How the U.S. Lost Chip Dominance and How It Can Be Regained

Joe Weisenthal (0:11)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:16)

And I'm Tracy Alloway.

Joe Weisenthal (0:18)

Tracy, remember when I said a few weeks ago that I thought we should do a semiconductor Odd Lots spin-off series?

No, not a series, like a whole new show. The idea was a whole new show on the subject.

Tracy Alloway (0:31)

No, that's not what you said. You said you wanted to transform Odd Lots into a semiconductor podcast.

So this is the latest step in your plan to do that, I assume.

Joe Weisenthal (0:41)

Yeah, so we're not going to do that. And realistically, I don't think we're going to have a new spin-off, Odd Lots branded semiconductor show. But I do think, but we are going to do some more episodes on the topic, because it really does just intersect with a lot of different themes. They're sort of the pure tech question of their role in the economy, why different companies are rising and falling.

But it also intersects with things like national security and sort of economic strength, and some of the questions we've seen during the COVID crisis about say domestic manufacturing and reliance on manufacturing in other countries. So it's a rich load to mine.

Tracy Alloway (1:27)

Yeah, well, I mean, you could go even further. So it kind of gets to, I guess, the heart of a large body of economic thought, right? How do you balance domestic interests with market forces? So when the entire market is telling you to outsource manufacturing to a cheaper place, and they can do it more efficiently, is that the way to go for something as important as a sensitive technology like a semiconductor?

And I think we're seeing those tensions over and over. I think we see them reflected in a lot of US politics and the way people feel at the moment. But, of course, we also see that reflected in the U.S.-China trade war, and technology is really ground zero of that. And within technology, semiconductors are the epicenter of the ground zero. I'm mixing my metaphors, but I think you get it.

Joe Weisenthal (2:17)

The epicenter of the ground zero. No, I get it.

I think you're absolutely right. Like, it's kind of a, it's a business topic, but it intersects with a lot of our favorite macro themes that we discuss all the time. And I think another sort of macro theme is, you know, we talked about it a lot in 2020, but the sort of rethinking the role of the public sector and rethinking the role of government spending, rethinking the role of government investment. And I think that's also, I mean, that's, that was a big topic for us. It's a big topic nationally. I mean, I think, you know, if you look at one of the successes that we've had in this crisis, most people would say the speed with which we were able to develop a vaccine for COVID was in part due to the government investment and Operation Warp Speed, and of course the longstanding investment in pharma.

So there's all kinds of reasons to sort of use this moment as a chance to reconceptualize what is the role of the public sector? How can the public sector spur more innovation, manufacturing, production? So it's a great topic because it hits a lot of Odd Lots themes, I would say.

Tracy Alloway (3:29)

Yeah, that's right. And I think we have seen a proposal in Washington about how to boost domestic semiconductor capabilities. So yes, it hits all the sweet spots. It's something that's happening right now as well. And I think it's gonna be an interesting conversation.

Joe Weisenthal (3:45)

Yeah, I'm really excited about this. Our guest today is a professor of management practice at Harvard Business School, Willy Shih. He writes a lot about the topic, about semiconductors, about manufacturing, US manufacturing in particular, what it takes to make it work. So we're gonna dive into all of these questions with him.

Professor Shih, thank you so much for joining us.

Willy Shih (4:09)

Well, thank you for having me, Joe.

Joe Weisenthal (4:11)

So I'm trying to think like where the best place to start is, but obviously we were talking about Intel, and for a long time, Intel is not just the leader in semiconductors, but the sort of like the vanguard of US tech and tech manufacturing capability. And of course, the story over the last couple of years has been the problems they've run into in manufacturing, also business model questions. But to start, why is it important for a country like the US or a country like China for that matter? But why is it important for a country like the US to have this capability at scale to produce high tech goods such as semiconductors?