Tag: SEMATECH

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)

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!