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CHIPS Act ‘an incredibly important place to start,’ tech expert says

MIT FutureTech Research Project Director Neil Thompson joins Yahoo Finance Live to discuss the challenges that the CHIPS Act may face, U.S.-China relations, and advanced computing.

Video Transcript

JULIE HYMAN: And as part of the CHIPS Act, there's $50 billion in allocation for research, for plant building, et cetera, in the US. $39 billion of that goes-- is earmarked for corporations. The remainder is going to go into academic research STEM programs. And so let's talk a little bit more about that aspect. Neil Thompson is joining us now. He's director of the Future Tech Research Project at MIT, as well as Yahoo Finance's Dan Howley. Neil, as we look at the tech arms race, if you will-- and I know in AI in particular, there has been a lot of attention as of late. Kind of, where do we stand? And is what the government is doing through the CHIPS Act, is that an effective way to help the US compete or maybe even catch up in some of these areas?

NEIL THOMPSON: And good morning. Nice talking to you.

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Yeah, I think this is a very important question. Right now, the United States has, for the first time, really being challenged at the forefront of computing. So for many, many decades, the United States has been leading. And what we've seen in the last 15 or 20 years is trying to really closing that gap. And so I think many of the things that are in the CHIPS Act are an incredibly important place to start for making these things. And so, of course, very important that not only do we pass that, but we also put in that money to make sure that the United States can actually catch up and maintain our lead in a way that we haven't at the moment.

DAN HOWLEY: Neil, this is Dan. What kind of areas do you think are most important when it comes to investing in these kinds of high tech companies that the government wants to keep ahead of China?

NEIL THOMPSON: Yeah, so I think here, we can think about this on two different fronts. So one is sort of the resources that we're going to be using to do advanced computing, and then the people who are going to be doing that computing. And so on the side of the systems that we're building, some of that is building those advanced chips. And indeed, we're thinking very strongly about that.

But if we think about, for example, supercomputers, which are the biggest machines that we use for the most complicated simulations and the most complicated scientific computing that we do, the United States has historically had a huge lead in this. And now, depending on the measure you use, China is equal or just above us in terms of the number of supercomputers that they have and they're working with. So, in terms of some of the systems that are at the really cutting edge, we're really now sort of neck and neck. And that's something we need to think about.

DAN HOWLEY: And what happens, I guess, if the US does lose its lead to China or to other countries?

NEIL THOMPSON: Yeah, so this really matters a lot. And let me give you an example of how we might use advanced computing to give you a sense of how this might work. So some of the biggest supercomputers in the world are owned by oil companies. And they're using that to figure out exactly where to drill. You can imagine this is a really crucial question because it costs a huge amount to get these platforms set up to drill. And if you drill down anywhere wrong and you drilled in the wrong spot, you end up with what they call a dry well, right? And so that's not-- no good.

And so having this better computing means that you're less likely to have that. That means you're more productive. That means that you are making more money. And of course, it also means, in this case, that you have less environmental damage because you're not drilling in places where there's no oil. So there are lots of advantages that flow here. And if US companies are not the ones who are at the leading edge of that, they're going to lose out on some of those contracts. They're not going to gain their productivity in the way that they have been before.

BRAD SMITH: The federal R&D funding is one thing, at least for this point in time, to ramp the amount of capacity that's necessary to build out foundries and so forth and bring more of that online. But in the future, even further off, do you imagine that there's going to be even more of a passing of a baton ideologically in terms of one side of the aisle versus another in future elections and how they're approaching where we can get ahead of that next wave of necessary chip investments?

NEIL THOMPSON: OK, so let me answer what I think what I'm interpreting in your question, which is that, right now, we're actually at a very interesting moment in computing, where this path that we've been on for decades and decades, what people often call Moore's Law, was really grounded in miniaturization and that making these chips ever smaller. And we're now at a point where we can see the end of that process.

And so we're now needing to say, OK, we need to develop this next generation of computers. And they're going to be based on not just miniaturizing our existing CMOS technology, but moving to other ones. And that kind of investment is something that we-- is now in the CHIPS Act. It's really important that we are funding that in that adequate level. It's something that I would argue that maybe we should have gotten to maybe 10 years ago. But I think it's really important that we're now there and going to be moving into the future with as much of that as we can, because we really need to get there first if we want to reclaim a lead in advanced computing.

JULIE HYMAN: Neil, forgive me if you've already kind of addressed this, but just to put kind of a fine point on it here, what we're mostly talking about and the trajectory of US tech development over the last several decades has been that we design here. We develop here, but we don't make here. Does that matter? Is it important for the US to actually make chips, make computers, make technological devices in the United States, physically in the United States?

NEIL THOMPSON: Yeah, I think so. I think we've seen with some of the supply chain issues that have come up in the last few years that this is a really important question. I also think it's very important for us to be at the forefront. So there was some very interesting research that was done about a decade ago. And it looked at US companies versus European companies.

And what it showed is that half of the difference, the US companies were more productive. And half of the difference in that productivity was driven by US companies using IT better. And I think the most natural interpretation of that is that US companies were closer to the technology and the frontier of technology is we knew how to use it better. And so it's really important that we are at the forefront of those technologies because that manifests in productivity of firms, and of course, as the Secretary was saying earlier, in the competitiveness of US military as well.

JULIE HYMAN: Neil, thank you so much. Really interesting perspective. Neil Thompson is director of the Future Tech Research Project at MIT, and of course, our Dan Howley joining the conversation as well. Thanks.