Deepening US-Taiwan Cooperation Through Semiconductors

>> Kharis Templeman: Well, good afternoon from the Hoover Institution here at Stanford University in California. Good morning to our participants from Taiwan, several of them at National Tsing Hua University. And good day to our audience, wherever you may be out there. I am Kharis Templeman, I am a research fellow here at the Hoover Institution and the program manager of the project on Taiwan in the Indo Pacific region.

And it's my pleasure today to introduce our event this afternoon on deepening US Taiwan cooperation through semiconductors. I wanted to offer a couple of remarks before we jump into the two panels that we have set for today. We're going to feature a distinguished group of experts from both Taiwan and the United States to talk about US Taiwan cooperation in the semiconductor industry and in policy towards semiconductors.

And one of the goals of convening this event is to follow on a recommendation from a report that the Hoover Institution recently published called Silicon Triangle, the United States, Taiwan, China and Global Semiconductor Security. And that recommendation was to do more with our Taiwan colleagues, both in the academic space and in the policy space.

And so, one motivation for convening this group today is to kind of follow on, on that recommendation, to actually walk the walk and engage with our partners in Taiwan on these critical issues. We, of course, also want to call our audience's attention to the publication of this new report that is the result of about 18 months of work by a working group at the Hoover Institution that included a visit to Taiwan a little over a year ago, where we met with a couple of the people involved in today's event, including Terry Cao, we saw last August.

It's good to see you here, Terry. And we, second, I think it's important for our own project and our own working group to push back against some of the, what I would call negative narratives, the IMEI narrative, about the United States as being a kind of unreliable partner in this relationship.

Our own view is that the United States and Taiwan actually have a lot of room to deepen our partnership and that we should focus both on US Taiwan government coordination and industry cooperation, as well as academic exchanges. And so that's one message I'd like to leave our audience with today.

And then the third goal of this symposium today is to allow our audience to hear Taiwanese perspectives as well on US Taiwan cooperation. There's a tremendous amount of interest in the United States right now in Taiwan's semiconductor industry and about strengthening the US semiconductor industry. And I worry sometimes that the interests of Taiwan are too often treated as an afterthought in conversations about semiconductors.

And so it's extremely valuable for us today to hear from directly from our Taiwan participants about these issues, too. So on that note, I'd like to turn the floor over to Chen Ming Chi, Ming Chi who's an associate professor of sociology at National Tsinghua University and formerly of the mainland Affairs Council in the Tsai administration.

Ming Chi, it's good to see you this morning, welcome and the floor is yours.

>> Mingchi Chen: So thank you very much, Kharis, for organizing such a great seminar, bringing together scholars and industry experts from the Hoover institution and the National Tsing Hua University, to discuss an issue of vast importance to the economic interests and the national security of Taiwan and the United States.

It's an honor to be part of the effort to raise people's awareness about the prominence of the Taiwan US PRC triangle not only in maintaining peace and stability in the Indo Pacific region and beyond, but also in shaping the configurations of the global supply chain for critical technologies.

Although Taiwan and semi conductor has received certain attention that we would rather avoid. And our congratulations to the Hoover institutions for publishing this wonderful policy paper that provides timely, in depth and balance analysis and some policy advice. Particularly this report stands out among the numerous others covering similar subjects by taking into consideration Taiwan's interests and the concerns.

As an economic sociologist uniting in a defense and national security Think Tank, I would like to highlight some of the key points in the Silicon Triangle report and add some of my own while we discuss a way to deepen US Taiwan cooperation through semiconductors. First, economies of agglomeration and ecosystem matter.

In more than four decades, Taiwan has built a world class semiconductor industry, not through a mercantile state, a couple of well founded chablis, or several standalone big takes. Rather, Taiwan strength lies in the agglomeration of many firms, each focusing on a small segment of the whole manufacturing process, yet complementing each other to form an integrated ecosystem in which trust is essential for governing interference exchanges.

Semiconductor manufacturing cluster in Taiwan is Taiwan's small firm network toward the force and it is not easily replicable elsewhere. Second, trust matters. The renowned globalization theorist Thomas Freeman, wrote an article earlier this year arguing that the world has entered a new era where goods and services crossing country borders are no longer the identical and anonymous shadow of goods, that have nothing to do with white privacy or identity.

Instead, deep goods, including telecommunication device, AI apps on your smartphones and the chip that drive out of this account for a significant portion of intercountry exchange. Whether you can trust your smartphone has now become not only a critical personal matter, but an issue with strong national security implications.

In short, trust is essential in the era of deep goods, three value matters as hyperglobalization subsists, what has reemerged is not only geopolitics but also the values that we hold. The technologist regime has risen the tide of globalization and turned technology into tools to repress its people and invade its neighbors.

Technologies are no longer neutral they are now value laden because who controls technologies matters a lot, because technology are enablers and the problem is whether they enable democratic values and civil liberty or dictatorship. Semiconductors come into play because they are enablers of the spyware that steal the surveillance cameras that repress and the missile that killed.

Four, alliance among like minded partners is better than unilateral long armed regulation alliance build upon trust, share values, and mutual respect, while unilateralism destroys them all. Just as the Sino US tech competition, the COVID pandemic and the war in Ukraine has shifted the business community's attention from just in time to just in case.

The USSR customarily weld its long armed regulation without much consultation among like minded partners. This has not only resulted in numerous complaints and bitter feelings among its Indo Pacific friends, but also fostered US skepticism in the region where the US appear to care solely about its own business interests.

And the national security narrowly defined, and now truthful about its commitment to the security of the region, it is counterproductive. The US would likely benefit from communicating with its like mindshift partners about its strategic goal, emphasizing that it does not intend to use reshoring to replace Franchoring. This strategic communication could take place in a mini lateral platform composing of government officials and industry leaders.

Five and the last, Taiwan should also man its own legal system to strengthen the collective small yacht hang technology regulatory regime. Due to the close ties between Taiwan and PRCS high tech communities, Taiwan sometimes becomes a loophole for technology leakage, this hurts a partnership among black migrant countries and bring distrust.

Taiwan should strengthen its legal framework concerning investment review, export control, intellectual property, and talent migration. On this regard, Taiwan can seek help from the US to synchronize the regulatory regimes of two countries, and by doing so, it qualifies itself as a trustworthy partner to a mini lateral alliance of semiconductor and other critical technologies.

To conclude, Taiwan's security is the security of the democratic chip supply chain. Taiwan is not only a semiconductor powerhouse, it shares democratic values, private entrepreneurship, and is a trusted partner of the free world. As Taiwan's complex cluster of chip manufacturing is not easily replicable elsewhere. I echo the view of Hoover's Silicon triangle report that by standing with Taiwan, the US is safeguarding its own supply chains, its national interests, and most of all, our share values, thank you.

 

>> Kharis Templeman: Thank you, Ming Chi, for those opening remarks, we'll have a lot more to say about everything you've already put on the table, I am sure, but I find those very encouraging. I'm gonna turn the floor over now to Larry Diamond, who's co principal investigator of the project on Taiwan in the Indo Pacific region, and also one of the co editors of Silicon Triangle, Larry.

 

>> Larry Diamond: Okay Kharis first of all, Kharis, thank you for your role in organizing this online workshop with Professor Ming Chi Chen. And thank you both for your opening remarks and thanks to all of our participants for joining us, I don't wanna take more time by offering a long set of framing remarks.

So I only want to say one thing, my style is very direct and candid, so I'm gonna be direct and candid. One of the dumbest and most counterproductive statements that a former American national security official ever made was the one made by a recent former national security advisor in Taiwan, who said, well, if China invades Taiwan, we'll just destroy the Taiwan, the semiconductor industry in Taiwan.

First of all, we need to be steadfast and also confident in making it clear that we can and will together. Through the prudent management of our policies and through the strength of our alliances and forms of cooperation, ensure peace and stability across the strait and deter any catastrophic unilateral action.

And second of all, we do not view the United States does not view, the current administration does not view and the American people do not view Taiwan as just some kind of platform for manufacturing semiconductors and making sure that our industry has enough of them. Taiwan is a deeply and intrinsically and indispensably valued partner to the United States because of our shared values and because of our ability to cooperate to advance economic possibilities in human welfare.

Across the board through two, I'd say promisingly complementary economies and sets of research and technological leadership and so on. And I hope a theme that came through Silicon triangle and will come through this webinar is the word cooperation. That is what is needed between Taiwan and the United States, and it's got many challenges involved, but many exciting possibilities.

So that's my editorial. Now it's my pleasure to kick off the first and moderate the first panel, and then my colleague, as Kara said in our program on Taiwan and the Indo Pacific region at Hoover, Admiral Jim Ellis and my co editor of this book and report will chair the second session.

This session is going to probe industry views on deepening us Taiwan cooperation. There is that word again through semiconductors, and we're very lucky to have three extremely distinguished speakers who will each give some opening remarks. Then we'll have a little dialogue between them, then we'll open it up for wider Q and A.

Our first speaker is Terry Tsao, who is a seasoned executive and industry leader. He currently serves as the global chief marketing officer and also president of Taiwan at Semi. In his current capacity, Mister Cao assumes the responsibility of directing corporate marketing strategies of semi encompassing various critical areas such as strategy formulation, association operations, product marketing, and market communications.

Our second speaker will be my colleague here at Stanford, the Willardar and Inez Kurbel professor in the School of Engineering at Stanford, an indispensable contributor to our Silicon Triangle report. Philip Wong Philip has been a professor of electrical engineering here at Stanford since 2004, and as I think many of you know, he was on leave for two years, I think 2018 to 2020 as vice president of corporate research at TSMC.

His research aims to translate discoveries in science into practical technologies. His works have contributed to advances in nanoscale science and technology, semiconductor technology, of course, solid state devices and electronic imaging. His present research covers a broad range of topics including carbon electronics, 2d layered materials, wireless and planable biosensors, directed self assembly, device modeling, brain inspired computing, non volatile memory, and 3d system integration.

In other words, he's really on the cutting edge of many of the most exciting technologies of the future. Our third speaker will be Burn-Jeng Lin, who's a distinguished senior professor at National Tsinghua University, a position he has held since retiring as vice president of TSMC in 2016. He joined TSMC as a senior director in 2000 and became vice president in 2011.

Prior to that, he founded and led linovation Incorporated. From 1970 to 92, he worked at IBM, where he held various technical and managerial positions and was the first person to propose immersion lithography, a technique that eventually became viable in the 1980s. So let's hear from each of you for a certain amount of time.

Mister Tsao, we'll begin with you. And then when the three of you have shared with us your initial thoughts, I'll come back to expedite the conversation.

>> Terry Tsao: Thank you and good afternoon the audience and our good friends in US and all the audience in Taipei. And of course Bern Philippe very nice to meet you here by virtue.

I am Diteri. I work for semi. This industry organization set up since 53 years ago in Silicon Valley. And of course I'm the head of Semi Taiwan. We conduct a lot of the industry collaboration and also the policy. So even though I based in Taiwan, I notified that the reason, no matter the think time or from the government policymaker who visit Taiwan, the topic gradually shift from the traditional beef, pork, potatoes.

So the semiconductor becomes every tiny conversation during their visit. Then of course I also want to congratulate. This is really a well written report. Later on we'll share with you what I think it's very valuable and it's to the point to tell the truth. So regarding this topic, I just want to begin to talk about from the industry perspective, the semiconductor industry behind the US Taiwan definitely is the industry interdependent and complementary.

I think most of you know that actually the beginning of the Taiwan semiconductor can trace back from the 1976 when the Taiwan government they want to identify semiconductor industry become one of the most strategic industry in Taiwan. Actually 1976 we sent out around 19 engineer from Taiwan we go to RCA.

So that was the beginning of the Taiwan semiconductor industry. We learned from the us company and we also learned from the us semiconductor industry. And probably you also know that of course from the semiconductor global supply chain. Based on the comparative advantage every region country they have what's their best at in their semiconductor industry segment.

So from system design perspective, US is one of the significant semiconductor sector. So for the most of the Taiwanese foundry. Device manufacturers US actually is the largest pie in the portion for their customer market share some of the Taiwan foundry company the US customer even more than 50% or to 60%.

So that shows how important from the supply chain or the customer perspective US is a huge base for Taiwan semiconductor manufacturing industry. It is on the other hand Taiwan because is the hub of the global semiconductor manufacturing Taiwan spend the most of the semiconductor equipment and the material consumption even among the world.

So for the past almost ten year decade Taiwan is the largest for example semiconductor material consumption. And as you know that majority of the semiconductor equipment and the material they are really the US supplier. So from that kind of both customer supply chain you can see from the industry supply chain perspective this is really the complementary perspective.

And I also want to make the point that actually the foundry business model actually is really the alleviate most of the big heavy Capex investment to alleviate most of the US semiconductor company become the fabulous. So they can release vendeer company corporate fund to the R&D and to design to service.

So I think one of the Taiwanese companies like TSMC say they really unleash the innovation. I think that's really good tagline to describe by the Taiwanese even from the capex perspective we really give the freedom for most of the US semiconductor company to do the design and the order service.

And also at the same time from the talent perspective I think both US and Taiwan also very inter semiconductor is from the very complementary perspective. To be honest I believe most of the younger generation in US of course they study the stand-related program. But if they have the priority or they have the choose they are more willing to go to the design company like Google, Facebook, right?

So, they probably don't like to go to the factory with night shift like rotation. But on the other hand the talent from the Taiwan the semiconductor manufacturing still one of the prominent semiconductor industry. So for the younger generation, they are more willing to go into the manufacturing side.

So I can say from the Thailand perspective both the US and Taiwan we are also complete military that kind of perspective. So I think nowadays we talk a lot of the resilience in the semiconductor supply chain. I think we found, in terms of the resilience we talked about from the original from the offshore to the onshore and however, because they have some limitation we talk about frame shoring.

So in that kind of perspective I think the Taiwan semiconductor industry also contribute a lot even just like Ming-Chi mentioned about from the just in case to the just in time to become the just in case. So lots of the localization manufacturing in US we can see the Taiwanese company really participate there.

So for example TSMC in order to support made in US they just build their new fab in Arizona to echo and to support the local resilience and also create lots of the job opportunity in the US. So I think like Ming-Chi mentioned above Taiwan is the trustworthy partner.

So actually the Taiwanese company also played a crucial role even in nowadays the concept shift to the resilient Taiwanese company also support in the US semiconductor industry. So I also want to echo and make some point from this report. I think there are several points I really agree with that.

First of all I think when I saw the point talking about insurance policy and the continuous flow from the US government is open for the foreign investment. I think the concept is really showed a good gesture not just only for the US semiconductor company or industry. But also it showed a good gesture to the non-US semiconductor manufacturer such as the Taiwanese company.

And also I think lots of the conversation talk about how to enhance the data exchange information. I think this is also very important but also I want to make the point I think in the cyber, in the semiconductor cyber security perspective. I think that's also the area for the US-Taiwan semiconductor industry should put the emphasis on that.

I think three years ago the TSMC take the lead to build up the first semiconductor cybersecurity standard and the year after intel also takes the lead to set up another semi cybersecurity industry standard. I think that's also a very good example for both US and Taiwan semiconductor industry to enhance the further collaboration.

And I also like a point in the. In the industry report, the Hoover Institute actually talked about definitely we need to set up the good friendly environment, and friendly business climate for the old Taiwanese or even the non-US semiconductor company in the US. I think the friendly environment which also in Tokyo include for example the workforce or the labour union, recently I think there is no secret there are some of the issue for the Taiwanese semiconductor company when their factory construction in US.

The sound of the conversation from the both party. I think of course this is just because in the beginning it's more like the culture shock, or the different culture management style or experience. But definitely under the friendly business environment I think the workforce or the labor union definitely will be the key success factor for both US and Taiwan semiconductor industry.

And last but not least, I want to conclude from the collaboration perspective I think nowadays we talk about the success of the TSMC factory in US. I want to make the point that the success of the TSMC or the Taiwanese semiconductor supply chain in US it is not only the TSMC or the Taiwanese semiconductor company.

Actually it is really the success for the US and the US semiconductor industry. Because only when TSMC success that will make the good showcase to the US, or around the world, that means US is really the good infrastructure to bring the semiconductor manufacturer to US. So I wish from both parties we should by the collective effort to make sure the Taiwan semiconductor company their investment success in US.

I think they will definitely we should treat this both win win situation for the further enhance the US Taiwan semiconductor and collaboration. Yeah, that is my remark for the first session. Thank you.

>> Larry Diamond: Great, thank you Terry, and it's difficult to overstate the importance of these investments proving successful for both sides of the relationship.

Thank you very much for your calling out some of the points of our work and for your insights, Philip over to you.

>> Philip Wong: Well, yes, thank you Larry for the opportunity to join this panel and also thank you Karis for organizing this panel and pleasure to join my good friend Terry and Burn on this panel.

Much has been said about the importance of semiconductors and a lot of the discussions kind of started with this statement that it is as important as oil. As you know, the oil is fossil fuel, that's important for all of us. We need energy and so on and, and there's a comparison being made between oil and semiconductor however, I believe the comparison stops at the importance of both semiconductors and oil but rather oil and semiconductor have very different characteristics.

Oil never changes. Oil is in the ground for millions of years and you can stockpile them, you can store them for millions of years and they will never change. However, semiconductor needs to constantly renew itself and constantly advance to reveal its value. Otherwise there is less value about on semiconductors.

Why do I say that? Well, you could ask yourself, would you like to use a cell phone with a chip that was ten years old? And if you don't, then you know the value of semiconductor. The value of semiconductor is in its ability to provide more year after year, more functionality, more energy efficiency, more things you can do with the semiconductor chips.

How do we constantly advance this? And that brings it to the next point I wanna make in here is that manufacturing of semiconductor and the research and development of semiconductor goes hand in hand. One cannot do manufacturing without knowing what to manufacture. And also you need to have the next generation of products to manufacture.

So you need to constantly do research and development to produce the next generation of products that you can manufacture. At the same time, if you don't manufacture, you don't know where the real problems are. And you don't know what other important research and development topics are. So therefore, manufacturing and R&D goes hand in hand.

And there lies the importance of international collaboration. Good research and development has always been a collaboration among different parties. And more important than that is a collaboration amongst many different regions, many different countries. Good research comes from collaboration across different regions and countries. In other words, knowledge knows no national or regional boundaries.

And that produced the best research and that produced the best development. And therefore it produced the best manufacturing technology. In that regard, there's a strong incentive for the US and also like minded countries and Taiwan to collaborate. Because there is a strong industrial base in manufacturing. Some got up to mufacturing in Taiwan and also elsewhere in the world as well.

Not just limited Taiwan, but also in the US and New York. They have very strong research and development efforts. Is strong in these two regions in here, and they have respectively, strong R&D efforts and strong manufacturing efforts. And because, as I mentioned before, R&D and manufacturing goes hand in hand.

It benefits everybody if one collaborates across the regions. So I'll stop by my comments in here and really emphasize the importance of making alliances and drawing upon the strength of everybody across the world in a collaborative way. Thank you.

>> Larry Diamond: Burn J, over to you.

>> Burn-Jeng Lin: Okay, could you show my slides?

Well, thank you, ladies and gentlemen, and thank you all my friends in Taiwan and in the US. Well, I'm talking about Chip Peace. As against chip war from Chris Miller. Well actually, Chris Miller is not that pessimistic, but I'm taking everything at the right side, so the next slide, okay, thank you.

Shortly, initially, the US is dominating in everything, the US people invented semiconductor and invented integrated circuits and even gold and more, dictate the growth of the industry. Everything is American, however, IC has evolved into a multinational enterprise, next slide. Well, just state it more explicitly, it has become too complex to be promoted by a single country.

And the next slide will tell us, we need diversity. We need diversity in knowledge or in physics, chemistry, electrical engineering, computer science, optics, precision engineering, materials, statistics, and a lot. As the industry grows, as the technology grows, we can even find more disciplines that we need. Also, for the people who work on the industry, they have to be innovative and some of them has to be consistent.

Some of them have to be innovative, some of them have to be persistent and goal oriented and so forth and so forth, all right? You cannot find single set of people that contain all the kind, all the different talent needed for the industry, so, that goes to the second slide.

Okay, it has now evolved into well, US is dominating in design and Taiwan also is involved in the design. For imaging, we're talking about the Netherlands, we're talking about Germany, Japan. Etching is the US and Japan deposition US, material Japan and mass production, Taiwan, South Korea, metrology, US, Japan and so forth.

So we see a diversity and we see the interdependence, if any of this stops functioning, the other people will suffer together, okay? If you stop the imaging supply, nothing can work, same thing, mass production, material supply, whatever, okay? So the next slide tells us that, initially the world was working on a complementary model.

We, let's say, I'm assuming that to be self dependent, self independent for design within 50,000 people, okay? And manufacturing 50,000 and so forth, just make it simple, every discipline. I named five disciplines, design, manufacturing, materials, equipment and metrology. And we have a shortage of talent, what is our shortage?

About 10%, that means we need 5000 more people in design and so forth, okay? But however, we are running into something called a self sufficiency or single country model, the next slide will tell us. Single country sufficiency model, SCS, if we do that, each country will need 125,000 people.

I'm cutting out the 50,000 by half, so you need a critical mass of at least maybe 25,000 people in design, and in manufacturing and so forth. And let's assume that there are two countries who desperately want to be self sufficient. That translates to a need of 250,000 people, which is an order of magnitude higher than the complementary model.

And that explains why now, we cannot find talents everywhere because of this unreasonable need, okay? All of a sudden, in a very short time, we have this need and satisfy this need and we are getting into trouble. The next slide, okay, this one is because there are two applications for semiconductor technology.

One is military, of course the other one is civilian. It's a very strong reason to worry about military, because national security, right? Nobody can ignore national security, however, it needs only a small quantity. According to Chris Miller, it's a 2% of the entire semiconductor industry output. The other ones for civilian use is 98% of the quantity, okay, so what's happened?

If we want to be very secure in that 2% quantity, we're emphasizing the military, the M and it would definitely disrupt C tremendously. The world economy will suffer tremendously, okay? However, if you emphasize C, it will help M, why? Because the two can be separated, the semiconductor industry can evolve into very sophisticated common vehicles, that can be used to improve people's lives and economy.

Also, for military, the differentiation is that, you can have some common vehicle, like FPGA, or some logic device, memory device, whatever, or memory is a very clear example. Memory is a commodity type of thing, okay? So the logic, the FPGA and so forth can also be a great common vehicle.

There you put the design in, which US is very strong, put the design in the particular design, the very outstanding design that will make your military and national security superior, okay? But does not affect the economy of the world, okay? So next slide, I'm drawing this as an example, which we probably all well known.

Hua Wei was export controlled, because of that, TSMC lost a big market, huge market. Because, when the domestic product tried to compete with TSMC products, they're always lost, because of the quality, the price, quantity and so forth. However now, because of export control, we are cutting off TSMC, forbidding it to sell anything, that is of the advanced design to China.

And because of that, a Chinese domestic company got to sell 20 million units. That's a tremendous quantity to help them improve their technology, we talk about quantity, we talk about, you need to manufacture. A large quantity to know about the problems and to solve those problems. Now, all of a sudden, they don't have that opportunity, now they have a tremendous golden opportunity to do that.

So that's the lesson learned, we should learn the lesson. We should not promote the self-sufficiency model because it doesn't work, in number, in reality, anyway, okay? And also, we shouldn't provide opportunity for the Chinese IC manufacturers which were heading to them, okay? All right, so the next slide will tell us something else about drones.

Drone is now a very common technology, the difference, again, is in the special chips. Everybody can run a drone and can make it as a weapon, okay? It's already shown people can use drone as a weapon. Cheap and difficult to defend weapons, okay? However, I think US has the potential to make the most sophisticated, most capable drone because you can design those chips that make a difference from the other countries.

And also US talented people, as Philip has pointed out, they want to do design, they enjoy, they pick design to study in the university, and so forth. You almost have to put a knife on their neck to make them study processing and so forth, right, and force them to work in processing.

It's not going to make progress if someone is not interested in that. However, if you take advantage of the interest, you can continue to be dominating in design and either or civilian designs. Okay, next one, next slide, please. All right, we learned a lesson from Vietnam War. Initially, we spent a lot of time, a lot of resources, a lot of people's lives to keep this goal, to keep half of Vietnam free, okay?

However, it didn't happen, we didn't reach that goal. But it's a blessing, since we didn't reach that goal, we stopped sacrificing and so forth. Now we don't have to waste anybody's life or any resources, and so forth. The entire Vietnam is now working the economy with us, okay?

So that should be a very good lesson to learn. Now another slide, okay, now, is nuclear war evil? Well, Chris Miller said it's a cheap war, right? Now, there's also a nuclear war, is it evil? Of course it's an evil if you actually happened. But the fact is that it didn't happen because it's so destructive, nobody dare to use it.

It becomes a detriment, it's become a very effective detriment. Okay, I love that chips, next slide. Yeah, the ships also have enormous power, you can enable weapons, they can destroy the whole world. Well, here I emphasize selfish, if a nation is selfish, you can use it to destroy the whole world.

However, if we focus on the chips enabling power for civilian and for economic use, it can become a very, very effective detriment and then assure peace. That's why I said chip peace, let me also give you an example. Let's say if the worst case happened that Taiwan is taken over by PRC and they have control of the TSMC factory.

So it's gonna happen, they are going to block TSMC from supplying to the US. There's no way, why? Because TSMC is so dependent on the equipment supply, the equipment purchase, equipment maintenance, on material supply, on design, and on market, and so forth, okay? You don't have to bomb TSMC, just ask all your allies, the people in Europe, in Japan, to stop supplying to Taiwan, that's it.

Then the whole world will suffer, they will be unable to produce the chips at an economic price. But, however, it will not happen because nobody wants that to happen, even PRC itself doesn't want that to happen. So that is a very, very strong chip for the US to negotiate and to force PRC to allow TSMC to fight the whole world.

Well, they can produce a common vehicle, as I mentioned, FPGA, and also common high-performance CMOS, hypermos, infect, whatever, then we put the design on to differentiate, say that from the world, therefore it's worse. So that's all my comments, thank you.

>> Larry Diamond: Great, thank you very much for that, you've certainly, all three of you, given us a lot to chew on.

We have a panel coming up next that focuses more on the security challenges which you have introduced, Bern, with your concluding remarks. So probably we shouldn't probe this too much in depth, but since our other colleagues will be speaking on that panel and the four of us will not be on that panel, we should at least have a word or two on that, and then we'll move backwards to the theme of US-Taiwan cooperation.

I'll just offer my own thought that if China does move against Taiwan, frankly, the semiconductor industry will be the least of Taiwan's worries. You will no longer live in a democracy, many of the people who now lead civil society organizations, government and political parties will be in jail.

In case you haven't noticed what's been happening in Hong Kong, and the remarkable miracle of an open, democratic, and free society will be crushed under the weight of a PRC neo-totalitarian state. People should have no illusion about this, just look at what's happened in Hong Kong. But in any case, Philip has also made the point in a different way about the semiconductor scenario, and that is that without the intellectual capital and the constant updating of the technology and inputs and so on, the PRC would not be able to operate the industry.

Let me just give each of you a chance to respond to the others of you very briefly. Terry and Philip, do you wanna respond to that point or any other that Byrne has made? And Byrne, then, I'll give you a chance to respond to them or to any of the other points they made, and then I'll come back to the cooperation theme.

Terry, you have anything you want to reflect on or add from what your colleagues have said?

>> Terry Tsao: Actually, actually, we are more from the industry perspective. So if something really happened that is go beyond our industry, can make the comment. I think from the geopolitical perspective, of course, all the assessment was based on some rationale decision-making.

So I think what we should do there is, first of all, to continue to enhance a united region country, to make sure from a strategic perspective, we help each other and build up the resilient counterpart partnership. I think earlier maybe I made more points on the Taiwan investment in US.

But, on the other hand, probably you will also notify, on the other hand, TSMC or the other Taiwanese semiconductors device manufacturing, they also try to do their best to do the localization in Taiwan from both directions. One is for the international supply chain localized in Taiwan, so a big company, for example, US company like the Entegris, they just have their big investment in Kaohsiung.

And on the other hand, Taiwan TSMC or the other Taiwanese company, they're also looking for the Taiwan local supplier. They have become more open-minded for build up the Taiwan supply chain. So that's how I am thinking. I see from the resilience perspective, industry perspective. What we can do is more from the industry perspective.

I think we also heard from Mark Liu from TSMC. He also made the point that if there goes something not rational or goes something wrong, this is not just Taiwan, actually, it's a disaster for entire world, yeah.

>> Larry Diamond: I certainly agree with that. Philip.

>> Philip Wong: Yeah, Larry, I echo your point.

Later on, we may return to the technical part of it. But for now, let me just expand upon what Byrne just mentioned about export control. I think there are two industry trends that we need to be aware of. One is in the past, military technology was fairly well-contained, for example, nuclear arms and deep sea, that kind of thing, which is very military focused and did not have a lot of broad societal, commercial use.

And containing those military technology can be more precisely applied than what it is today. Today for semiconductors, it is broadly used in the commercial space. And basically, anything that plugs into the electrical socket on a wall or use a battery uses a chip. So the entire world runs on semiconductors.

And so advances in semiconductors are mainly led by the commercial space rather than led by the military space. So having control not only in the manufacturing, but also in R&D and other semiconductors and any kinds of control would have tremendous impact, broadly speaking, to the entire industry, and as a result, to the entire society.

So the notion of small yard and high fence that is being promoted in the US, in my opinion, is somewhat problematic, because the small yard is no longer small because of the broad commercial application of semiconductors, is very large yard, in fact. And the fence is rather leaky because international collaboration, international supply chain, makes the traffic of information and knowledge goes very broadly across.

So I don't know. Of course, I don't know the answer or the alternative to export control is, but it behooves us to all think about what would be a better alternative than the export control tools that we have today.

>> Larry Diamond: Okay, and Byrne, you wanna reply to anything that's been said recently before I move on?

 

>> Burn-Jeng Lin: I agree a lot with what Philip has said. Some of what he has said has resonated between the two of us. What I mean is that, now, the quantity and the cost. Now, TSMC has done a lot of work in developing the advanced technology. But at the same time, it also had to control the cost, to also make the cost appealing to fulfill Moore's Law, okay?

I think if anything happened to TSMC, first of all, the market now is smaller, it affects everybody, including a lot of US companies, the European companies, Japanese companies, and the Taiwan companies and Korean companies. The market has all of a sudden become smaller, and that slows down the progress, because it's smaller quantity, less chance to explore, less motivation to do research, okay?

So still, I think there are two issues. One is a national security issue, the other one is the economic issue for the entire world, and those two has to be optimized together.

>> Larry Diamond: Great, thank you very much, that's very well-stated. So let's go back to cooperation now and the challenges we're facing in the building of these plants and how US-Taiwan cooperation can be deepened on two fronts.

First of all, we'll go in the same order. I'd like to ask you to comment on kind of where we're at in the arc of ambition to stand up these plants in Arizona and elsewhere. I think we're behind where we wanted to be. I think you, Terry, were very polite in alluding to some of the challenges, we face in terms of workplace culture and so on and so forth.

But if any of the three of you want to kind of as respectfully or not as you wish to address what you think the US might do, that would enable it to be more effective in realizing its side of the bargain of standing up effective and cost effective manufacturing facilities in the United States.

And in that regard, since we don't have a huge amount of time, I'll roll in the question of immigration as well. Skilled immigration, which I'm quite passionate about, and I know my colleagues in the report are as well, and ask you if there's anything you want to reflect on or recommend in that regard.

And before I turn to you, Terry, I also want to alert our audience that the Q & A function is open. And if you want to post questions, I'll do my best to convey them. Please go ahead, Terry.

>> Terry Tsao: Yeah, earlier I just forgot in the report, I also like actually one, I think it's in the insurance policy.

You make the point about realistic, like a percentage for the onshore manufacturing. I really like the keyword. Realistic, yeah, because nowadays we talk a lot about we doing the on show, no matter it's a TSMC or the other device manufacturing. Actually this realistic is also where circle back and also echo to like a burning perspective.

Is there really efficiency? We put all the manufacturing back to US. What is the real so called realistic? So actually we talk a lot about onshoring or like a resilience but we seldom talk about what is so called the realistic perspective. Like for example, how much is enough and also for example, of course probably in the recently we talked about we have some goal like from 10% to 20%.

But I think that's also related to the so called cost efficiency nowadays for the national security or the defense part. I think that makes lots of the sense we doing the onshore manufacturing, but just make very simple example just in case majority of the manufacturing just replicate and duplicate in US, then it's not the ideal supply chain model like Bern just mentioned about it.

Probably, for example, the iPhone becomes the double the price or triple the price, right? Nowadays, for example, 10% of the TSMC factory to US, then the cost, probably TSMC can absorb or even the customer is willing to pay a little bit more. So called the resilient cost, right?

But if we return the huge of the manufacturing back to US. But this is not so called realistic and the market will have the other driving force to push back because the situation does not fit in like Berlin, talk about the cost efficiency model at all. So the proper balance in the realistic way and also the good boasting communication from Taiwan, the US, I think that is the must and based on the consensus we have, the like mutual expectation.

Otherwise we don't have the consensus about the realistic goal. I think that also make a lot of the uncertainty for the industry or the people in Taiwan. Like this is really, we suspect the US like an email and also that kind of the question were coming out. Yeah, I think I really like you make the point realistic, yeah.

 

>> Larry Diamond: Yeah, and I think the percentage you mentioned that's in the realm of what people are talking about. I just don't know anyone who's informed and connected to the industry that thinks we can onshore anything near to a majority of the manufacturing, but Philip, we turn to you next.

 

>> Philip Wong: Yeah, thank you, Larry. I would like to instead of focusing on the issues at hand in front of us, I would like to focus on the opportunity going forward. Building up manufacturing around the world is a great opportunity in front of us, because the world will need more semiconductors going forward and not less.

So the demand for semiconductors will continue to be strong and also stronger than what it is today because not only everything runs on semiconductors, but there will be more things running on semiconductors going forward. So that's for sure. So building up manufacturing worldwide and in the US is great.

Now, one thing that, if I may offer a thought, is in the US, US, as opposed to many Asian countries and in countries in Europe, US is very big country, we have 50 states and spread across three time zones. If you include Hawaii, is six time zones. It's very broad geographically and in terms of the nature of semiconductor manufacturing, is that there's a lot of value and efficiency derived in being able to concentrate everything in one location.

In a very close proximity geographic region, because you need a very strong supply chain, not just the manufacturer of the chips, but also the equipment suppliers, the support of the equipment, the materials, chemicals, waste disposal. Everything has to be very close to each other to derive the efficiency that we expect of simulator technology.

So it would be not very efficient if the US wants to build up some. Manufacturing in all 50 states, it doesn't make sense at all. But realizing that the political situation is such that everybody wants something to themselves. That is a situation that we need to manage our expectation well enough to make sure that there is enough of concentration and not spread the resources around to much.

 

>> Larry Diamond: That's an immensely important point, we tried to make it maybe a little too subtly in our report. I'm glad you've made it very explicit here. And a lot of this underscores the need for political management and political leadership of this issue in a democracy. Anyway, over to you, Burn.

 

>> Burn-Jeng Lin: Okay, good, well, I think from the TSMC point of view, I think it's good to diversify and to spread out into other countries because we have our own limitation in power, in water supply and all those things, okay? However, the problem is first is the manufacturing cost and the other thing is, look at our TSMC people.

I know that the TSMC people are very smart, but I do not think that the US people are not as smart or smarter, okay? So the differentiation between TSMC and US manufacturer is probably in the infrastructure, TSMC in the local infrastructure, where it can optimize its operations, okay?

Once you move it to the US, they are facing the US infrastructure, they have to be able to live with the US and take advantage of it. I think the best is that we will create two Intels or two GlobalFoundries, because they are run by smart people in the US infrastructure, okay.

So we end up having maybe three manufacturers in the US, okay. Okay, that's good, it will satisfy the US desire to have local manufacturing, but it's not improving the industry, the semiconductor industry.

>> Larry Diamond: Right and probably we should add here, which we stress in the report, on the imperative of addressing the enormous regulatory challenges at the national, state and local level.

To expeditious construction of these plants, the burdens in terms of environmental clearance and so on and so forth. And that may also argue for geographic concentration, cuz you can kinda get all of this done and get buy in from the state government in one or two or maybe at most three hubs or something like that.

Anyway, we're now starting to accumulate questions, so let me pose two or three of them. Maybe each of you could make notes and, answer what you will. One participant asks, so there's the issue of export controls. I'm sure we're gonna come back to the next panel. It's just profound when you consider the national security dimensions, and it's agonizing because everything you said is true.

On the other hand, why do we worry? The motivation is not really to keep the Chinese economy down, it's not worth it for that. It's to avoid losing a war to the people's Republic of China because of the technological edge they might gain even from being a year or two faster ahead than they would otherwise be.

Anyway, I won't opinionate further on that, but one participant asks, can outbound investment restriction be an alternative to export control? I'm sure we'll come to that in the next panel, but I mean, we'd welcome your views too. And obviously some of that is happening with respect to the PRC.

A second question, if the goal is to prevent China from developing obviously their military capability and you think export controls are a bad idea, are there any other options? Well, one that was just proposed is outbound investment restriction. Have you got any other thoughts? And then hello. Caution.

He asks, advanced semiconductor technology is widely used in communication and computation intensive application, which are very important for modern defense. So obviously we're back to that. We'll surely discuss this even more in the next panel, but let's go back to each of you and have you reflect briefly on this.

Terry, first.

>> Terry Tsao: Yeah, this is really the dilemma to make the decision at all, definitely from the national security or the defense weapon perspective. It's not because of the economic perspective then we of course feel like this is a must for doing the policy like that. But the current situation is also not really make the best efficiency from the industry perspective.

And even the first damage is from the US industry or even the US semiconductor company at all. Yeah, so I think that's really the dilemma situation, how to balance from the national security perspective, but also can facilitate the economic steel industry growth. And most of the semiconductor, even the US semiconductor company really take the China as a big revenue source.

And I always heard about from the US semiconductor company, their statement is like only when they have the semiconductor revenue from the China market. They really can facilitate and help for their advanced semiconductor next generation research for that. So I think that's the dilemma situation from the national security perspective and also from the industry perspective.

So that's my comment, thank you.

>> Larry Diamond: Okay, Philip.

>> Philip Wong: Yeah, I saw it, there's a question or comment about advanced semiconductor technologies widely used in communications and computation intensive applications, which are very important for modern defense. I couldn't agree with that more, except that in the past, those technologies were the advances of those technology were largely military use driven.

Yeah, and now I was talking about maybe like 20, 30 years ago. Today, advances in those technologies, namely communications and computation intensive applications, are mainly driven by commercial use. So in other words, advances in those areas are happened or being deployed or examined or studied, mostly first in the commercial space and not in the military space.

I'll give you an example. Cloud computing has been around in the commercial space for a long time before the US military realized that they need to use cloud computing. It's also, that's one prime example of commercial space leading many of the advances. For example, today in machine learning, AI and AI hardware computation companies like Nvidia and AMD are leaders in this field, mostly by developing the technology, but to satisfy the commercial use and not to satisfy military use.

And the trickle down that we've seen before from military to commercial space has largely reversed. Namely, the development of the advancement of technology in the commercial space is beginning to trickle down into military use. Some Bernin illustrated an example about drones. Drones use chips, and those drones are first developed because people want to take aerial pictures for fun not to strike a target.

 

>> Larry Diamond: Burn.

>> Burn-Jeng Lin: Okay, well, again, I think in terms of computing power and all those things, every country already possessed that because of the easy availability of commercial products. Okay, so as Philip has pointed out, the military used for computing and so forth is not the most advanced anyway.

So whatever you do doesn't make any difference. Now in terms of the investment over export control. Well, those are two vehicles. We definitely know that export control doesn't work. I think those things, the semiconductor technology is dependent on free economy because you got the whole world to chip in whatever they know best to advance the technology.

So, well, then, does investment violate free economy? I don't know. It's a difficult question to answer because if you don't invest, somebody else is going to invest, okay? The whole world is biggestG. If us doesn't invest, fine, somebody else will invest. So are you depleting the opportunity for the US investors to invest on something that has a high leverage, high potential to grow?

So those are the things to trade off and to consider.

>> Larry Diamond: Okay, thanks. We have only about eight minutes left before we take a break and then move on to the next session. I know that my colleague Admiral Ellis is listening and will probably bring us back to some of these national security related issues of export controls and thinking about how to manage this problem from a national security angle.

But let me conclude on a supply chain angle and a cooperation angle and pose kind of two and a half questions, and then I'll come back to you in order again and give you each a chance to discuss them. Thomas Spitters ask, given the discussion about manufacturing site feasibility, would it be constructive on any economic and engineering level to enlist Japan first in line to help in the difficulties faced by Taiwan as presented by PRC?

And I'll elaborate on that. This is the half question to ask. Well, you've each noted, I think very wisely, that establishing a more secure supply chain and also building out investment from Taiwan, given that Taiwan's gotten, got probably some asymptotic limits, it's approaching in terms of energy, water, as you said, just capacity to produce on island.

Where else might Taiwan be looking? It is already looking to, and TSMC, I think is starting to look to Japan. But where else might it be looking? And of course, a lot of the concern in the US is not just about jobs, it's just diversifying the sources of supply.

Final thing, if you wanna address it briefly, is about cooperation in R and D and how you each spoke to it, I think at the beginning how we might move that along. So again, we'll go in order, Terry, Philip and Bern to conclude.

>> Terry Tsao: Yeah, I think in terms of the diversification, I think Bern just mentioned, I fully agree.

It's nothing bad for the Chinese company now become the global footprint, because always have the limitation in terms of the infrastructure, even the talent pool in Taiwan. So now the investment in US, definitely the first step to enhance the US Taiwan collaboration. But at the same time, not every Taiwanese company affordable go to US.

So some of the other supply chain move just within the Asia Pacific region. They're looking for the opportunity to fulfill the diversification, go from the customer needs. So TSMC or even UNC could have the opportunity to expand in Japan and also Southeast Asia for like Singapore as a front end or the Malaysia as a back end.

That's some of the geographic region become more and more popular within the semiconductor supply chain. And I think there's also no secret the progress in TSNC project in Japan. Actually it goes very well. And the culture wise. Manufacturing site, the culture discipline or the willingness to take the night shift, something like that is more feeding the semiconductor manufacturing.

So diversification outside Taiwan. I think one week before Morris Zhang also made a comment. He foresees Japan and also Singapore probably have the great opportunity success besides of the US. So that's also some of the diversification perspective I want to share with you, thank you.

>> Philip Wong: I'm an academic, so I would like to pick up your questions about R and D and collaboration in R and D.

As I mentioned earlier, knowledge knows no boundary and good research is clearly characterized by international collaboration. Now, particularly in the US in the past, maybe a few decades, maybe two, three decades, there has been a dearth of federal government support on research and development in the semiconductor space.

With the underlying assumption is that semiconductor is something that is a technology that companies can take care of and therefore the US does not need to specifically sponsor research in those space. But as you recognize now, manufacturing technology is a very important part of the R and D.

And so the loss of manufacturing in the US has caused a loss of R and D capability in the semi-productive space in the US. Coupled with the fact that the US has basically under invested in semiconductor R and D. With the kind of atypical mentality in the US that basic science fundamentals, basic science is the most important element to support.

And applied science is something for industry to do. But I think that is a fallacy, because we need to value applied engineering sciences, otherwise we will fall behind in terms of manufacturing technology. If you look at Asian countries such as Korea and Taiwan and Singapore and so on, the government agencies, they do value a lot on applied engineering sciences.

And that shows after many decades of such support, it shows in the way they have grown their manufacturing capability. So I think, going back to your question about R and D collaboration, there's a lot to be improved upon in terms of A, international collaboration. So that we all advance faster than before, because the demand for semiconductor will be more in the future and not less.

Second, is especially in US, we need to have this notion that we should value more applied engineering sciences in addition to basic science, of course. Because without basic science, fundamental science, there will be no applied sciences, of course.

>> Larry Diamond: Well, thank you for articulating so crisply what I think are some very important points and recommendations in our report.

Okay, Burn, we'll conclude with you.

>> Burn-Jeng Lin: Okay, well, I think yes, indeed, applied science and basic science are important. However, I think it used to be very emphasized by the US. Look at the Intel, the Motorola and a lot of semiconductor companies at that time in the US.

Okay, well, even AMD was in manufacturing, and then it resort to focus on the design part. So I think it's a little bit difficult to revive applied science again in the US because we are going against the trend, but it doesn't mean that we don't do it, so we have to give it a try.

And you will also have to give the research people the right incentive because now is it glamorous or is it worth a Nobel Prize and all those things? So we really have to think through very carefully on what and how to improve the applied science interest in the US.

In terms of collaboration, it doesn't mean that we cannot collaborate because the country that's good at basic science vision and future products or whatever, there's no reason they cannot collaborate with a country who is looking at more realistic questions, okay? They can help each other and look at each other's perspective and help each other.

So in terms of supply chain, I think we have evolved very naturally through free economy. And if we want to try to secure the supply chain, I think that's still the best way, by natural evolution instead of by forced development. Okay, those are my opinion.

>> Larry Diamond: Great, wow, well, we're a couple minutes past time, but you've really, all three of you, done a tremendous job of laying issues on the table, giving us a lot to think about, giving us perspectives.

And in some ways highlighting and in other ways maybe pushing back a little bit on some important themes of our report. I wanna thank Terry Cao, Philip Wong and Ban Zhang Lin for kicking off this workshop so well, and just for such a vigorous discussion. I know that Jim Ellis will pick up on some of the themes of it in the next discussion.

Kara says, I understand it, we now take, what, about a 12, 13-minutes break and then resume?

>> Kharis Templeman: That's correct, yeah, we'll resume and kick off again at 6:45, it'll be-

>> Jim Ellis: Well, thank you all for joining us, especially our friends and colleagues from Taiwan, but also the friends from the United States that are on the East Coast who are staying up late in order to participate in this.

It's been a great conversation so far. And as Larry hinted, or he didn't hint, he stated on a number of occasions, the purpose of this panel is to examine the national security implications of the efforts that we have ongoing. And I think we've got a number of experts that can contribute, I think, in significant ways to that conversation.

But in reference to the panel that preceded us, though, I don't think we should be surprised that even though we began as a premise, we were gonna talk about collaboration and cooperation. That we moved into the national security domain, or the security domain so quickly. Because the title of the work of the group that we put together that authored the report that you've read is the Hoover Institution Asia Society working group on semiconductor security.

But security is broadly defined, as you highlighted in your conversations. I mean, there are economic, there are business cases, there are practicalities, there are realities. There are dealings with labor forces and skills that are in short supply. There's all sorts of dimensions to security as it relates to semiconductors as it does to many technologies.

So I'm not surprised that we headed in that direction, and I'm going to reverse that, I think, as I start, because before I introduce my colleagues on the panel, I'd like to put a couple of framing issues out there, and many of them you all touched on in your conversations.

And so upon repeating myself for repeating you, I apologize. First off, for those of you that I've not had the pleasure of meeting, I'm Jim Ellis. I'm a distinguished visiting fellow here at the Hoover Institution and was one of the three co editors of this report and oversaw its implementation.

And along with Kharis and Larry, I'm a part of the project on Taiwan and the Indo-Pacific, which Kharis runs so well. So I have a long background in technologies. In addition to the nuclear piece that appeared in my brief CV in the email, I also have 39 years in the military, a lot of technology background in terms of aerospace engineering and nuclear engineering and the like.

And so I'm a technocrat, but as we focus on the technologies here today, we need to understand that there's a policy piece to this. And I think that's a lot of what was discussed in the first panel and is likely going to be a part of our security discussions here in the second panel, we had a number of contributors to our book.

Not all of them agreed. Many of them had similar views to those that were expressed in the panel that Larry Ran so well. We did not bill this as a consensus report because we recognize that there's variability and there are ranges in all of this. But as with many things, as I am fond of saying, there's probably three sides to every story.

There's yours, there's mine, and then there's the truth. And so the question is how do we identify where the truth is? Where do we set the rheostat or the vernier? And I would argue, as Larry and I have, that the first thing we need to do as part of ensuring the security of this global semiconductor ecosystem is elevate and expand the conversation.

And that's a part of what we've been doing here tonight, and that needs to be done on a much larger scale, both domestically and internationally with our partners. You can't start a Hoover seminar here at Stanford without quoting George Shultz, our eminent leader, who, regrettably, is now no longer with us.

But he was fond of saying that if you want people aboard at the landing, you have to have them aboard at the takeoff. And so as we think about how we want this to end, if we want the model we want, because in reality, we're talking about crafting a new system here, or at least modifying significantly an existing system.

And how we do that is gonna involve and must involve all of you and all of us, and I would argue, even a larger combination or collaboration. And so we need to think how to do that. The US' part of the CHIPS Act has established a number of regimes to do that, collaborative mechanisms.

We need to ensure that those are expanded to include our international partners and in meaningful and impactful ways. It's not the case, as I once worked for a commanding officer whose favorite saying was, Jim, if I want your opinion, I will give it to you. And so we can't have a conversation that takes us in that direction in something that is critically important for global security.

Not just US and Taiwan national security, but global security, both economic and national security, going forward. So we need to think about how we do this, and we need to understand that this is not a one and done. The CHIPS Act did some good things. There are some things in there that you kinda go, ooh, is that really the optimum situation?

How do we establish a mechanism that has a continuing dialogue that allows us to do, as my engineer professor wife would tell me, this is an optimization problem, and it's not a static optimization problem. Because the conditions and the circumstances in which we exist are changing continuously. So the idea that the lawmakers got it right, the CHIPS Act got it right, I think is a bit fallacious.

But it involves, I think, the creation of mechanisms that bring the right people to the table, that put the candor that we heard in the first panel upfront. And that we have those kinds of conversations and ultimately reach decisions that inevitably are gonna be a compromise to one degree or another.

The other piece that I would address is one that Philip and a number of others in the first panel raised, and that is that legacy CHIPS matter. It's not just the high end technology that we all like to focus on as we ratchet down the scale from seven to three to, well, I don't know how much lower you can go.

You're the experts on that. But there's a huge role and an interest in how much could we or should we do in the legacy regime that I think bears scrutiny as well. And all of this comes back to how we interact with China. And we've talked about the technologies, we know where the technologies are made, we've talked about ASML and the like.

But these are global technologies, as you know better than anyone else, as our panelists do, and I hope many of our viewers and listeners know. When you talk about ASML's leading-edge, deep ultraviolet technologies, the lenses are made in Germany, the lasers are made in San Diego. So, I mean, the idea that that's a dutch problem or a dutch issue is a bit fallacious as well.

And so it kind of highlights the unique character of this and even the complexity of the conversation that we hope ultimately will lead to some coherent and sustainable policies over the long-term. We've talked about the national security piece very specifically, and there are some things that I think we need to consider on the national security side.

I served for 39 years in that arena and understand the value of technology. And though I have to admit that sometimes technology is overhyped in some ways, as an old carrier fighter pilot, I was always waiting for that black box that was going to solve all my problems.

And I think, to some degree, I'm still waiting. But that's the nature of technology and the optimism that comes with it. But nonetheless, there are national security implications here, both for Taiwan and for the US. So what I'd like to do is, As we talk today, is in our panel is touch on the things that we can do that contributes to security.

And security, as you define it, it's economic security, it's social stability. It's the fact that at the end of the day, whatever we produce, as Bernie reminded us and a number of others did as well, similar to what one of my colleagues in the nuclear industry told me many, many years ago.

He says, Jim, you got to remember, nuclear is not a religion, it's a business. And at the end of the day, we have to make money at this. And whatever we decide has to be a system that is sustainable. It has to attract, as you talked about in the earlier panel, the capital that's gonna be necessary.

It's got to have the investors that make it all work. And so the idea that we can somehow subsidize our way out of this challenge is, I think, equally fallacious. And so it's up to us to look at the issues that need to be put on the table so that we can explore what this optimization problem might look like as we begin to move forward.

And so joining me on the panel is, as Kiaris has already mentioned, is Tain-Jy Chen, a senior professor of economics at the Taiwan School of Economics and also a professor emeritus at National Taiwan University. In addition to an extensive teaching career, he's previously served as the president of the Chung-Hua Institute for Economic Research.

The think tank specializing in economic policy studies, and also in the Taiwan government as minister for the Council for Economic Planning and Development and the National Development Council. So again, there's an economic dimension to this, and we look forward to his contributions. My next colleague is Kuo-Chun Yeh, professor at the National Institute of Development at the National Taiwan University.

Which is a research center for Chinese Studies, the National Taiwan University secretary general of EU Zhongune and coordinator of China Research program in the School of Social Sciences. And please feel free to elaborate in your backgrounds if the short precede that I put together doesn't cover all of your skill sets.

And then finally, we're gonna be ably assisted by Kharis Templeman, who is a longstanding colleague and researcher, is the effect of the instigator and the manager of the project on Taiwan in the Indo Pacific. And has a decade more of research experience here and is well regarded as a Taiwan expert both on the political side as well as on the social side.

And so thanks, Kharis, for stepping up to be a part of this conversation. So I've opened with a few comments, some of which may be provocative, but I wanna emphasize the need for collaboration and consultation in this conversation. And all the conversations that are gonna address this challenge going forward and reemphasize the need for has to be a continuity of conversation.

It's not a one and done. Nobody has the perfect answer. And even if you did, it's not gonna remain perfect for long, because the environment which you created it and for what you created, the environment you created to deal with, is constantly changing as well. So I'd like to begin with going to Professor Chen and invite you to begin with any opening comments that you might wanna contribute to the panel and to our many listeners.

 

>> Tain-Jy Chen: Thank you, Jim, for kind introduction. Can I have my PowerPoint? I'm very happy that the chair has highlighted that this session will be on national security. So some of this, my point probably going to coincide with what has said already, but from a kind of different perspective.

Next page, please. So the key point there is we are worried about the Chips Act. The real objective, there seems to be at least two objectives is put up there. One is national security and the other is reshoring of the manufacturing industry or try to create a manufacturing employment in the US.

And in my kind of humble opinion, is that the formal objective seems to be relatively easy, although this doesn't mean to be relatively easy compared to the second objective, okay? So I'm gonna look at the labor market conditions of the United States and Taiwan to argue that the second objective in terms of creating manufacturing jobs through reshoring of the semiconductor manufacturing, will be a difficult route goal.

So if we can really focus on national security, I think we will have a better solution. And then, of course, that will entail also intensive discussion, as our chair has alluded to. Next page, please. So here I just pick up some numbers for you to take a look at how the employment profile of the TSMC in 2020 by education level.

And you can see the high school graduate will account for about 13% of the total labor force, which is now about 70,000. And then your people with two-year college is about one, 9.8. So altogether you have 23% of the employment are really the people with under four-year college education.

And you have four-year college education people, which account for about 26%. And the biggest chunk of the employment are really people with master degree. They account for about 47% of total. PhD is about 4%. So you put together these master degree and PhD students, then you realize that 50% of the TSMC employment are really the guy with advanced degrees.

And my message is quite simple. You cannot replicate this in the United States, it's just not possible. It's a very special labor market condition and also the special industry structure in Taiwan that allow TSMC to have this kind of privilege by sort of working with a fleet of labor force which are very highly educated.

And this is not also the kind of profile that you wanna create jobs in the US. The guys who have advanced degrees in the United States do not need the semiconductor manufacturing to provide their jobs. They have better alternative, as Bernie has just discussed. So next page. So I think that will make you clear.

So this is just repeat what I say. If the US expect TSMC to create manufacturing job at high school level, I think the number will be very small and the investment of capital will be huge, right? And then you realize that there's about 25 or 26 6% of the college graduate working at TSMC, these guys are primarily working on production lines and even that was very difficult to do to put those people to work on the production lines and they have to take shift.

So that's the kind of thing you should have really to consider. Next page. So this employment profile cannot be replicated. That's just very easy to see. An American college graduate will now work on production line, taking responsibility and doing the shift. Master-degree, graduate and PhDs, they may work for TSMC, but the number I believe will be small.

And I think in the US in general, these people with higher degree, they want to work in a software related industry such as even in hardware industry such as Apple, Qualcomm, Nvidia, we classify them as a hardware company. Even in Los hardware company, the people with higher degree, they are working on design rather than production.

So next page. So the availability of the skilled workers which are needed for the factory, a semiconductor factory is really limited. And I have read some literature. Somehow intel has tried so hard to keep, to recruit and retain very limited number of skilled workers. And that's the reason they've been going to set up their factory in different places in the United States as well as in overseas locations.

So TSMC's first overseas fab, the Wafer Tech, which founded in 1996, is located in Camas, Washington, just very close to Poland. And we all understand the reason for TSMC to choose that location because it's close to intel and it's close to the skill labor pool which may be available for TSMC, but that proved to be a failure policy.

The TSMC will never compete with intel in terms of the solar, these very skilled air force because they couldn't pay better the kind of product they are doing, it's relatively small value compared to the microprocessors that intel has been producing, and therefore you cannot pay a higher price.

So if you don't pay a higher price, how would you expect to kind of do away the workers who are working for intel? And even if this time the more is coming on the other day, the TSMC may be different today, 20 years later it has a higher value product being produced and technology may be also better compared to 1996.

Is that going to make TSMC more competitive in the labor market? I think intel is gonna suffer because this so called, really the limited pool of skilled workers available for the manufacturing industry industry is a key constraint we really have to think about. Next page.

>> Tain-Jy Chen: So, and then of course that given the problem, which is already serious up to this point, during the construction process of the Phoenix plan, you immediately realize that if TSMC is going to succeed this time, it has to adapt to the local market labor conditions.

It's not going to be the other way around. It has to be the company adapting to the market conditions. And at least this TSMC does it. It will just become a second intel. And I think this is the point I just borrowed from Berg. And why, if you are going to create just a second intel, why don't you just provide incentive and help intel to expand its capacity?

The result will be the same. So you really want to create something a little bit different, or maybe the Arizona factory will be connected to Taiwan in a very strong way such that the operation there will provide a further sort of assurance for national security. So we really think about how this Phoenix plan should be defined to serve the purpose of national security in terms of the capacity, work capacity as already discussed in the previous panel, and also what kind of product it will be making and how this is going to be different from the power that intel can really provide there in order to make this whole ecosystem, they more sort of supported all the national security.

Next page. So that's, I think pretty much what I have to say. The Sematech experience is history. But what the US really trying to do that time was to sort of revitalize the US manufacturing capability to compete with Japan. And of course that being successful to a certain extent, at least in the equipment industry, US has really recovered its competitive strength.

But in terms of manufacturing itself, in terms of wafer fabrication, it's really didn't do. So what happened in the and is US really outsourced this manufacturing work from East Asia and concentrate on product design. And in the end, US has been able to nowadays account for about 50% of the sales in terms of semiconductor product that they design and marketing.

And that gives them tremendous power of course, in terms of dominating this geopolitics sort of rearrangement of the supply chain, because you are controlling the product, you are controlling the designing innovations, marketing of the product. And this manufacturing technology will turn out to be of secondary importance. Next page.

So that's, I think the history we should learn. You look at the US market share in semiconductor, in 1987 it was 37%, but today it was 49% across to 50%. This is calculated by the product that's sold by the US company under the US brand. And it's certainly designed by US company, but not necessarily.

Necessary manufacturing. Of course, in manufacturing, solar percentage now is falling from about 37% now to 12%. We all understand this is a concern of the US policymakers and also in the previous section where the decline or the manufacturing capacity or percentage is gonna hurt the sort of innovative power of the US industry.

So that's something we could talk about. But if this 12% is not really good linked percentage will be really necessary. And what kind of manufacturing as our chair also alluded to is not necessary. The cutting edge one and maybe the legacy product are also important as well. So that's the kind of question I think we really should dig into it.

Next page.

>> Tain-Jy Chen: So in terms of the key technology innovation, we always feel as I think Bernie also alluded to this is probably more critical for the us leadership in the industry. Next page.

>> Tain-Jy Chen: Okay, next page I think because time I would just, people can take a look.

These are the equipment the industry share. The US still leading with 35% and the second with Japan. Next page.

>> Tain-Jy Chen: So this is the foundry part and that's what the longer concern is all about. Taiwan is about 50% share in 2021. Next page.

>> Tain-Jy Chen: All right, so the option of course here is the US seems to me is no longer concerned about mass production of the semiconductor.

This was the key issue in 1986 and 87 when the US Japan trade war. Semiconductor is taking place and the sematic was founded. So mass production commercial product is the concern. But today seems to me it's a cutting edge chips and of course our chair said it's probably more than that.

Now, the cutting edge process technology can only economically applicable with mass production, unfortunately. So you really want this cutting edge process to take place in the US, you need a minimal scale, too small reduction will not be sort of sufficient enough to support the investment and technology research needed to substantiate to sustain that line over time.

And of course relocation may result in some kind of inefficiency. It's quite clear that the Arizona plan will be more expensive. So therefore how we're gonna balance these, the security issues. Next page.

>> Tain-Jy Chen: I think that's the final one. So the issue here is diversification seems to be something we all agree the US too much concentration in Taiwan incur some kind of risk and diversification as Bern just mentioned.

We also need to diversify because of the resource constraints. So there seems to be a common sort of agreement there that we could diversify to a certain extent. And so we could sort of maybe focus on that and see what the optimal strategy for diversification, then you have sort of more options available, okay?

In addition to US, you also have Japan, Germany, Singapore, Malaysia. They are quite obvious candidate for relocation of some manufacturing activities. And therefore they may have different advantage and therefore provide different opportunities for these. So if we open up that space for policy sort of design and exercise, then I think there's a better chance for success.

Thank you, that's all I have to say.

>> Jim Ellis: Well, thank you, Professor Chan. That was excellent. And teed up a number of the issues that were both a part of our report and a part of the ongoing conversations. And like you, we, I've been a part of a lot of technical studies in the space domain and the cyber domain and the like.

And virtually every report details that fixing K-12 education is gonna be a part of the solution. But I don't think we have the time to wait for that kind of an outcome. And you pointed out that, as Ronald Reagan used to remind us, there are simple answers. There are just no easy answers.

And so it's important that we understand the difference between the two. And I think that's excellent. We'll come back to your presentation here in a moment after we hear from Professor YEH. Thank you.

>> Kuo-Chun YEH: It's my great honor to be here. And thank you, Jim. And thank you, Kharis, to invite me to be here.

I would like to introduce myself a bit. In fact, I'm also the secretary general of Chinese Association of Political Science in Taipei. Why Chinese Association in Taipei? Because it's established in 1932 by the nationalist government, because of the Japanese invasion in Manchuria, and then retreat to Taipei. Or in fact, we have formal membership in international political Science association, which is sponsored by the United Nations.

But you may wonder why China not expelled Taiwan out of the international association. Because normally political science stresses on the importance of human rights and freedom. China would not participate at the International Political Science association. But every year, a lot of countries will question why China not here.

For example, last time, Italy, Greece, Brazil, question why China should not be the member of the international politician association. But this year in Argentina, no one questioned this. I think this is because of the change of the geopolitical situation. Okay, so it's also closely related to the current development of these things.

So, in fact, I really enjoyed the last discussion, especially the presentation by Professor Benjian and Professor Bern. He mentioned about the deterrence, okay. The idea of the deterrence but I agree most of his idea. But now we would like to show some historical and political viewpoint. Okay, next slide please.

I think you are familiar to this photo, right? Especially this Chinese. I think most of you know a bit Chinese. It means that all anti Chinese communists and Chinese enemy are all paper tigers, including America. In fact, we should not forget China is very well experienced at economic and political blockade.

Okay, so that's why they invented atomic bomb and satellites and missile etcetera and such. Of course, you know that semiconductor chip are smaller and more complicated. We know this. Okay, but we should not forget the history, when China face the blockade, they will try to do their best to break the blockage.

Next one please. And the next case is Taiwanese pilots W2 to recon the Chinese mainland and I mean the former Soviet Union donates 33 SA2 to China. And then the us intelligence said that we estimate that China rent out all of the SA-2. It would be safer to fly into the Chinese mainland and this brave hero named Huang Long Bei.

We should not forget this hero's name and then shut down by the missile. And later we find that this is not SA-2. This is the red flag one according by reverse engineering. And this photo made by another pilot named Zhang Zhenliang from U2. I mean, we should not underestimate China's technology and their ability to catch up the technology.

Of course, I think in our last section a professor said that how to slow down and how to stop China catch up the progress of the chip. But we should not forget about the history and that's why. Next one. This is my point. China would break the blockade.

Although chip are small and more complicated compared with missile or satellites. This book published by Hoover Institution would like to stress on the different US Taiwan Corporation through semiconductor. I will show some statistics, some questionnaire statistics. Yes, of course. And I think Taiwan according to the questionnaire, Taiwan's enterprises list in the Taiwan stock markets has the ability and the will to cooperate with the United States after the trade war and this geopolitical change.

For example, because I'm also the Eumone chair, I would like to showed an example. For example, Taiwan would like to ask EU to sign the EU Taiwan bilateral investment agreement. But it is not economic, it is too political. So EU will in fact, since 2015 EU ask Taiwan to strengthen the relations through the industrial corporation, industrial association, for example, IMEC, Esmond in Belgium and the Netherlands, we have a very close, very, very close link, very close and very real link with the Belgium and the Netherlands Research institutes and the company.

This is real, not symbolic. But sometimes Taiwan would like to try to get something symbolic. For example, BIA. Do you think of BIA? Yeah, of course. I also fully agree the BIA, but it will be it's not economic, but political and can semi conductor. This is my main point in this presentation.

Can semi because the book. The theme of the book is about a semiconductor. So I would like to ask a question. Could the semiconductor be a credible threat or credible assurance to make deterrence efficient? And first let us see the the possibility of us Taiwan cooperation. Next one, please.

For the time limitation, I just want to show the questionnaire cooperated with Zhonghua Institute of Economic Research. I know Professor Chen was the dean of the CIR. And in fact we tried to make the question and ask Taiwan stock market house the company list in Taiwan stock market to see whether they would like to invest in Europe and in the United States.

Please focus on the right hand side in the trade war. At the very beginning of the trade war, no one would like to invest in the United States and Europe. But after TSMC claimed that they would like to consider to invest in the United States. And then you will find that 2020 the ratio becomes eleven and also Europe eleven.

Why? Because Europe also claimed the so called Indo Pacific strategy and then hesitate, decrease a little bit and then I increased a lot because TSMC confirmed the investment in Arizona and then they finished the investment, so the ratio decreased a little bit. Now you see the ratio in Europe also decreased a lot because the Taiwanese company also hesitates.

But now you know the almost 100% sure that TSMC would like to invest a new factory in Sachsen, Germany. I didn't update the number because this is from my new chapter in a book published by the end of this year, can semiconductor be a tool of Taiwan's economic diplomacy?

If we talk about economic diplomacy, I think this is out of question, Taiwanese enterprises would like to invest in Europe, in the United States. Next one, please, I don't want to discuss the detail, and I also fully agree with Professor Chen's viewpoint, Taiwan's company would like to diversify, okay?

So, you see the manufacturing sector or any semiconductor sector, the very, very high percentage ratio would like to develop a secondary supplier localization and the so-called short supply chain strategy. So, this means that you can find very strong willing and ability for Taiwanese enterprises to diversify by investing in US, Europe and other countries, next, please.

So, I think if we would like to talk about the cooperation, it's not a problem, but the problem is about because this section would like to discuss about the security reason. So, I would like to ask another question, can semiconductor play a role in avoiding a war over Taiwan?

And I just show a paper published on foreign affairs by Christiansen Glacier and Andrew Nathan, okay? And I like this paper because the paper mentioned Thomas Shelley, the Nobel Prize winner in economics, but I think he has a very huge impact on political science. But I think he has a very clear definition, effective deterrence is a combination of credible threats and credible assurance.

I read the book, next one, next slide, this is the book, I read the book, I didn't finish all of them. I read the book, I found a lot of pages and a lot of parts mentioned about the role of the semiconductor conductor in deterrence. But maybe I'm wrong, but I think the deterrence in this book means credible threats, but no credible assurance, I didn't see a lot of description about credible assurance.

We follow the definition by Thomas Schilling, so maybe we should think about the credible threats and credible assurance to make very effective deterrence and avoid the war in the Taiwanese cross strait, okay, next one. So, this is just some parts of the book mentioned about the deterrence. For example, the us government should improve regional deterrence by partnering Taiwan manufacturing to rapid scale up local production or larger number of mobile distributed resilience weapon.

This is closely related to semiconductor, but this is the idea of the asymmetric strategies, something like that. And next one, next page, please, and I think this page is mentioned a lot, I think the main idea is about we should use military and economic power to make a very effective deterrence.

But moreover, you will see a strategy to deter China's leadership from conventional combat are unnecessary, but not sufficient, okay? So economic deterrence should be necessary, semiconductor can offer unique but are difficult. Economic deterrence choice as Professor Benjian and Professor Akchen mentioned that we should pay a lot of costs if we would like to organize credible threats using the semiconductor in a semiconductor industry, but how about credible assurance?

Next please, I think in this book or other papers clearly showed semi conduct can be a credible threat, okay? For example, you know this word by Morris Chan Zhang Zongo in CBS news say that if that person, I think that person means President Xi, right? Priority is for economic well-being, but I doubt whether his priorities economic well-being I think they will refrain from attacking.

And another paper I think I have to say that when this paper published it shocked a lot of Taiwanese, okay? The brokenness broken arrow strategy it means that when there will be a war between Taiwan in the cross trade, the semiconductor industry can be destroyed. Taiwanese semiconductor industry can be destroyed and evacuate all the human capital from Taiwan to United States.

Anyway, whether you agree or not, but I think there is a lot of description about the credit, but how about the credible assurance? This is the last one or please next one, but how about, I have no clear answer, but at least I know that everything needs to change so that everything can stay at the same.

If we would like to stay at state school then we have to change a lot of things for example, now US is trying to establish the new credible threats and credible assurance and China and Taiwan need to do so too, okay? So, for example, this is just an example, I have no clear answer do you think it's possible to have a new community?

For example, now the US say that the TRA should be higher than the three communique by US and China, but now the problem is that it seems that the US gave up the strategic- Now the US strategy becomes clear and clear and China doubts whether US still support the three community about the one China policy.

I don't know if it's possible to confirm the past assurance and also include some semiconductor part for example now on Tuesday, this Tuesday US imposed a strict restriction on the equipment and cheap equipment and relevant parts exporting to China. So maybe us can try to farm it according to China's semiconductor development and the situation of their industrial upgrading to adjust their export control or investment control.

And I don't know if semiconductor conductor can play any role in informing the so called credible assurance but I have no answer. But maybe we can discuss a bit and then we can organize credible assurance and credible threats and semiconductor can play a very important role in this.

Thank you very much. Thank you.

>> Jim Ellis: Thank you very much Prasia, that's extremely interesting and significant contribution and we certainly enjoy to learn a lot from it, particularly the historical references with which I had some passing familiarity. But I think your points that you keyed are significant. In other words, we've got to have real, not symbolic interactions and collaboration.

I'm not sure Schelling would, how he would view the credible threats versus assurances because he also said deterrence is a combination of capability and will. And so there's a, you know, he was a great scholar and in fact we're doing some work on what of his work is, is applicable in today's world.

And we're finding, as you do, that many of those underpinning theories have great legitimacy and validity in today's world. But we did look at the Silicon shield concept though, and the status quo. And assuming that China can evaluate that on its own and that that production capability that Taiwan represents so well, well would deter, as Morris would hope that deter Chinese military action.

We're not sure that if Xi Jinping decides this is the time for the prosperity and the future of mainland, that the existence of the silicon industry is going to stand in his way. But again, as I said earlier, reasonable people can see that from different perspectives. Kharis, could you have some thoughts here very quickly before we move to Q&A?

 

>> Kharis Templeman: Yeah, since I'm batting cleanup here, I wanted to just throw a couple thoughts out about the report. And I wanted to start with a personal observation. When I started working on US/Taiwan interaction about ten years ago, at least in a professional capacity, the Taiwanese side, so you folks were really interested in developing deeper cooperation or ties with their us counterparts.

And it was mostly a one sided conversation. The Taiwanese side wanted to work more closely with Americans and the American side was either silent or a kind of polite maybe someday. And the reason was very simple, China. So academic institutions, NGO's, government agencies, were reluctant to work with Taiwan because they viewed China as the big thing that they needed to prioritize.

And for a variety of reasons, many of which you all know well, we're in a different world today. It's a different China, for one, in the US, we're much less enthusiastic in general about deepening cooperation with China, especially in areas that pertain to national security. And it's a different US/China relationship as well.

Those national security concerns are front and center. And so for Taiwan, what that means is there's a big opportunity here, and we tried to center that in our report. There's a lot of challenges that our countries face that we actually share in this new environment that we think Taiwan and the US could cooperate on much more.

So, for instance, we have some recommendations in the report to create deeper research and development cooperation between the US and Taiwan, our research organizations, our academic institutions. We highlight a partnership between Purdue University and TSMC that got started a couple of years ago to try to train engineers and send some of them to Taiwan to get on the ground training and then come back to the US and vice versa.

And our report really thought that this was a good model and something that we could scale up. Both the United States and Taiwan, notably, have a shortage of skilled labor. And so we both have a potential solution to that problem, immigration as well. And so there's a section in the report that touches on that, too.

There's a recommendation about joint evaluations of mutual semiconductor supply chain vulnerabilities, and working more closely at a government to government and industry level to evaluate and share data on supply chain vulnerabilities. And then beyond just the kind of semiconductor specific questions, we also have some broader recommendations about infrastructure resilience or energy resilience.

I know Taiwan has some serious energy challenges looming. The US is in a position to play a constructive role in helping Taiwan with some of those energy vulnerabilities. And the political environment in the US is much different than it was ten years ago. And so if there's one message I could leave our audience with and our panelists with, it's there's an opportunity we need to do more together, I think, in this new environment that we're in.

And I hope that we can continue this conversation. This is beginning of a series of conversations about how we can do that, rather than having this be kind of a one and done sort of event. So with that, I'll throw it back over to the chair and I look forward to the discussion.

 

>> Jim Ellis: Thanks, Kharis. Great intervention. And I would only comment after Professor Yeh's excellent presentation is that we don't have time to debate or discuss the difference between the one China policy and the one China principle, which are not at all the same as I think we all understand, but that plays in this as well.

One of the things I did want to get back, though, with Professor Chen, because he said a very important and interesting thing in his presentation when he said that the US is in control of everything except wafer manufacturing. Does that imply, professor, that we have more influence than we think and that we don't need to be as alarmed about the vulnerabilities that we seem to be focused on with regard to the semiconductor situation?

Could you add a bit more clarity to that?

>> Tain-Jy Chen: The answer is yes, US is really having more power than you think. Imagine that the US is now imposing more restrictions on the semiconductor equipment exporting to China. How many of them is really manufacturing in the US? You mentioned the case of ESMO, which is a Dutch company, and this dissolved machine was really assembled in Netherlands.

But because you have key technology there, this key technology coming from United States, without key technology, this machine will be useless. So controlling the really the choking point, if you don't use the supply chain, maybe the technology chain, then you have power. I think this sort of possibility or exercise in this extraterritorial rule indicates very much that us is still in front control of the entire global supply chain.

So of course, I think there's a lot more room to be operated than the very sort of small sort of thinking about relocating fab back to the US. There must be other ways of doing that and maybe more effective. And so the question these, I think, is very important to keep Taiwan as an important place that can continue to support this very important industry one way or the other.

So when the previous section we talked about maybe R and D collaboration in the area in addition to manufacturing, would be very important as well, because this, industry, if the strategy really is to be ahead of China, right. It's a moving process, you can expect China to stand still, although you try to do everything to keep them slow.

But you can imagine whatever you do, they will continue to move, so the most important thing is you have to move faster. So therefore, I think the current thinking is more on contentment, but I think how to advance this technology further ahead, it's also very important, and of course, that Taiwan can also contribute to that process.

So I just think that we need, it's very good if that we're going to focus on national security rather than you have multiple purposes coming from different politicians, and it's very hard to have one law and then try to serve three or four political objectives.

>> Jim Ellis: Great point, and the use of the foreign direct product rule and those types of mechanisms is actually obviously being is an increased part of the actions that are being taken or considered as we move forward.

And I think you make a good point, an excellent point, but as does Professor Yang, on the need for real cooperation and collaboration. We have a couple of questions that I'd like to get to, since we've had some patient participants, I think this was a bit of a softball.

Do you agree that strengthening cooperation is a method for reducing risks? As every element is interconnected and launching a war requires more consideration? And then the follow on is do you think that the approach that's being taken by the us government risks establishing two distinct groups in the world, one compromising democracies and the other autocracies?

This kind of gets back to the greater geopolitical conversations, but I think we would all agree that cooperation, strengthening cooperation is a method for reducing risk, I think that's probably a given. But what are your two views on the approach of the US government? Do you think that's forcing a division that's unnecessary, or do you think it's acknowledging a division in societies that is inevitable going forward?

I start with Professor Yang.

>> Kuo-Chun YEH: Thank you professor I think, sorry, I suppose this question is for the previous section, but also very useful in this section. I think, yeah, fully the corporation, but I still need to say that a lot of things changed, but we still need, still want to keep the so called states poor.

For example, the recent poll, Taiwanese poll shows that almost over 80% Taiwanese people hope that we can keep the state school. I think maybe the people in the United States also would like to keep the current situation. But the problem is that now a lot of things have been changed.

So how to establish the state score should be a very big problem. For example, in 1995, we know that the American, on the one hand the two carrier in the Taiwanese trade can deter Chinese military force and on the other hand, the US government said that they never advocate Taiwan independence.

But the situation changed a lot. Now the US cannot just send two carriers to Taiwan's trade to deter the Chinese government threat. And it seems to me that the US government also, I mean some politicians in the Congress or the House representative say that they support Taiwan should be independent or even US should establish a formal diplomatic relation with Taiwan.

I mean, of course this is not related to the semiconductor, but I have to say that this is a security issue and how to go back to the states quo under a lot of. Conditions changes. In fact, I think Taiwan, China and the United States should think about this point.

But now I think the US strategy is very clear. For example, US try to establish a lot of military bases from the Japan to the Philippines and to change the defense strategy. But on the other hand, I don't know the US government would like to do this, but sometimes some politicians visiting to Taiwan, the former visiting in Taiwan, should not be a very good assurance for Taiwan security.

And in contrast, it will increase the risk.

>> Jim Ellis: Thank you.

>> Kuo-Chun YEH: Yeah.

>> Jim Ellis: I well understand the 1996 crisis since I was the commander of those two aircraft carriers, so. But Professor Chan, you have any perspective on the direction that these conversations can take us? Is it unnecessarily divisive?

Do you see two camps? Is it going to be reglobalization without China rather than deglobalization? How do you think about the future?

>> Tain-Jy Chen: Yeah, I will comment on, From the economic perspective, I think the sort of division of the world into two camps is probably not going to happen.

But it's a real thing that the China will be a strategic competitor from the US point of view. So there was a debate about whether US should decouple China from all these economic globalization in the supply chain, for example. There's debate still going on, but I think from the China perspective is quite clear, they have to decouple from US.

So it's obvious strategy going on now that they were trying to make everything without something will be subject to US export control, right? So called the Eiffel supply chain or the race supply chain, which. Even if US were considering whether we should keep China on the supply chain, China is not going to keep US on the supply chain, so that's the reality we are facing.

In order to do that, of course China would like to make friends with everybody except US in terms of production. So they are approaching European Union and the other Asian countries, of course, including Taiwan in this respect. Anybody can help them build a kind of self sustained production system so they can be independent from the US sort of control or coercion that is in their national interest.

So we are facing this very hard reality. I really don't think the old idea and China is so big right now on the global supply chain on whether what you do, so apparently it's unrealistic. Try to decouple China, right? You just can't get them out of the whole thing.

There must be some kind of strategy to keep them somewhere and maybe to a school learn from some negativity, so that's a very serious issue. But the way I see this is when the western countries, democratic societies still debating on whether you wanna decouple, but the other side is very determined already.

So that's the kind of thing we are facing today. So I think the most important thing from Taiwan's viewpoint is the US really need to be more humble and talk to the friends, exchange information and more coordination, and therefore that can make the strategy work.

>> Jim Ellis: That's a great final thought, and I appreciate that.

One of our last intervenors asked the question, if we make it very difficult for China by whatever mechanisms we choose, does that not encourage them to try even harder to create these advanced capabilities? And we had that debate and discussion within the working group and couldn't come to a consensus on that, too.

And here again, the answer is always, it depends. And in the context in which you do that. Well, we're approaching the end here, and I know Larry and Ming Chi Chen are still with us, thanks for your patience in all of this. And I'd like to give them an opportunity for some closing remarks.

But before I do, I wanna thank certainly Karas for stepping in. Professor Chen and Professor Yeh, for your excellent interventions. You've added clarity to the conversation and you provided exactly what we were looking for, which is the academic level of examination and comment on the work that we put together over 18 months.

Extremely valuable, we've decided that this has got to be a continuing effort from our perspective as well, and we certainly want to include incorporate your perspectives as we consider options for the future. So thank you very much, and now I'll turn it back to my colleague, Larry Diamond.

 

>> Larry Diamond: Well, I don't really need to say much, this has been another really excellent panel. And one thing I'd like to say is I've really learned a lot from the presentations and dialogue over the last 3 hours. And the exchange and partnership that is represented here, I think very much reflects what needs to happen at a very deep, multidimensional level between Taiwan and the United States.

The operative word in this meeting, the really essential one, is cooperation, which is why I began my opening comments the way I did, because there was a certain comment made by a former public official that did not reflect the spirit of cooperation. And I've been kind of fascinated to see some of the points of convergence, not entirely, but some between the way people in Taiwan are thinking about the future of the semiconductor industry, supply chains, Taiwan's leadership role in that.

And the way the United States and others are thinking that there's a value to everybody, to diversification of supply chains. I think the discussion of deterrence was very. Very intelligent, very valuable, and we're doing a lot more work on that. I can tell you that issue of how, with a combination of strength, analytic wisdom and information vigilance, strengthen cooperation, partnership, alliance building, you look at the world today, Ukraine, the Middle east, deterrence is just an overwhelming priority.

But if it's deterrence through provocation, it's gonna defeat its purpose, and I think we have some common ground there as well. So all I can say is thank you all so much, you know, Karas and I are both gonna be there for the election campaign. Maybe we'll see, see some of you there.

And thank you, Jim, for your just extremely adroit moderation of this session.

>> Jim Ellis: Mingchi Chen, do you have any final words for us?

>> Mingchi Chen: Nothing much beyond the deep gratitude, I work in the National Security Council, and there I also put together a group of experts and scholars, and we have a small report, and the thing that is that we want Taiwan voice be heard.

I think these panels serve that purpose well, and I think that's one thing that we have to keep in mind. That is reality, and it's not only about Taiwan US want to decouple with China from China. I think China, they have their own consideration about vulnerability, how to avoid the vulnerability.

So that's the reality, it's not only about the covering from us, we decoupled from them, but they are already prepared to decouple from Taiwan. I want to echo Professor Chen's comment on that, so that's the reality, and second thing is that very important here in Taiwan we are anxious and we don't know what's the direction of US policy.

I think much more consultation is needed before us take any action, I think for such a long time we've been sort of Sinai. We are informed, but not part of the conversation about the strategic goal of our alliance. So I think that is something that we should work together, and I think today's event is beginning of that conversation so that we can work with each other in a better way, so that we can strengthen and increase the resilience of the global supply chain of critical technology.

And thank you so much for the Hoover institution, for not only publishing a wonderful report, but also hosting such a wonderful event, thank you very much.

>> Jim Ellis: Thank you, sir.

>> Kharis Templeman: Well, good night, everyone, thank you.

>> Tain-Jy Chen: Yep, goodnight and welcome, you all, to Taiwan.

>> Jim Ellis: We look forward to.