national security – Chrysanthemum Marketing

Semiconductors, China and Us

A friend observed that Elon Musk is remaking Central Texas with companies that bore (rock), move (electric trucks), launch (space ships), and link (your brain). And yes, it seems that the South African native opted for this most business-friendly of states over progressive California.

He’s not alone.

South Korea’s Samsung is negotiating a $17 billion expansion of its existing fabrication plant, or fab, Samsung Austin Semiconductor. The new fab will make logic chips, a more profitable product than the memory chips its made here for the past 25 years, and expand the company’s foundry business. Perhaps most important, it will do all of this closer to its U.S. customers.

With a national unemployment rate flirting with 8%, semiconductor manufacturing jobs pay about twice those in the rest of the manufacturing sector, feeding those middle rungs of the pay scale ladder where the middle class lives (or would like to live). Samsung’s new fab, for example, is expected create 1,900 jobs that pay an initial average annual wage of $66,254.

Semiconductors: Technology’s anchor store

Semiconductors, or microchips, are the technology food chain’s anchor store, the building blocks for advanced technologies that will run our factories, manage our cities, develop and deliver our medicine, re-shape education and the workplace, and keep us safe.

Semiconductors are the tiny chips that serve as the brains behind your toaster, your smartphone, all the way to fighter jets and in the very near future, they will serve as the brains behind the innovations of tomorrow such as 5G, quantum computing and artificial intelligence.
U.S. Representative Michael McCaul, ranking member, Foreign Affairs Commitee and Chair, China Task Force

Today about 90% of high-volume, leading-edge integrated circuit production in this made-in-America industry takes place in East Asia –Taiwan, South Korea and the People’s Republic of China. Although the United States remains the market leader in worldwide sales, the pandemic and a testy relationship with China have shaken both U.S. dominance and its confidence in the complicated, globalized supply chain and foreign markets those sales rely on.

There’s always a bit of machismo in dominating an industry, but also a real recognition that the ready availability of semiconductors is essential to both to national security and the future of America’s role in technology. Like sensible parents, microchip companies and policy makers want to bring some of that production closer to home. Of course there is a price to pay. According to the Boston Consulting Group, it will take $50 billion provided over 20 years to raise the United States from its #4 slot to #2 in domestic manufacturing production. Twenty billion will keep us at #4. By way of comparison, China is investing $170 billion in semiconductor independence.

About that global supply chain

The federal government has nurtured the semiconductor industry since its inception. The last time a foreign threat to U.S. dominance appeared, it bankrolled an industry consortium called SEMATECH right here in Austin. To underscore the importance of its mission, members installed no one less than the co-inventor of the microchip as chief executive.

There are those that ague against adopting anything akin to an industrial policy, but consider how integral semiconductors are to the drones, weapon systems and monitoring devices central to our national defense. Then consider the panicked workarounds that would be needed should supplies be disrupted. As if those risk scenarios aren’t enough, the biggest hack in U.S. history, also made here in Austin, was discovered in late December after months of burrowing undetected into the workings of both the public or private sectors. The 2020 Solar Winds Breach was a supply chain hack, perhaps through software maintained in Eastern Europe.

A time for enlightened partnerships

The semiconductor industry has shown a remarkable ability to develop ways to collaborate on common problems. SEMATECH skirted proprietary intellectual property issues and settled on a strategy of solving common manufacturing problems that would result in more efficient, effective manufacturing processes.

Not that supply chain concerns are restricted to the United States. Europe doesn’t want to depend on the United States or Asia. China doesn’t want to depend on the United States, and South Korea doesn’t want to depend on Japan, which doesn’t want to depend on South Korea. So depending on how you look at it, the field is ripe for geopolitical gamesmanship – and enlightened alliances.

As Samsung negotiates its plans in Austin, Taiwan-based TSMC is breaking ground on a $12 billion fab in Phoenix. Both Taiwan and South Korea are U.S. allies; both live in dangerous neighborhoods; both are manufacturing powerhouses, hosting respectively 36 and 24 operating fabs. In addition to its Austin fab, Samsung has six fabs in China and is reportedly repatriating its semiconductor supply chain. It closed its China-based smartphone factories in 2019 over intellectual property concerns.

Semiconductors are the tip of the iceberg.

The federal government is doing its part in maintaining a robust tech sector, its battles with Big Tech aside, passing the 2021 National Defense Authorization Act, thanks to the efforts of Congressman McCaul (R-Tx) and Doris Matsui (D-Ca) in the House, working with Senators John Cornyn (R-Tx) and Mark Warner (D-Va). The NDAA, which still needs to funded by Congress, provides incentives, grants and credits research and development and domestic fab construction.

But semiconductors are only the first rung of a technology food chain that creates industries that in turn create jobs, opportunities and living wages for real people and their kids. With geopolitical gamesmanship the name of the game these days, it’s a good time to look ahead, learn from not only the past and “our most serious competitor.”

Allies and immigrants: We get the job done

Which brings us back to Elon Musk.

Musk’s relationship with China transformed Tesla into a stock market darling and Musk into the world’s richest man. Tesla is a case study in using the anchor store concept to build supply chains. The all-important batteries that power Tesla EVs are made locally by Chinese manufacturers not the Tesla battery factory in Reno, Nevada. The romance may not last, but there’s a lot to learn from it.

Does Elon Musk answer to anyone? Turns out, the answer is yes. Take a look at the language Tesla used in response to the Chinese regulators inquiring about quality issues. In a filing, the company “sincerely accepted the guidance of government departments,” and “deeply reflected on shortcomings.” That’s a far cry from Musk’s belittling the SEC as the “Shortseller Enrichment Commission,” or telling U.S. auto regulators its rules are “anachronistic,” or attacking California health care officials as “unelected and ignorant.” Pretty clear where the power lies these days.
Alan Murray, CEO Daily, Fortune

Tesla’s Gigafactory in Shanghai, built in record time with $1.4 billion low-cost Chinese loan and a $1.6 billion infusion when Covid-19 hit. The factory uses locally-made batteries rather than those from its U.S. plant, building and strengthening the Chinese supply chain for EVs. (photo/dw.com)

A Prayer on September 11

Today, my memories of September 11, 2001, when the world froze and I stood paralyzed as images of people jumping from the Towers repeated and repeated and repeated, are mixed up with memories of other days when time stopped — the deaths of each of my parents, my brother, selling off my dad’s cattle, days that closed one chapter of my life and initiated another, whether I knew it or not.

In the past, I watched landscaping crews saw limbs off of trees where birds were nesting in the spring and early summer. I thought I knew how those hysterical creatures felt as their homes and offspring tumbled to the ground. But 2020 has shown me I didn’t, I couldn’t, watching safely from the ground.

Today, I see images of cataclysm on a Biblical scale — the California fires and melting ice caps, human-induced tragedies, unintended consequences of — let’s call a spade a spade — our greed and ambition. I think of the lives destroyed and the unimaginable suffering of those beautiful lands and the wildlife trapped by fast-moving flames and melting ice.

None of us knows what will follow. Have we learned from our mistakes? I wish I could say, “Yes, absolutely!” But that’s yet to be seen.

So here, on this day, I’m offering a prayer that we rise above our prejudice, greed and hate to preserve what we love and somehow figure out how to move together into a future that honors our best selves.

Are We Learning Anything from China?

China welcomed Tesla’s EV manufacturing innovation and used it to build an EV supply chain. Where is America investing?

Del Valle, Texas, has made a bid for Tesla’s $1 billion electric truck Gigafactory, waiving some $46 million in property taxes over 10 years, with the county kicking in an additional $14 million.

Can you help us get an HEB?
Question from a Del Valle resident to Tesla representatives

The thing about economic development is that, in Texas at least, communities bid with the property taxes that pay for public health and kids’ educations. Del Valle, a stone’s throw from Austin and its Bergstrom International Airport, is chronically underserved. It has neither a permanent medical clinic nor a hospital. At a recent community meeting, a school board official’s question to Tesla representatives was, “Can you help us get an HEB?,” HEB being the the state’s flagship grocery store.

Proposed land for the Tesla Gigafactory in Del Valle, Texas. Courtesy of Michael Minasi/KUT

Innovation, riding the crest of Chinese investment

Any relationship is a risk. Not too long ago Tesla, in need of cash, made a similar gamble with China. Tesla agreed to pay $323 million a year in taxes, accept a $1.6 billion state loan, and source 30% of its parts locally (100% by the end 2020) to open a Gigafactory in Shanghai, the first foreign automobile company not required to share profits and technology with a local company.

The deal paid off handsomely. Tesla’s second-quarter earnings moved into the black, the stock’s value quadrupled to $1,790 per share, and Elon Musk’s personal wealth pushed past Warren Buffet’s.

But then Tesla fit neatly into the guiding principle of China’s “Made in China 2025” strategy: “innovation-driven, quality first, green development, structural optimization, and talent-based.” And since Tesla sources parts locally, China builds an in-country supply chain for manufacturing electric vehicles.

Looking for a mask? All roads lead to China

That’s EVs, now consider medical supplies. If you’re wondering why American doctors are re-using their masks, read Keith Bradsher’s reporting in The New York Times. In three years’ time, China has dominated the market in medical devices and supplies by investing heavily in companies that make those things and requiring hospitals to source locally. Bradsher, chief of the Times‘ Shanghai bureau, quotes an LA-based entrepreneur who decided to manufacture masks and hand sanitizer, only to discover the machines that make masks and the plastic bottles that dispense hand sanitizer are only made in China.

Investing in the future, locally

In the next 10 years, Deloitte and the Manufacturing Institute estimate U.S. manufacturers will be short some 2 million skilled manufacturing workers. The starting salary for an entry level Del Valle Gigafactory worker with a high school diploma would be $36,000, about 55% of a living wage in Austin. But those jobs could conceivably propel workers into more skilled, advanced manufacturing roles with double the salary, in a market market hungry for those skills.

A model of a Tesla Cybertruck model. American innovation has depended on private investment and state and local economic development initiatives.

To fill the pipeline, local Austin-based manufacturers and the Army Future Command are collaborating with the Austin Community College to build an advanced manufacturing incubator that would offer hands-on experience and apprenticeships. As an EV manufacturer, Tesla could play a major role in mentoring the community in those very sectors that matter so much to the Chinese government: “innovation-driven, quality first, green development, structural optimization, talent-based” manufacturing.

Some signs of investment at the federal level

These are important but local initiatives. The larger question is whether we as a country are learning anything from China’s passion for investing in the technologies that will shape the future — advanced manufacturing, artificial intelligence, 5G, semiconductors.

Take semiconductors, technology that beats at the heart of all things digital. The U.S. semiconductor supply chain is complex and global. Fabrication and assembly are mostly off shored. A bipartisan bill proposed this month would offer matching grants to chip manufacturers willing to build domestic fabs, a line item of some 20 billion for a state-of-the-art facility. Two of the bill’s sponsors are incumbent Texas’ politicians, both ranking members in their respective chambers and both up for re-election this year. In the Senate, John Cornyn (R-TX) is working with Mark Warner (D-VA), vice chair of the Senate Intelligence Committee; in the House, Michael McCaul (R-TX) is working with Doris Matsui (D-CA). China meanwhile, seeing the writing on the wall, is investing huge sums in building domestic semiconductor manufacturing capabilities. The jury is out on the feasiblity of such an initiative but then again, China is a country with a history of moving mountains.

Texas and Austin, of course, were once the site of the semiconductor consortium SEMATECH at a time when Japan threatened American dominance in that seminal industry. In the end, the state withdrew funding, SEMATECH moved north and is no more. So much for long-term vision.

In this mercurial world, it pays to pay attention, particularly to our own hubris. Texas has always been a destination for risk-takers. Hopefully we’ll take the right risks, and Del Valle will finally get its HEB.

The Pandemic, Jobs and Human Dignity

Magical thinking gets us through what seems unendurable — grief, pandemics, subjugation, airplane flights. But now is not the time for it. We need to be sharp and practical to build the future we want for our ourselves and our country.

When the shelter-in-place-order hit, lacking medical skills, I pitched in to help with the collateral damage — an avalanche of unemployment applications. The experience has given me a catbird’s seat on the future of the job market here in Texas, home of the Texas Miracle, and it is not a rosy picture.

In Texas, jobless claims top 2.3 million

I’ve been without work more than once, and I can assure you it is no fun. Take away the job, the income, the camaraderie (even when it drives you nuts) and what’s left? Those of us lucky enough to have an education, skillset and professional network will probably be okay. Otherwise, we’re in trouble.

I’ve sorted applications from oil workers in south and west Texas, Louisiana, and New Mexico; substitute teachers, restaurant and fast food workers, millwrights, puppeteers, musicians, pipeline consultants and business process engineers, cosmetologists, travel agents, dentists and their hygienists, retailers, financial planners and anesthesiologists. Their names have the ring of Africa, China, Vietnam, Japan, the Middle East, Mexico, Latin America, rural Texas, the Ukraine and Poland.

“I work for pennies, not hours”

Early on, I opened an application with a handwritten note. Written in block letters by a deck hand on a shrimp boat, it said,”I work for pennies, not hours.” There was no self-pity, just the facts from a man with four kids and a third-grade education. A laborer from Donna, Texas, was out of work because he unloads onions from Mexico. Take away the trucks, and there is no job. The pandemic anticipates his future. As autonomous driving and robotic technology develops there will be no need for him.

Consider a 30-year old former Lyft driver with a wife and a four-year old son. When we met in April, he was taking three classes towards a career in cyber security without really understanding what working in the field would entail. He worked 10-hour days, six days a week while taking three classes, found he couldn’t pay his rent, became discouraged and dropped out of school.

Accessible, hands-on approaches with a global outlook

Disasters crack open change, and the pandemic may very well re-shape education to address reality. Instead of competing to get into a high-cost university to realize her dream to become a veterinarian, my friend Cherie’s daughter enrolled at Blinn College where after a couple of years, she’ll be able to transfer seamlessly into Texas A&M University and enroll in one of the best veterinarian training programs in the country.

Austin Community College will soon have four incubators where students get hands-on experience in their future careers. Bioscience, gives students access to a wet lab, which until recently was hard to find in Central Texas. The Fashion incubator features a huge 3D printer for designers and makers, and Entrepreneurship jump starts budding small businesses, something we’ll need in coming months.

A fourth, advanced manufacturing, will train students to use the sophisticated design equipment and processes that produce semiconductors for the factory and consumer of the future, chips that will take advantage of 5G and the Internet of Things. Graduates will be qualified to fill well-paying, high-demand openings at local employers Samsung, Advanced Micro and AMD.

Widening the lens to see the world

Even more remarkable may be an award-winning project at Del Valle High School, a chronically underserved community in the shadow of the Austin Bergstrom Airport.

Using Zoom and a partnership with the World Affairs Council of Austin, the Global Scholars Diploma program connects students with policy experts around the world to explore racism, immigration, climate change, global infections — issues that will shape their future. At left, these young women welcomed me when I visited to watch a regularly-scheduled moot court session with University of Texas law students.

Del Valle and Mike Cunningham are not taking a traditional approach to education. Working on a shoestring budget and leveraging local resources, the program teaches its students to think. It encourages debate, tests opinions, builds confidence and the patience to listen to other views. It nurtures participation, an understanding that the world is bigger than our own backyard, and a sense of a human responsibility that transcends the day-to-day.

Nurturing human dignity

Among Yuval Harari’s many provocative writings is a statement that humans have evolved too quickly to develop the dignity shown by the large predators of the past, who both ruled and served.

Needless to say, we’re not doing a very good job on the dignity front. We murder one another in the name of law enforcement. We brutalize the wildlife that shares the planet with us in the name of “sport.” We deport sick young immigrants who have contracted Covid-19 while in federal detention, transmitting the virus to their home countries.

Dignity is a big concept on which everything we call civilization turns. Our sense of human dignity determines our self respect, which in turn determines how we treat one another, the planet we rely on, and the beings we share it with. It’s difficult if not impossible to maintain our dignity if we lack the training or education to get a job that supports our children, if we’re too sick or obese to endure a full day’s work, or if other people look down on us because we can’t communicate effectively.

Education will not address all of our problems. But it is part of the baseline. Our world is trending in a direction that reflects more of the East and less of the West that defined the last century. If we are going to change direction, this is a moment of full of possibility. Just recognizing the opportunity and working towards a better future would be a fine thing. Because if we don’t do it, who will?

If We Know So Much, Why Don’t We Do Something?

An old book of Texas history, pulled from storage during the Covid-19 shutdown, reminds us of the optimism that marked the start of the 20th century, in stark contrast to our fears for the 21st.

A young activist writer living in Austin, Texas, is inspired by a charismatic politician. He writes a successful novel, secures a good job close to the halls of power and passionately supports liberal causes. A global crisis breaks out. He volunteers to help, is exposed to an untreatable virus, and dies at the age of 33.

The writer is Sinclair Moreland; the year, 1918. The virus was the so-called Spanish Flu. I pulled his book, The Noblest Roman, a tale of idealism in the face of corporate greed and political corruption, from a box I stored a decade ago in preparation for — now?

Sinclair Moreland wrote The Noblest Roman as a testimony to “civic morality.”

When Moreland wrote The Noblest Roman, the world must have seemed full of possibilities. The Spindletop gusher of 1901 remade the oil industry in the image of Texas. Progressives took the reins of power and used a tax on oil production to create the state’s educational and transportation systems. They battled big business, reformed the prisons and passed laws to protect food safety and regulate lobbying. They created the Texas State Historical Society where Moreland became the archivist.

The corporate villain of the time was Ohio-based Standard Oil, the first company to master both vertical and horizontal integration and own its supply chain. Feared and disliked by competitors for its questionable business practices, Standard Oil built a loyal consumer base by keeping its practices low. The company’s CEO, John D. Rockefeller was the world’s richest man. Sound familiar?

The year after Moreland published The Noblest Roman, The Supreme Court split Standard Oil into 34 separate companies, one of which became Exxon-Mobil. The stage was set for what The New York Times columnist Thomas Friedman calls “the next train coming down the tracks,” climate change.

So goes the arc of history. Last week, six new Guggenheim Fellows were announced. Among them is Jeff Goodell, who like Moreland, lives here in Austin. But while Moreland paints an ideal of political leadership, Goodell’s award-winning The Water Will Come mourns its absence in the face of rapidly-rising sea levels, and the inevitable associated destruction and mass migration.

“Sea-level rise is like aging. You can’t stop it. You can only do better or worse, ” Goodell quotes an expert in The Water Will Come.

And while Moreland’s subject was bounded by Oklahoma, Louisiana and New Mexico, Goodell’s is global, differentiated only by economic disparity and whether there is too much or not enough water.

“Nature is going to win. Nobody wins with water. Think about the Grand Canyon.”
Jeff Goodell

In 1917, the year before his death in the flu pandemic, Moreland wrote a second book, The Texas Women’s Hall of Fame, dedicated to the women of Texas for whom “social caste has no place” and who maintain a “vital interest in … clean streets, better factory conditions, child and animal protection, higher moral standards, public health, social justice and decent government.” With that in mind, I pass on the brilliant Arundhati Roy’s thoughts for our preset time:

Historically, pandemics have forced humans to break with the past and imagine their world anew. This one is no different. It is a portal, a gateway between one world and the next. We can choose to walk through it, dragging the carcasses of our prejudice and hatred, our avarice, our data banks and dead ideas, our dead rivers and smoky skies behind us. Or we can walk through lightly, with little luggage, ready to imagine another world. And ready to fight for it.
Arundhati Roy, writing in The Financial Times

Observations Made During a Search for Provisions, Day 7 of the Covid-19 Pandemic

Is insatiable hunger a symptom of Covid-19?

Everyone is talking about how things will be. How will they be? I have no idea. What I do know is that people are afraid, which makes them very hungry. Some also feel the need to explain why they’re not following the usual courtesies. Some observations made today, Day 7 of the pandemic:

A man scanning the empty aisles of our largest neighborhood grocery store, “I guess I better come early in the morning. They clear the shelves by afternoon.” Indeed, all the raisins are gone. Ditto the Goya beans, my favorite. Ah! I snag a box of golden raisins, pushed to the back of the bottom shelf. Who are “they,” I wonder, and where are “they” putting all of this food?

Is insatiable hunger a symptom of Covid-19? (Lauren Canterberry/Community Impact Newspaper)

Pet food, fully stocked. Should I worry about the cats and dogs? My staple Earl Grey tea, all brands. Gone. And I thought I was surrounded by coffee drinkers.

The checker at the same grocery store. He’s about 18. I try to make him laugh by asking where all the groceries were going. I get a smile as he shakes his head. “I don’t know. Don’t they know things go bad?” Together we wonder when we’ll all settle down, perhaps to a very large shared meal with lots of beans and raisins.

A woman opening the door of the UPS Store with her elbow as I approach sheltered behind a 36-in by 36-in box (the lamp my sister has rejected which I couldn’t return to the store which had closed overnight from the day I called to see if they were open): “I’d open the door for you except for this coronavirus thing.” The door closes just as I reach it. I’m impressed that she explains her actions to me.

Is it time to shop online? Should I worry about the environmental implications of paying Amazon Prime $13/month to bring me tea and raisins instantaneously? What about all those young delivery people who have no health insurance? Perhaps a victory garden in the flower pots on my balcony would work.

Like Scarlet O’Hara, I vow to think about it, not tomorrow, but next week when I run out of greens.

Take care. Be safe, and yes, if at all possible, stay home.

Building the 5G Wall: What Do We Want to Become?

The Defense Innovation Board report on 5G is a warning that the U.S. is headed down a path of isolation that with disastrous economic and moral implications.

A super-fast national Internet exclusively for urban America? That’s the scenario that comes to mind in reading the Defense Innovation Board‘s report on 5G, the next generation of super-fast wireless communication. Written by technology’s A-List, it outlines a trajectory that separates cities from rural areas, the have’s from the have-not’s and the United States from the rest of the world in a “post-Western wireless ecosystem.”

“The leader in 5G stands to gain hundreds of billions of dollars in revenue over the next decade, with widespread job creation across the wireless technology sector. 5G has the potential to revolutionize other industries as well … The country that owns 5G will own many of these innovations and set standards for the rest of the world…
That country is currently not likely to be the United States.”
“The 5G Ecosystem: Risks & Opportunities for DoD,” Defense Innovation Board

(L to R) Mark Sirangelo, Milo Medin, Jennifer Pahlka, Eric Lander, Marne Levine, Eric Schmidt, J. Michael McQuade, Missy Cummings, Richard Murray, and Adam Grant. (DOD/Lisa Ferdinando)

Chaired by former Alphabet Chairman Eric Schmidt, the Board was commissioned by former Secretary of Defense Ash Carter to make recommendations to the Dept. of Defense on the next wave of innovation.

I recommend the 30-page document itself, but if you’re pressed for time, try Dr. Lee, Physic Genius’ more entertaining version though, disclosure, despite some inquiries, I have no idea who Dr. Lee is.

A technical approach that deepens divisions

In the United States, the Federal Communications Commission allocates the electromagnetic spectrum. Most current 5G development is in the “sub-6” range. But in the United States, the military owns that portion of the spectrum. So the FCC made a higher-band width known as “mmWave” available for commercial development, which is where Verizon and AT&T are developing their 5G offerings.

Only two other countries currently support mmWave for 5G. Both of these countries are now U.S. allies — Japan and South Korea — and both are using a dual strategy, developing both the sub-6 and mmWave ranges.

U.S. policy makers and suppliers hope mmWave will eventually become the global standard, but as the Defense Innovation Board report makes clear, it’s not a strategy to hang your hat on. MmWave transmissions are more powerful but shorter and blocked by solid barriers — walls, trees, even people. Providing comprehensive service will require what the report labels a “massive infrastructure build-out” ($$$). If and when that is successful, mmWave service may not be viable for rural areas, where reliable connectivity is a literally a lifeline.

Consider that despite diplomatic tensions with China, Canada recently signed a contract with Huawei to deliver 4G LTE to rural communities in the Arctic, remote areas of north-eastern Quebec and Newfoundland and Labrador and according to Huawei, some 25 communities in the largely Inuit areas of the Nunavut territory.

Own the IP; own the industry

No American company makes the base station equipment to transmit 5G signals. The United States owned the majority of 4G-related standards-essential patents. But today over one-third, (34%) of worldwide standards-essential patents for 5G technology are owned by Chinese companies, 15% by Huawei alone, according to Asia Nikkei News. South Korea is second, with over 25% of standard-essential patents.

That will make building the network infrastructure for autonomous cars or next generation factories more expensive for U.S. companies. But owning the intellectual property will reduce costs and accelerate China’s building the infrastructure of the future.

Huawei has signed 50 contracts to provide next-generation 5G networks to 30 countries including Italy and the United Kingdom.

We damn the consequences at our peril

Were the United States to decide to compete with the rest of the world, the Board’s report provides a timeline. Sharing the sub-6 spectrum will take five years, and the Board considers a sharing spectrum a viable alternative. Clearing the spectrum would take 10 years. This would get us to the starting gate — if the federal government were to open up the sub-6 range. And that’s a big “if” in this political environment.

“Damn the consequences!”
General George Patton

The consequences of isolation are immeasurable. Beyond the obvious — American competitiveness, jobs, standard of life, education, opportunity — connectivity is the root capability for solving every over-arching problem we face — climate change, income inequality, immigration, human rights.

I just finished reading Hyeonseo Lee‘s remarkable story of escaping from North Korea with her family. She’s paid a broker to get her mother and brother to South Korea when they are imprisoned in Laos. Here, she’s waiting to enter Laos to rescue them:

“About 20 people were waiting in line to have their passwords stamped. A few were backpacking white Westerners in high spirits. I looked at them with envy. They were inhabitants of that other universe, governed by laws, human rights and welcoming tourist boards. It was oblivious to the one I inhabited, of secret police, assumed IDs and low-life brokers.”
Hyeonseo Lee, The Girl with Seven Names

Laws, human rights and a high standard of living are part of a vulnerable legal and moral infrastructure. Protecting its integrity and viability requires an actionable connectivity policy and a cogent strategy. The Defense Innovation Board report is a warning salvo. We must make sure that it is heard.

Austin, Texas: A Case Study in Managing Competitive Crises

Austin, Texas, the site of the June 2019 CULCON Symposium on U.S.-Japan Collaboration was also the site of SEMATECH, a public-private partnership that modeled how to manage an international competitive crisis.

Three things are clear about the future: technology will determine competitiveness; talent comes in all colors, nationalities and genders; and the problems are too big, too complex to solve in isolation.

The annual CULCON Symposium on U.S.-Japan Collaboration was held in Austin last week, the site where 30 years ago a rallying cry of “make America great again,” created SEMATECH, now a model of how government, industry and academic institutions can work together to manage competitive crises.

Today Japan, nestled precariously between North Korea and China, is doing something similar, boosting its competitiveness in science and technology by expanding university-industry partnerships and building a more inclusive work force.

Who owns the future? The electromagnetic spectrum and 5G

Bursts of “make Japan great again” thinking punctuated the session. In what was apparently a last minute change to his presentation, cybersecurity expert Dr. Motohiro Tsuchiya, pointed out that the United States owns Japan’s electromagnetic spectrum, the highway for next-generation 5G mobile technology, the internet of things (IoT), as well as x-rays, gamma rays and radio waves.

The electromagnetic spectrum hosts 5G technology, which will improve the reliability and reach of mobile internet communication. Illustration/ Children’s Health Defense

Thirty years ago, who would have thought something called the “electromagnetic spectrum” would become so essential to a single country’s competitiveness? But 5G technology has vast implications for not just cellphone upgrades, but but for medicine, business and national security. Case in point: Russia recently signed an agreement to allow Huawei, a lightening rod in the U.S.-China trade war, to develop the country’s next-generation wireless network, but since the Russian military owns their electromagnetic spectrum, there could be blips in its implementation.

This world and then the next

Dr. Takashi Tanaka, an expert in machine learning at the University of Texas and like the other panelists a product of international collaboration, pointed out that rocket technology can also be applied to missiles, a critical capability for an island nation with testy neighbors.

Space technology extends scientific inquiry to national security. Illustration/Nikkei-Asian Review

Proprietary rights in space? Dr. Moriba Jah, an expert on Space Domain Awareness, brought up the ever-controversial Elon Musk’s launch of 60 Starlink satellites into the crowded night sky, the first of a proposed fleet of 12,000 designated to provide global internet coverage.

Funding and talent

Innovation is all about funding and talent, which implies a partnership between the public and private sectors. The U.S. Department of Defense’s Defense Advanced Research Projects Agency (DARPA) provided the seed money for SEMATECH. The National Science Foundation funds emerging sectors like artificial intelligence where American leadership is increasingly challenged. Japan, a global leader in robotics, is stepping up its investment in other sectors as well.

“Last year (2018), the Council for Science, Technology and Innovation, the government’s science advisory body, announced a 7% rise in spending on science and technology (to 3.84 trillion yen), after years of stagnant funding. The government is considering another 100 billion yen for the upcoming fiscal year to pay for exploratory research aimed at achieving what The Mainichi newspaper calls “moonshot” results. The government is on track to hit a goal of spending 1% of GDP on science and technology in higher education by 2020.”
David Swinbanks, Nature, Nature 567, S9-S11 (2019)

Talent is increasingly collaborative. The CULCON panelists referenced cultural barriers in Japanese universities that inhibit the collaboration, from silo-ed departments to paying research assistants. But then again, perhaps the group’s of Austin as a meeting site was significant. The city is a case history in how a single successful experiment in public-private collaboration, SEMATECH, spawned a vital tech hub that continues to attract jobs and talent.

Stumbling from failure to failure with no loss of enthusiasm

I shared Churchill’s quote with my seatmate, Mr. Naoyuki Agawa, who asked a bedrock question of Austin’s assistant city manager, Ray Arellano: What do you say to people who have failed? Mr. Agawa teaches American constitutional law at Doshisha University in Kyoto, following a long career practicing law in New York and Washington and a stint as Japan’s Minister for Public Affairs.

His point was well taken. Without role models, without examples, without encouragement and social and financial support, failure is a hopeless quagmire.

I said I could do it, and I did it

Mykaela Dunn, Brooke Owns Fellow, University of Texas at Austin. Photo/The Daily Texan

Eureka! Beamed into the panel discussion on space technology was a Texas success story. Mykaela Dunn, a native of tiny Stafford, Texas and a recent aerospace engineering graduate from the University of Texas, has just started her internship in the California-based Stealth Space Company, courtesy of a Brooke Owens fellowship. Dunn encouraged the audience to consider more than grade point averages (GPAs) in evaluating talent, mentioning that she had to remind herself to do the same.

Well done, Mykaela!

Do Tariffs Make Us More Competitive?

When is fear a valid reason for protectionism? At what point does openness become bad business and a national security concern? David Firestein, the executive director of the China Public Policy Center, stopped by the “World Spins” to remind us that relationships make the world go round, and punitive tariffs don’t win trade wars.

David Firestein dropped by last week’s “World Spins” session to reassure us that at about $1 trillion, give or take a few million, the U.S.-China trade relationship is too big to fail. But he had some thoughts on where we’re taking it.

Firestein‘s credentials in U.S.-China relations are wide and deep — the State Department, EastWest Institute, and now, president and CEO of the George H.W. Bush Foundation for U.S.-China Relations — in addition to his role in academia launching the LBJ School of Public Affairs’ China Public Policy Center.

Perceptions of growing authoritarianism

“China’s rising authoritarianism colors U.S. views in a profound way.”
David Firestein

The Uighur minority and the telecom giant Huawei are the poster children of American perceptions of China, prompting national security concerns that have underpinned both the administration’s trade narrative and domestic regulatory actions. On the heels of watching China use facial recognition software to persecute the Uighur and other Muslim minorities, San Francisco banned the technology. Last week those same concerns spread to Washington, bubbling up at the House Committee on Oversight and Reform.

Blacklisted by the administration, Huawei typifies China’s state-supported hybrid economy. The telecom giant sits on a deepening Maginot Line between the Internet of the East and that of the West, drawing a line between American interests and increasingly, everyone else’s.

“In public and private statements, American intelligence officials and telecommunications executives and experts have begun to concede that the United Sates will be operating in a world where Huawei and other Chinese telecom companies most likely control 40 percent to 60 percent of the networks over which business, diplomats, spies and citizens do business.”
David Sanger, The New York Times

There’s a silver lining for Big Tech. Nothing unites like a common enemy, and China has provided Qualcomm, Facebook, Google et. al. with a new “America First” narrative to relieve regulatory threats.

The missing quid pro quo

“China is vastly more closed to us than we are to them,” Firestein said. “When someone from China gets off a plane in San Francisco, they have immediate access to their email through WhatsApp. But an American landing in Beijing can’t access their Gmail.”
David Firestein

For an administration determined to deliver on its “America First” campaign promises, protecting America from China is a top priority. Vice President Mike Pence’s watermark speech at the Hudson Institute frames the U.S. response to Chinese “economic aggression.”

With China, all silk roads lead to intellectual property. In the absence of any Chinese quid pro quo to American openness, in 2018 the administration has expanded its powers to protect domestic technology from foreign investment. The Treasury Department’s Committee on Foreign Investment in the United States (CFIUS) began to block mergers and acquisitions considered a threat to national security. The Export Control Reform Act (ECRA) and the Foreign Investment Risk Review Modernization Act (FIRRMA) are charged with protecting tech sectors that map with its “Made in China 2025” strategy — advanced manufacturing, artificial intelligence, self-driving vehicles, semiconductors and telecommunications.

Applying worst-of-breed practices

Unintended consequences abound. The ban on Huawei network technology hits rural areas the hardest because the small network providers have to swap out cheaper Huawei equipment for more expensive offerings. And faced with its American supply chain being cut off, China will accelerate its build-your-own strategy, a trend that is already impacting U.S. tech companies’ stock prices.

Which brings us to where Firestein breaks rank. A trade strategy based almost exclusively on punitive tariffs has penalized American producers by eliminating lucrative markets, disrupted supply chains and cost consumers at check out.

“The United States is adopting “worst of breed” practices that are destructive to the economy … Our trade deficit with China is the largest good and services deficit dating back to 1776.”
David Firestein

https://www.marketwatch.com/story/heres-all-the-stuff-the-us-imports-from-china-thats-causing-a-huge-trade-deficit-2018-03-23

Nowhere is the cost of the trade war more obvious than in the agricultural sector. Last week at a “hats on” event, President Trump announced a $16 billion farm aid package in a robbing Peter to pay Paul strategy to offset farmers’ losses with taxpayers’ dollars.

Trump rolls out $16 billion in farm aid amid Democratic outrage over $64M meat bailout to ‘corrupt’ Brazilians — https://www.nydailynews.com/news/politics/ny-democrat-answers-trump-bailout-meatpacker-brazilian-20190523-ocqbh2tvb5eltlch47ulfykcxa-story.html

In fact, tariffs can make industries less competitive.

It breeds a kind of laziness here,” said Simon Lester, director of the Herbert A. Stiefel Center for Trade Policy Studies at the Cato Institute. Tariffs are taxes on outside goods, so they inherently protect some U.S. businesses from foreign competition. “You don’t have to compete with the best in the world you can just relax you don’t have to work that hard and face any competition,” he says.
Marketplace, May 27, 2019

Despite the national security narrative, the relationship between China and the United States is not about military might. Certainly, the U.S. technology industry is rooted in federal defense funding, and the Department of Defense continues to fund innovation. But this is a 21st century struggle not a 20th century one. China’s goals are economic.

“Military interests are a function of power. China is building its military to define its power … But let me assure you, China has no interest in becoming the world’s policeman.”
David Firestein

Relationships make the world go round

The conversation closed with a reminder that relationships grease the wheels that make the world go round. Firestein brought up a flash point from his first few weeks in Austin when two U.S. Congressmen, a U.S. Senator, numerous professors and the University of Texas student newspaper protested an offer from the Confucius Institute to make a donation to the CPPC. Firestein noted, however, that the United States has similar practices, and that in the end:

“Relationship matters. We have to get it in sync.”
David Firestein

What does the future look like?

A year ago, Firestein cautioned that competing with China was like a no-holds barred cage fight in wrestling. China knows what it wants its future to look like. State control provides a longterm planning horizon. It has a clearly written industrial strategy, state funding and a non-interference strategy with its people. The United States operates from tweet to tweet. As for a strategy?

In the end, we’re going to have to step up and compete. China is not our enemy but it is our fiercest competitor.
David Firestein, in a May 2018 talk at the “World Spins”

In the not too distant future artificial intelligence, autonomous vehicles, advanced manufacturing, semiconductors, telecommunications will shape not just American competitiveness but what our world will become. Even the current administration, loathe to cooperate on much of anything, went so far as to endorse a set of international AI guidelines sketched out by the Organization for Economic Cooperation and Development. To echo a comment made by Senator Richard Burr at the University of Texas’ Fifth Annual Texas National Security Forum:

If we don’t create a framework for this technology, who will?
Senator Richard Burr, chairman, Senate Select Committee on Intelligence, Nov. 2018

Taking Care of Business as Titans Clash

Titanic trade clashes, Chimerica, Huawei,’s blacklisting, theft of intellectual property — oh my! As the trade war with China intensifies, Tyler Johnson’s “The Way of the “Laowai” reminds us that international business is an art; opportunity, a matter of perspective.

In the titanic trade clash between China and the United States, Tyler Johnson’s is a calm, sane voice. But then he is a businessman, and businessmen get things done. Johnson spent the go-go years between 2005 and 2015 growing Dell’s Asia-Pacific business. He saw the blossoming of Chimerica and now, on the cusp of what is starting to look like a nasty separation, reminds us there is an art to conducting business with another culture.

What he learned is the subject of a new book, The Way of the Laowai, a testimonial to taking a global perspective. (Laowai means outsider or alien in Mandarin.)

Take note, America: The self-selected attendees at Johnson’s “World Spins” talk were almost all Chinese. As one explained, “I want to learn how you think American companies should compete in China, from your perspective.

It’s complicated

The scale of the trade clash is enormous, and the stakes are high.

China is the world’s most populous country. Its breakneck development over recent decades has added hundreds of millions of consumers to the global marketplace while supplying a vast assemblage of low-cost goods… It is the source of roughly one-third of the world’s economic growth.

Peter S. Goodman, The New York Times

Separating business from policy is a sticky wicket, especially when two radically-different cultures have bound themselves so tightly together economically. As Li Yuan, the New York Times New New World correspondent wrote :

The two sides have plenty of reasons to distrust each other. The United States blames China for heavy job losses, theft of corporate secrets and cheating at the rules of global trade. China credits the hard work and sacrifices of its people for its success and sees the trade war as driven by American fears of a prosperous Chinese nation. (Photo/Doug Mills, The New York Times)
Li Yuan, The New York Times

Photo cohttps://www.nytimes.com/2019/05/14/business/us-china-tariffs.html
Photo courtesy of Doug Mills, The New York Times

But in the end, business is business, and sometimes getting things done requires a “whatever it takes” approach.

In China, government initiatives drive almost everything. It’s important to understand those initiatives and analyze how they figure into your business model. The more you understand what the government wants, the more likely you’ll be aligned …
Tyler Johnson

A laboratory for future innovation

Over the past 25 years, China has become what Oppenheimer Funds calls a “laboratory for future innovation” for U.S. companies. Big Tech-funded R&D centers place scientists from both countries side-by-side to crack breakthroughs in pivotal data-intensive areas including artificial intelligence and cloud computing. Microsoft Research Asia (MSRA) funds basic research in AI. Google opened an AI lab in Beijing and has a research alliance with Tencent on cloud services. Jeff Ding, a graduate student at Oxford and the force behind the China AI newsletter, is well worth following for a deeper understanding of cooperation between the two countries in R&D and technology (AI) commercialization.

But there are concerns. M.D. Anderson Cancer Center in Houston recently severed ties with three scientists over their ties to China and policy violations with research grants from the National Institute of Health. Writing in The New York Times, Mihir Zaveri noted that a report commissioned by the N.I.H. also mentioned that 39 percent of the Nobel Prizes in physics, chemistry and medicine won by Americans have gone to foreign-born scientists.

Data, ethics and national security

Research spawns innovation and ethical (cultural) concerns. The facial recognition technology that San Francisco banned out of fear it would be abused by the city’s police, is being used in some form by companies in China to save pigs from the devastating spread of untreatable African swine fever — and allegedly to suppress minority populations.

“Today’s battles are all about data, how you get it, who has access to it, and who you can share it … With 1.4 billion people (and limited enforcement of privacy laws), there is plenty of data in China.”
Tyler Johnson

Then there’s national security. At an intelligence forum sponsored by the University of Texas earlier this year, Sue Gordon, the principal deputy director of National Intelligence, acknowledged the reality of concerns over “dirty networks.”

“We have to figure out a world with diverse technology we can’t control.”

Sue Gordon, Principal Deputy Director of National Intelligence

Can a Chinese company, genetically tied to the government, become a global technology leader?

Huawei, the subject of Gordon’s reference to “dirty networks,” is a stunning case study in whether a Chinese company, genetically bound to its government, can thrive as a global technology company. Huawei has made it a point to develop an entrepreneurial culture based on best-of-breed Western business processes.

“Only by learning from them with all our humility can we defeat them one day.”
Ren Zhengfei, founder, Huawei, The Huawei Story

But its blacklisting by the Trump administration is having a trickle-down impact. Just yesterday, Reuters announced Google restrictions on Huawei customers’ purchases of its proprietary offerings, a move analysts expect will hit Huawei’s European business hard.

A big world full of opportunity

At the eye of this hurricane, The Way of the Laowai is a reminder that opportunity is a matter of perspective.

There are roughly 196 countries in the world and close to 800 billion people. That’s a lot to wrap your brain around. Each of these countries is complex in its own way … In every location you want to do business in, you need a grasp of these particulars. In each place, business needs to be conducted differently… The world is big and full of opportunities if you can keep your perceptions in place.
Tyler Johnson

As proof, Johnson proudly brought along his smart, confident 13-year old, Mandarin-speaking daughter Reese, a living demonstration of all there is to be gained from learning the ways of another country. Indeed, she corrected him several times.