The U.S - China High-Tech Competition is Modernizing American Industries

It is rare for a tech mogul to leave Silicon Valley for a position in the State Department, but that is exactly what Keith Krach decided to do four years ago. The founder of Ariba & DocuSign CEO, Keith served as Undersecretary of State for Economic Growth, Energy, and the Environment for nearly two years, successfully orchestrating a coalition of 50 nations and 180 telecom networks to block Huawei's 5G from their global telecom market. Keith's experience in tech & government equips him with a unique perspective on how today's current geopolitical climate is impacting the private sector. I recently had the opportunity to sit down with Keith to discuss the geopolitical climate and how he sees it affecting the private sector.

Here are three key takeaways from my conversation with Keith:

1.????Government Investment in Semiconductors is Generating Substantial Results

In our discussion, Krach highlighted recent legislation designed to turbocharge American economic competitiveness such as the?US. Innovation & Competition Act – providing more than $250 billion in high-tech funding and the?FABS Act – creating a 25% tax rebate credit for all new semiconductor foundry investments. These efforts have generated a wave of momentum for the American semiconductor industry and the results are showing. In recent months, TSMC has committed to onshore a?$12 billion foundry?in Phoenix. Samsung has committed to building?a $17 billion foundry in America. Intel has announced a?$20 billion investment for two new foundries?in Phoenix. Krach expects this momentum to continue as more foundries and suppliers begin to cluster in Arizona – this prediction was supported by Commerce Secretary Gina Raimondo's comments last week that?recent investment efforts could bring up to 10 new foundries to America.

2.????Government and Industry must Invest in High-Tech Talent Infrastructure

Krach emphasized that conscious leadership is needed by both Congress and industry to generate necessary investments in manufacturing automation and high-tech vocational training?for the Western labor market to gain an advantage over Chinese competitors. Historically, American labor costs have been a competitive disadvantage; however, Congressional incentives and innovation in technology are driving new possibilities for industrial efficiency & output that can put America at the front of the pack. This competitive shift will allow America to lead in emerging technologies that they are currently lagging in. Keith highlighted how China holds 90% of the global photovoltaic energy market - led by their minimal labor costs. The reality that 70% of all energy will be sourced from solar power by 2050 highlights the dire need to compete - and win - in this space. In order for America to do so effectively, we must lower our manufacturing costs down through the application of automation and a high-tech workforce. We have to invest in a different kind of infrastructure: high-tech talent.

3.????Public and Private Sectors must Compete Together to Win this Race

Keith told a story of a time where he brought Secretary Mike Pompeo to Silicon Valley. Over four days, more than 40 Silicon Valley executives and CEOs told stories about their conflicts & challenges with doing business in China. They highlighted their concrete appetite for American leadership in high-tech and a willingness to engage in investment & competition. Within the U.S. Innovation & Competition Act, there are several provisions that highlight the need for public-private-partnerships within high-tech. Keith specifically mentioned these as a possibility for participating countries and private sector allies to benefit from mutual research generated from public-private joint funding - all readily available for commercialized use. He noted that the true open-market possibilities for America to partner with its industrial allies was the core of its economic competitiveness, citing the successful efforts of Ford, Chrysler, DuPont, and Kaiser in the 1940's. At the conclusion of our discussion, Keith simply stated that, "It is time to rally our manufacturing titans once again."

Now more than ever, the American private sector is positioned to benefit from the geopolitical climate's appetite for high-tech investment. From semiconductors, to automation, to public-private-partnerships in joint technology research, there has never been a better time for companies to be planning long term while aggressively driving towards leadership in emerging technologies and partnering with their respective governments to accomplish their strategic priorities.?