Tiny Tech, Big Impact: Advanced Microelectronics in National Security

Transcript

[Music] my name is Yan Jung I am iq's chief of staff and for those of you not familiar with iqt uh we are a not for-profit Global investment platform that accelerates the introduction of groundbreaking Technologies to enhance National Security and prosperity for America and its allies for more than a quarter Century iqt has delivered significant Mission impact by forging a unique partnership with the US government and playing a central role in building a Global Security investing Community you know I firmly believe that National Security at this point is not simply who has the most tanks and guns and ships and planes but it is technology domains I mean as a former Wireless guy wallway was such a wakeup call for me and not only wallway is a company but also the fact that China had was suddenly moving aggressively into the standard setting body I mean that was something that were we I think it always dominated I think bio is going to be an area that we're going to have to think longer about I critical minerals we've had a couple of convenings on that they may not be at the same size as chips but we're going to have to think that all through but one of the things that I've also been very involved and and why I think this kind of gathering is so important is how do we deal with the capital stack and um you know we the chips money has helped some some of the incumbents and hopefully we'll do some more at least bits and pieces um incel I think is an extraordinarily valuable entity in the whole ecosystem um we've seen other nation states start to copy that the UK has one NATO has one kind of this governmental entity uh I I do think uh I don't know if anybody's here from diu but I do think diu is on the defense side um has got a clearer Mission now more money but a clearer Mission so maybe incel can can help on the you know early early stage but diu can help you know kind of get you through that stage the as we all the old VC term of valley of death but we really one of the things I've I've tried to work on for some time is how we better arrange the capital stack in a way that's trusted I hope that uh you can still count on me not only as a supporter of inel but a supporter of innovation um you know I'm I think it's going to be a an interesting ride for the next year or so as uh the new Administration comes in my hope is that they will keep this focus on Innovation and recognize that um I hope they also make clear that you know and acknowledge that China is a great nation and our beef is with the c with the CCP and shiing ping not with the Chinese people or the Chinese diaspora I think that's really important um but the way that's going to happen is from rooms like this where funders um entrepreneurs and folks who are part part of this ecosystem uh can really make things happen so y I very much appreciate you having me here this morning the key Technologies are we often say dual use but they're actually primarily civilian the development is primarily in the commercial Market which means that governments on both sides are less relevant and also less able of screwing things up and the advantage the Chinese have is not that their government is full of geniuses or that they've managed to structure it extraordinarily well is that they've got a vast Market with relatively strong commercial incentives that making progress despite the fact that their government regularly makes uh significant errors in uh technology policy in Silicon Valley uh many of you will be well aware uh everyone who made their career investing in semiconductors in the 1960s and 7s 80s now retired and indeed at the most famous Venture Capital firms in the world there's now hardly anyone who knows about semiconductors seoa and reesen these are companies that uh at a time uh many decades ago were spending a lot of time and money building semiconductors and now they're focused entirely in most cases on other uh segments of the technology sector and that's bad news because these are the firms that in many cases build the technology companies uh of uh the future and the reason for that I think is is pretty straightforward there's a generational Dynamic the generation that focused on semiconductors retired the generation that made their money in consumer internet or in SAS products is now leading these firms but the bigger issue is that the return on investment in software products has historically been much higher than the return investment in semiconductors the capital intensivity is high the durations over which you must invest before you reach your Market is long and so for investors there's a very rational uh process of focusing on something besides semiconductors and related Technologies I think the good news is that we've got groups like this that are I think succeeding in a a big way in bringing together government industry uh Venture and Academia uh to uh build the networks of people that understand the importance of this issue and understand the business models behind this issue understand the technology behind the issue I would submit that five or 10 or 15 years ago this ecosystem was not nearly as tightly nit as it is today and there's a lot of people who are participating in conversations like this that uh were not several years ago second I think in the Venture space there are some new entrance that are playing an important role and government I think is uh redoubled its focus on this whether it's dark whether it's the chips and science act I think we see a new Focus relative to a decade ago uh recognizing the importance of of microelectronics I think the third thing is that uh we're having some success in making microelectronics cool again which I think is extraordinarily uh critical when you're talking about training the Next Generation how do you create an ecosystem and a uh application process in which to invite all of those companies in and then then have a North star as to what we're going to fund and why and we need to have that Vision right away but then as we learned along the way um to uh quote Mike Tyson everyone has a plan until they get punched in the face right and so we had this Vision we devised the process and then we were hit with 500 statements of interest of companies that want to propose things to us more demands on our funds that we had and Incredibly complex uh uh negotiations for building and it was a really gratifying experience and I think um one thing that I would like to let the public know about what we do is that we are moving as fast as possible we are learning as fast as possible and our goal is to achieve as much National and economic security objectives and goals that we have laid out as much as possible so chips I think was meant to address across the full value chain of companies that are trying to move in different ways the big emphasis obviously is on getting major companies to reshore here and serve as hubs to catalyze additional investment there also is a goal hope to Foster companies to move further up the value chain right which is like the companies that need capital investment but are earlier revenue or more Innovative technology that the market isn't meeting and then there's a desire AC cross chips to incentivize you know seedlings right research and development and the sort of earlier stage you know if you are doing values-based industrial policy which is where this president was always focused and where this Administration was focused it does take time to make sure those values are instilled in the right way this was not a post-financial crisis program that was designed to get money out the door as fast as humanly possible this was a make smart Investments That create good jobs that are sustainable that are tied to business metrics and I think that while on an individual case and my colleague to my right here will have um some thoughts on this in the private sector which I'd very welcome hearing that on a macro basis you have to leave time for those negotiations to happen um to make sure that what you're implementing is something that really does push the bounds on all these different fronts and yes compromises will be made in negotiations like every negotiation but you know for industrial policy to succeed for future chips programs you have to leave this in a place that not only gets the money out the door but gets it out the right way and I think that's very much what the lesson learned has been everybody we talk to they recognize the technology but when we get through the motions of having to bid having to compete with other guys and all of that we don't get money you know so we're lucky I I shouldn't say we don't get money we have inel as one of our investors uh Michael I'd like uh to thank you he sits on our board actually so inel has been a huge supporter um yeah I mean I think uh it's important to recognize that that the Chinese system is uh very different from ours and I in no way would recommend that that we replicate that um but I think you know um the the way that that you know China has approached this um it's very um you know government topown driven there um you know strategic um indicators set and goals set um that come from the government and a lot of the funding um basically you know encourages companies to move towards that and um I think one of the things that that we're seeing um you know before before export controls were in place um it was still even though that there were there were these directives for um you know Chinese companies to basically um indigenize certain parts of the supply chain um it was still difficult not just technologically um to to innovate and catch up um but it was also difficult for these Chinese companies to um sell their their products and their equipment um to their Chinese customers because the Chinese customers still recognize that you know they were driven by obviously by also by market dynamics and the the the foreign products um were were still still better [Music]