized Taiwanese workers and I was wondering if you could comment on that and if we're trying to retain and attract the world's best and brightest in chip manufacturing shouldn't there be immigration reforms there uh in play uh but also how can we not leave behind blue color America thank you again these are very simple questions we'll start with uh maybe start with Liz and then turn over to BR um well so let me start I guess last question first which is um you know immigration policy in the in the US has been is just in a difficult place right we have not been able to move things forward um at the Congressional level um despite the fact that I think there actually is agreement on both sides about the need for immigration and skilled labor as part of our immigration strategy um so I'm still hopeful that particularly as we see um you know a lot of demand in not just in semiconductors but in other areas that we'll see some kind of breakthrough on on the on the Visa front Etc um I don't know if people saw this latest statistic which is there's been a 200 over 200% increase in manufacturing Construction in the US just in the last year so it's it's an early indicator uh it doesn't tell us you know we know you know in what areas generally but this demand is just building for I think for some of the skilled workers um and um I think that um in terms of the question around um around the talent program in China how responds to that I mean let's be clear we have as a as a country we have we are unable to respond to the money that China puts toward all of its industrial strategy right I mean what they've done to try and build their capabilities dwarfs um the 52 billion that we're putting into semiconductors it's a it's just a a drop in in the proverbial bucket so I don't imagine us um you know meeting one for one whatever the Chinese strategy for bringing Talent back to the mainland that they will um you know they they've got they've got um resources and they've got uh priorities that will uh you know that will be significant I I do think that as a as a general rule we need to find Pathways for uh our International students to stay there have been as you know um visas issued I believe at the federal level uh certainly at the state level uh where where possible where for anyone entering a an entrepreneurial um Endeavor or you know can find the work permit there there are Pathways but it's still short you know short periods of time so I think that that our critical path right now is to figure out how do we extend to today's International students an opportunity for the path forward and where are we going to find you know it may be that the the the pathway is is sort of cleared at the federal level but if we want fun fing uh which for example the state of Massachusetts wants to retain its graduates in this state maybe we're going to see State step up and provide some of the funding or Pathways forward that you're that you're talking about well I I know that a lot of children of my friends they graduate from the University and they couldn't stay okay so actually you have said the same thing the the immigration laws not what in our days was much easier well I I remember uh President Johnson signed into a law that anyone has an advanced degree can apply for permanent residenc and I'm one of the beneficials you know I got my masters in from AIO State and I apply for permanent residency I got it even without a job right I continue to be a research associate so I don't see that happens okay now the other thing is talking about the military use of the of the chips in China uh I don't think the military would need 20 million CH 12 million chips for military use so I think what they announc is actually not not what's happening yeah I think still they depend a lot to to use their chips uh for their for their commercial products I I am not in a position to comment about um China and military use on ships but I did want to go back to the comment the question about what you know can we see a path forward with immigration and what does that mean for the bluecollar worker in the US or what I might call the median worker and I think that time and time again research has shown that immigration is not a direct threat to the bluecollar worker here in fact the Immigrant population is generating uh more economic activity and helping start the next generation of companies um that it really is a false um tradeoff and that we really need to see this as additive and supportive of actually uh the median worker in the United States so let's do Chun you have one follow-up question did you wanted to add I saw your hand up at one point before we break trying to flesh out what John cow was talking about so this's a direct question for Elizabeth can you say more about mit's experience with these Partnerships so I was struck a couple years ago when I looked at what happened to Carnegie melon versus what happened to mitm in terms of the demand for autonomous driving vehicles but basically Carnegie melon basically lost its entire department because who can compete with10 million bonuses and my impression and this is a question for you is that MIT took a different response it basically brought the companies in right it it it and and it created this partnership so I was I'm wondering just looking for Pathways forward can you say something about that and what the experience has [Music] been right so um great question and we should have another hour on that topic right I think that um I think the point was made earlier that all of what we've been discussing this morning will not happen without a partnership with the private sector and that and ser it's industry government and the private sector and and certainly MIT has a very long tale uh when it comes to engagement with industry you know it's been one of the most applied institutions and I think it's I think it's gotten better better out what those consortia need to look like and how do they work on very applied problems so Edwards was just mentioning there's a a new consorti around energy um run out of the enging school and just to get a little bit into the Weeds about um 15 to 20 companies who are who do not compete with each other are brought in as part of a conversation about how their challenges for reducing their carbon footprint and so it's a very iterative process of understanding you know providing a place where people can trust uh and share sensitive information and then finding ways to address those Solutions or address those problems with practical solution so in fact I was just talking with a PhD student who's hearing from companies that it's very hard for them to apply or understand how to work with the IRA that requires Community benefit plans so if you're going to apply for investment uh you have to and this is again one of the uh you know one of the conditionalities that the that the Biden Administration has put on these plans to to make sure that the journey is as you know valuable as the destination um how what you're going to do actually going to benefit communities that are affected by this investment um not easy to do but we've now got a PhD student developing technology or or sort of software to help uh uh figure that out and um I think that you know what happened to Carnegie melon I mean you know who is it a is it a Black Swan is it something else I we don't know but but actually the problem solving with industry um you know Academia can do a lot things industry actually can't and and that Consortium building is really valuable so there's a lot of peer-to-peer learning before we break for lunch I just add a little bit to liiza saying that I think the and I think Cary melon did this to an extent but one of the things I think MIT has done very well is if you even look at that MIT energy initiative one of the key things that industry really wants is not just that pre-competitive environment but also a lot of insight into where government in in those types of Industries highly regulated long cycle long you know large Capital Industries where policy going so I think having and this is where the Kenny school has an advantage although I don't know how integrated we are with the r University MIT is highly integrated right run by Engineers it's an Institute and so having Ernie mon for example who was really the one of the founders of that energy initiative then go into becoming the Secretary of Energy and then coming back out John deuts running CIA coming back was massively I think important for stepping that up basically standing it up and I think for the industry it was very helpful to have that level of um foresight into the way the government is trying to shape policy so I think that's also a big reason that's not just to push the Kenny school's own agenda here but I think that's why MIT is particularly good I think they get that Fusion unlike a lot of other universities um so with that um first I would like to thank the panelists um and uh basically have them them think a little bit more over lunch so so if you can push them you know they're going to continue to sing for their supper at least for their lunch um push them ask some other ask us questions um but uh we're going to break for about uh 30 minutes grab some food and then we'll have the lunch speaker of Ronnie chatterie but for most importantly thank you two very [Applause] much yeah testing testing testing testing see all right can you hear me okay Ronnie can you hear me this is Edward how you doing my friend I can hear you hear me yeah can you hear me okay okay got it okay so I think we're gonna it's gonna work Ronnie hold on I'll start hurting the cats okay could I share my screen is that going to work or is it a we do see your slides Ronnie so that's a good sign we're getting there yep you're looking good thank you be on TV no wonder they chose you to be in the White House I see I see you got that you got that well if I can't be there person this is the best pretty just want to make sure are we good Ronnie can you talk talk a little bit Ronnie sure testing one two three testing and I'll pivot slide one let me see if this actually works I think he's low I can hear something coming through yeah so keep talking Ronnie I'm we're gonna try to play with no no worries testing one two three testing yes good man there we go nice I'm here in Durham North Carolina and hopefully you can see me and my slides as I click through yeah your slides are moving beautiful yeah yeah good okay now I think we're good perfect Ronnie I what I'll do is I'll start uh hurting people together so we'll start in like two minutes sure sure I'll go on mute in the meantime okay sounds good thank you thanks thank you very [Music] much good thank you very much okay sounds good okay thank you very much all right everybody we're going to uh we're going to get [Music] going okay everybody welcome back hope you're enjoying your lunch running the types of events is always a lovely microcosm into the complexity of even a simple academic conference which I think gives us a lovely window into all the complexity that you could possibly imagine in running a semiconductor uh industry um Liz and burn and the other speakers I think did a great job uh laying out those challenges and even here we're challenged by Logistics um just between Raleigh uh or Durham rather Durham North Carolina and Boston so Professor chaty Ron Ronnie uh was going to be here in person but his flight was so far delayed that we have to beam him in uh from duke uh fuka School of Business but that just shows you even simple things can get very complicated let alone the things we're all trying to coordinate with allies and other um uh interested parties globally so what I'll do is just quickly introduce uh Professor chattery uh turn it over to him to give some comments and then I'll help moderate and field questions for you Ronnie um so uh Professor chatterie uh is a senior um distinguished professor of business and public policy at Duke um he's one of these great examples that we all try to to look to here at the Kenny school he's at the intersection of Academia public policy and business um and he has published widely as most of you probably know one of his most recent books uh through Stanford press um is can business save the Earth but for here in terms of our purposes I was quite uh happy and excited uh that he said yes to our um invitation because he was until very recently just weeks ago uh the White House chips coordinator on acting deputy director of the National Economic Council in the Biden Administration so he's also had many other roles uh in government he was a chief Economist at the US Department of Commerce um he worked for President Obama as a senior Economist in the Council of economic advisors so there's a very long list here I won't go through all of it what what I find so uh compelling about what Ronnie does is he really is sitting at that what we talk a lot about which is a new industrial policy well he's had to both deal with designing and executing it um and is fair is really well and uniquely situated um to give his thoughts about where we're going um and so we're quite lucky to have him um I without anything else I think I'm going to turn it over to you Ron if you could and give your uh remarks then we will turn to the audience and gather some questions so welcome my friend good to see you and sorry we can't see you in person oh thank you so much uh Edward and to the audience oh thank you everybody uh and I just want to say first Edward Cunningham you deserve a lot of credit for putting together a fantastic uh program I wish I could be there in person and I want to thank you personally for all the work you've done with me for the last couple of months to try to get this lined up only to be thwarted on the day of by flight delays and when I go talk about some of the Investments we've made uh in infrastructure in America please no jokes about my flight being delayed in infrastructure Investments we're working on it flight still do get delayed but um you you'll cut me some slack there and Edward along with Folks at the rajw foundation Institute uh the kendi school and all the other sponsors it's an honor to be here to the audience I'm really sorry I can't meet you all when I looked at the agenda I said this is going to be a fantastic place to chat with people and get to know folks who have a lot of knowledge that I don't have and I can tell that by looking at the other panels as well as well as the participants who are in the audience um I can also see all your lunches and so I'm very upset that I can't be there to eat lunch with you as well spread um but what I'll try to do is be concise uh here on Zoom give you some overall comments about four different things first what is the broader economic strategy that the vine Administration has been pursuing I'll give you a take uh based on my own experience for the last two and half years uh in the administration but also as someone who is an academic Economist in a business school and thinking about industrial policy through a Scholar's lens as well as someone who's implementing one of the major programs and hopefully that is something unique I often feel like I have to have two sets of ideas in my head at the same time Scholars have healthy skepticism about policy and what works and what doesn't as they should and as we should but when you're implementing often you have to move really quickly uh and you have to get a sense for the best approximate solution rather than the perfect solution and so I think of those two things together as I give this talk today I want to hone in on the chips program in particular this is the last time I'll say it but it's an acronym actually which only myself and my children have memorized which is creating helpful incentives for the production of semiconductors so you like The Branding there we'll use chips here and the chips and science act we'll talk about the goals of the chips and science act as well and we'll talk about some related technology policy issues too while some of these are things that I worked on directly and are in my areas of expertise some of them a little further a field but I need to mention some of the issues around export controls uh Global institutions that are intermediating some of these conversations between countries around chips and happy to discuss that in the Q&A to the best of my ability and the last piece is some of the opportunities and challenges that exists both for the chips and science act as well as what you call the modern American industrial policy or strategy more broadly so that's what I hope to get done because we're on Zoom I'll do two things one Edward I'll ask you if you're having trouble hearing me or seeing me just give me a thumbs down I can see it I'll keep it on you during the presentation what's most important is that people can see the slides which I think are over his other shoulder as I click through them um especially because sometimes for a fast talker like me Zoom is difficult because people can only pick up every other word I'll make sure I'm sticking close to the slides and happy to uh to go faster or slower Edward if you can give me a a sign up there too as well well so far so good looking at the thumbs up uh let's let's jump into it and talk about uh the industrial strategy more broadly so it's really important when people ask me about chips and I've been doing a lot of talking around the chips and science act since leaving government about a month ago where it fits in with the rest of the economic agenda that the Biden Administration pursued over the first two years and I think one of the most important things to realize is that when I started working in the Biden Administration it could be that this slide two and a half years later could have ended up blank what do I mean by that well when I started talking to the Secretary of Commerce Gina Rando when she was nominated uh and announced it wasn't clear we were going to pass any legislation at all and I had read a lot about polarization in Washington I had worked for President Obama in 2009 and 2010 a period where Congress became more polarized and a lot of folks thought it'd be very difficult for any agenda to be passed in Washington DC and I say that not to uh give you a victory laugh for any particular political party just to remark on the idea that I don't think most people maybe on either side of the aisle Democrats and Republicans could have imagined how much could actually be done this is separate of course from whether you think these are good policies whether you think it's a good use of money these are all things we can discuss and debate and of course I have my opinion but in terms of passing legislation as one measure of the output of a government and getting divided in particular to work together I think it's a really interesting and surprising list to see these four major initiatives I'll also note that a lot of the discussions about American political systems and institutions before this period even today really delve on how polarized we are hopelessly divided and unable to do big things but if you look at two of the big initiatives here the bipar and infrastructure law and remember you're not allowed to make a joke about my flight delay today they say that and the chips and science act both of those were passed with bipartisan support and signed by President Biden and so when you look at those two pieces of legislation I think you can draw two things from that one is there seem to be areas not everywhere but areas of compromise between the different parts of the political Spectrum in the United States to do particular things and in this case investing our roads rails Bridges and all the networks that connect people and ideas at 21st Century speed and also the National Security impetus behind the chips and sici act and I think when we get to the later discussions both today and maybe the Q&A when you think about the durability of these programs I think it's really important to remember that they come from a strong bipartisan base now it was not true in the case of the American Rescue plan and the inflation reduction act the biggest climate initiative of our lifetime these were passed with Party Line votes but I do think when you look at the pillars of the America's new industrial strategy a large part of it has been bipartisan and that's pretty interesting a lot of folks um ask me when it comes to chips what happens if there's a change in government what happens if American politics change and one thing I'll tell you is right if you look at the bip parts and roots of a lot of these pieces of legislation it gives you hope that there could be more continuity on some of these programs than you may think that doesn't mean for all the programs or all each part of the program but it does let me think about it in a different way that I would have thought about before now just to give you a quick look and I think you've probably seen this before the American Rescue plan often talked about as the stimulus happened very early in 2021 um it was $ 1.9 trillion do to stimulate the economy out of the pandemic we all live through that if you're in the audience here economies around the world took different approaches and the US economy recovered relatively strongly from the pandemic and a lot of folks basically credit some of the action from the aican rescue plan there's a lot of things in there uh I won't delve into it today but it's a key part of why we're in the situation we're in right now the bioparts infrastructure law it was passed later in 2021 this was the bipartisan support President Biden's first year in office and that was $550 billion to support infrastructure projects there's already been 32,000 projects in every one of our states and territories and lots of private sector investment I won't mention much more about infrastructure other than to say in the white house we organized our work according to implementation teams I led the chips and science implementation team in the White House that coordinated all the agency's tasks with implementing the chips and science act my colleague Mitch Landrew organized the bipartisan infrastructure law implementation group and he coordinated with all the different agencies Department of Transportation and energy among them that would coordinate the implementation of the infrastructure law John podesta was the implementation coordinator for the inflation reduction act that's a $500 billion investment in clean energy also reducing health care costs and increasing our tax revenue through a variety of different improvements through the IRS and a key part of that program we'll talk about today is the efforts through decarbonization which I think work quite a bit in tandem with the chips and science act just one aside why do we have implementation coordinators why does that make sense anytime you pass a law it's going to be the major agencies in government the Department of Commerce the Department of Defense that actually Implement and make the law reality what President Biden had learned during his time as vice president when he was the point person on the American Recovery and rescue Act is having one person accountable in the white house for a particular program could be very useful and so it was my job every day to wake up when I was the White House coordinator and work with the Departments that were tasked to deliver the chips and science act the cabinet secretaries and their staffs are incredibly important they're in many ways the ones who do the work but it was my job to her the cats and make sure they were doing it in a way that was consistent that was consistent with President Biden's values and that's where the chips and science act fits in I'll say one thing also about this that we can get to at the end when we talk about industrial policy putting these things together does represent a big shift in the way American economic policym is being done we knew that at the time we were making these decisions my boss when I started at the White House was Brian De uh I know he's in the Boston area maybe he's even in the audience but Brian was a real architect along with Jake Sullivan and others in terms of putting these ideas together as a new way to approach Economic Policy later when he was Su succeeded by Leo Brainard who I know who spent some time at Harvard Le also took each of these pieces and put it together to create an argument about what e policy could look like and this of course is very controversial immediately when I came back to Academia a lot of my friends who supported me during this time and said great job going to work in the Biden Administration they would sort of whisper and say this industrial policy stuff's not going to work is it and it's a really interesting discussion to have because this is a change in Paradigm from what we've been doing and if you continue to see the implementation of these acts and further legislation it will represent a pivot point in how we think about Economic Policy there's a lot of case studies and a lot of examples of that industrial policy here in the United States and abroad we'll talk about them a little bit more later but I just want to remark for now whether you agree with it or not whether you have strong feelings on this or not this is really a transition point in the way we're thinking about Economic Policy some will depend on future elections but some of it's already s into motion so I wanted to talk about that to start and then we're hoping that we're tracking in terms of uh people able to hear me and slides awesome with chips many people know it under different names um there's still a lot of confusion about what is chips and in it so I'm going to briefly just talk about that piece of it it was called originally yusa yusa is not as catchy of an acronym as chips but it stood for the US Innovation and competition act and that passed the Senate way back in June 2021 and I remember when that happened at that time I was the chief Economist at the Department of Commerce working directly for secretary Gina Rondo and when I first started that job Gina Rondo's big question to me was where's the lumber now that might surprise you right I'm working on chips what is does it have to do with Lumber well the biggest issues in 2021 and to some extent later in the year in 2022 were supply chain issues and as you recall lumber prices were quite high and I looked to my left and I looked to my right and I realized that supply chain understanding and capabilities with the exception of people like Liz Reynolds who you heard from earlier Monica Gorman who succeeded Liz in that role very few people in government really understood Supply chains and so we had to work together to figure out what happened to the wood and it turned out mapping the supply chain of lumber gave us a little bit of insight in terms of why prices were high some of was traditional Supply demand Dynamics right that economists are very familiar with but some of it was the unseasonable storms that had happened in Texas the winter prior it had Frozen the pipes that prochemical plants were using those pipes that produce the petrochemicals are used as input to resin which is a kind of glue at least for a non-scientist technologist like me that's really important in OSB now before I joined government I had no idea what OSB was or why it mattered now I have a PhD in OSB it's oriented strand board which is used as a compliment substitute to plywood when you're doing construction because of the unseasonal weather because of the impact on the petrochemical plants and because of the inavailability of resin we saw lumber prices going way up during that period And I was happy to tell secretary Rondo later on when lumber prices came down that was because of my efforts but I think it probably was a lot more complicated than that I did build a chart to that effect just to show people who were interested in correlation and causation but in the end right seeing these Supply chains Dynamics play out in real time whether it was Lumber steel aluminum and then of course we got to chips during this time yusa morphed into different bills with different names finally in May of 2022 the Senate and the house came together to negotiate the differences between their virgins in a conference committee and in July 2022 it passed both the Senate and the house with bipartisan majorities and I was proud to say that that picture is of the day when President Biden signed the chips and science act into law in August of 2022 on that day he said today is a day for Builders I remember feeling two things one it was really hot so I felt very hot wearing my suit in the Rose Garden but I also felt really optimistic about what was to come and I knew at that point that I was going to come over to the White House and lead the implementation now a couple thoughts just on the chips and science act why this and science piece this is something that I think is really important for people to remember who looking at this from the outside the chips and science act actually authorizes over $200 billion in spending so many of my academic colleagues when the bill passed they said great when is the $200 billion coming to support scientific research R&D and Innovation it turns out the difference between authorization and Appropriations is key A lot of times Congress will authorize spending but only appropriate a fraction of it so we're thinking about the chips and science act and frankly in the media I see this mistake even today they discuss it as a $200 billion package but the actual money going out is 52.7 billion and I apologize for being pedantic on that I know these numbers are going to glaze over but I do think it's important when we think about implementation to think about how much money we actually have and the other important point about that 52.7 billion doar the actual amount of money we have to spend in the US government for chips it's really a fraction of what's needed to achieve the goals of the chips and science act and definitely a broader industrial policy and so when you think about achieving those goals which I'll talk about a little bit later we're going to need lots of private sector investment to complement the chips and science act money at the same time my colleagues in government are fighting to try to get the additional money that's not been appropriated so they can make the investments in research and development science and other priorities that were funded or authorized in the chips and science act so one more number just to throw at you just to keep things straight this 52.7 billion is really mostly in the Commerce department so you think about which money which departments have the money Department of Commerce $50 billion 50b $50 billion 39 billion to make incentives in manufacturing to build Fabs and Supply chains in the United States of America and 11 billion for research and development on semiconductors all of that in the Commerce Department why is that important first I think when you read about the chips act in the Press almost all of it is a about the 39 billion to build Mega Fabs in the United States it's a big part but it's not the only part the second thing is the 11 billion for research and development is going to be used to start something called the national semiconductor technology Center an R&D effort that's supposed to help the United States lead the Next Generation particularly in the development of New Logic chips and memory chips now when it comes to the R&D piece as an economist I've always felt that despite it receiving much less attention from the Press it's as important as the 39 bill billion dollars to the success of the chips program but of course because of the nature of research and development because of how complicated it is because of how it moves it draws less attention from commentators than the 39 billion the last piece I'll just explain is there's a large portion of the incentives from chips that are going to come through tax credits it's estimated to be in the neighborhood of $24 billion but it could be larger or smaller depending on how many companies take it up the treasury Department is working on that guidance about how that tax credit should be used the investment tax credit Treasury Department plays a key role that was part of my implementation job when I worked at the White House the last pieces to highlight are an additional $200 million at the National Science Foundation to fund Workforce Development initiatives and a $500 million effort at the state department to facilitate diplomatic engagements in round ships one thing I'll say up front I'm sure there's a lot of questions about this in the audience if you look at the earlier panels does America's industrial policy mean that we're going to do everything on our own and honestly if you look at the semiconductor supply chain you can understand that that's impossible the supply chain is incredibly globalized and and Edward sent me some very articulate comments from panelists kind of pointing to this the role of Taiwan the role of Japan the role of the Netherlands Europeans so many others in This Global Supply Chain there's really no way that any country could be self-sufficient completely with the entire chip supply chain so what we're trying to do with our state department work is make sure that we're working with our partners and allies to understand where the supply chain bottlenecks are and how to make a more globally resilient system that's the path to success and I will say that everyone I worked with and the government understood that sometimes when people talk about supply chain resilience it can seem very much about a single country that's really not the way that we're intending to implement it uh obviously I'm open to critiques about things we can do better or worse on that regard but I want to let you know that people understand that it's an important part if implementation story okay the last piece I want to highlight and this is important for the history of the chips industry is the $2 billion that will run through our Department of Defense to support something called a micro Electronics comment if you're doing the math at home you have 39 billion for the incentives 11 billion for R&D two billion for the Department of Defense and the balance of the money is going to come for the state department and the National Science Foundation those agencies together with the treasury Department comprise the implementing agencies for the chips and science act now the dod piece is really really important and we may not get time to say more than this so I'll just leave it at this which is to say that if you think about the history of the invention of the semiconductor and later the integrated circuit a lot of it had to do with a demand push from the federal government in the United States it was the Air Force who was actually sort of asking for requirements from these companies to make sure they would develop particular kinds of chips and it was the Air Force and the military right as we started to send aand to the moon and integrate some of these chips into some of our post most important weapons that really led the market but what happened when you had a government as a buyer was that the cost of producing these chips started to go down and over time we created a commercial market for chips that ended up being the one we're talking about today and so today there are similarly applications both for defense and commercial that are really important to take into account the Department of Defense program will lead on the defense applications but it's very likely that many of those are going to have spillovers into commercial applications as well I think it's really important to look at that two billion dollars with that regard as well okay let me go on and talk a little bit more about how it's split out we talked about the split you have the numbers I won't mention them again the reason I put these up there is just so people can keep things straight I often have people talking to me about the hundreds of billions of dollars in incentives um and comparing to other countries that's not what we have when it comes to the chips and Science Program now what was the context why did we do this why was there so much support both in Congress and so much excitement in the White House and the Department of Commerce a lot of it had to do with what was happening with those supply chain shocks in 2021 having work for President Obama and then working for President Biden when someone asked me who's the supply chain person in the Department of Commerce or the white house I didn't really know what to answer I didn't know if it was me because at the end of the day that wasn't a language that we were talking when I was doing work in the Obama Administration remember that was the aftermath of the global financial crisis a totally different set of issues and so the first time governments started to Grapple with supply chain issues automobiles are a perfect example not the only one as you know a modern Auto automobile will need thousands of chips and Electric vehicle will need even more some of these chips are fundamental to the way an automobile operates others control things like airbags driver assist systems or things on your dashboard now think about it like this you don't need the most advanced semiconductors to go in every piece of the car a semiconductor executive once teased me and said Ronnie if an airbag saves your life in an accident you don't complain that it was a legacy semiconductor right all those chips inside the automobile can be really important to actually getting that automobile to the customer and what was happening during 2021 was that the lack of chips the chip shortage was leading a lot of these automobiles not to be able to be sold and they were stuck on the lots of the car dealers around the United States and onethird of the increase in prices measured by core CPI in 2021 was driven by Automobiles and a big part of that was chips and so when you think about the Top Line issue that the Biden Administration faced on economic policy inflation being number one one the supply chain issues played at least some role and I think you'll see rightfully so lots of different estimates from economists about how much but in the automobile case in 2021 chips did play a role and it was something important that we paid attention to and so when we thought about the shortages in chips we started to think about oh it connects to all these different Industries anything with an on andof switch your automobile your laundry machine your dryer your refrigerator not to mention the electric grid wireless routers and of course all the Consumer Electronics we take for granted and so it started to become clear to us that chips were a key part of every aspect of the economy they were the DNA of the built environment and these shortages were going to create significant economic damage and in fact they did causing $240 billion of losses in the US economy in 2021 a sizw well chunk coming from automaker Revenue we set out to try to figure out where that shortage of chips was coming from we tried to understand just like I had done for lumber for steel for aluminum how the supply chain works and of course as everyone knows in this audience it's an impossibly complicated and beautiful supply chain but one that makes it very difficult to have Point Solutions particularly ones that would change the supply of semiconductors in a short amount of time and just as an aside I think that the government in general across the world but especially in the US we have sophisticated tools to stimulate demand as we had done with the American Rescue plan what it talk when we talk about expanding Supply or eleviating supply chain bottl lacks we're really with a much more limited skill set and honestly I think more expertise is needed across the world in those key issues and so that's what we started working on in the run up to the chips act this is a highly simplified chart of how interconnected the semiconductor industry is I think given the topic of this panel I don't need to sort of spend too much time on it but I spent a lot of time just digging into 28 neter right and trying to figure out if those are the ones that were having issues or not I spent a lot of time talking to dealers and Distributors trying to understand if the intermediaries were playing a role I spent a lot of time talking to designers and Fabs right trying to understand where these things happen and I spent a lot of time pouring over the financial statements of Chip makers and Chip designers trying to understand how to make a positive difference in the supply of chips in the end the chips Act was already moving through Congress I would say that the shortage the acute shortage during this time was another driver of momentum but really if you look at it there were other issues going on as well so this is just one quick uh example of the 700 steps that it takes to build a chip um and I think it's going to get even longer when we talk about the most advanced nodes I think um one point I'll come back to here on this okay let me I'll come back to this let me say one thing about this us manufacturing of chips has gone down over the last 30 years in 1990 we used to make about a third a little more than a third of the chips in the United States by the time we were working on the chips act um Taiwan in particular was producing 20% of the semiconductors and of course for people in the audience who know this right it's clear probably the LI share if not almost all of the most advanced chips so at the same time we were having these acute shortages that had to do with global factors not particular companies or countries we also knew that we were relyant on specific parts of the world for the Lion Share of the most advanced chips ones that had applications that could affect our domestic economy and consumer products but also our military and National Security and it was the Confluence of these two factors the experience of the pandemic where Supply chains that used to be just in case or just in time we wanted to shift over to just in case and also the National Security lens that I think brought a lot of diverse supporters around to support the chips act and if you think about the goals of the implementation today of chips the main priority is supporting National Security and that's something I want to make sure that we got out today as we thought about this I will say one other implication that we thought a lot about with man manufact in is related to the work of one of your prior speakers I can't see if he is in the audience but if he is Willie shei one of the world's experts on manufacturing and one of the points he's made in his research is that losing your edgy manufacturing could also have an impact on your ability to do Cutting Edge R&D and that's something we spent a lot of time thinking about and reviewing the work of Willie and some of his colleagues uh in the white house now once we pass the chips at it's already being seen in terms of the effect it's having around the country now if you think about this about $161 billion in private sector investment has already happened since the chips Act was passed and much more since the chips Act was announced you know many of the examples I'll highlight a few Intel building their factories in Arizona two chip factories today Micron planning to build uh their investments in Upstate New York tsmc tripling their Arizona Investment to build additional Fabs in Arizona as well in the Phoenix area you're seeing at the same time that these companies are also investing in Workforce Development Partnerships with community colleges these aren't just going to be Investments that are single Fabs and a single Factory first of all these are huge industrial projects in the tens of billions of dollars in many cases but as importantly it's galvanizing a bunch of Community Support around the Fab one is just for pure Workforce needs the community colleges around notice that these are going to be great opportunities for their students but they need to design programs that will actually help their students get jobs in these Fabs and that's something we can talk about more I'm sure Liz talked about on previous panel with other folks but if you think about it this way we already have 45 community colleges that have started or expanded semiconductor programs in response to these kinds of Investments you're also seeing a lot of suppliers locate approximate to these Fabs and other kinds of Economic Development occurring around the semiconductor fabrication facilities now this just isn't just with chips if you look at the map overall you'll see that there are private sector invest not just in chips but in wind in solar in electric vehicles and this is where the industrial strategy starts to become more clear let me give you a tangible example from my own backyard here in North Carolina wolf speed is a company locally in Durham my hometown that makes silicon carbide Wafers and some chips silicon carbide Wafers are important for making the chips that go into electric vehicles because that kind of Compound Semiconductor is amenable to high voltage and so for Eves and the increase in demand for electric vehicles you're going to see a large number of silicon carbide applications be useful so there's also a new electric vehicle Factory being put up our first in North Carolina by a Vietnamese company called vinfast which made a multi-billion dollar investment in North Carolina but of course you can't just have the electric vehicles and the chips that go in them you need the battery so Toyota has opened up a battery investment multi-billion dollar battery investment in between our area here and the Greensboro area which will be part of this as well now of course you can't just have batteries you need lithium and so we're mining lithium near Charlotte North Carolina a company called Alber Marl and processing it in South Carolina put all that together right from the lithium extraction to the processing to the electric vehicle manufacturing to the batteries themselves and the chips that is what industrial strategy could look like at a local level and that's what's generating a lot of excitement in North Carolina where I visited with President Biden uh last year or earlier this year and that is a story that's happening all around the country and so it's the interconnectedness of these Investments that's a really big part of the chip story because chips are going to be key for our energy transition as well now at the end I'll talk a little bit about why some of these Investments aren't necessarily going to work the way people think they are or critiques of those I think they're very fair what I'm trying to say here though is that you're seeing these investments collocated in particular places and so along with industrial strategy you're seeing a renewed interest in place-based Economic Development some of that have been pioneered of course by Scholars at Harvard Michael Porter Ed Glazer others um but as you think about sort of um place-based strategies because industrial strategy is by definition dealing with industries that are Gomer a lot of it ends up being in specific parts of the country Intel making a big investment in central Ohio near Columbus initially they're going to have two factories uh with 3,000 people there's always a lot more in the construction jobs that are shorter term but they'll have lots of jobs for partners and suppliers it's Intel's first expansion to a new state outside places like Oregon in 40 years they've already decided to give $17 million to 80 colleges and universities to develop curriculum to train people for these jobs and obviously that's been a big question described in the Press we've seen it from uh the co the founder of tsmc Morris Chang we found other folks here in the United States worrying about the workforce issue which I'll I'll return to in a second but this is basically what we're seeing by Intel in Ohio the last piece I want to talk about on this is the National Security imperative and this is think is well put from um a commission on AI that was done in Congress if a potential adversary bests the United States in semiconductors over the long term or suddenly cuts off us access to CAD chips entirely it could gain the upper hand in every domain of warfare so for a lot of the folks from the National Security perspective the critical significance of chips in the supply chain not just for consumer electronics for our grid for automobiles but also for all the military applications are really really important and I think the rise of AI and sort of what we're seeing with the amazing applications from chat GPT the use of Nvidia chips to basically train and also use inference from large language models has become really really important to the story and another reason for why you're seeing uh the frontier on chips continue to expand that's a key reason why the coalition to support chips is bipartisan and a reason why this has continued to be in the news of course I think you earlier heard from Chris Miller who is's written the fantastic book Chip War which talked about this um and some of the global competition around it it's a invaluable contribution uh to this discussion as well and something we're thinking about a lot one piece to tell you here on the international cooperation that I want to highlight if you think about the International Peace the Department of State is really the node for collaboration in the United States on these issues just one remark that I've been thinking about a lot recently in some of my scholarly work after World War II the United States built up a system to connect different parts of the world post war to make sure we could build a more robust and interdependent global system that would benefit not just the United States but the rest of the world and the institutions that mediated that the Bret and wood system and what came afterwards really important to what happened in the postwar era what I see here is new institutions that allow us to have discussions with our partners and allies about key technology issues particularly chips so two things I just want to highlight one is the TTC the technology and trade Council that happens between the US and the EU where chips and Supply chains are key issues having a space for that dialogue some people would say okay that's that's symbolic just having something on an agenda but it creates an institution to have those discussions to generate expertise to release statements of what we agree on and what we don't agree on and I found them to be really useful in building dialogue to try to make sure that what the state department is is trying to do here actually happens building a robust Global ecosystem the second thing is new set of countries coming together people in the audience have heard of the Quad Japan Australia the United States and the UK sorry Japan it's India Australia UK and United States if you think of these things together it's an association of countries that wouldn't otherwise be talking in other spaces having Dialogue on these really important issues and that's another place where the chips discussion could come up I want to say two um other things about the global and I know that these bullet points represent large large areas of debate and discussion it may be of primary interest to people in the room Visa some of the domestic opportunities on the chips act one is the guard rails so I'll be very specific here because I worked on this directly which is that when a recipient takes money from the chips program or uses a tax credit by Statute there's going to be certain rules of the road about Investments they can make in countries of concern we published preliminary guidance from the US government on what those guard rails can be and we're in the process now of finalizing that guidance what's interesting here is that you know we we from a national security perspective would not be want to be giving money to companies that were then investing in things that could hurt us National Security and so people think about some of the other institutions we built around other program requirements the guard rails for the chips recipients both the tax credit and the grants is really important to look at and so far I think it's been a really important way of thinking how the chips money would see effective governance when people question you about indust strategy the natural question they say is two one how is the money going to be used and won't you just waste it and two how are you going to make sure that the money actually gets used for what you think it's going to be used for now on the second point it's difficult right money is spongeable it's difficult to figure out exactly how it's going to be used but by putting governance mechanisms in place to call back the money if it's being used to invest in particular Technologies and countries of concern is one important governance mechanism we've used there'll also be the money itself will be tranched out so that that we can understand how the recipients are spending the money and whether they're actually building Fabs and increasing capacity in the United States or they're using it for other purposes and so these are some things that I think could improve the governance of the chips program this is something from a from a scholarly perspective that we should be watching over the next five to 10 years to make sure that that's actually working in the way it was intended because that's going to be one of the most difficult Parts the other piece of it it comes back to October 7th 2022 I think I I have my dates right it's around the export controls on both semiconductor manufacturing tools and chips that's the part when you're reading about chips in most Global newspapers they're talking about this as well as the chips itself just to be clear right the export controls is a separate piece of work that's not in the chips and science act and so it's you know in terms of the way we worked on it I would work with my colleagues from the National Security Council and the Commerce department but this wasn't where I was spending my dayto day I will say right based on how we thought about it when I was there this idea of having a small yard and a high fence is really important thinking about the scope of technologies that are uh limited by the export controls being ones that really have direct National Security implications and not making sure that it was too broad to discourage Innovation and Entrepreneurship that is a difficult line to cross I know people have diverse opinions about how well they're working you know Huawei recently recently released a new phone with a chip that to many folks at least in the demo um seemed relatively advanced I think if I you know experts in the audience can tell me if I'm wrong but if I think about seven neter node this is something like 5-year-old technology so it turns out that they've developed some advanced technology in the Huawei phone I think to look at this going forward we'll have to understand both what are the yields on this process that smick and other uh countries are doing are the yields high in world class or are they not um and what the impact of these developments really is I don't think or I think it's too early to say whether it's a ver on how well export controls work or not um I think given that these were announced U about a year ago and given that many of the pieces of this are still being finalized it'll probably take a lot longer to understand the impact of controls on the rate and direction of innovation so that's kind of how I'm seeing that piece of it as well Edward I think I have two more slides I'm okay on time just to make sure we're good okay good so when you think about the implementation Milestones that I want to highlight here for you to understand where things are February 28th of this year was when the first announcement came out to fund commercial Leading Edge current and mature node fats so the question I got really from the day the bill passed was really when's the money coming out and of course one of the other critiques of industrial strategy is government's too slow government doesn't have the right people government can't make good decisions they'll be politically connected decisions so we focused really hard on doing two things one is making sure that within six months of the bill being passed we could send out the funding notice so applicants for this part of the program which is leads to the Leading Edge Fabs which is really important to the mission of the program we made sure that that was out and it was validated and many of you read about it in the major papers where it was covered um and honestly six-month turn around on a funny announcement like that to lay the stakes of the program was something that was a stretch goal and something that we really um I think we're proud of as a milestone now of course then companies and other applicants had to look at the applications understand what the requirements were and develop their applications and so over time companies have delivered statements of Interest s sois to say hey we're interested in this program we're going to we intend to do a pre-application or application they do pre-applications in some cases under a voluntary mechanism they can get feedback and then full applications that's the process that we're in now there was another announcement June 23d on supply chain projects you know all of us recognize it's not enough to build favs we're also going to need funding for really key semiconductor materials and equipment that $300 million plus type of project there was a funny announcement in June 23rd of this year explaining how to apply for that coming next there'll be smaller equipments and suppliers uh applications so look not every project is going to be above 300 million and so it's really important to do a separate call for the smaller supply chain projects to get make sure particularly that smmes small medium Enterprises are included that also be another call for R&D Fabs fabrication facilities that also have a research development component which is really important and actually goes back to probably willly she's work about connecting manufacturing and research and development the Department of Defense and their program uh you'll hear more about that very soon as well and the treasury Department is finalizing the investment tax credit as well and you're seeing the state department and NSF programs continue so that's sort of the state of implementation and you're going to see a lot of major announcements before the end of the year on a lot of these key initiatives and so that's what we're looking at in perspective I think that we've taken the time we've needed to make make sure that the program is going to work as we intended it I think if the awards had come out too early without enough due diligence you'd risk the um the chances that you'd make bad bets you're always going to make bets that you're not proud of or can't um don't turn out but it would increase the chance and I think doing it this time right just a year after the bill has been passed is an appropriate window at least that's how I've been thinking about it I will say one other thing uh when the bill was passed and when the first notice of funny went out we received a lot of criticism too people said oh what's all this stuff about child care you know no company's going to apply for these funds if there's Child Care uh requirements involved well first of all the the notice of funding says that they have to present a plan to provide affordable child care and what I've seen in the year in the year that's happened since is 400 statements of interest from firms all around the world in the chips program so I think a lot of folks by looking at some of the early documentation felt that the program was going to be overspecified and not and deter a lot of interest that's not what's happened doesn't mean that it's not going to be successful or it's going to be successful but it does mean that so far what we've done has engendered a lot of interest in participating in the program one other question I want to deal with which is really important and a fair one I think it'll come up in a later panel industrial strategy to use a um American football metaphor often has a moving goal post if you don't set goals if you don't say this is what success looks like it's very open both to opportunism people saying well just because I didn't succeed with the first billion give me two billion I'll succeed even more or right folks using an expansive bandaid to do things that were never intended we released a paper in February of 2023 exactly in accordance with when this funding announcement was reached out and we did that precisely because the decision was made that we want to specifically articulate our goals one to push back against folks who said that there was no goal or objective and two to make it clear to folks exactly what we were looking to fund and what we weren't that's a really important key to Industrial strategy so when people say what makes you optimistic about the chips act given previous efforts in other countries and the United States haven't always achieved their objectives my first question is did they ever write down their objectives do you know what their objectives were and the second is right by clearly specifying the objectives I think we have a better chance of hitting them so just a few things to note from that report you can read it it's publicly available the goal by 2030 is to see two new large scale clusters of Leading Edge logic favs that would include packaging we should be able in the United States to have uh production of high volume of memory chips on terms that are economically competitive the memory um sort of goal as you can see is more determined by the economics because of the nature of that business than the number we want to have multiple high volume Advanced packaging I mean just looking at the audience and seeing the BIOS there's so much expertise on the chip business you know how important Advanced packaging is going to be to Future innovation in this industry we want to make sure that we're increasing production capacity in particular current gen and mature chips I mentioned some of my uh you know deep Dives on 28 anomers and others there's going to be really key nodes process nodes that are really important for key applications and things like automobiles that are important to keep in touch with on R&D Investments you can't specify what this is going to be but we want to make sure that the nstc and the other investments from R&D are going to lead to investments in the next generation of processed technology for the next generation of logic chips the idea being that we're going to come up with The Cutting Edge from these R&D efforts as well as in memory so hoping that in the US through these Investments and through our Global Partnerships we'll be able to lead the world in the next generation of logic and memory is an important part of the program and finally making sure that some of the supply chain shocks we saw during the pandemic um that were more resilient to these kind of chip shocks uh overall because this is a very cyclical industry and some of the issues that appear in 2021 could appear again looking ahead a couple things to look at and this will be my last slide and I look forward to your questions and comments one is the timing right when will those first large Awards be announced and what's going to be the response from media from business and from governments around the world this is going to be really important uh in this next period you know it tends to be despite all the institutional detail I've showed you despite the program discussions people are G to pay attention to the first big bets that this program makes and more so than the R&D they're going to pay attention I think to the big awards for Mega Fabs in the United States which for receive them how it connects to the projects and the response from the media in terms of how they cover them from other businesses in this industry and others as well as our own government at state and local levels and foreign governments is going to be really important to understanding the coverage I say this as someone who lived through a lot of these big announcements of the chips act and realizing that when these things are talked about on the front page of the paper opinion is often formed by that and how that's covered and when the timing is be really important something to watch the second is there's been tremendous private sector investment there's also been Rec increases in the construction of new facilities for manufacturing we're seeing a building boom will that pace continue how quickly will the projects be completed a lot of folks will say look Ronnie this is impressive what's happening so far but there are environmental pering rules and Workforce issues and other things that going to slow down the development of these projects and you know we've been thinking about all this stuff since the beginning we're trying to solve for any of these things but in the end of the day that'll be a really important empirical question about how quickly these projects get completed and whether we maintain M our diligence attaining these timelines are you going to see the appropriate investments in Workforce this is something I think a lot about and uh as those who know and are following tsmc and familiar with the company um they've been talking a lot about you can hear it a lot of coverage particularly in Arizona the idea that we're going to to need to fill tens of thousands of jobs in this new industry an industry that many Americans are not familiar with and aren't trained for is going to take a massive effort and so to me it's going to be more than just corporations um sort of announcing a new a new Corporate social responsibility program or a single partnership with the Community College what I would encourage you to do is what how I've been thinking about it is that every time you see an announcement ask yourself how many seats are in that class how many semiconductor technicians will be trained one really interesting thing for me is the potential for these industries to create jobs for people who do not have a college degree and they are going to be able to earn a high wage in some of these industries that's really exciting that's one of the reasons I think that President Biden is so excited about the chips act but to do that we have to get people from where are to where they need to be to work in these chip factories and it's going to take a massive investment at the state and local level as well so that's one thing to watch the suppliers need to show up uh a key ingredient to tsmc Intel Samsung Micron Global foundaries Texas Instruments all these major companies is going to be their supply base and if those suppliers particularly for our foreign owned companies that are coming to invest in the US if they don't come along with them it'll be very difficult the chips program alone can't do all that work and so we're going to have to work across a lot of different public and private partners ERS to make sure that we see some of these suppliers come as well the regional cluster issue is really important too I talked to a lot of Mayors uh and County Commissioners and I I get excited about chips and they say slow down we we need housing we need transportation and we need education where's that going to come from how is it all going to sync up and in what time period something really important if you're thinking about development of places the last two things one is how will supply chains really shift over the next five to 10 years you know think there's a lot of talk about supply chain resilience and plus one strategies it'll be really interesting to watch corporate strategy and the big companies that operate all over the world and see what extent they're actually changing where their supply chains are located and where they run through the president obviously just got back from a trip for Vietnam Vietnam India and other places are important right now in terms of these alternative supply chain destinations something to watch going forward that will have big implications for American resilience our productivity our wages and Innovation and the last piece which is over hangs all this is how does the success of the chips program or not affect the debate over industrial strategy my sense is that if we are not successful with chips and the inflation reduction act which I can talk about in the Q&A um it'll obviously set the cause back for industrial strategy considerably we're making a big bet on a different way to do policy and uh if you have high-profile failures and people lose faith in the ability to do it uh it's going to be very difficult to get people to appreciate that you can actually do big things this way I think if we're successful on the chips act and aspect of the inflation reduction act it'll be a real step forward for people who think about industrial strategy as a way to create positive economic outcomes uh I think it's gonna be an open question depending on how well it's implemented I was proud to do that work uh in the white house but now back at Duke I'm interested in studying some of the impacts of these things and working together with people in the audience Edward and others to try to figure out uh best practices so we can have a higher chance of success with that I will stop and take your questions I really appreciate everyone's attention and uh apologies again for being on Zoom I wish I could be there with you you but hopefully the message came through that and clear so so thanks a lot Ronnie you set a great table a lot of lot of complexity which is which is I think captures reality well um one thing for you to think about uh as I then turn to the audience is Willie you mentioned him several times we we had multiple great speakers one of the things I lik that Willie said was you know this is it's big push and it's big push Supply um there's not enough to discuss about Demand right you yourself mentioned the importance of key customers Air Force for example on the US side so how important those key customers where he mentioned apple as a major customer for tsmc you know a quarter of their revenue and those types of things so just the back of your mind just think about maybe commenting as we go through around the demand side in s demand side why maybe that was lighter in terms of the approach um but obviously the reason we love to do these conferences is because our audience is just as well informed as our speakers so let me turn over to to the audience and start um let me take the first three questions and maybe collect them Ronnie and then turn to you so we got Margaret in the back and again just quickly you know who you are hi thank you so much um my name is Margaret I'm from Harvard Law School um as uh you touched on how quickly will the projects be completed and I want to touch on Japan and um the tone in Taiwan domestically about uh the Japanese expansions are notably quite different from uh the US Investments if anything uh the expansion and investment in uh Japan seems to be quite positive uh and maybe even ahead of schedule um so I wanted to ask um why does Japan seem a little bit more uh on uh maybe ahead of schedule uh or a little bit more successful in terms of timing and what will the US need to do um in order to catch up or are there things that are already in place uh to be able to address this competition thank you Ronnie do you want me to collect a couple sure if the questioners don't mind I can yeah you could take three and then I'll uh I'll I can answer perfect good thank you okay great so yep so then in the back and then when she in the front hi uh my name is nthony and I'm a public policy student here focused on education policy um given historically that the community college system um has responded to Workforce needs to mixed outcomes I wondered if there was anything in particular that was done with the chips act to make sure that the programs and types of graduates coming out of these colleges would indeed be hired by some of the same companies that are bidding for contracts um my name is weni U I'm a fellow with Ash Center um both you and and Liz previously has said that security is sort of you know in the heart of the consideration when pushing out those policies um so my question is you've laid out an amazing by the way congratulations and Kudos on you know accomplishing such like G gigantic and enormous um work um but in terms of the political side of things um is sort of organizing all these efforts around security or national security um more of a political um act or is it truly that the perceived security threat is so great that uh we have to organize our efforts in that way and how how did you or how did the administration uh convince the Congress to actually come along with you that's fantastic Edward should I should I take those three to start yeah if you could that'd be great exactly well first of all I I well I can't see all the audience members I can hear them and uh those are fantastic questions I'm going to do my best to answer them and uh Edward they lived up to the billing there people who know a lot about this so first I've been following that Japanese um Fab as well the tsmc is building and reading some of the same things you are I'm not able to read it in in the native languages but trying to read the translations and get a sense of of what's happening and as you are saying it seems like that it's ahead of schedule working well um what I've learned in all these projects though is until it's producing and producing at scale um I won't draw any firm conclusions on it because I think there's a lot to go from here similarly the tsmc project in Arizona has received a lot of attention you know tsmc is a world leading company that is leading the chip industry in many areas for a reason and when you think about the history of Morris Chang um his work here in the United States at Texas Instruments and returning back to Taiwan receiving a lot of support uh in Taiwan to build this world leading company um I have confidence that um they can do a good job in different places they operate it will be new for them and I think you're seeing that and I hope that I think in terms of like trying to improve the Chan of success there you're seeing a lot of concern right now about how we issue or deal with the Workforce Development issue and what kinds of training we need and how we think about who can do the jobs and I think that that's going to be a key thing for the company and the local uh labor organizations and the mayor's office and others to be working through and I honestly think it's something that while it's very difficult it's something that's going to serve the company and the community well over the long term to work this out because if you think about the Intel and tsmc investments in that area it could be transformative it already is becoming transformative and you think about plugging in Arizona State University Maricopa Community College other really key institutions so I think there's a strong incentive to get it right I think these Workforce issues are going to be the key thing in many cases and also um connected to permitting some of the availability of water um that are going to have to be worked out in terms of how these proceed but you know I also struck by the idea that in the United States that we built a tremendous manufacturing industry in a previous era we lead the world in some key aspects of advanced manufacturing we've also had some of the major technology Industries take root here and so I'm pretty confident that we can get this done it's not going to be easy but I think that um you know there's a lot more work we can do so I I remain optimistic though I think the issues being raised are really important and uh something we need to we need to Grapple with in Arizona I think when it comes to community colleges excellent point I mean you're right mixed record I think is a good um a good way to describe it our community colleges are fantastic in terms of their flexibility uh in terms of being an entry point for people to have an affordable uh continuation of their education it's challenging when they're uh being asked to do something that's really transformative at this kind of scale the one thing I think it's important that we worked really hard on is we're working hard on funding the professors and the instructors to reinvigorate and redesign curriculum around semiconductor technicians for example example or other parts of the supply chain so you know there's a lot of alignment often between community colleges local industry but there's often not and speaking as Professor curriculum development syllabus development is one of the most important things we do there's a real focus on trying to get Community College instructors the funds they need to develop the curriculum and the expertise themselves to teach those courses it's going to be a big effort that's only one piece of the puzzle but that's a unique thing that we've been doing in the context of the NSF programs um on the political side I actually think that U my understanding of the interactions I've had is that the National Security uh implications of chips are well felt across the political spectrum of course you know the things I've talked about in terms of Economic Development are also things that people care deeply about but I think the national security stuff is is real and when people think about the applications of chips both Legacy or mature nodes in things like missile systems satellites but also Advanced chips in AI uh there's a recognition across the aisles that this is going to be really important for National Security not just in the US but across the world so I think it is a real thing I think what you're question might be alluding to though is like you know there's a there's a spillovers from making things about National Security and we certainly don't want to do that if they aren't National Security issues so in this case I think they are I think one thing I thought a lot about as a member of an Asian-American Community the son of immigrants is making sure that when we're talking about National Security we're not demonizing groups of people we're not making this about one group of people versus another and we've seen in the United States in recent history um how rhetoric can be used and weaponized against people from various backgrounds that are connected to perceived National threats and so we got to be really careful to be able to do both of those things identify what's in the best interest of the United States but not demonize large groups of people and as an Asian-American in this case I think a lot about it and talked to a lot of folks about it um I'll I'll leave it there Edward and and take some more questions and I'll get around to the demand side point that Willie made to in a sec y sounds good great thanks Ronnie so I see changai here no um this is Chang tare from the from the University of Chicago so the question is so there there's a there's a saying that that I've heard I've heard that that the best people who do industrial policy are the people that hate industrial policy the most uh because they understand how difficult it in so the question is suppose that you are successful by the metrics that you have laid out okay how do you know that that is the right thing to be doing and and I'll give you one example the closest predecessor of the CH chip sack was what happened in the 1980s when the US and Japan were battling over memory chips over because everybody thought that memory chips was the key thing of the future and there are lots of similarities they put a lot of money into a research Consortium this thing called seatech which lived for about 10 years and then it eventually died uh because it didn't really do that much and if you look at what happened to the industry uh memory chips essentially became a commodity business that it basically left the US it left Japan it left there's only one US company and the industry moved into something else uh moved so the question is for those of us who are don't really have real skin in the game which is that it's not our money it's somebody else's money who don't really know the details of the tech technology how do we know that we're doing the right thing uh that is you could be very successful by your uh by all the metrics that you laid out but in 10 years from now something brand new could completely could come up and then this is just an obsolete industry at Le at least I don't know that's right thanks thanks chai so uh so Ronnie why don't we will leave that as the final I don't see other hands for now if you could just um answer that and then tie in maybe the demand side that Willie raised um then we can we can close perfect well CH first thank you for the question and uh let me yeah let and let's let's also talk about offline because I you're asking the essential question so let me tell you how I how I think about this right so first I do think setting out the clear goals is important right in previous efforts the goals weren't as clear I've studied a lot of that era I've looked at semitech and my adviser in grad school actually wrote some of the biggest papers on semitech and I don't know if I characterize it as a complete failure I think there were some successes in key areas like equipment but in general I think you're right it eventually um sort of fizzled out and I think that you're also right that you know if we pick um the wrong technologies that we lock into to the long wrong technologies that can have negative outcomes here's how I'm thinking about it today one is I think you got to come back and assess the work you're doing so one of the reasons that the money in the chip program is going to be handed out in tranches is to make sure we're understanding how it's being spent and these Fabs that are being built right if they're building technologies that go offsite League they shouldn't be continu that would be my first answer right so we have to make sure that we're not just making these Investments and then being asleep of the switch for years and years and years that's I think one thing and I think you know you'll see both sides of government in any situation Republican Democrat who are eager to provide that oversight and I think that that is important I think the other thing I'll say is that when it comes to chips right if it'd be different if we succeeded and then someone said we should go on to all these other different areas that are really important I think chips is singular in many ways because it's an input to almost every other product and in particular because the National Security applications are really important the National Security piece is I think and this is where you and I can talk offline I know you won't have a respon a chance to respond and so it's unfair but I would like to think more about like how econ models can accommodate these National Security externalities because it could be that it makes perfect sense from an efficiency standpoint to have all the production of a really key input in the economy in one part of the world but what happens if if that Geographic concentration creates big National Security risk for Nations and so I think when I see the chips ad I don't see it as kind of a scattershot industrial policy let's build this let's do this let's bring back every single kind of manufacturing across every Dimension which I think is one of the key risks you're worried about I instead think about it as a very specific investment in an area that we know is important today that looking at the directory of Technology should be important integrated circuits more broadly have been important since the 1960s 1958 and so I feel like it's it's a it's a bet a bet with some information but nobody can know if they're going to be right nobody in government or business is going to have that kind of information um but that's at least the way I've been thinking about it so far I also think that research and development investment will be in basic research that will allow us to take advantage of lots of different technological trajectories if you think about packaging as one example there's a lot of development in pack packaging to allow you to stack 3D right or heterogeneous packaging these are things that if we build a foundation desend depending on where it goes we'll be able to take advantage of that as we apply that research and commercialize it into entrepreneurial firms or existing innovators so I think you have to lay a groundwork to take advantage of where technology goes you have to make some bets based on what we know today and what we've been looking at for a long time and I think relying only solely let's say on kind of an efficiency based model of where the location of production is might not be the whole story when we think about something like chips that are so important in all these applications so that that's kind of where it's out but I please I'll send you an email because i' like to talk more with you about it and it's a really important Point you're raising one that I honestly think about every day as someone who's back in Academia on Willy's point just to finish up Edward um Will's making a good point that you can juice the supply you can get more production of chips who's going to buy all these chips and it goes back to CH Tai's point which is that you're going to see ups and downs in this industry and the memory chips he even just mentioned you saw right mikon and Samsung talked about a lot in 2022 memory demand creat as the demand for smartphones PCS and other things went down we're going to see lots of Cycles in this industry as well the type of demand push that Will's talking about I I didn't hear the comments but I'm thinking two things in response one is it is important that the big uh consumers of Fabs so you you can think about Apple you can think about uh TSN sorry Apple broadcom Nvidia AMD companies like this they're going to be really really important in determining the success of Fabs in the United States of America and so making sure that those companies are valuing having the supply here on Shore that they're incorporating that into their risk tolerance is really really key and those are some of the biggest right Apple Nvidia Qualcomm I'm sorry Apple Nvidia Qualcomm AMD would be the ones broad count also important those are all firms that are going to be key in terms of as as those who are consumers of Fabs more broadly I think the electric vehicle Revolution and other um drivers but that's a big one will drive the increased demand for a lot of chips as well as what we're seeing with the rise of AI so I think those are some of the things on the demand side that I'm watching but this industry is cyclical and we will ups and downs and that's why I think these Investments are going to have to be born out over the longer term and I do hope in 10 years from now we'll have some things that went well some things that we say look we're not going to do that again because they didn't have the impact that they intended so I'll stop there and I thank Edward and the keni school and the audience for for their attention thanks Ronnie appreciate it make sure to use your use your connections more investment Eastern seab board so we can get you in person next time so so I assume you'll get that done thanks Ronnie thanks a lot why don't yeah thanks a lot so why don't we just take a quick five minute break to catch up on time five minutes and then reconvene all right why don't we get going does sense hey Eric nice to see you absolutely all right if you could just take a seat we'll uh we're gonna get going on the next panel even then not even then because I guess the way the economists are trained to think about trade policy is that it's all about lower prices and it's all about the consum yeah very good so we're we're moving topics we're moving topics we're going to move from the the optimism of a former White House official to the realism of uh of a of a the DNA of academic skepticism uh and I think it it's a natural transition right so we heard from Ronnie about the complexity of what they were trying to do but you know the optimism of big push industrial policy from someone who just stepped down from the White House and I think that makes a lot of sense and it was useful now we're going to hear from a a wonderful panel about what are the costs what are the costs of what is happening costs in terms of trade cost in terms of political alliances right what are those costs and what are the concerns built in to uh from our allies from other parties in terms of what um the US and and Taiwan and and many partners are trying to do here so um I what I would like to just do here is introduce uh our fellow Wu um who will then introduce the panel and then act as chair W She is again like many of our speakers um both here and this morning she's this wonderful combination of what we all strive to be I think at least at the Kenny school which is multiple sector right so she began her life in government in a way right through working for US Congress also the uh State Department she also then joined Goldman Sachs and was in uh the China office for many years um she's interesting also because she's uh then moved on to the private sector again but in a different way working with technology companies in terms of crossb transactions uh and their strategy but also in media uh as a as a uh correspondent and chair um of a wonderful uh program actually in Taiwan through through tvbs so she wears many hats and has seen things from different angles and that's why I think she's very well positioned to uh chair this uh panel and introduce our um our speakers so with that I will turn over to you wiie thank you again for coming up we appreciate itk thank you thank you Edward for your kind words uh well kudos to you and Tony for pulling this off I still remember when you guys visited Taiwan and started this conversation many months ago and so congratulations uh not an easy task but critically critically important so um I think after this morning's and lunch discussion we're going to ask a few important questions that hopefully will help us frame um and think through Washington DC's industrial policies and business responses uh when business interest and National Security interest interest aren't entirely aligned perhaps uh how should government policies ensure the least harm done to businesses and how do businesses prepare and adapt to the changing policy environment uh we have all witnessed the Trump administration's use of a trade War to reverse the decade long uh practice of trade liberalization and the US China relationship uh the Biden Administration pretty much has extended trade tariffs and even further refined its economic security policy to include targeted export controls and an attempt to bring manufacturing from foreign countries including China uh back to the United States and so several major pieces of legislation that you know this morning um as panel has touched on the infrastructure investment and jobs act chips act and inflation reduction act all shared the common trade uh big government spending so the so-called biomics um outlined by the National Security adviser Jake Sullivan just a couple months ago at the Brooking speech uh in my view is an attempt to rectify two uh oversights maybe um over the last few decades right he said first uh an oversimplified market efficiency policy in the name of trade liberalization that has not kept up its promise to help America export goods not jobs or capacity and second a growth policy that favor the financial industry while other essential sectors such as semiconductors and infrastructure uh took a real hit and solivan believes that in addition to the domestic industrial base being hollowed out China's heavy government subsidies in sectors from steel to clean energy and US economic dependencies in the EU and China as a result of liberalization exposed America's vulnerabilities so today's P all giant thinkers I like to implore um our panelists to discuss not the Biden administration's diagnosis which we've heard a lot from uh Ronnie and Liz but it's policy Solutions let's discuss how effective can those policy Solutions be uh first off we have Professor Joe n uh who needs no more introduction uh he has inspired a whole new generation of people who think about power in a different way and I am a loyal fan um and so you know he will talk a little bit about well actually set the framework about the fundamentals of the US China relationship uh which in my view is what drives so much of today's policy conversations so Professor NY thank you very much um our topic is basically geopolitics and chips and since I know almost nothing about chips I'll talk about geopolitics uh but what I want to focus on is is the nature of the US China relationship and how that affects everything including chips the um there's a recent article that was published in foreign affairs says that the US and China are locked in uh what the author calls an enduring rivalry um and that is supposed to tell us that they'll be conflict and hostility forever uh that's much too simple just take the last um uh 50 years of the US China relationship since 1949 and it it goes something in Cycles okay it it goes somewhat in Cycles the the U first um cycle almost 20 years uh we were killing each other in Viet in Korea shooting each other the second cycle after Nixon's visit to to ma in 72 we were cooperating against what we thought were the problems of the Soviet Union to the point that we were allowed China allowed us to set up uh listening posts in western China in the third cycle which goes roughly from 1990 to 2016 uh we had economic engagement where the US supported Chinese participation in the WTO and since about 2016 notice I say this because it starts before Trump we've had what's called great power competition and uh that has led some people to say well why don't we just call it a cold war we're in a cold war with China and we should behave the way we did in the first Cold War which we won the trouble with that is if cold war is defined as intense hostility or intense conflict without a military conflict yes you might say it's a cold war but if Cold War implies something like the historical cold war with the Soviet Union it's a very misleading historical metaphor which could lead us to the wrong sorts of strategies for example in the US Soviet relationship there was almost no interdependence other than military interdependence uh in the US China relationship there's enormous economic interdependence a half trillion dollars worth of trade and there's also ecological interdependence us and China are the two biggest producers of greenhouse gases which affects everybody so in that sense the metaphor of the Cold War as though what we're doing is going to be like what we saw in the 50s 60s so forth I think misleads us on a strategy basically uh what we're going to need to do is to realize that the idea of decoupling from China Which is popular with some uh people in Washington now uh there's almost a bipartisan consensus on China part of it uh rather misled the idea of decoupling is is much too costly if you mean I think they've corrected it to say Dr risky no no I'm I'm coming to that okay all right they but there are some who still talk about overall decoupling and that obviously is much too costly so when you think about selective decoupling or drisking what you do is you get into this linkage to security and there the question is how do you in Sullivan's words build a high fence around a small field uh there are going to be internal pressures to make the field larger and larger or the fence higher but it's the making the field larger that bothers me protection significant role and once you say you're going to have a high protective fence uh well maybe chips at uh 7 Netter or less are within the fence but when is the fence going to be extended to 20 Netter and when is it going to be extended to solar panels those are a set of problems that we face which would greatly increase the costs the other thing I think to to notice is that um if you have a strategy to deal with technology uh you should start with the idea that technology always spreads uh there's no way in which you can completely sit on or control technology uh in the early days of the American Republic the British thought they could prevent the US from developing manufacturers by having strict controls on what was sent to the colonies uh it didn't work and the way to think about the role of Technology controls is in the image of Surfing it's a matter of time you have to be on the wave so that you're ahead of the curl if you're able to do that you're not going to fall over and drown but if you think that you're going to stop the wave you're you're going to fall over maybe drown so I think the the dangers I see when our our topic is cost is that we're not going to be able to implement this the way we really need to um and that goes very much to domestic politics I think in in terms of U uh of where we are in today uh I personally agree with the emphasis that's been put on uh stopping Huawei from building 5G in the US I think that was a major security threat to the US uh I also put would agree with efforts to prevent uh smick or wway having the access to the latest chips um but I think the danger is that we think that that's going to be something that we can hold as an advantage for 10 years might be the in fact it turns turns out five years the latest um Huawei phone suggests that they've gotten down to 7 nanometers uh much sooner than we expected we heard from the chattery at launch we have to be careful as we apply this high fence a small yard that we keep the yard small and we realize that the fence is going to be jumped every once in a while uh so those are some of the costs um let me bring that to um to Taiwan um it strikes me that the U key questions about Taiwan are going to be um whether we can maintain the uh type of status quo that has worked for uh the past 50 years uh and of course if we can't then what happens to tsmc and where do the chips of come where do the chips fall excuse a a bad pun but the uh uh basically when Nixon and Ma wanted to cooperate with the Soviet against the Soviets in 1972 they realized that they couldn't agree on Taiwan from China's point of view it was a renegade Province and remnant of the Civil War from the US point of view was still in our view the Republic of China which represented all of China and they couldn't get an agreement on that so essentially they found a formula to Kick the Can down the road not to go into the Shanghai communic and so forth the simple verse is there would be no dour Independence for Taiwan and no use of military force by China and within those the boundaries of that box the two sides of the Chinese straight or Taiwan straight would work out their differences now some people say that's not going to work uh they say that uh the growth in Chinese military power means that's not stable uh they also argue that if Trump returns in 24 neither that nor anything else in foreign policy will be stable um I was interested I was on a panel last night by Zoom with Taipei and M Joo gave a very interesting speech and he more I know he represents ging dong and that's not the full spectrum of thought on Taiwan but he gave a very good argument for why we should try to preserve this status quo and I think that uh the question is can we do it um and there are some people say no I think it's essential that we try to maintain Ain it and that's going to depend on two things deterrence and Inter the fact that Taiwan is the location of tsmc and that that is important to China as well as to the rest of the world some people say that's CH taiwan's silicon Shield well silicon Shield alone is not enough but if you can add to that improvements and deterrence of the American Military presence and in equipping Taiwan with smaller missiles ship a sore to ship which can be held in caves and not vulnerable to a Chinese first strike in case of force um then you can make as people say make Taiwan into a porcupine and difficult to attack or to swallow and in that sense I think with um if combine these two deterrence and interdependence the chances are not bad that we can keep kicking the can down the road with this formula of no Independence doury and no use of force now people who disagree with me say but you haven't paid enough attention look at what xiin Ping said he wants the pla to be ready to invade Taiwan to take Taiwan by Force by 2027 this is a narrow window and we're about to see it close and we're about to lose um it's true that Xi Jinping would love to see Taiwan reunited with the mainland during his presidency but there's one thing that Xi Jinping cares about more than he cares about Taiwan and that's his control of Chinese Communist party and Chinese Communist party control of China and if you ask what is the thing that would be most likely to upset the thing he cares about most in this Inner Circle of priorities uh it would be a failed effort to try to capture Taiwan which is why I take us back to this strategy of both interdependence which comes which where the chips come in and uh deterrence which is the traditional military posture and I think um it is doable but it it we also have to realize that humans throughout history have made enormous mistakes in trying to understand things like this and so we have to remember when people say there's analogy with the Cold War we should not make an analogy with uh Europe in the 1940s with Europe in 1914 when the leaders of the major countries thought there would be a short War troops would be home by Christmas and that uh net result was four years of war in which four Empires were dismembered and four leaders lost their Thrones so it's not an easy Balancing Act to do but I think it is one that is doable if we get our positions correct so let me let me stop there on that view of the Geo politics which is uh not optimistic and not pessimistic somewhere poised in between well thank you um I think um as a Taiwanese American who uh still has family back home um I have to say it makes me feel a little bit uncomfortable to hear words coming from Washington DC constantly around Taiwan is about war and conf while it is highly possible um at some point uh but I do think you know the language itself uh we do question if it would lead us to that type of thinking um and I think you know today obviously the conversation is so important because um you know taiwan's and China issue has always been there but the newly added element and the interest around Taiwan is you know at the heart of our conversation today is the chips it makes Taiwan even more important from many people's point of view um more than just democracy and values and its military H strategic position um but we want to move on to uh Professor Mark woo uh who's a trade technology and legal expert uh at Harvard um he's written a lot on trade governance and how China presents certain challenges to the global trade system um and you know he he will focus on the security aspect of trade policies and I'm really glad that this morning when we first met he reminded me that uh the security aspect of tra trade has always been there it's just for the last 25 years we kind of forgot about it um and I recall having a conversation with a very senior tra former senior trade official in Washington DC and she did say uh the trade as we knew it is dead so what did you say what what what would you say how would you respond to that so um thank you very much um thank you uh to Tony Edward and everyone at the ash center um it's a real pleasure to be here especially to follow my former international relations Professor who from whom I learned everything uh starting from my fall freshman year here at Harvard um I will say I absolutely agree I think um the we are in a new trade Paradigm and um this is in some ways uh a return but not an exact return to the old trade Paradigm if we think back to the Bron Woods system BR and woods was not set up for trade liberalization to lower transaction costs to serve consumer welfare interests to fuel efficiency for multinational corporations um it had all of those effects but its main impetus was to develop a set of secure rules not for the entire world but for a set of allies with shared values and I think we are returning to a world in which that is the impetus for trade policy and that is very different than the liberalization efficiency economic welfare without putting or assigning weights to externalities and thinking about um endogenous Dynamic um modeling for economic ICS and so let me lay out first uh in the first part of my discussion today why I think Washington and increasingly not just Washington but also other like-minded allies believe a new trade policy is necessary particularly with regards to chips and then I'll spend the second part of my comments today looking at what some of the costs will be from a traditional economic standpoint but arguing that those costs May well worth be worth bearing depending on what the security payoff is from that so that's the general course of my comments today um I think there are four reasons why there was a need to move off of the old trade Paradigm um we spent a lot of time today at this conference looking at uh the prc's development of its own indigenous IC Industries through a number of different industrial policies and I think the general view is it's been much less success than other elements of industrial policy um but we've spent less time today looking at some of the other emerging technology domains that are increasingly important for Next Generation Warfare and which have uh disruptive implications both as far as security as well as economic welfare are concerned and we can see on those domains uh AI is the one that's come up most frequently but certainly Quantum cryptography even biotech and so forth um we have seen major advances those advances are uh some are more successful than others but they do pose a looming possibility that the status quo military dominance of the United States in Warfare in its current form may be threatened as new disruptive Technologies change the nature of warfare in years to come so that's the first point that I think is at work here the second point is um that when it comes to thinking about tackling this um there is civil military Fusion everywhere but particularly with regards to the PRC and a number of other Neo authoritarian countries that have adopted this type of model um that Fusion is much more opaque and much more widespread than is otherwise the case so if you're looking at using traditional trade instruments simply to block off the military part but keep flow going to the Cil part in an opaque world where that civil military Fusion runs much deeper the success of that strategy is likely to be um less uh on point the third point is of course then there has been traditionally a resort to the rules-based order and particularly to what one might think of as lawfare to resolve these types of issues but there's something unique about semiconductors and I's uh which is the fact that when it comes to this area the agree greed upon International agreement which came about much more during the sort of pox Americana post Cold War era is that um there are zero tariffs on the vast majority of Information Technology Goods including most semiconductor chips so the ability to resort to traditional trade instruments to ratchet up tariffs and so on so forth is limited or constrained to the extent that you're willing to be bound by the rules and this is both regards to the um Information Technology agreement one and two for which all of the major Powers including the PRC are parties too so that takes away that ability and then the fourth part would be well if you don't do that then perhaps you can break the rules but try to see if you can get away with it for a period of time through litigation and we have seen a reminder right that the United States and others um have resorted to WTO cases to deal with right the types of subsidies or other types of industrial policies um that either fall into the gray zone or fall into the explicitly illegal Zone and the first WTO case filed by the United States was on semiconductors against China um I should clarify right first WTO case against China was filed on semic not the first WTO case ever by the United States um and so we have seen resort to that but because of the nature of the way trade rules are set up including the remedies that are available it has not been effective at constraining or pivoting or changing the large scale industrial policy that's at work there so in light of all that right that just suggests if you if you stay with the current rules based Paradigm as set out um in 1994 right that is essentially changing and moving the security status quo and so in light of all that right what does one do how does one think about this and here's where I turned to the part about costs right um so if you look at all this then what one needs to do is um one takes into a probability to think about what is the likelihood of conflict and if that conflict were to emerge what would that do to my Supply chains and in that type of world what one needs to do is to then have certain forms of redundancies and certain forms of additional costs that one would bear so as to increase your resiliency in a time of conflict um this is uh a natural strategy that I believe most countries take with any key uh industrial sector it has however highlighted the importance of semiconductor and we can have a debate as um Professor NY was suggesting about how large that yard is versus how small what node that is what types of tools whether this encompasses Eda software so on but I think the uh I think the key part is right that there was a focused attention about well we need to bring parts of the semiconductor supply chain into that yard and then we need to erect much higher fences than has been the case in the course of doing that that does mean there are redundancy costs that get borne and that get borne also in terms of consumer costs and to the extent that because these are scale industries that you believe that's it's large scale which fuels the large profits which then fuels your ability to invest in R&D it may also have Innovation costs because those profits will go down as costs go up and as your markets go down and so forth so it may also slow The Innovation time cycle I think these are all costs that are to be born right from the title of all this the question is whether or not this is worth it um the that turns on your assessment as to what is the likelihood of conflict and what is the nature of that conflict to be especially it's to be a slow boiling type of conflict and here I think what's been interesting is the administration's approach in the United States has been to focus on building those fence I like to use in analogies is to say really we either have a membrane or you have the type of fence that has holes that allow you to go through it's just you can't scale it all together um but it has been to focus on those parts of Technologies or products which are tied to I'm using the administration's own words here Military Intelligence surveillance or cyber enabled capabilities um that um tie into the Civil military Fusion that I tie into or the military defense sector um which um are aimed at acquiring and diverting Cutting Edge Technologies for purposes of achieving military dominance and so there if that's the case the set of tools that are being used here are all encompassing they don't include just trade uh but even so they've moved Beyond traditional trade instruments of thinking about just export controls licensing and tariffs right which would be the three s of traditional means to a much broader scope beyond all of that in terms of thinking about all this what is interesting is again here the point that's been made several times by other panelists this is not about bring everything on Shore um this is about um drisking in the sense of having multiple redundancies in the event of conflict and having those be in Dependable places that will not be affected by the conflict particularly were that to happen in um East Asia or somewhere within the Taiwan Straits um and so with regards to that what you see are um it if that's if you believe the probability of conflict to be higher than the markets believe them to be which I think is partially the case right now at least the assessment is higher in government corridors than they are in boardrooms um and you believe that markets aren't going to respond uh with only large scale industrial policy incentives on one side but not on the other side that does lead to a market failure that does require some forms of Market interference that comes on both the supply and the demand side um as we've seen in the discuss that Ronnie and others noted on the chips act but it also means in terms of the fence fenes being erected uh in terms of looking at instruments Beyond just simply um export controls licensing and tariffs in order to achieve the type of uh Corrections for the market failures within all that and of course if you believe the probability of conflicts to be low you believe boardrooms have better information than um intelligence agencies and so forth then you believe there's not a market failure and these are just redundant costs right and I think these are the biggest debates that are being borne out here in terms of have we assessed the situation correctly or not and if we um even if you've assess the situation or not correctly there's a question to be made as to whether or not this can be executed correctly and that's I think a theme that will come up later on this afternoon as well so I'll leave it there in terms of just answering the question W that you posed um are we in new trade Paradigm absolutely um this is a security uh Paradigm um and that's what is leading to a change of trade policy that's much more comprehensive and takes trade away from its just traditional business oriented commercial purposes and one towards enhancing security well thank you um I think that I'm sure a lot of people will agree the probability is probably somewhere in between like you said right and it probably changes over time too um depending on the sort of you know various factors um and so the question um I I wanted to pose to uh next uh speaker uh Professor chai is um so then what what are the costs right the cost to Taiwan in particular um this is not just a threat uh or security concern to the United States um but you know throughout I would say the world and Taiwan seems to be in the middle of everything and um you know how how should Taiwan actually drisk or mitigate those risks and you know is it you know relocation or diversification of ship manufacturing the best security guarantee or what are the other risk mitigation measures thanks um I I think that I will have a different perspective so let me just start by saying that just stop by saying that you know we've all seen what's happened to the to the Republican party over the last 10 or 20 years that it's it's clearly now a party that is isolationist that is Nationalist and I think Frankly Speaking you know economically incoherent I think that we we we we have seen that now and what's been really distressing to me is that I see the same thing happening in the I see the same thing happening now in the in the in the uh Democratic Party that is if you were to listen to say what senior Biden Administration officials uh say they sound remarkably like Peter Naro you know without his personal Edge his his personal agend but in terms of fundamental economic philosophy and maybe this is well expressed by by what Mark was saying you know fundamentally the belief is that we need a new trade Paradigm uh so let me what I thought I would do is let me try to illustrate why I think uh uh us trade and industrial policy is just remarkably incoherent even taking sort of the stated goals let's not talk about economic cost let's not talk about economic efficiency and let's talk about security goals okay how does trade meet us security goals so I'll talk about two things how does US trade policy meet its security goals Visa China and how does it meet security goals Visa Taiwan so first about China right one of sort of the platforms of of us trade policy Visa V China I I I I guess the first thing that you you've got to ask is what is the security threat posed by China to the US and I think the fair answer is that it's a combination of a Le inous party structure with lots of dynamic uh firms that have control over keych technology so Huawei is a good is a good example that I mean nobody worries about you know control of key Technologies by North Korean companies or control of key Technologies by companies in Cuba I mean uh uh nobody cares you know you know they they uh they pose a different threat but it's not the same kind of threat that is posed by China so once you recognize that so one what you that that that is the threat it's company like Huawei that posst now let's think about what US trade policy tries to do one of the platforms of us trade policy Visa V China is that China's economy is Distortion and let me and there are many ways in which it's Distortion but let let me just pick on with one thing which is support of state owned person right uh it's it's support of now you want to ask okay for example you know one of the reasons that Trump started the Tariff war was to try to Force China to to reduce the support of a state on now ask the question supposed the Trump tariffs had been successful in pushing the the the the the Chinese to reduce their support of state fls of course they were not right but imagine that they were okay does that make the China threat to the US bigger or smaller so for that you've got to think a little bit about Chinese economic history that is you've got to ask the question question well what's happened in China over the last 40 years and what's happened in China is is is the obvious thing that the state sector has collapsed has coll I mean that's just this basic fact the basic fact or one of the really Central episodes of of Chinese history was what happened between 1998 and roughly 2004 where Premier so this is the program that was put in in place by Premier zong G was called in by the Chinese grasp the large let go of the small and when when they when they when they literally basically forc millions of Chinese sen firms into bankruptcy right and and if you think about what Happ this is sort of the golden period of Chinese growth this is when Huawei began to take off this was Huawei so and it's a really simple story that basically what happened was that you had all the resources that was being sucked up by the state owned system only when you shrink the state owned system then you get the resources start to be released for for the PRI for for uh private sector firms it's only then that these companies start to be able to emerge and when you look a little bit at the so so back on the case of Huawei for you you know for a long time the state champion of the Telecommunications equipment sector was not Huawei it was this uh hwe for a long time was this obscure company in in shenzen the state Champion was this state own firm called Shanghai Bell I mean that was the champion of of the if you look at the early years of Huawei they were severely liquidity constrained they had no access to money and there's a really interesting thing about if you look at the early history of Huawei they came up with this obscure corporate structure because one of the ways in which they were trying to get access to money was to basically force their employees to lower wages and in exchange they would compensate them with non-transparent shares of this holding uh of this uh of this uh of this uh holding company so chai can we come back to the yeah yes yeah I I I I will do that okay so so so let's just think about so just ask the question if they had been successful I think the the the argument is is that it there would have been not one Huawei but many many many companies like that uh now coming to the point about Taiwan uh you think about that's also another pillar of US security what is it that we want or the US wants or you know what is Central to US security I will say that it's basically a free and prosperous Taiwan right I mean I think that we we we we can all uh we can all agree on that so what does US policy do it puts in place a 52 billion doll chips sack which sets off basically this this subsidy Race So once they do this then the Japanese have to do the same thing the Europeans have to do the same thing which if the program is successful put aside all your skepticism about the chip sack and the Japanese chip sack suppose that this thing really really is successful what is it going to do it's going to hollow out taiwan's most important industry it's going to and if it Hollows out taiwan's more most important industry does that make America's security problem better or worse and the second bit about Taiwan and this builds a bit on Joe's point the other pillar is a free Taiwan and I would say that's probably right that a pillar of being uh you know what what keeps it free is deterence and interdependence now think about what happened in the summer of 2020 when the US after trying many times to try to stop tsmc from selling chips to Huawei finally put in place this system of extr territorial rules that basically forced tsmc to stop selling chips To Hai what does it do you know if if if that goes on to its logical conclusion it break it starts to break down the interdependence so if you if you if if you start to break down the dependence all the way then you know that arguably removes one of the pillars of the of the deter strategy so and I would say that the way to summarize the way I think about it is is that it fundamentally I think is these two strands of this new trade policy and then and it's it's not been thought through and and I would say that the that you know one strand is what we have talked about which is the the desire Air Force Security but the other really big piece of it is also this nationalism and this isolationism that is also there that is is also there and and I think that it it it just doesn't serve the purposes of the US it doesn't serve the purpose of us and and and we haven't even started to talk about what the economic costs are uh to to the US but that is I think the real damage if I have 30 more seconds uh let me just say you know I think it really is is an own goal by the US I mean i' I've seen just lots of you know pieces you know I happen once in a while to look at the global times the global times and they they they very frequently come up with pieces say uh say hey Taiwan the US doesn't really care about you it they're fundamentally not your interest and I think that's basically right basically right so far it doesn't have an effect and so and so maybe another way to ask a question is what are taiwan's options and the answer right now is none because the and the reason Taiwan has no option is because the other party the Chinese is even crazier that that is they are even crazier than what what the uh or if you think about say you know the policy of the South Koreans they uh you know they're embracing the us because they have been really scarred by what happened from 2016 to 2018 so right now the US is being saved because the other side I think is just off the scale in terms of craziness but there might be a day 20 years in the over 30 seconds when things change all right I'll end here all right I think there are two points that's really interesting I do want the whole panel to discuss uh about it first is it's debatable whether uh taiwan's semiconductor industry is being hollowed out uh I think there are different perspectives about it and second is yes fundamentally I do think it comes down to us domestic Politics as well I think a lot of observers uh may have not uh paid enough attention to that which is foreign policy tends to be or trade policy or any policy is an extension of domestic policy uh ultimately this is a democracy so elections do matter and so I think um a lot of the you know B Administration policy some people would argue it's an extension of you know Trump Administration policy is just much more refined and strategic and targeted and better implemented um and I think you know I I want to just throw it out there and you know see if others want to respond would you if I may um I feel compelled to respond having worked on shaping this administration's trade policy um to respond to Chong Tai's uh attack right so I I think uh those of you who know my background know obviously right this is not being shaped by some person who has no lack of understanding about Chinese economic history nor any understanding of how the semiconductor supply chain works right having both worked on the west coast in Tech specifically ON Semiconductor and having the bulk of my um research here I think the misreading here is that the objective is to get China to change off of its subsidies policies um if you read both Ambassador leiser's new book and you look at what Ambassador Tai is saying um I think the change that's happened is there's a realization that rather than this interdependence changing China's economic tactics or using WTO cases or using carrots of new trade treaties such as the cptpp to change China's tactics here the fact of the matter is China's economic policy is driven by China's own domestic interests that has always been the case and those domestic interests given that currently aligned means and especially given China's desire for technology autarchy that there is not going to be a shift of that types of subsidies and policies so if that's not the case how do other countries need to restructure their supply chains and what types of trade tools are required to do that and if you look at from that success metric I think these policies have been at least early on shaping responses whether that's successful or not it's too early to say second point right I think when you you made it for me I think it under counts and in some ways trivializes the Ingenuity of the A hollowing out perspective I think it's possible for Taiwan to remain an invas Hub an R&D leader and also to have diversified manufacturing Supply chains and so we've seen this in other instances but the risk here is that that diversification is increasingly concentrated on the mainland to taiwan's own detriment the reason that's the case is because of market failures elsewhere they have not provided the types of subsidies compared to what's and demand driven policies rightly so as Willie pointed out this morning and so it's a question of how does the rest of the world respond with a set of policies so that Taiwan itself can de Risk by moving its own Supply chains off of the Mainland and addressing a whole series of market failures in a coordinated fashion amongst like-minded Democratic countries that support Taiwan so in that sense too I think this is a misreading of those trade policies and there if you look at it the number of alternative tools that's today is much greater and lastly I'll just note on Taiwan trade policy perspective I'm especially proud of the fact that we have moved in this Administration to enacting the 21st century partnership which I believe is the most aggressive effort of any Administration the last 20 years to advance taiwan's both freedom and prosperity so I'll just stop there I am speaking in my own personal academic capacity today but I felt like this was a frontal attack on what we've been doing in this Administration and I just needed to correct the record there I I sorry I I similar DeMark will try to defend a bit but let me um let me ask this question of whether our policy is really hollowing out uh taiwan's uh semiconductor or particularly tsmc's uh capacities uh if the if all the things you saw on those slides at lunch are wildly successful the us will go from what was once 133% um producing its own semiconductors to maybe 25% if they're lucky um and will we still be dependent on tsmc yes if I were Mars Chang playing this game I would say say I'm going to give the Americans the next to the best uh if I'm working oners I'll give the three nanometers which is what they're doing well I know that's what that's that's why I'm giving you this this example on the other hand I would also say that while I will follow this surfing metaphor always realizing it's about time and I'm going to stay a little bit further on the curl of the wave than anyone else but I also need to remember that I need the Americans to think that they need me and so I have to make sure that I don't stiff the Americans if I say if they say build something in Arizona and I say no way well that's going to cost me something in this larger geopolitical sense so what do I do I do what what tsmc is doing now I give the Americans some things near The Cutting Edge of the highest level of ships and I give them something where they'll have jobs and political uh uh responses that are positive in domestic politics and that's the optimal position for Taiwan and for tsmc so I don't think it's a uh necessarily a foolish strategy I think the Taiwan has been playing its cards pretty well can I just so let me just say that I I I I think I agree with with the two of you that there is not likely to be a hollowing out of Taiwan semiconductor industry but for the following reason but for for the reason because I don't think my best guess is that the chip sack ultimately is not going to work that if the chip sack does not work what I think is the what is going to be the most likely scenario and I'll point to the example of a tsmc in people hear no important or or something lot like that which tsmc built up 20 years ago that I'm sure the people in in the room goes and it never expanded capacity than never expanded capacity because it was just 60 70% more expenses so the basic point is that what do I think is likely to happen to tsmc Phoenix that you know you put in place subsidies you give me free you give me free you give me free cash I'll take it right I mean that's the whole thing about cash you give me free free free cash I I will take it so tsmc is going to take the cash but ultimately I think when when when I listen to Ronnie talk like to Ronnie talk that's not really what his goal is his the goal is not to have a semiconductor industry that's only viable with 52 billion dollars in subsidies what I think what he ultimately wants and I think what US policy makers ultimately want is a self sustaining semiconductor industry in the US that no longer depends on American subsidies I mean uh no no longer and if that ultimately is successful I again I want to say that I don't think it's going to be it that is going to happen but if that were to if that were to happen then I think there's a real chance that that would Hollow up the uh uh uh uh uh the Taiwan conduct Adry just to um defend the ation a little bit more I read those charts as I said even they're wildly successful they're not going to solve this basic problem and they're not going to hollow out tsmc if they're wildly successful you may have a couple of overpriced Fabs maybe in New York maybe in in Arizona maybe in Ohio vintel builds there um but the key thing is the backward linkages all those people are going to be subsidized or encouraged to go to Community College and computer science uh all the support Industries so that you essentially have uh the development of a much larger support structure so if you just measure the success of this by the Fabs and whether the Fabs are Cutting Edge are going to be Beyond tsmc or are going to be um uh slight behind if they've had these backward linkages it may well be worth the investment I I'll add one other point here right I mean subsidies just changed the cost equation a little bit but at the end of the day this industry is not one that's right affected by cost it's about strategic decision making so we've talked a lot today about tsmc but remember the first Fab itri funded wasc right and if we look at why ISC stumbled while tsmc has not it's not a cost equation right all of you are experts in this industry to know that's the case here right and so what we're talking about is truly der risking in the event of a conflict in the region that there are multiple Supply chains that would be able to keep production moving so that what we saw as a preview in the automotive industry is not what we're looking at um with regards to key military equipment components in the event of a conflict that's what I think these other Investments right and whether or not Taiwan Hollows out tsmc stays ahead or not is going to turn out decisions made in Shinu on technology um and I think that's always been true in this sector it's not going to turn on cost particularly not $50 billion dos yeah and and I do want to bring it back to our you know Focus today which is really about geopolitics right so I think the chips act you know obviously it's a security issue but you know fundamentally I kind of you know I I think chai actually you know in some way asked a good question right like what what in the end is America you know trying to do um I think at Heart of is just competition with China for leadership um China does present A Different World viiew a different system and different values and so you know fundamentally I do think the US is competing uh to continue to have that dominance and that leadership um in the current liberal sort of order so um that may be driving a big part of you know whether it's chips whether it's you know other issues um it is in a competition with the Chinese system and if you look at sort of chips 4 Alliance and all these other acts you know the US is trying to bring allies together you are seeing these two blocks at least that is again us plus allies whether it's militarily economically or politically uh trying to sort of bond and force that Bond even further compared to the last maybe 20 years or 30 years um to make sure that you know the the values and the current world order is preserved right so I think you know want to come back to sort of the geopolitical issue can I just say two things one is just at a quick response about drisking I guess it it looks to me like it's a really it's a really backwards way if that's the goal it's the a really backwards way to the risk if you really want to Der risk and then defend Taiwan that that that that's the most that's the most uh effective way to the risk and it is not just about Taiwan yes let me let me finish I think my sense is that the fundamental problem with us trade and industrial policy is that they're not very clear what what is it that they're trying to do that they have too many goals they want to have you know protect American workers protect jobs bring back certain industries deal with these linkages drisk the supply chain deal with the security challenge of China so it's it's a typical problem that you have one tool and you have 10 and you have one tool and you have 10 goals and and and you you have these different parties that are you know you have you know the people at the USR with one particular goal in mind people at the Commerce Department with another goal in mind the Department of Defense with with with another goal in in mind it's all so I said there's no Co there's no coherence uh please I I agree but uh notice the fact if I go back to the roots of what are our interest our in China and the US don't present existential threats to each other the way Stalin's uh Soviet Union did or Hitler's Germany we're too big for China to invade or change and vice versa uh so what we want to do is avoid 1914 if we got into a stumble as the example I gave earlier then we China could be existential threats to each other so one objective that we have is to avoid war don't Sleepwalk or stumble into something which makes this an existential threat on the other hand simultaneously we have an objective of competing effectively with China for influence and power and preserving a type of international order that we find is suitable or better better for our purposes and a third possibility or third objective we have is to cooperate with China when it's possible so I mentioned earlier uh ecological interdependence doesn't obey the laws of politics it obeys the laws of physics and biology and therefore you have to work with China on some of these aspects so that gives you three quite different objectives uh total caution uh utmost competition and cooperation you'd say those are contradictory and they are and a successful strategy is one that allows you to resolve contradictions and to manage them or to balance them let me give you an example um I I was having an argument with a friend of mine who's very distinguished uh uh realist and U uh American political scientist who is head of the uh president of the association a very distinguished person and we were talking about Taiwan he said really we don't have that much interest in Taiwan and if you take the first objective that you laid out avoiding 1914 we should do a deal with China and say you can have taian but you accept that we will be in the Western Pacific in Japan and elsewhere and that would be the way to reconcile this and I said to no but that ignores the value proposition because that's another area we'd say that we we care about the values of Taiwan represents so if you try to oversimplify these and say I'm gonna have a coherent policy for just one of these that could lead you to say taiwan's not worth the price or the risk I strongly disagree with that I think this is why I was suggesting I think think you can develop a strategy in which you can continue to Kick the Can down the road and manage to have a free and de facto independent Taiwan never de and at the same time have a cooperation with China and at the same time avoid CH beijing's use of force that should be our objective that's hard and it if you don't think of it as a balancing act if you just say I want a coherent strategy as some people are now saying enough of strategic ambiguity let's have a clear goal of Defending Taiwan well you got to think of what's that due to China and the probabilities of something going wrong on on the 1914 model so I think I think the search for Pure coherence is less important geopolitically than the search for balance of contradictory objective so I want to invite the audience to POS question questions Jason first and then this gentleman [Music] here thank you so much for being here Jason Shu har Kennedy School uh my first question is to um Dr wo um so uh founder of tsmc U Morris Jong said that globalization is de um he believed that the globalization will be probably less effective in the sort of a liberal trade framework you laid out um I wanted to know your thoughts on so he also commented that the US's industrial policy for un shuring chips will make chips more expensive and less accessible and less available because of the cost increase as well as the competition so I wonder in in terms of the trade design what are the elements in this aspect have been thought through or covered and my the other question is to uh uh uh Dr NY and both maybe Dr sh can also commment on this so uh in July in taipe we held a Taiwan blockade uh tabletop exercise and the energy dependency um for a semiconductor was I identify as the most critical vulnerability and there's really no way out on this because Taiwan depend on 90% import of a natural liquid gas so in this area of deficiency how would you advise Taiwan or how should us think about um bolstering our energy uh robust uh preparation that's one thing and secondly for deterrent strategy to work work you need both carrot and sticks and it seems to me that the carrot uh the stick is is very very strong the threat level is high on all three sides but the carrot or the so-call credible insurance is low on both ywan and and China in other words us uh thinks China would invade Taiwan and China thinks us is similarly supporting taiwan's sovereignty and China also fears that Taiwan will pursue and Dey Independence so how would we then ensure the credible insurance is also implemented at is the geopolitical uncertainty thank you um I I'll start with the first question oh sorry you want to take this okay yeah I think we'll just add one question to it and know what it's my question is what is reallyy yourself sorry TJ CH I'm from chinai University the my question is really what the US government see this semiconductor policy uh as a part of the sort of neutral policy or national secur policy or whatever what what what is this really Define is for example if we take the Arizona plane right it could be interpret as just a contingency major for the possibility of a war on the Taiwan street so maybe that could be understood in that way and that if that the case there will be no problem or hollowing out right but then you look at the policy that tsmc is now uh a sort of deny to have to do business with Huawei that's a very different policy right that is a policy Were Meant to maybe slow down the Chinese progress in the semiconductor industry or it could be a policy to prevent the sem the sort of advanced chip to be used for military purposes you know all this confusion is really coming from why this semiconductor must be a part of the US security policy I think that if any one of the panelist can kind of Enlighten us to that fundamental question you be useful thank you uh Megan O Sullivan from the Kennedy School I think this is probably for Joe and Mark and it's returning to the concept of the small yard in the high fence which I think conceptually sounds right it makes sense we all understand it but I wanted to get your thoughts on is it actually workable for something that is so Dynamic like technology and if it's not workable um will it constantly have the downside of deterring investment and engagement in trade and sectors that would potentially fall inside the small yard high fence but are not there yet I mean is it really possible to define something that way without it bleeding into a huge buffer zone that would effectively amount to a large yard and who knows what height fence Mark you want to resp I I'll start with I think Jason's first question um so on uh Mor song's comment um I think the costs uh readon cost is correct and they're very much reflected in my earlier comments right in terms of um so I think there is a cost here and there's an innovation cost which is what he's getting at there um I think the comment about globalization being dead I don't think globalization is dead but I think the nature of globalization is changing and globalization is still very much alive but the um the value and the shared security interest part is reating the way we think about globalization rather than simply efficiency costs and there's hedging to be had all around including other countries hedging about the United States and our own political shifts in our commitment over the course of time so I think there's um all of that is at play here um the second set of questions um on small yard High fense uh and what's the end goal here um I think it's Dynamic and that's why I like so much Joe's analogy of the surfer you're never going to block everything out and I don't think there's an intent to do so right you can always employ licenses here um so there are holes um but it's a sort of a panopticon effect to at least keep an eye out on what's going in what's going out so you can shift that strategy and things are going to leak through but it's about staying ahead of the Cur as opposed to or ahead of the wave to use the energy correctly um and then readapting your I mean I'm a horrible Surfer so I'm not the right person to say how to do so but those who are successful right the strategy that you use towards one wave versus another is very different as you think about that and everyone did what I did yes certainly you'd stumble and the walls would come crumbling down anyone you want to respond oh yeah I'm on this side now uh take Megan's question first the uh the uh if you think of a um a policy such as we have now of not permitting any export of any technology to let's say of a particular type we do it for security reason but we have to realize at the same time that the effect of a of policy like that is to provide the equivalent of an infant industry tariff so many developing count say I'm going to shut out these foreigners even though it's economic inefficient because I want for my security to build up a capacity at home so what we've done with our policy is delayed Huawei let's say for five maybe 10 years um and we subsidize smick and so essentially smick is now getting an incentive to put efforts into uh producing a technology at the level they weren't quite ready for now we can try to rein forces by telling the Dutch don't don't transfer lithography and working with allies can determine that question of how much time you really have but you have to be realistic that a uh when you put on a a boycott or an export um uh embargo um you are basically creating an infant industry tariff and Chinese and smick in particular has the capacity to respond to it the only question is how long and how much are we buying in terms of time and then how effectively do we use that time does this discourage uh trade and investment uh no it just distorts it it doesn't discourage it people are going to continue their activities doesn't end globalization that just twists us into a slightly different shape and on the small yard um uh I had mentioned that I worried about the yard becoming larger because of protectionist forces within the United States if I if I'm making solar panels in the US and I notice that the Chinese can greatly undercut Me by state-owned subsidies to solar panel Bakers and I say I want in the yard too alongside semiconductors people say no that doesn't affect the lake military technology and I say oh but it affects the whole question of our Energy Future uh so I want in the yard to keep the solar panels out that's a purely protectionist argument but we are often vulnerable to protectionist arguments like that so that's where I worry about the the Jake Sullivan's yard May grow whether whether he intends it or not I I'll leave the Taiwan thear your time one question because I essentially have spoken about that already can can I just add one one thing on I I should should I should should have said I mean I I I realize I may have come across two negative us industrial about about us trade industrial policy the one policy that I think has been remarkably successful and remarkably targeted has been us export controls uh it where the goal is to try to the goal is exposit to try to uh prevent uh China or Chinese companies from getting access to to S certain technology so that's an example of you know there's a very clear Focus there there's a there and and it's I'll come back and and I I agree with what Joel said that is you don't need a complete blockade you just need a lot of speed bumps as long as you and I mean that's the one thing like I from what I what I can tell the rules that were rolled out in October 2022 I think it was October 22 I think I've been have it is probably the most effective thing that that that the US has done assuming that the goal is to try to prevent China from getting access to these uh to these uh to these technology it was not sold on on on the ground of jobs it was not sold on on on the ground of Reviving blue color workers it was a very clear goal and it's remarkably it I think so far it's been remarkably effective okay you want you want to talk about the energy C can I just also ask a follow-up question uh whether um it's uh feasible possible to be so targeted let's say export controls what we're seeing so far is that the administration is very clear about um just the high-tech um and even cifas um and our outbound cus same way right they basically targeting um certain areas and the question um is um will these targets actually be a to be so clearcut I'm not sure if I'm asking this question in the right way will there be Ripple effects um and you know so that it's affect other areas that aren't intended uh to actually be the targets so I I would love to hear if there are experts out there who can because sometimes people make policies but there are unintended consequences and then second um you know in terms of what Mark was saying about globalization is changing I just want to remind everyone that you know us China trade reached all-time high actually last year so if despite you know the tariffs and all these other things but the goods continue to come to the US go to China Etc actually reached all alltime High um but it is targeted sectors that are being affected and we're likely to see we don't know if that's going again to have Ripple effects and affecting other parts of the um the bilateral trade or not that's a good question for us to ponder um and then last I just wanted to talk about um respond to what Joe was saying about is China an existential threat or not if I recall Bill Burns actually said sorry CIA um um head actually did say China is our existential threat um and he would in the context of sort of you know while we're sort of involved in the war between Russia and Ukraine But ultimately China is the so I think that is again fundamentally the debate in Washington DC today how do we really see China the competitor a threat enemy border line um I I'd like to add a question and this was a question for the audience for for the audience so that for I mean the reason we're here presumably because we want to talk about Taiwan so I want to ask them the also what does taiwwan do so I want to ask that Qui question to a as well if uh let me ask let me deal with your question about existential threat and then come to the defense of Taiwan and uh and by definition an existential threat means the threat to your existence Hitler and Nazi Germany wanted to change our system in the long run Stalin had communist parties throughout our different countries because he wanted to change us so a threat to our existence as a free independent democracy yes they were I don't think China's in that game uh how many people are Marching through the American streets in Def of XII ping thought with Chinese characteristics or do you expect there will be pretty close to zero and so I think the to my mind something that would threaten our existence would be if we were to fail to manage this Balancing Act and to get in a war imagine that we did have a war over Taiwan the effects on the American economy the Chinese economy and the world economy would be enormous even if it didn't go nuclear the Rand Corporation did a study on this in which it said that u in such a war a non-nuclear war over chiwan uh the Americans would win but it might cost as much as 25% of GDP that comes close to what I call an existential threat but I I mean frankly the mood in Washington now is this by partisan consensus on demonizing China and in that sense their the argument is China wants to take over the world they want to destroy the liberal International order they want to expel us from our alliances and forward positions in East Asia uh that's in a threat to our existence I don't buy that but who do but but very quickly to to come back to the defense of Taiwan if if I were Xi Jinping I would not try to in invade Taiwan amphibious Invasion um I I would lose and I might lose my job if I if I did I would try to squeeze Taiwan and recognizing that Taiwan is dependent on energy Imports I would create a naval blockade in which I would say every 20th ship or every fifth ship I will stop and inspect as possibly Contraband don't want to give them too much advice no no no but but my advice the Americans if that happens I would have a US ship escort commercial ships that are going into Taiwan other words I that would to me be a line that we had to say okay we're not going to fall for that but in addition to that you can increase stockpiles of of energy you have to put them in ways in places that are relatively invulnerable a lot of oil tanks sitting near the coast will be taken out by pla immediately but if you have deep underground storage in Taiwan that gives you more resilience and the same thing goes with t what you need is not more f-16s what you need is more Harpoon missiles which can be hidden in caves so that after a preemptive first strike you then wheel them out and use them against Chinese ships so there's there's there's a lot to be done for the defense of Taiwan uh but what we shouldn't do is announce frontally that we're going to defend Taiwan no matter what and thereby stick our finger in XI Ping's eye and precipitate something that would become an existential threat what I'm saying is quietly help Taiwan to defend it self and become more resilient but don't get in this game of demonizing China or treating China as an existential threat unless we contribute to it any last words from our other panelists before we wrap up well thank you everyone uh I think this uh discussion has been rather broad because uh the intricacies of Taiwan semiconductor and us China relationship is so complex so thank you so much for joining us and thank you uh ash center uh rajala foundation for uh organizing this panel being such a good we'll do 15 minute break and uh meet at 3:30 well it is but no but I think you kept hi Joon I my moderator I just that's right least doing stupid let them keep doing something stupid why are you forcing them stop doing well thank you well there there are there are okay like he's very like like filtering the stupid so then you demand that they end the stupid things and you know that by making this public demand they politically they can't do so this way you guarantee that they keep on doing this now now the question is whether you yes this is Joe's yeah so the so the question is whether we really are we really are that I mean I I this sounds silly have right now on my screen intervie many Chinese Korean request and I was on screen last night so we'll do it it out no worries worries but I in my book I write about the hello build the Pyramid for our own research is I like yeah out way really can fund a lot of that stuff and I friends in the US government who say well we're you know hard to deal with but it depends on what level and then we get some the details that's why to see you such a good moderator the two big things because I'm doing well out there but I'm increasing here so so I can run at least the sense of like not the were the same but just you know like I'm a I'm a I'm a broad but also have some dep in certain things he seems Broad in the sense that he's an Executor not actually a subject as you know so that's interesting that you chose him yes right [Laughter] l so I'm [Laughter] also oh hi hi I give you my General that's you three spots three spots correct and the whole thing inent and I've been [Music] St type of [Music] thing so I think it'll that's I don't know the answer to that [Music] fa done done was [Music] was Joe [Laughter] I this institute one that's love for oh that's [Laughter] myew I this is so nice for [Music] way y was like Hice yes yes okay he I'm looking for somebody to come to my class and all right everybody we're going to get started so if you can take your seats so there's a very high pressure on the final panel here is we're pulling it all together we've moved moved as most of you saw from questions of optimism um from the perspective of the federal government to some realism from the perspective of some of the academics and and ingrained skepticism that we all are trained to do terms of asking questions um and now what we're going to do is integrate multiple threads uh that we've heard throughout the day into our final panel um and what I'll do again as usual I think you're Now train so you expect what I'm going to do I'm just going to introduce uh Professor Sia as a um chair and then he will then in turn introduce uh the panelists um we're quite lucky to have Pressa here not only because he's he's a nice fire brand I thought that was an excellent he did a good job with that panel fueling uh some of the uh discussion which was great I had multiple people come up to me after saying well that was one of the more interactive panels I've seen in in while in time so thank you I think that was that was excellent um but more important he is a highly respected as most of you know highly respected Economist he is the Phyllis and irn Winkle Reed distinguished service professor of Economics um and also the PCL faculty scholar at Chicago Booth um he's of course widely published uh served in many different positions uh his research is really on growth uh and development um but he's also been a visiting scholar at the FED in San Francisco New York Minneapolis done a lot with the World Bank um and is a research associated with NBR um what I uh find most interesting he's also been recipient of the Alfred P Sloan Foundation research fellowship and he's a member of Academia cica he's also won the SW Fang prize twice which is very impressive uh we have a lot of friends who've won it maybe once but twice is is something so he's what I like about what changai does is he brings both an economist's Zeal for metrics and Frameworks but also at least on from my perspective also brings an appreciation for um Place meaning regions uh and political institutions in Asia and Latin America so when you do those two things you can then really be an applied economists which is a lot of really the value he brings to us so with that I will turn it over to you chai thank you again for coming and is it in your capable hands okay thank you so much so I'm gonna normally when I share panels I will try really hard to keep my own views outy all right so I try really hard to keep my own views out of the discussion uh uh but I guess now it's hard because you all know know my views you but I'll try my best to keep my my my own views and the way I thought I I what what I told them the way I would try to run it is that I try to I I I'm I'm gonna try to run it like uh a conversation between friends over lunch uh so I um so uh I sent them some questions to think about and but we're going to try to keep an open dialogue so so that that's why I'm going to try to run it so it it can go in all in all uh directions so just briefly about the speakers Fiona is a professor at m at uh MIT Stone and my understanding is that she specializes in like how do R&D systems work uh uh uh ten is is somebody who has straddled both the academic world world and also the world of government he's been a minister uh in in in Taiwan twice for both kmt and DPP administrations uh uh so he's well-versed in sort of like uh so I I thought the way that we would try to focus this is to focus the discussion about uh industrial policy uh focusing on semiconductors in the US and focusing on Industrial policy on semiconductors in Taiwan in Taiwan and I want to try to bring out some of the details of what industrial policy in Taiwan has been because there clearly has been an in in in industrial in in industrial policy so that we can stop talking about in the abstract we we we we we can stop talking about a dream world that uh let's talk about the realities of how it it happen so the the way I thought I I would try to start the discussion is and we touched on this and and this is for any one of you right on on what what exactly is the US trying to do uh uh in in terms of semiconductors right and there's been like lots of like if uh for those you who were here o over lunch it seems to be a whole battery of things it's to make sure that car companies never see shortages again it's about making sure that the uh I mean if you know a little bit about the history it was basically the dumb decisions by the co by the car companies that led to these shortages uh to remedy the decision by Intel to to refuse to produce chips for Apple which o opened the doors for tsmc to gain dominance uh is it about trying to protect the US in the event of a war with Taiwan or what exactly is is the goal right or is it about blue collar jobs uh so any one of you uh well first thank you for having me I it and I will say and I apologize I wasn't able to be here before I was actually teaching uh down the river at MIT this afternoon and so I think actually you have accomplished your goal of having this dialogue with at least one of us being entirely unaware of the precise details of what you have just said so that may make for you know violent uh random agreement or it may make for exciting disagreement so I actually don't know what's gonna what's going to come out of this I'm really pleased to be here and um just want to say that sort of my a lot of my own work right has been on the sort of notion of Technology sovereignty the kinds of ways in which different countries have thought about the kinds of of science and technology that they want to have and I've worked particularly with what I would call some of the smaller Nations who at some level I see as sort of somewhat stuck in the great power competition um between the United States and um the PRC and of course as you might be able to guess the country I've worked with most closely on this is the United Kingdom I've served on the prime minister's Council for Science and Technology for over a decade and prime minister plural um in the UK we have this Council we give advice to the prime min whoever he or she may be and whether they want that advice or not we continue to give that advice and a lot of the advice in the UK in Denmark Singapore Israel and I would add Taiwan to that I think often has to do with how these smaller countries who cannot be good at everything respond in the light of the sort of shifts in competition that are really H happening when I think about that and think about working with many regions worldwide and then try and sort of ask the question what is the US trying to accomplish I try to answer that question as somebody who spends more time trying to cross the Atlantic than somebody who goes down to Washington um I understand with Ronnie's travel issues that it's perhaps easier to get to London than it is to get to Washington DC what can I say um when I read into this I think there are many things one could believe the US is trying to do I would actually say at the end of the day I think it is about sovereignty um which is about Destiny and the ability to control their own destiny and to make strategic choices and not to be at risk from a very specific dependency um and I think the dependency means you know are we going to be at risk for some sort of adversarial action and so regardless of whether or not some of this I think ends up being about jobs and talent and Investments and kind of writing some of the Strategic decisions of corporations in the past I think perhaps the most deep seated foundation and the reason this is happening today is definitely because of I think a shift in people's beliefs about what might happen and thus about a supply shock to the military and I do think that that is at least how you bring a consensus about why action might be needed although I do think that that consensus then allows you to wrap in a whole bunch of other things some of which I think are aligned with that goal and others just seem to be just useful things that the US wants to do that maybe a rather random grab bag of of activities including insisting that you know fams have child Care Centers um or Regional policy so putting projects in certain places in the country which I do think are secondary um I do think the fundamental reason is one of ability to control Destiny in the face of adversarial action but I absolutely think that it has become a grab bang for a bunch of other things that people might otherwise not find political consensus to do you may not exactly but they don't yeah but but but how are people in Taiwan thinking about yeah I think we we Taiwan we do a lot of industrial policy uh and and we think we are entitled to do it because we are small uh and we are developing country we want to catch up so we thought it's it's only legitimate for small developing country to have industrial policy and our policy is always very clear that we want a particular industry to be there in Taiwan so therefore we do something to make that happen and we've been successful in some area of course fail in others uh but this semiconduct policy socalled the new generation industrial policy or modern industrial policy as as Looney just alluded to in a speech uh adopt by United States and to some extent P of friend uh nishik kawang is really making a tremendous industrial policy of modern time as well in Germany it's it's really out of my comprehension uh this is really something new we we need to understand uh and it's also not very clear what they really want I mean the end as I've been asking this question throughout a conference what is the end goal of that and and Rooney for example in in in lunch speech he has clearly listed right A few items that to be targeted to me that's that's just alarming that that's first is very difficult to achieve that because that will mean uh a fundamental change of the current landscape of the global semiconductor industry and it's going to take a lot of resources to make that happen as well not only as we already discussed not only money uh but also talents and that's going to involve the change of the education system to train not phds or uh specialist people are good at Innovation as the American University are very good at doing now you was talking about beginning training technicians using the uh Vocational School Professional School uh Community College which is something we think only developing countries are doing like Taiwan when our company went to invest in Southeast Asia or in early days when we invest in China the our company always complain that we are short of technicians skill worker I mean and so you should have some vocational school at a high school level and and to a less extent at the college level twoyear special College uh for training a particular technique uh and I was amazed when this Arizona uh project now been implemented and the local newspaper was talking about estaing some kind of institution to train this shortterm uh skill workers I was very confused I thought this is not the advantage of the United States the tsmc should come here and recruit phds from Harvard and MIT to do the kind of work that we couldn't do in chinu because as ber just mentioned this morning we've been short PhD because for the last 30 years because of the very rapid development of the semiconduct industry uh most college students are engineering level student they are not required uh to go to uh a master degree program two years and and the return to that is tremendous the two years additional education above the the college level uh they are tremendous rewarding and therefore that many people are rushing uh to that uh sort of career path even for the people who are not specialized in uh they are not major in science and technology they will try somehow to get into these SP Master programs uh because the demand there is uh and then once you graduate just got to work for tsmc and some other semiconduct Industries and and it's so rewarding so in in about two or three years time uh these student will come back to tell their professors my salary now is higher than yours uh is that really the case is it really the case it's really it's really now it's it's uh I give you a number uh our Prof pay maybe 30,000 right beginning salary for green PhD to begin with and that's pretty much what a master graduate student will be paid in neither of us moving in a hurry are we or what I said neither of us are clearly moving in a hurry to take an academic job in Taiwan in that case so you can imine why we don't have PhD now because people don't want to study it and the reward of that is is pretty much negative uh so therefore we need phds because all these in these company are telling us you know we need phds otherwise this this business cannot continue you know this technology continue to improve and you have to look into the future and and and and be prepared for that so they they they know not only faculties they they need PhD at a corporate level and and so so therefore I really think that you know he when they come to Arizona maybe there are more phds available uh but turned out to be not a case so that's why I was really confused uh whether we are whether the compan is going in the right direction or just just going into a wrong direction can I just follow follow why is it so hard for tanes companies to recruit from the Berkeley PhD program or UCLA or MIT or I mean I think they are getting some some but probably bur can answer that question but uh but but I think the reason because what we are doing in Taiwan is manufacturing it's it's a very hard work manufacturing and a PhD of course it could be in the R&D department but even if you work for the R&D Department of tsmc it will be you are supposed to develop process technology right and that's something that related to kind of operational kind of Technology it's very demanding on Hardware and could be borning as well as I imagine uh so maybe some PhD they don't want to do that they want to do something more Innovative you know I mean I would I would just add that I think the choice set both for our undergraduates especially for our PhD students nowadays it used to be I think that we would assume many many of them would go into Academia for those that didn't their career path would be to go into the R&D Departments of very large Global organizations that increasingly entrepreneurship and joining very early stage Ventures that are increasingly well capitalized has become extremely appealing and that path I think was started and opened up by those in computer science and software but with the increasing amounts of risk capital and particularly slightly more patient Venture Capital going into some Hardware various sorts of semiconductors for tonics and so on you begin to see this alternative path that's not always well paid on day one but the potential upside and the autonomy and the excitement um I think is very very high and so we definitely have seen a shift in where our PhD students are going and they're making some really diff different decisions I think and and we are also educating them accordingly with that in mind just switch here so that's get into the N degree details industrial policy so we can't really talk about the us because it really hasn't it's only in the beginning stages uh so sorry so I'm just we can't really really talk about it yet in the US because it's really just the beginning of the process so but let's talk about Taiwan and then the specific question is what of the arguments that I hear a lot uh Ronnie did not say it but I I I heard it from I've heard in lots of other places that we've got to subsidize our semiconductor industry because all the other countries in the world do it uh that's what we got to do so so tell us about the origin of tsmc tell us about uh I mean this uh it's great that the audience that we have here tell us about sort of the role of the industrial technology Research Institute and lots of people talk about Morris and how he was Central but really it was the it was this body called the the industrial technology Research Institute that was Central and then it's not and then I'm going to invite uh uh uh shinai who was Central in that process you know who was there for 2020 for 20 25 years that basically o oversaw this so just just tell us about that in tell us about that institution tell us about the organizational design so tell us how that work because I I don't think anybody knows uh uh this is our question that I knew uh before the uh before the panel so I have some some number that written down for that I think it's all began in 1976 right uh Mr she is really the the when was something like 30 years old and he that program and we begin with uh the government of Taiwan begin to think we should have a semiconductor industry and that time you were talking about seven Micron kind of process with a few hundred transistor in one chip today you are hundreds billions more than uh transistor now so what they do this is not uh you you could call that industrial policy but actually is a technology policy I think the government decide to import technology from oura paying for it and they send a a team of something like a 40 people Mr she included to uh go to RCA uh to be trained for six to one year they brought technology back to Taiwan and they buil the first kind of uh uh experimental fabrication line in Shinu and that's the beginning of taiwan's semiconductor industry and uh that fabrication line and with the technology transfer from RCA was then converted into the first Semiconductor Company in Taiwan called United micro Electronics this project cost uh uh how much money uh 12 us dos at that time 1976 all the way to 1981 and then following that we do a project called vsi uh project which is very similar to the name is all the same uh to the American vosi project and the Japanese vosi project beginning 1976 uh but Taiwan did that in 1984 and that was to uh again uh not imported technology but kind of self-develop a new generation of process Technologies uh at 2.5 Micron level uh and this was then later converted into tsmc so that tsmc was again established from a government sponsor research project with the technology and equipment that been bought for that experiment purposes become a new company and that's 1987 this project cost 5 55 million us and then following that there was a third project beginning in 1990 again a five-year project to do something called submicrons so that the technology is already dropping down below one microme and that project cost about 250 million us dos and the this this uh research line was later converted into the a dam company a memory company but that was aailable this company only uh uh sort of uh survived for five years and was closed uh in 1999 just just when the uh memory price was falling down uh the company couldn't sustain so the lesson I think Taiwan learned is this this this policy can work uh but this this can fail also uh the third project uh was when we look back at this history we consider this project as unnecessary uh because the government initiated this project and create a Company the company did not survive the competition uh but in the meantime there are private company uh who you know invested all by themselves used their own money and of course they most of them did not survive either but but one a few of them did sort of continue operation until today yeah so so the hour and after that after 1994 the semiconductor industry is pretty much standing along uh we we did not have any significant policy intervention after that and so our understanding is this is only as I say you know a small developing country seems to be entitled to uh do some kind of industrial policy in the beginning just to to create a new industry from from zero right and after that you know they they should be allowed to operate uh in the market without any iion from the government for example tsmc was created by government money government contribute 48% of the share to the company so it's literally a state owned company uh but the the but the government has never given the company addition any additional send after the first injection of capital the company is require to stand on its own foot after that and and of course they have to go public to raise money in order continue to invest and therefore the government share was sort of dropping over time and today the government still own about 6% of tsmc's share uh but in the beginning it was 48% so that's the way kind of Taiwan if you like kind of incubate uh our semiconductor Industries it was always a one shot injection uh so when we sort of you know reflect that experience on today's situation you look at tsmc's project in Arizona you kind of worried uh because you have to sort of assume this one shot subs from the US government is going to sustain the corporation right in instead of I I can't imagine that four five years later tsmc came back to the US government and say we need more money I I just can imagine that will happen or that will be acceptable so that's been the sort of the our experience and history so in that sense we are Al certain hoping that this one shot sort of uh to jump start something it has to be successful but one shot uh that would be very hard although you know in the 1987 we just begin our Democratic process but even at that time the company cannot sort of you know consider that getting more subsidy from the government is one of the options they never thought about it they understood they have to stand on their own FEI from that day on uh until now until now until now uh uh Fiona you want to just follow up on that or you want to just say something about what you see in R&D systems and other places that you w work out yeah so I mean I think what I would say is if you look at the the Taiwan case and I think you've described this extremely well is that to do this you have to be extremely patient I mean you have to have incredible political commitment and a sort of a coalition of the Willing over very very long period of time and a willingness to invest in a large number of very complimentary elements so I think about sort of skills and education the capital required some of the infrastructure and in many instances the Demand right the customer base I think that may have been less relevant because you were tapping into a global market but nevertheless and doing that in a way that is aligned and consistent over very long time periods and what we've seen in other countri countries that have tried to do this I mean there are very few examples I think of successful fully integrated industrial policy of this type I mean the only ones that really spring sort of very very deeply to mind um particularly in other parts of the world I would say would be Israel and its industrial policy around the defense industry and you think about why that particular political Coalition was able to sustain a lot of that was about a sort of an again an existential threat and a willingness to say are going to be self-sufficient we have to be self-sufficient and an alignment of skills of investment of infrastructure and in fact of demand of a government willing to buy and Singapore has also done some of this in life sciences I think that's been less successful it's been much much more difficult and there's it's been slow and complex as there was other countries I think looked to this many of them and the UK included who sort of have this discussion kind of should we have an industrial policy well no we've always we've never liked that idea um the UK's policy has always been a bit more push money into the front end of R&D push money into science and Sort of hope that you'll become a science and technology superpower in the in the words of Boris Johnson um which you know even though he's not here anymore we still like that expression because it sounds good but there's a recognition that you then have to make choices and do this complimentary set of things over the long term and I think that has been very hard for many other countries to sort of pull off and I think for there are many moments when one could have imagined that the Taiwan story would not have ended up this way we've seen this very specific successful path but if markets had been different if the technology had been less cumulative if this very specific set of skills and investment hadn't quite been aligned we might not have been talking about this in quite the same way and so it's extraordinary that we do but I think it's it's quite unique in some interesting characteristics so just just follow up on the issue of the UK one piece of the semiconductor industry that the UK has is this company called armm so so so so just tell us about what you know about that company how did that company come about and also luckily it's not subject to us industrial policy and why not indeed I mean so arm is a very interesting example right of a company that actually came out of um a number of people who were working in and around the Cambridge the other Cambridge the now smaller but original Cambridge uh ecosystem um who recognized that there was this tremendous opportunity in the design element and that one could do this extraordinary sort of fabulous design and be absolutely leading and specializing in that not least because these other complimentary assets the ability to make these things already existed so that company went through some extremely interesting ups and downs right it was sort of iconically British for at the beginning um had a very difficult time in raising Capital um ultimately got capital I think they had a quite deep relationship in Japan um and then obviously as many know had a very large investment from SoftBank and at the time when that happened there was a great celebration of the fact that there was a British company that attracted Global capital and then you wind the clock forward and you have the sort of abil you know this attempt to do a merger and what have you um and then there's a sort of lamentation that the Brits are about to lose this company because there's a whole debate about which of the public markets it should float on and whether that should be the UK or the US and so while us narrow industrial policy hasn't actually come to upset the British the fact that floating on the NASDAQ it allows you to tap into much more sophisticated technology investors means that this company is now basically floated in the US um massively oversubscribed IPO um and I think people have have a very mixed set of views about whether this is success or failure um and it's a different set of questions around whether or not we create a different industrial policy which is the conditions for General success in technology companies over their life cycle and those are hard things when you're small as a small country so the view of failure is that because it's it's trying to get an IPO in the US right and so the concern is that you then lose this tremendous base of technical talent and you also miss out on opportunity to sort of educate the British public markets in what it means to invest in and follow overtime real technology companies and there's continued debate about whether we have yesterday's stock market full of old industrial companies but just pushing a bit on there why do do you have a sense on on why is it that industrial policy hasn't been gunning for arm because they also have an effective Monopoly over their segment of the market yeah right so why I mean look so I think that there are probably several reasons so again in the UK there was a very long government discussion about whether or not they would invoke a sort of National Security uh investment act a sort of a cfus like uh mechanism to actually say you could not list internationally um I think wisely I think that would have been a huge dampen more in general I think the reason why the US hasn't come after armm or I think we talked about asml is is to be frank that they are much more distant from a potential adversary and so I think that you know there's there's a basic view that if we if chokepoint Technologies are owned by other countries we need to ask the question who are those countries and what threats are they subject to and I think that the very pragmatic answer is that nobody thinks that arm is going to be subject to external influence specifically from China I mean I I think that's the most straightforward answer to that question yeah also for those of you who follow arm there there's been this long-standing drama over his Chinese arm over chines I think finally got resolved I think yes people weren't allowed in the building and then they weren't allowed out of the building and there was a whole bunch of sort of complexity and I think that arm eventually just gave up on that part of the company and said you keep the company you keep the potted plants I mean I think it was that odd I mean there was a sort of who gets to have the paperwork who gets to have the decorations and so yes it's been a it's been a country that a company that has a microcosm of some the drama played out again by smaller countries who end up caught in the crosshairs um who are trying to do some combination of sort of a lasair policies with industrial policy so let's turn back to the US uh and so let me just ask so I'll get to the question about sort of how you think about the the design of the CH chips act but first let's look at the history of the US and I was my reading of the history is that the US has a really difficult time pulling this off right and there's lots of so I last week I went back and and I read and I read about things that I knew a little bit about so I read about I found out I just about you know back in the early 1990s there was a DARPA initiative because they thought that The Cutting Edge technology the critical technology was don't laugh flat screen TVs uh or flat or flat screen TVs and the the head of Dara gave the statement saying I can see a future where 3x5 flat screen TVs hang in the living room of every American family right now in retrospect it seems crazy right it seems crazy because we know what's happened to that yes it's important but it's become a commodity right it's and then there was all the discussion about oh but we need it for our fighter jets and and so DARPA put in $50 million it wasn't that that much money until Congress said no and this St there there was another really big initiative that nobody's talked about they they started doing the Clinton Administration I think they called it the Supercar act where it was a Consortium of big American car companies and the goal was to create a superar a superar so they they put in I think the number is two or three billion dollars in those days in those days and and it died so there there just multiple multiple example so why is it so hard for the us to do this I mean again we got two foreigners here who are sitting here kind of opining on on this country um look I I think again that to do this well you have to be able to build consensus over a quite long period of time and I think that the American political system and our ability to build consensus here is extremely messy it doesn't last very long and I think that just in general the politics of this and the fact that you have to to get tremendous alignment amongst a whole set of things including the education system and I couldn't agree more with your comments around sort of it's not just the phds it's the technicians and so on you then need alignment around industry you need alignment around building new Industries in a country which has always relied really on the allocation of private capital on the you know on the beliefs of a small set of individuals who have private Capital at their disposal I think the place where we're beginning to see that change a little bit at the moment is an interesting alignment between Silicon Valley and Silicon Valley investors and Silicon Valley billionaires on the one hand and the US government and its sort of national policy goals on the other and so all of a sudden you're beginning to see this and you you get industrial policy almost through billionaires which is a rather odd and particular way of doing it but I I think just the ability to maintain that consensus over the long run in this sort of political system in a very large system that relies on public private markets just becomes almost impossible the examples you've given are excellent because they sort of we've had to go and then we just we give up very quickly and we particularly don't like it because if we're wrong with our initial hypothesis there's not a sense of saying we could fail at some bits of it and then try again we can't get a whole of system approach yeah but but I would just say the the daa really it did have the privilege to develop something called technology without the technology been successfully implemented commercially because commercial implementation is never been the sort of constraint or the goal of daa right they just want that technology to be applicable for milary purposes so I think it's right uh so you know whenever that is partially successful or and in many cases is is it's been commercially very successful as well uh although may maybe been unintended I remember that in 1980s when uh during this us Japan uh semiconductor conflict uh Dara has a documentation which is now available on the website because of the confidentiality been uh been been released talking about why the government of us should intervene uh in trade with Japan uh uh for memory chips and and the document mentions that for technology to be continue to develop you need that technology to generate enough commercial value and this commercial value will only coming from the market so you had to protect the market for the US memory industry so therefore they be able to uh generate enough revenue and that Revenue could be then uh uh put into the R&D and therefore the semiconduct industry technology will continue to upgrade so I don't know whether this is the conclusion coming out of a very specific uh industry called semiconductor right because you have a generational technology which keep moving and so if you don't have enough money to move to the next Generation technology you're dead you know that that's a very special case you know this a very special case kind of industry uh usually when you suceed you succeed and there's a way to maintain your Market position uh by continue to to improve usually right you continue to improve on that but semiconduct industry is different it could be very successful on you know on on the one Micron Technology and if you don't don't succeed the next one when the next generation of product is now become the norm in the market if you don't enough uh invest enough money you don't create a technology which is soon enough and good enough you're going to lose that and once you lose that you're gone so this is very different that's why I think burn this morning continue to tell us this commercial Market is the key if you techn ology is not going to succeed commercially this technology is not going to sustain uh but if you are going to do something only for minitary purposes which is very different right hway chip no matter how good it is as long as it's working right you could have you only need a few chips right to put in the missiles and some other military equipment it will never be minons of Chip you need for for communitary appliances uh so therefore it's a very different kind of game uh and and and commercial of course commercial technology could be applied to military technology as B mentioned repeatedly this morning but the other way around is not true so then let's take what we what we know right what what we've learned from all of these all these experiences in other episodes and let's now go back to the issue of the chips right given the design of the CH chips what is your best guess on how that's going to play out I mean look I think if the if the real idea is to say the US needs to be have sort of strategic autonomy I mean I think that that is a a failing strategy because it's very clear that it's not actually an approach to try and build this bottom up and say you know we've got this incredibly complex industry let's build this end to end or even to say we've got this globally complex industry let's build this end piece of it as we think it's at risk actually the only way that they that we're moving forward is to say let's invite the people who are really good at it to come and do it in our country and I think as we've already seen that's an extremely difficult equilibrium to sustain because we don't all on training and technicians and so on and so I think the the sort of ostensible goals I think are going to be extremely difficult to um to actually accomplish I don't think that I mean there are many things that one could say will be positive that will be the outcomes of some of these Investments around training and education and what have you and even just an attention to the fact that this matters but I don't actually think that the way in which it's configured is going to give us if I'm right in saying that the reason is that we want strategic autonomy I don't think we're going to get it this is something I really learn very Rec strategic autonomy or technology autonomy particularly European countries are so much concerned about that but the fundamental question is really uh in in the in at least in the area of semiconductor uh technology is so complex uh and it has to be developed by by through some kind of collaboration I agree there was no you know as burn said no single country even the us today can uh really uh do everything by itself it has to rely on somebody else uh so interdependency has become the norm right there's no way you could be totally self-sufficient in semiconduct technology you have to realize that interdependency is a reality and the key is then you you want autonomy right uh so uh to what degree you could depend on foreign countries you know and that really a very difficult kind of balancing act that uh you know to do consider the theography you know you look at the history of the semiconductor conf uh beginning beginning in the 1980s and of course that when when US Government intervene uh we in that situation one major objective of the sem ATT is to to uh to kind of revitalize us leadership in theography uh sters uh and and scanner and that the ster and scanner this is really something invented by the US company but then it was losing competitiveness to Japanese company in Nong and Canon uh you know by the mid 1980s so one major objective is really to regain the leader us leadership in that particular machine that particular machine was considered the most critical equipment in whole uh production process of the semi conductor fabrication now that a lot of money mean been devoted uh through the DEA project uh including research and direct subsidy to American company but in the end what happened in the end all American companies are gone right today the leading theography maker theography machine maker is asmo which is located in uh in Netherland nevertheless the US is still able to order ASO not to sell evu to China right y so why you you've been so sort obsessive about owning a particular company it's not it's not necessary and why is the US is so powerful because us still control the key technology that going into the machine right and and the technology ownership that maybe a few uh Chris Miner has a very good description about this story in his book about what technology is been controlled by the US um and and through that a few key technology ESO has to collaborate so I think that lesson tell us really quite clearly you you don't need to be uh you don't have to worry about interdependency you know uh if your goal is only autonomy is even even uh uh easier to be achieved even if your goal is to be uh the sort of the dominance in that like a us can you use that as a geopolitical power I think what is really really needed is the key technology I think what's hard about that so people have talked about this as sort of Choke Point Technologies and there's numbers of names for it and we know it when we see it our ability to predict it going forward right exanti is actually quite hard and so you know we I I think many of the European countries are actually having this discussion at the moment which is what might those unique Exquisite capabilities be that we can have in order for us to have a seat at the table so while we may still have a set of codependencies we can have those with a collection of allies but we actually have something that gives us a sufficient seat at the table as opposed to sitting you know somewhere by the wall and I think that's a those are live debates and discussions I think across many European governments made more difficult by the fact that much most of the leaders both political and frankly Civil Service leaders are traditionally not technologists and so with a few exceptions across Europe but particularly if you look at you know the the UK and elsewhere Denmark I mean a number of these countries you don't see you know engineering is not a background that you would find most civil servants are more likely to have a degree in history or could speak Latin and that is not actually tremendously helpful in understanding a checkpoint technology and I genuinely think that's actually problematic and so how we deal with that I think is an important question but that is I think the way we talk about it I say that that was the thing that sort of troubled me the most when listening to the to the talkover lunch by Ron Str G because my sense is that I'll just say it out there he's not his understanding of the technology is at my level and I would be terrified if I had to uh take2 billion because I recognize that I that there's so many things that I just don't know I don't know I so I just wouldn't do it just just because they all these uh you know you don't want lawyers to do be doing this uh you know you don't want lawyers I I I want people who actually understand deeply the technology and all the risk involved to be doing this let me just on the issue of risk on the risk I I I have two examples one could make the argument that by cutting yourself off from the world that actually makes your choke point problem like much much worse and and I'll give you two examples in the 1920s the US was really worried about shipping capacity so it passed thing called The Jones act which for those of you who know it basically said that any shipping between the US has to be done on us owned ships right so we know that now think about so it stayed on the books and then there's a political Coalition behind it because they earn lots of money from from this but if you think about what's happened as a consequ that it makes like in the last month it's made responding to the fire in Hawaii much much difficult because there's limited shipping capacity because that can only be done on a US ship so they can't really respond effectively or in in the hurricane you know two two years ago in Puerto Rico the same thing it has to be done on a US ship so it makes responding to these demand chocks much much harder so it's made these made the US economy just a lot more vulnerable I mean there's also the issue that it just raises Priceless period right or for those you who remember about a year ago there was a scarcity of INF formula uh for those who know this and part of the reason it was such a problem was because it can only be produced in the US there were these set of laws so you couldn't import from Europe you couldn't import from Europe so therefore you had this real scarcity uh uh of that so it has these really unintended consequences I think we we got to be careful about these these these these simplistic arguments like like there there's there's a choke point and therefore we've got to we have got to we've got to control it let me can I just I think that there's a difference between saying there's a checkpoint we have to control it than saying we think that there's going to be a very specific capability that's very powerful and so let's be the best at it in the world so that is a different way of going after that which is about investing in those things that we think will give us a seat at the table versus saying we're going to just keep everybody out and a sort of protectionist approach which I think I you're right is is a very difficult long-term approach to take it unlikely to be successful so let me just turn now and I'll turn quickly to the audience uh this is a question for TN or TNG given that this is going on in the US what does Taiwan do I'm lucky I'm not in the government anymore that's why I'm asking you because if you're in the government I wouldn't ask you a question because you wouldn't answer me the uh the first the first time I heard about this case was uh some a complain from tsmc executive about why we we've been able we are trying we've been trying so hard in the past to avoid uh involved in any politics but it seems that we could not get away from politics now so this this really A new challenge to Taiwan uh because we are small country and and and Forme right most company are so small and so the the the philosophy for the Taiwanese manager business manager is to stay away from politics including domestic politics not to mention International politics uh but now you you can stay away people are go sort of sort of pull you in so that's really a big challenge we never been uh our company or our government never been uh challenged with this kind of issue before so I think we are in a learning process I don't know it's it's very hard it's something there's no reference point uh so we are trying to learn something from other countries such as Netherlands uh small Advanced countries uh they may be caught in the middle uh sometime in the history uh in a similar situation and try to learn that how we should cope with this new reality let me push you more than probably you you want me to but it's just what are what are different parties saying just just just give us the landscape of of what are the the different options that that are that people are discussing uh H the the opposition party I can only opposition party are saying that the ruling party is caving in too much so they want to uh to have more kind of autonomy uh taiwan's own position be being her uh but I'm not sure whe the this this criticism is is value or not so um so as I say it's it's very hard it's uh because you know uh some people mention about Cold War I think it's it's uh Mark was talking about cold war in the Cold War It's relatively easy because you you are you know where which Camp you're in right so you just follow this which is really easy uh and the rule is also very clear uh and and the risk is much smaller because you don't you don't have any trade with China uh but now it's very different we are shipping more than 30% of our export of China and tsmc will probably still have 5% or 6% of the revenue was still coming from the part the world and and so you had to manage that risk right this risk will include not only the geopolitical risk uh but some genuine business RS such as technology leage and others uh so so it's become uh very much uh difficult is much difficult for the for the lead of the two cam they are they they they they are treating each other like competitors right they're saying they are comp strategic competitor but for the followers the people countries are lower in the edong of this power structure it's very hard uh they they they they don't know how to how to act so that that's something we really really are groing suppose that's why we're here we're here trying to grope for answers so let me try to just so let let so let me turn the floor over to the audience now I think we so uh I didn't want to do this uh yeah let me just let let me collect two or three questions what don't you go first and then uh and then and then the gentleman in the back and then uh W next hi thank you all I'm Hugh student HKS uh my question is kind of uh regarding this FR Shoring concept and to what extent it can work uh earlier on today we've talked about kind of this proliferation of incentive packages that kind of kicked off after uh the US passed the the chips act um and you see that in places like Japan the EU uh you know maybe India Vietnam really a quite a wide range of countries and growing are trying to get in on this um some of these would you know naturally fall under kind of typical definitions of friend Shoring friends and friend Shoring and others maybe less so I think you know as broad as like Hungary and and usbekistan them also are in the mix of countries trying to pass policies and I kind of guess from like my question is from an economic perspective it seems like there's a very high chance that these incentives are going to be at best kind of redundant where you have a lot of different governments Maybe approaching at kind of like a zero sum problem trying to take you know a you know claim share uh of of this kind of boom and interest and semiconductors I'm curious if one you would agree with that characterization and two if so what would be a good strategy or a good kind of forum to try to do a little bit more proactive coordination uh to to avoid these kind of like zero sum Dynamics more questions thank you for an absolutely terrific uh panel uh I'm Bill Kirby I teach in the business school on this side and on Chinese history on this side and some years ago I wrote a study of Chinese industrial policy at least of 20th century industrial policy can argue really began in a serious way with sunen the the Shad J of 19 21 which was absolute gospel for the guong uh in the 1920s and the 1930s and the 1940s and the 1950s and Beyond because it would be read in every government office uh through that uh but to make the point that when you think of industrial policy and its long history in China in different ways but in the 20th century really beginning in that way one of the unique things about Taiwan is that it inherits a national industrial bureaucracy on a small island it's not a it isn't just Taiwan being a small island the nationalists developed this industrial bureaucracy they sent their best young Engineers to Germany in the 1930s they studied in the United States including at places like RCA in the 1940s under Glenn Lee and then of course these people in a kind of an interesting little footnote to the you know China the The ROC the Republic of China sent many of its best young engineers an economist to Taiwan in 1946 to begin to build up the post-war economy because Taiwan was to be one of the engines of postwar growth and these people were stuck on Taiwan when the mainland fell they didn't go with Jang Jer uh they were just stuck there and they became the center of this extraordinary uh industrial bureaucracy but a key Point here is when if you know the political history of this this is a policy that begins under a highly authoritarian governments it's not there it's not a matter of public consensus building uh for uh and but a great belief in that Science and Technology will build a modern China and that you listen to the people who actually know something about it that was one thing that distinguish JN kek from maong uh in the 50s and Beyond but then of course Taiwan as we said 1987 becomes a democracy and I remember when I was doing this project decades ago I interviewed liuing uh uh right when martial law was ending so the one of the great planners of Taiwan and he said to me Mr Kirby if you remember nothing else remember this democracy will not be good for the economy and it will not be good for industrial policy now there's an interesting point here he is at the same moment that tsmc is being founded and of course I had no idea what was going on uh with TMC or what it would become and we see this today as one of the great Virtues Of post 1987 or at least of earlier and then after 1987 industrial policy but certainly a big question that you've addressed a little bit uh here is you know is its success really a result primarily of industrial policy or is it the remarkable combination of you know a foundation of industrial policy and extraordinary entrepreneurship in business sense and Engineering sense you know I take I would take the moris Chong argument you know he was a Harvard freshman so we take credit for him um think I thought MIT likes to take credit for him they just he was a Harvard freshman and he wanted to be an English major and when he told his father at Christmas time that I I want he wanted to be an English major his father forced him to transfer down the river to get a real education what can I say but it is one of these things you know you have industrial policies and it's not perfectly replicable you know smic is an attempt to plagiarize tsmc you you start an industrial Zone you recruit somebody who with a surname Jong who's from Texas Instruments you do everything they did and it doesn't work um in in this in the same way so here we are now looking ahead in a a more complex is China is Roc industrial policy still vibrant is tsmc the outlier as opposed to you know the one extraordinary success story and is there still are there still legs to taiwan's Industrial policy going forward this is the grip let let me just uh just uh use my position as the moderator and let me turn that question now just let me turn it to uh to shintai who was Central to this process so he was in charge uh at at the time so can you just talk about Bill Kirby's question didn't study the whole history of you know the taiwan's KT went to came to Taiwan and uh but that they really build a foundation for the base of uh technology development that's true um so I I think but I don't know whether that is really um just against the Democracy okay um I think there are very smart people uh for all this uh uh technocrat what they called is they are basically Science and Technology engineer based uh government officer uh rather than now mostly uh uh political or uh law uh type of uh um experience I think that make a difference no I'm I'm [Laughter] optimistic um so uh they were an engineer with science they are facing the problem they are really particular engineering training is to solve the problem okay not to create the problem that's my understanding so when we know uh what we can do as an engineer we will try very hard to solve it so as long as we have some kind of uh blueprint for growth for the fut I think that when we when we started as a young engineer um in 1970 mid 1970 1976 up to about 1994 okay so that about 20 years of development is really remarkable so you have a reward even today that people still uh enjoy the re uh fast growing and also the uh build the foundation of technology for the future growth I think that's uh important yeah all right weni my apologies thank you um so a a South Korean uh Member of Parliament who is formerly uh in in the government uh remarked that uh it is a lot for the US to ask their allies to implement America First policy um especially when the economic interests may not be entirely aligned um so on that obviously chips 4 uh Alliance um and so I am curious right when it comes to Taiwan we know there is a government the ruling party that is viewed as uh more close to the US uh and so in your uh from your point of view if it was a different government ruling party uh do you think you know we're still seeing what we're seeing today and uh a follow-up question um let's say 2024 presidential election um as the polling shows is it still will be looks likely uh the DPP in government however if it's a different ruling party um do we have to think about different possibilities right turn to the two of you okay I think I can answer wi Jin's question if if it's it's a different party in charge today uh like I I think this tsmc thing happened in 20 18 I think decision was made in 2018 but the the American approach was coming around 16 or 17 early in the Trump Administration I think it would be more difficult for kmt if they were in power to handle it because their relationship with China is better uh but I don't think the result will be different it'll be the same yeah so for that your second question is also the same I I don't think the policy will be changed uh it's the fundamental sort of national security problem for Taiwan so you don't have a choice as you know Professor n was just telling us this is something above everything there you you have to to do it so it doesn't matter who is who is going to be power uh some politicians particularly from the opposition party is is saying that you don't have the cave in that much or you have to POS a question mark when us ask you to do something that's probably that's probably it uh but the fundamental relationship won't won't change yeah I can also comment on the French Shoring thing I think that's a very important question for me it's it's I I believe that Morris will say something when he has a dialogue with Chris Meer in Taiwan and he was saying that the US even don't treat Taiwan as a friend uh in in this chip situation so it's very difficult in the in in business is easy to to find a friend and not a friend right uh people you trust will be a friend if the company you don't trust they won't be a friend uh so therefore you your business deal with with a trusty worthy partner will be will be different in Japan you even have people you can trust for a long time and people you don't trust uh but when when when when the friend is defined by politics uh and then you try to apply the principle in business deal I guess is very difficult uh because politics can always change and some country they they have they have separation of this political relationship and economic relationship they try to distinguish the two uh the many country have this policy particular when we talk about how they treat China commercially so so it's I guess this principle this principle is very hard to put in practice that's that's my question so I I think we should really come back to sort of the risking although that also very ambiguous but this you're saying that we diversify right uh the business principle is always you diversify in order to reduce risk and that that is accept acceptable and and where are we going to diversify then you can choose the one that you really trust most right and therefore you diversify there first something like that will probably work yeah Ian I think the the only things I would add I mean on friend Shoring but I think what we're going to see and what we do see is for many entrepreneurs and those who do have that sort of entrepreneurial spirit is very much an opportunity to say I'm basically going to engage in Forum Shopping and and to sort of look and see where I can find some of the best deals and opportunities and certainly what we when I engage with the entrepreneurial community that would be the advice I would give them but also that we we we're now asking individuals who used to sort of say well you know my job is to kind of be entrepreneurial and take Innovations to Market to actually be born geopolitically Savvy and so it actually means that our students need to go backwards and forwards across the river between the business school and the Kennedy School up and down the river with the technology in a in a way that I think is completely different uh than it used to be um I I think at a political level we are seeing these different coalitions forming and at least interestingly to my mind we're seeing some of them when it comes to Who Do We Trust at the political level forming around some very new alliances but some old and established ones you know I think about orcus five eyes NATO and some of the sort of architecture of alliances and relationships that have traditionally been really about defense and security becom the scaffolding for more of the industrial conversations and I think that's a big a big shift and the last thing I'd say bill mean I think you're the the sort of History I I um now I'm going to go off back to Amazon and find and I presume your book is about this big and so let's hope it's electronic but I would say that as I sort of reflect on some of what you've said I mean the countries were I think things that we would call industrial policy that have been successful and I you know mentioned obviously Taiwan Israel Singapore you know have all had characteristics of being somewhat authorit Arian for a whole variety of reasons or at least will coordinate because of a deep sense of urgency and sort of National Security and National Mission so I think that that is often what will hold these things together while uh the deeply entrepreneurial communities are doing their thing and it provides a sense of urgency and Direction and I don't think that those conditions exist very very frequently though I do think we're seeing some interesting new experiments in places like Denmark and Sweden where there a governments that are not predisposed to Industrial policy but we're seeing powerful other forces like the wealthy foundations wealthy families stepping in and providing some of that interesting coordinating role against a backdrop of every very different sort of government system and so whether that will be relevant I'm not sure but I think we're seeing other versions of this trying to to kind of come to the full but more questions uh let me take John first thank you for such a wonderful discussion um I came to this Symposium with a simple quest to understand why is it so hard to have a very clear success definition in any public policy especially industrial policy so it was very clear during the the lunch uh presentation that as you put it Fiona is a gra bag of things everything from Community College to to uh uh kind of a market adoption the list goes on on on and I've been listening to the uh the interactions and I'm I'm caught in this uh uh very difficult dilemma because it sounded like in Democratic process it's very difficult to come to a consensus where you have a very clear cap I as Engineers would put it you have a design criteria and you just go for it and and you know when you're there because you defined it and you know if you missed the Target because you're not there so so how do we how do we um how do we bring the two together well we are at H Candy School I'm still confused I think I I think t pointed out very clearly that when you look at the the chips act it's ve it's almost like you have a bipolar you want one thing and then something you want maybe that's the I mean so maybe we have to accept the fact that most policies have a sort of multi-stakeholder and thus they're like a raw shap block that basically everybody who has a voice has to see something for themselves and so I would say particularly in these systems which makes them likely to be quite incoherent very frustrating and for people who you know want to see a specific outcome they're just not going to see that and so you know whether we can find the core rationale and some core metrics while everything else is noise I think is actually what a good policy looks like and I wouldn't wouldn't see that here so let me give you two examples of of of things that I I have seen that that that has that that that has worked and there there's a Common Thread uh behind this so if you think about like 2020 operation with warp speed that is in you know you want to think about it that's in the US industrial policy right we got to develop the co we got to we got to develop a vaccine and you think about what is it that make that distinctive right the vaccine either works or it doesn't work right so there's a very clear there a there's a very very clear objective but even then it's a little bit nuanced because fiser chose not to take part of it right and they were actually the first they were the first the other example that I've seen is what I see local governments in the US do what local governments in the US do in terms of bidding for large projects so I can't say that much more about it but I was involved in the bidding not not not involved in the bidding but I did a little bit of work with the Virginia Economic Development board when they were putting together the bid for Amazon that's all I can say uh about it but the thing that really struck me about it was that it was a very clear metric Amazon either came or it didn't right it either came so there wasn't any of this develop industrial clusters what the hell is a cluster got all but you know there was a very so it's really about the the the things that work and and these guys you know in that in that body they were all focused about winning the bid and actually for those of you who are here they all thought that Boston was the main competitor uh the the the the main competitor so they're they were all trying to outthink Boston uh but see that that was the thing they were all it it and we say that's that's the key thing right and then you can say well maybe the political system doesn't deliver that which is right I think but then you also got to then you also got to accept if that's the case you're not likely to accomplish anything I mean that's that's just uh that's you know that's the tradeoff right right thank you so much for the panel um I'm Justin I'm a JD PhD student at HKS and hls uh my question is focused I guess for Professor Murray you mentioned that um your advice on technological uh techn technology sovereignty like can you elaborate a bit more what that what does that mean like instinctively that word makes sense but then does that mean like the factories are in your country does that mean tsmc is building factories in the US does it mean that someone from your country owns the patent or like is the perhaps CEO of the company uh I think one illustrating example was talking about arm like who owns it now like does is that a sovereignty story for the UK or um yeah how how do you see this well so I think traditionally when we've thought about sovereignty we have literally thought about you know a Sovereign Nation having control but I think there's point that is that increasingly the technological landscape is and has been something that crosses you know complex Supply chains complex value chains what that comes to mean for particular countries and particularly smaller countries is having sort of control over one's Destiny which means having a seat at the table so that you can because you have something to play in you can get some of the things that you want from the other people who are part of that value Network let me use that word instead um so I think for smaller countries and and frankly for the us as well there's there's a real deep understanding that we can't do everything and so the only thing we can hope to do is have a coalition amongst our trusted allies to be able to develop things or to have something that's a sufficient card to give us that seat at the table and and you see this in a number of areas and I think about this in the National Security space you know if you have the extraordinary capacity and say cryptography then you know people will talk to you even if you don't have the biggest computers in the world right so it it's things like that so I think we've had to expand our definition to perhaps think about sovereignty among allies so it's the collections and coalitions and the scaffolding of that that becomes I think the discussion and one of the things I think has made this current debate around semiconductors difficult is that I do think that the technical frame is or the frame of the policy maker is that the US can control everything which I think just ignores the technical reality that all the engineers know which is that there are so many different inputs and in fact that this often also goes against some of how we think about um the monopolies right and and anti competitiveness so we've had opportunities to buy some of these companies and the US has said no because it's anticompetitive and so we also have a lot of contradictory policies that that sort of get in the way um For Better or For Worse and so I think um and that comes back back to this point about you know is there a narrow goal I think these narrow goals happen when you have very narrow things you're trying to accomplish you can get a kpi the only other policies that I think can be effectively measured and monitored are things that are trying to create for example the broader conditions for so specific policy interventions in the price of filing a patent for firsttime inventors will give you you know whether you've succeeded but that's a sort of a a policy that's trying to level up all boats right and so I think the kind of intermediate industrial polici is extremely hard to measure and becomes basically I think a mess which doesn't really have a sort of an intellectual Foundation to hold it together we have one more minute uh T you got this this industrial Professor Kirby also mentioned the leing was saying that in democracy you probably don't expect industrial policy to work or or people will no longer demand that but surprisingly this industrial Pro continue to be demanded uh in our experience uh but it may not work as well because of course you face a lot more constraints compared to the authoritarian regime right and it's very typical industrial policy can carry multiple objective because it's been demanded by different constituents or policy makers try to satisfy different group of people by single policy like what the US chips Act is not doing today so it's like a Christmas tree you want to put a lot of different kind of decoration on there and then my I don't know my assessment is when you have a crisis like Co right your objective is very clearcut is very this this thing is dominating uh so you try to do something and you have a consensus and and it's more likely going to work uh but when you have multiple purpose kind of industrial policy it usually won't work because it's very hard to and it probably also mean that the thing you are doing are not really serious you you not in a state of Crisis or sort of thing that's why you have a kind of policy which carry so many different purposes at one time so it's more kind of political uh and Benin political Christmas tree yeah that's right okay thank you so much and thank you to the two pist thank you terrific so before we depart uh I want you to help me do two things uh one is I want to help basically want to thank several people uh our colleagues Laura Danielle uh Gina Sarah Melissa and Hugh who all made this happen so number one please help me in thanking them well done also to National chingua University of course right the president uh John who's here uh also wangong and the foundation who supported all this who's in the back right now uh please help join me in thanking them uh lastly our lovely speakers and chairs without them none of this would have been very interesting so please so thank you particular the last [Applause] group and it's been a long day quite interesting day there's only thing one thing that I'm going to do I'm going to flip what we usually do at conferences and rather than try to encapsulate all the gems of of knowledge and insights I'm going to steal what we do from Executive Education so you're all now Executive Education participants it was a good price you're not paying the usual ridiculously inflated fee although I shouldn't this is being recorded so I shouldn't say that um and we often what we do at the end of these programs is we say all right we spent a lot of time together and for those people who enjoy reading um uh effectively the the tales and Adventures of Sherlock Holmes any who who knows Sherlock Holmes Sherlock Holmes the inspector right so most of us know so there's a great story about Silver Blaze who's this Amazing Horse and the horse disappears and there's a big mystery what what happened to the horse and all of a sudden who in sweeps um Sherlock Holmes and just figures out what happened and one of the key points that I love in that particular story is he said most people listen to the dogs that bark but I listen to for the dogs that do not bark and there was the the dog that night was not barking meaning it knew the person who came and took the horse so what we often ask are two questions one is what have you heard heard right dogs that bark what have you heard today that surprised you that you didn't know or at least changed the way you think question number one question number two dogs that don't bark is there anything that we didn't talk about there's only one day there's only four panels and a lunch speaker that you expected to hear that you um were surprised by that we didn't cover that we should have covered I can't cover everything but it' be helpful particularly as we start to think about building this a larger research program uh that in includes other centers here maybe even some of our compatriot MIT um in the long run so what did you hear that surprised you anyone and what did you not hear and that absence surprised you any thoughts yes Paul yep thanks Paul yeah I think that that did come loud and clear um but you can take that to the to the to the policy level which is and this is something part of the project we're now trying to Envision which is to what extent can US policy take into consideration the range of different interests in Asia Pacific on just Taiwan but other allies and other uh Powers particularly when their own interests sometimes are not aligned right so so that's critical anything else yes David sure yeah I think that was sort of chai's I think assumption right was let them run themselves into a hole right yeah that's right yes great well you can see that I mean what I always say when you look at any report to some extent and you and and I I there's wonderful reports about top 10 economies particularly in the sort of 1990s to the 2000s and I always used to say I used to use it in international trade teaching and and Korea was often number 10 and would drop down and come back up and i' say really it depends on who pays so the Koreans would often pay just make that never so I think in some ways of course here given the delegation obviously Taiwan was a was a major Focus but I think you're right certainly is a whole another which we have a lot of depth in of course in terms of the Mainland that could have could have come in um f do you want to say something on that no I heard you okay any other points thanks David yes burn closer as you mentioned we had a lot of gems How would would this change be transferred to the government any other points so this about translating basically recommendations to government any other points before we depart yeah John I can give you I've been hearing the word allies and sovereignty and friends and and people working together but as you know without the topic of semiconductor I don't think a lot of spotlights would be on Taiwan for for many obvious reasons so so speaking not on behalf of the 27,000 uh 20 um citizen on the island but I just feel these people us we don't have a international voice as a recognizable entity either to be defined as a friend or Allied or or Partners so so one thing I really would like this follow on discussion to continue is in terms of foreign policies and in terms of you know where does Taiwan sit in the international landscape is it a friend is it a casual friend is it you know what kind of friend yeah that's that came up a few times as an anal yeah that's right you can't say it I can say it that's right that's right the range of relationships these days gets very complicated I look at my younger cousins for example um yes in the back yeah Paul yeah thank you I I actually work in an autonomous vehicle company so what I heard a lot which is really great is that semiconductors are important and everybody wants to gain that capability and I agree with the other Paul very touching to see the real story of tsmc uh what I don't hear I was say is elevant in a room not even just a dog that don't bark what about the users of the semiconductor so a lot of dialogues about the Upstream of the supply chain the governments the people who produce semiconductors as a consumer myself of the semiconductor I don't know what I'm going to get um as a consumer I'm not part of the dialogue so it's almost like the supply chain dialogue of today mostly focus on the Upstream but what about the downstream the consumers Innovation so if the semiconductors completely get softed on the Upstream we lack the ability to innovate and we lack the ability for the consumers to enjoy then what's the purpose of all these thanks Paul I mean and that directly relates to I think what Willie multiple times and then later uh was was repeated the the critical demand side of the equation I think government often particular United States government tends to think about this as I said before big push Tech Supply um the reality is of course to figure out it was easier during the Cold War given the the level and the size of military users right and the and the immediacy of that uh I think to to push Innovation uh and then and then pull it in into uh various products but I think it's much harder you can see even from Ronnie's comments there was not as much discussion around the demand side incentives that exactly what Willie was recommending um it's it's a much longer discussion but I think very very valid anything else yes so we got Michael and then Chong thanks s thank you uh I learned a lot from from today's discussions uh in the National Po in Taiwan American and Japanese are two of the most trusted friends from the Taiwan Taiwanese perspective and yet I was surprised that the uh from today's discussion for the uh uh geopolitics and the uh and chips uh issues we still need a lot of communication between Among The Trusted friends uh from the lon speak uh we understand that the why and the reason behind us want to have a uh chip and science act and from what I my impression is um even a lot thanks Michael I think and then director nishikawa who who stepped out is about to come back I mean that's one of his jobs right in terms of in meti in Japan he's running the trilateral commission so that's certain there's three of the of the friends in the room at least let me just say that there was an episode when Nancy Pelosi visited Taiwan which which really struck me so she was at some dinner or lunch uh and and morang was there and Morris started to complain to this is from the Press rep report started to complain to Nancy p Losi about the about what the US was trying to do with the semiconductors Nancy Pelosi's response is said oh but look at what we're trying to we're doing for you in terms of the chips right and I think that she really believed it I think that she fundamentally believed it so and if I think about the piece that is missing it is that I think it's it's it's is exactly sort of a combination but John and you have said that I think Taiwan has not really used its voice right they haven't to really use their their their voice in terms of and there are many different aspects of this for example in terms of this narrative you hear oh the chip industry in in Taiwan is massively subsidized that's not really true right as can you put it or the other story that you hear a lot is that the semiconductor industry manufacturing industry in the US has declined and that's been a terrible thing for the US and I think the narrative is that look what it's led to is this creation of a brand new industry in the US which is a semiconductor design industry companies like Nvidia would not be here if it hadn't been for tsmc uh Apple would not be able to make its M1 chip and as M2 Chip if it wasn't be for so to also just tell sort of what the contribution has been and then the third piece of it is that if you don't if you don't think that what the what the chips is trying to do is good for you then you should speak up at least privately just say hey among friends if you are my friend this is not cool right I mean it it may have no it may have no if it it may have no effect but if you're not going to speak up then who then who will right so it leads to people like Nancy Pelosi believing that what what what Congress has done is great for Ty one all right so burn you want to have one did you one last yeah I'm G end on it well I think Morris this speak up yes yeah he been the only one yes the problem is that is the government the people who were supposed to have a voice they didn't speak up but okay the the people got affected if I were there I would speak up too Tony uh I just wanted to mention one very important dog that didn't bark in your comments Edward and that is uh we really owe a huge vote of thanks to Edward his energy his efforts really pulling this together has been tireless effort so thanks very much so