From the Crows' Nest

Ken Miller continues the microelectronics discussion to understand how the United States should invest in its industry partners to maintain its competitive edge in the global market and maintain national security with Jennifer Santos and her team from Draper.

Show Notes

Microelectronics is one of the United States’ biggest security risks, and the supply chain remains vulnerable. In this episode, Ken Miller continues the microelectronics discussion to understand how the United States should invest in its industry partners to maintain its competitive edge in the global market and maintain national security. To find this out, Ken sits down with Jennifer Santos and her team from Draper, an independent nonprofit engineering innovation company. They dive into the microelectronics supply chain, tech challenges, and opportunities; this episode is Part One of the conversation.

Jennifer Santos, David Hagerstrom, and Geremy Freifeld consider domestic sourcing and manufacturing of semiconductors a national security matter. They discuss how the US competitiveness in microelectronics has evolved and the purpose the CHIPS Act serves. They also compare how the US dissects its industrial base to how China and other competitors examine theirs.

To learn more about today’s topics or to stay updated on EMSO and EW developments, visit our website.

Creators & Guests

Ken Miller
Cassidy Butler
Laura Krebs
Reese Clutter

What is From the Crows' Nest?

This podcast features interviews, analysis, and discussions covering leading issues of the day related to electromagnetic spectrum operations (EMSO). Topics include current events and news worldwide, US Congress and the annual defense budget, and military news from the US and allied countries. We also bring you closer to Association of Old Crow events and provide a forum to dive deeper into policy issues impacting our community.

Ken Miller (00:10):
Welcome to From the Crows' Nest, a podcast on electromagnetic spectrum operations, or EMSO. I'm your host, Ken Miller, director of advocacy and outreach for the Association of Old Crows. Thanks for listening.

Before we get to this episode, I want to quickly say Happy New Year and Hope 2023 is off to a great start for all of our listeners. As we head into the new year we're going to be making some changes aimed at helping our listeners engage a bit more directly. And the first out of the gate is on social media. You can now follow me and the show on Twitter @FTCNHost. We'll be giving you a heads-up on some recordings, upcoming episodes, and providing a forum to discuss some of the topics that we cover here on the show, as well as you can submit questions, comments, and insights. So again, you can tweet or direct message me @FTCNHost.

Now on this episode of From the Crows' Nest, I am pleased to have with me a team from Draper. Here on the show we wanted to dive deeper into electronic supply chain and technology challenges and opportunities that are on the horizon. So I invited Ms. Jen Santos from Draper and her team here to the show at AOC headquarters in Alexandria. Due to the depth and breadth of the conversation that we had, we decided to turn it into two episodes. So this is part one of that conversation and part two of that conversation will come out at our next regularly scheduled episode on January 25th.

Draper is an independent nonprofit engineering innovation company. They focus on the design, development and deployment of advanced solutions for the world's most challenging problems. Developing new technologies to safeguard the US military electronic supply chain. They are supporting microelectronics through nearly all of the US Department of Defense's activities. They enable such things as global positioning systems, GGPS, radar, communications and C2, or command and control. Draper views domestic sourcing and manufacturing of semiconductors as a matter of national security. They are helping to build trusted foundries and a thriving electronic sector across the US. So they are deeply involved in nearly every aspect of this issue and I wanted to have them on the show to go into more depth than we often can in a regular episode.

I was pleased to have with me Ms. Jen Santos, she is the chief of Corporate Strategic Initiatives Office at Draper. Jen has more than 23 years of national security leadership experience in DOD, Congress and the private sector and has focused on this issue from many different perspectives over the course of her career. I was also pleased that she was joined by senior program manager, David Hagerstrom and laboratory fellow Geremy Freifeld.

David has been with Draper for over 20 years, developing highly customized, highly miniaturized microelectronic systems to address critical national security needs. He started his career at IBM semiconductor division where he contributed to several generations of world leading memory and logic products. Dave witnessed firsthand the decline of US leadership in manufacturing semiconductors and semiconductor packaging, and is involved in Draper's strategic initiatives to contribute to a resurgence of US leadership in critical electronic manufacturing.

Geremy serves as Draper's technology portfolio leader for system assurance, including security, radiation, hardening fault tolerance, and system resilience technologies. Previously he led all electronic development at Draper, giving him over 20 years of experience on microelectronics as well. So I want to thank Jen, David, and Geremy for joining me here on From the Crows' Nest. Let's listen in to our conversation.

Thank you for joining me here on From the Crows' Nest. It's great to have you.

Ms. Jen Santos (03:45):
Thank you.

Geremy Freifeld (03:45):
Great to be here.

David Hagerstrom (03:46):
Great to be here.

Ken Miller (03:47):
So I wanted to take a few minutes to kind of drill down to really help us understand the problem. We recently had an episode on From the Crows' Nest where we talked about a new book, Chip War by Chris Miller. And reading that book the thing that came out to me was that the history of this topic, of microelectronics, the supply chain, the technology is so rich and reaches so far back into, really, our national consciousness for decades and has really played a central role in industrial competitiveness and national security in almost every aspect of our lives and we don't really even know it today.

So we're here today, we recognize this problem of microelectronics and I wanted to turn to Draper here. I'll start with you Jen. Can you give us a little bit of insight into, okay, we're here in 2022. We have this huge problem, policy problem in front of us, industrial based problem that we're trying to address, how did we get here and how would you define the problem today?

Ms. Jen Santos (04:55):
Yeah, no Ken, thank you so much for, one, allowing Draper the opportunity to spend some time with you this morning and to the Association of Old Crows for hosting such a prestigious conversation. I also want to thank my teammates, Dave and Geremy here, who are excited to be a part of this conversation. So let's dive right in.

What is the problem and how did we get here? So can we define what is the US industrial base? So commercial industrial base is companies that create technologies and innovations that are vital to our livelihood. Defense and national security are companies that create technologies and innovation that are vital to our national security, such as technologies used by war fighters, critical infrastructure to name a few. And then there's this term dull use, technologies that can be used in our livelihood and also national security and vice versa. So that's how the United States dissects its industrial base.

How does China dissect its industrial base? So if you would look at US companies perceive these as separate and distinct. You work for national security, you work for commercial or you build something that can be applied in both cases but with definitely different roles and restrictions. For example, US companies typically have a federal business unit that markets to national security interests separate from their commercial business units. Unlike the United States and most western nations, China commercial technologies and industries are inextricably linked in their defense efforts. The deliberate transfer of commercial technology and innovation to defense is not exclusive to China as practiced by other adversarial states.

Now, considering that you think of industry partners having joint ventures with other countries and other companies. So when you think of the microelectronics industrial base, it has gone through a lot of industry consolidation. So you've had the industry partners that are building certain parts of the supply chain consolidating, as well as building relationships with other countries. So you have this consolidation happening, you have this new fight towards who can make the smallest fastest processor and now you're where we are. The United States industrial base and the microelectronics industrial base has consolidated and has shrunk the growth in those industrial bases focused on national security, which is where we're here to talk about, national security is one and half percent of that market. So it isn't a driver.

Ken Miller (07:40):
Yeah, I wanted to touch on that. When you talk about the US industrial base, you mentioned that there's the commercial piece, there's the national security piece. There's a level of complication to the US industrial base and you mentioned some of the consolidation that's happened and how that consolidation has affected the commercial national security or dual use aspects, and then the China piece, but then you have other Asian countries as well as of course countries in Europe which complicated.

So when we think about US China competition, keeping our eyes on Asia for a little bit, there's a lot of other Asian partners and other markets in their Japan, South Korea, Taiwan obviously. How do they approach this from, is it more of a US perspective? Do they figure out a way to balance in terms of how they divide up their industrial basis?

Ms. Jen Santos (08:39):
No. Whatever they build for commercial is used in national security. And so you don't have this industrial base that's competing for either or, it's just or. Which allows to have a larger demand signal to support the problem.

Geremy Freifeld (08:58):
So I just wanted to mention that the Asian countries like Taiwan, which produced a lot of semiconductors realized decades ago that they could use that to drive economic growth. So forgetting the national security aspect, I'm going to back up one second and say the problem is that microelectronics dictate both any kind of adversarial advantage we have from national security perspective. So they completely dictate the capability of our weapon systems. And two, they're the number one economic driver for the world at this point. So 7 of the top 10 of the largest market cap companies in the world are market electronic companies. And so not only are they important for national security, but they're also, forgetting national security, for countries that are trying to lift themselves up economically, they're the driver. And the Taiwanese, the Asian countries realized this decades ago and they invested heavily from a government subsidy standpoint into standing up the capability to allow the US to offshore microelectronic production. And so that has gotten them into a wealthy nation status and provided a different way of life for their entire citizenship.

So I think that it's both a national security and an economic competitiveness imperative for everyone around the globe. That includes the Europeans, that includes the Chinese and the Asians and it also includes us. Because as we see the industry slipping away, not only are we losing any kind of advantage that we currently enjoy from a national security perspective, but we're also losing that economic competitiveness advantage and we won't be the pinnacle of technology or R&D development anymore.

Ken Miller (10:50):
Yeah. And so Jen, you mentioned Geremy that they made a decision decades ago to go in a particular direction, and, Jen, you talked about the consolidation and all the changes happening in the US industrial base. Could you talk a little bit about how this has evolved where the US competitiveness in microelectronics has evolved to a while watching what's happening over in Asia, the decisions they're making over the decades? Because obviously we've been watching what they've been doing. This isn't a problem that's all of a sudden on our laps and we are not aware of it. We've seen it happening. We've seen it evolve in front of us. So why now are we all of a sudden by and large alarmed that okay, we have a problem we have to address?

Ms. Jen Santos (11:34):
Well for national security, in the national security spaces they don't buy a microelectronic, they buy a plane, a ship, a truck, a submarine they don't buy a electronic chip. It's not an aggregated demand signal. And so what does that mean? A builder of any weapon systems uses their supply chain to build whatever they need to build. And so if they need a microelectronic, they will outsource that to an industry partner to go build it. Well if you're outsourcing it to an industry partner, your job is to drive down costs and increase speed. And so if you can offshore some of those capabilities to other countries to fill the demand signal, now you've lost the opportunity to have that capability onshore. Which, as a result of that conversation... And Geremy made a fantastic point of a lot of the national security is economic security in this space. It absolutely is. Microelectronics sits at that intersection.

So as industry partners offshore their capabilities to do packaging at other places like TSMC, now you don't have that capability in the United States. Do you need to have that capability in the United States? So industries debating. From a Draper's perspective, we consider that the assured supply chain is instrumental to national security. And so we keep that as an important perspective and we understand what's going on in that industrial base.

So that offshoring is driven to results like the CHIPS Act. The CHIPS Act is a result of government realizing that we probably need to invest similar to what countries did 10 years ago into the United States into microelectronics and focus that conversation.

Ken Miller (13:25):
You mentioned the CHIPS Act. So we can just touch on that a little bit and I'm sure that'll will revisit it throughout the conversation. But the CHIPS Act, signed into law in August after a lot of debate on Capitol Hill. It's a multi-billion dollar investment plan that covers not only the building of manufacturing sites but also tax credits and so forth. So what are some of the pieces of the CHIPS Act that you think are going to be the most instrumental in moving this conversation forward, Geremy?

Geremy Freifeld (13:59):
The CHIPS Act, even though it's multi-billion, pales in comparison to foreign government investments. So both the European Union as well as the Eastern nations invest far more into their industry than the US does. And that was. That's part of the original problem is that the US doesn't directly invest into our commercial industrial base. Capitalism, market forces are what drive our development instead of direct government subsidies. And so the CHIPS Act is kind of a trying to catch up, but it's way smaller than what people are doing offshore.

Ms. Jen Santos (14:39):
So I don't want to call the CHIPS Act insufficient.

Geremy Freifeld (14:40):
Yeah. [inaudible 00:14:42]

Ms. Jen Santos (14:41):
I Would say the CHIPS Act is a signal to industry, the executive branch and legislative branch from the legislative branch saying, all right, we're listening. So it's brought a conversation to this country. Before that, was there a conversation about microelectronics vulnerabilities? I'm just going to say I used to work in the Pentagon and I would run around the building screaming microelectronics is our number one national security risk. I did it all the time for years. Because I saw what was happening. I saw, I read, I understood the Made in China 2025 and the Made in China 2020. I understood where they were going and I understood that our industry partners here in the United States were saying, we're going to offshore packaging, it's okay. But when that spigot is shut off things will change.

Geremy Freifeld (15:29):
You have to start somewhere and it's a good start. And the other thing that the CHIPS Act does I think is really great is that it intentionally prevents kind of the money getting into foreign control, which is pretty unique from a legislative perspective, I believe.

Ms. Jen Santos (15:46):
Yes, absolutely.

Geremy Freifeld (15:47):
So I think that that is one of the good things about the CHIPS Act. I think we need to just follow it up with more money, more investment and more development.

Ms. Jen Santos (15:58):
And Geremy, I'll add to that. Adversarial capital, which you brought up a couple minutes ago, is complex and growing threat to the US industrial and technological base. We not only need to illuminate the supply chain, we do need to illuminate the ownership chains. State sponsored economic trade craft could erode our technological advantage. So as an example, the CRS, Congressional Research Service, has done this summary, the summary of the Made in China 2025, their clear Chinese industrial policy. And that umbrella was introduced in 2015, it seeks to boost Chinese economic competitive by advancing China's position in the global manufacturing value chain, leapfrogging into emerging technologies and reducing reliance on foreign firms.

So if our industry partners recognize this as a vulnerability, they won't take on adversarial capital, adversarial influence. Which, is again a great signal because in that bill, just like in the Small Business Administration reauthorization said, none of these funds can go to adversarial countries. Which is changing the conversation. 20 years ago, industry was encouraged to offshore, now industry partners are saying, wait, hold on, let me reassess.

David Hagerstrom (17:13):
Yeah, I guess, Jen, I liked your comment about the CHIPS Act being a signal that we're listening. I've been around the microelectronics industry for quite a few years and we didn't get in this situation quickly where we have no competitive manufacturing here in the United States. We certainly won't get back into in that position very quickly. I think it's a good start.

I think the driving force for going offshore was really low cost. I was actually at IBM from the early '80s to the early '90s and I saw sort of this hump from being from IBM being very dominant in microelectronics. IBM was actually the largest American producer of chips, but they were all for internal consumption for decades. So their name doesn't always come to the top of the list as sort of the leaders in semiconductors, but they were for many years. And in the late '80s, IBM started doing packaging offshore in order to get their own chips package less expensively. And that trend was driven by largely consumer demand, the consumer demand for low-cost electronics. And now I think there's a different tone in this country. There's an awareness that both economically and national defense wise, there's other factors to consider besides lowest cost. So I think we're on the cusp of something really important and hopefully going forward we really will see these changes we're talking about.

Ken Miller (19:10):
So I want to follow that up real quickly because I was get into that a little bit to see is it enough? Because you look at these large price tags and you almost become numb to them at some point I was like, oh, it's 54, 60, 70 billion dollars. But when you think of all of government annual appropriations and all that we're investing in a number of different programs, it doesn't seem as significant. But I know that there's some subsidies for manufacturing, there's some tax credits, there's some investment in R&D. So what are some of the pieces that you're most interested in to see how they evolve? Because obviously a lot of this is promised money authorizations in the future. There's some immediate money, but this is going to be an annual debate that we're going to be coming back to. So what are some of the pieces that you're looking at?

Ms. Jen Santos (20:01):
So again, in national security you don't buy a microelectronic, you buy a plane, a ship, a sub. And so investing 52 billion dollars, which the CHIPS Act, the portion of four of the microelectronics is 52 billion dollars. 50 billion through commerce and 2 billion for defense department. Is that enough? No, absolutely not. I mean, I'm a prior appropriator. Throwing money at the problem doesn't solve the problem. It's got to be a collective understanding across industry, executive and legislative branch. The three have to agree that we have this problem and have to invest internally with the industry partners. The executive branch has to recognize the vulnerabilities associated with not having this capability in the United States, and the legislative branch has to support. But it has to be together. It can't be, let's just put some money in the appropriations bill and it will solve that. Having done that before it doesn't even move the needle. Because in truth, using the Defense Production Act you'll build up an industrial partner and then the government won't even contract with those industry partners.

It can't just be throw money at the problem. It has to be a recognition for industry to recognize that if their reliance is on a single or sole source supplier that could shut off the valve at any point in time based on whatever reason they come up with, it is a massive risk to that industry partner. That's step one with the industry side. The executive branch, that's the executive branch, not just the Defense Department, the whole executive branch has to recognize that if we lose this capability we will then not be able to rebuild it back up again. The legislative branch has to support the industry and executive branch to get this move in the right direction, but 50 billion dollars isn't going to solve it. China is invested, there's so many news articles out about there about where they're making investments and what fabs they're building up. They're talking at hundreds and hundreds of billions of dollars. But the difference that they have is they have direct and clear direction that their industry partner has to go do this. Whereas we're a free and open market economy, we absolutely would not do that.

Ken Miller (22:15):

Geremy Freifeld (22:16):
Oh, I just wanted to add that the other ways that the governments and the offshore industry uses their money is to procure technology from the US. So a lot of that money isn't going to build native capability, but it's going to just buy our capability and move it somewhere else. And I cue Jen up for this because I know that she's very into the concept of integrated deterrence and adversarial capital. So Jen.

Ms. Jen Santos (22:41):
Yeah, no, I mean it is all about following the money. Investing into these industry partners is really important right now. And having the industry partners... And I use the partner's word there on purpose, I do it all the time. Whether it's the executive branch partners or legislative branch partners. It has to be a partnership. And together collectively, the government agencies that have the authorities to support and help, the Department of Justice has amazing authorities to support the industry in these cases, Department of Commerce, US Trade, USTR, DOD have all these authorities to help industry maintain and grow its competitiveness in this space.

Integrated deterrence, which Geremy brings up as a passion of mine, which is really bringing those collective executive branch authorities together to protect and promote the US industrial base and our partners and allies mean. I just touched on partners and allies. It's such an imperative that we bring our partners and allies into this conversation and share together again, they're investing as well. And when you collectively put it together, now you have a capability. But just a 50 billion dollar appropriation ill isn't enough. It's not going to change the conversation.

Ken Miller (24:04):
I want to touch on that a little bit more. You mentioned something earlier on DOD does not buy microchips, they buy planes. And there's a very similar argument that's made in our community when we're looking at electromagnetic operations and we deal a lot in the world of multifunction systems where we're getting away from this idea of buying a single box that does electronic warfare nowadays. It's a multifunction system that can do a lot of different things. And DOD has had a problem buying that because of the way that the acquisition system is set up. It's antiquated in a way that there is nobody that can say, I'm going to spend X amount on a multifunction system that's going to do a lot of different things, but I'm only responsible for this one particular capability or technology in it.

So in that way of thinking, we've been pushing really hard for acquisition room to give us more flexibility in this. So this is a very similar situation. Do we have to rethink how DOD is buying things to allow them to have more flexibility in maybe not buying the chips, but buying that specific component technology so that they have greater flexibility in where they go across numerous systems and across the services?

Ms. Jen Santos (25:26):
Yeah, no, Ken, you're spot on. Does the DOD need to think differently about critical technologies and its weapon systems? Microelectronics is one component, but that's the component we're here to talk about. But does the DOD need to think about that? Yes. Does the executive branch need to think about that? Yes. Similar things, Department of Homeland Security, I mean what look what they're working on, very similar. But it has to be not just an aggregation of demand, but aggregation of knowledge and then a way to do things. There are industry partners out there looking at doing things like strategic sourcing. So if I design this chip that can source a plane, a sub or a truck, now I don't need a different variation for each one. And then I can make it assured, add cyber vulnerability protections, all these things to it, technology protections and use it in different formats. So that's one way industry is looking at how do we aggregate the capabilities in a company to apply it to different problem sets for national security. It's just one of the ways-

Ken Miller (26:40):
And it's interesting 'cause you talk about aggregate demand, we focus a lot of that in terms of DOD or, but you mentioned Homeland Security and almost every other government agency. And even when you get into outside of DOD and military, you have critical infrastructure, there's a lot of similar aggregation of that same demand going on. Who is responsible for aggregating all the aggregation that's happening out there to kind of say, hey, there's a lot more we have in common than we have in differences. So who's [inaudible 00:27:16]-

Ms. Jen Santos (27:16):
Who owns that problem? The National Security Council and the National Economic Council are the two organizations that bring the branches of government together, the executive branches, the cabinet level, together to talk about problems. So in my opinion, it sits there. I'm not saying they would do the acquisition, but they would be the one that understand it. There's been a whole bunch of executive orders on this case to look at supply chain vulnerabilities, supply chain problems. And so the recent one a year ago, so under the previous administration there was one in this administration, there's been looks at this and microelectronics has been one of the top problems.

But then it gets back into, all right, so we're buying a plane, a chip, a truck, a satellite, a spaceship. I mean NASA, Homeland Security buying planes to protect... I mean there are so many. Who could understand that demand? I think the NEC could understand that demand and I would say, and then they could apply it strategically. Now, if you are on the industry side, let's flip this circle around. Does the industry want the National Security Council and the National Economic Council telling them what to do?

Ken Miller (28:36):
No, probably not.

Ms. Jen Santos (28:38):
No way. No way. And so for a Draper's perspective, we want to build microelectronics, we want to design the most exquisite microelectronics and provided for the most exquisite national security problems. But we're going to do that on such a small set. If we collectively work with under other industry partners, which we absolutely do, can we together do some type of tiering of them to apply one of these microelectronics, I always say this and Geremy and I giggle about it, to a pacemaker or to critical infrastructure or to a nuclear weapon? Could we design capabilities that could accommodate all of those? Well, that's what the dual use or the military civil fusion program in China does.

Ken Miller (29:20):
I think that's why partnerships are so critically important. When we think partnerships, we think government to industry, but we also forget when you have really good partnerships, that industry to industry piece can also stimulate creative solutions apart from wherever the government is involved in. Just by increasing the crosstalk and cross pollination that happens there.

Ms. Jen Santos (29:41):
But you know the government is very stove piped in those areas. So if you go from commerce to NIH to DOD to DOC to USD, they're all well-functioning organizations. But their incentives to aggregate or to coordinate their incentives are to protect their rice bowls and solve their problems. There's no inter-connective weave between there. That's what we think is a great opportunity.

Ken Miller (30:10):

Geremy Freifeld (30:12):
We fight this battle every day because, as was quoted earlier, I think Jen said it that electronic demand from a DOD perspective is 1.5%. But recently the Office of the Undersecretary of Defense for Research and Engineering published a slide deck where if you aggregate the government demand, if you conclude FAA, DOD, critical infrastructure across all government and look at government as an enterprise, they drive approximately 23% of domestic demand from microelectronics. Which I mean, you can think about government's a huge entity, even just as a PC procurement part for all of its employees it's pretty huge in comparison to commercial companies.

So getting to that level where you have, oh, we're 23, 24% of domestic demand, then you can start making an impact that isn't contrary to commercial interest, but to in some kind of symbiotic way work with the commercial industries in order to ensure that that 23, 24% of electronics is produced domestically and with some assurance.

Ms. Jen Santos (31:19):
And can I add onto Geremy's point there? Going from 1.5 To a 23% ownership of that capability is game changing. So now you have industry that is interested in investing because they see a clear demand signal from the government, not just the individual agency.

Ken Miller (31:38):
One of the changes that some talk in the AOC that we're looking at closely is how will the CHIPS Act kind of stimulate this drive for talent in microelectronics? 'Cause you can put a lot of money into anything, but if you don't have the right people in the right places. So this talent development is going to be important. And according to the bill there's I guess, an establishment of a national semiconductor technology center that's going to be responsible for this working and partnership. Talk a little bit about some of the challenges with talent development and what are some of the things that you're looking at to help address that problem?

David Hagerstrom (32:25):
Well, microelectronics encompass several, what I'll call for the moment sectors. People talk about chips. So silicon wafers become silicon chips. TSMC is the big kahuna right now in terms of manufacturing state-of-the-art silicon. But silicon needs to be connected to something. And so when we talk about semiconductor packaging, it's all about that connecting the silicon to something useful. Now generally speaking, you're talking about connecting a piece of silicon into a circuit board. If you pop open your cell phone or your toaster, you'll see a little green board in there with components on it. That circuit board technology has also eroded in this country. So just like it's very difficult to source chips, it's very difficult to source those circuit boards that have been treated as a commodity but have actually advanced technically very much in the last decade or so.

So, I have started some work with an organization associated... Well, it's part of the University of New Hampshire. University of New Hampshire has a Center for Advanced Manufacturing. And there is a New Hampshire company that is arguably the leader in circuit board manufacturing in the United States right now. And Draper is working with both of them to add circuit board technology and advanced circuit board technology into the curriculum at the University of New Hampshire. And that's just one example. There's collegiate workforce development programs funded by the Department of Defense that are really, I think, gaining a lot of momentum.

Geremy Freifeld (34:17):
We have a huge issue with talent recruitment, both in the defense industrial base but also in the commercial industrial base. That's one of the reasons that the kind of the dominoes fall is because if the manufacturer happens offshore, and then when you talk about manufacturing larger systems that include the microelectronics like iPhones, they don't have enough engineering people in the United States to pull off iPhone production here in the US. And so it's just easier from a scale perspective to go offshore.

So there's a whole host of kind of development programs and especially indirect subsidies for companies that are working on workforce development. But I think the funny thing is, one of the things from the CHIPS Act is that they developed the draft national strategy on microelectronics research and development and they outline how they're going to stimulate venture capitalism and commercial investment into microelectronics. But from a work workforce perspective, they're not addressing the individuals.

So one of the responses that Draper provided is, other countries are directly subsidizing specific degrees based on economic and defense needs. So is it less expensive at a public university, for example, to get an electrical engineering degree than it is to get English literature degree? Right now it isn't. And so those are the types of very different against the grain from the traditional US education paradigm that we're going to have to think about in the near future in order to maintain economic competitiveness in this space because there's no way we can do it with the amount of individuals we have now. If you look at the kind of university departments, what you see is, even from 25 years ago when I graduated, the departments of engineering are much, much smaller now than they were then. It's gotten to the point where as a company we're fighting over dozens of engineers as opposed to hundreds in previous years.

Ken Miller (36:38):

Ms. Jen Santos (36:41):
And so at Draper we have a program called Draper Scholars, and it's really to offset the cost for folks to get specialty degrees to support national security. And I mean, I know it's small in the big scheme of things for the country, but it's an investment into offsetting the costs for students to go get these degrees. Dave mentioned New Hampshire, we work with a whole bunch of universities across the country to help in this workforce development. But again, it's got to be all three of those branches coming to that same conclusion. Offsetting costs for students to get their degrees, absolutely. Having job opportunities ahead of them. I mean, my daughter will kill me, but she just graduated with a computer engineering degree. She didn't have to blink to get a job opportunity. And so there's just not as many folks graduating with these engineering degrees. The demand signal for those jobs is way higher than the supply can fulfill.

Geremy Freifeld (37:45):
Sorry Jen to interrupt. Because of the American university prominence for the defense industrial base recruiting US citizens with these specialized degrees to work national security programs is exponentially harder than the commercial industry have it. So the graduates from US universities are a diverse mix of people, but they often take their education offshore now because that's where the jobs are. And so as that flows offshore, we just have less and less both US citizens, but also foreign talent in the US to kind of [inaudible 00:38:25] microelectronic domestic production.

Ken Miller (38:27):
At the top of the episode we mentioned Chris Miller's book, Chip War. And in the book he tells a story of Sony's Akio Morita talking about kind of Japan's investment plan. He quotes him as saying, while the United States was busy creating lawyers, Japan has been busier creating engineers. This is something that was a multi-decade initiative by them. What can we do to build a multi-decade initiative where we're focused on building engineers here in the United States more so than we have been in the past?

David Hagerstrom (39:05):
Well, so there's probably multiple angles of attack. I'm encouraged by sort of the thousand points of light possibility. I think there's growth in STEM education in communities. I think individual companies have an interest in developing the workforce, certainly not just Draper. But as Jen and Geremy have said, there's also a top-down policy kind of reckoning that's going to be required too.

Geremy Freifeld (39:38):
Yeah, and to expand on that, I mean, I think that the cost of a university education in the country has gone up at such an inflationary rate compared to the average wage and things like that, that you're going to have to either control that in some way, but especially for these specialized degrees like electrical engineering, mechanical engineering, you're going to have to have some type of... What's the word I want? Incentive for students to choose that versus philosophy and medicine for instance.

Ms. Jen Santos (40:17):
And it starts at such a young age, it doesn't just start at the college phase. And so in order to change the hearts and minds of students in school right now, you have to get to them and show them that when I talked about commercial national security and DOD use, the percentage of folks wanting to be in national security continues to decrease. And so if you get to the hearts and minds of them and describe, this can be applied to a pacemaker, as I said, or an automotive industry partner or a critical infrastructure, oh, now it's a different conversation. But it has to start at such a young age.

I know the Defense Department is investing in things like the industrial based analysis and statement. That portfolio is looking at project manufacturing, it's looking at how do we build more production lines and bringing in students at younger age and teaching them and evolving them. You have to start at a younger age to expose. One of the jokes I've said on the software side of it, but when you have to learn a language in school, when you're going through your education, your K through 12, you have to learn a language, why can't it be Java or Python? Because that's a totally different language and it drives a different behavior and a different way of thinking. So we got to get to the younger students, educate them, offset their costs and incentives to go into these really complicated portfolios and then offer them opportunities that aren't just national security.

Ken Miller (41:54):

Geremy Freifeld (41:54):
I just want to say from a Draper perspective, we would prefer Rust as opposed to Java for instance.

But anyways, the other thing, I think the Defense Department is actually doing a really good job in investing in the universities themselves. So Dave mentioned UNH but I'm going to shout out to Purdue University, Georgia Tech, Vanderbilt, UC Berkeley. So the Defense Department and is really investing into the workforce development in these programs, in the educators. Directly funding educators to develop curriculums and stuff that are applicable to the defense industrial base. And I think that you see a lot of this, for instance, Intel used to have a very large university program... They've kind of offshored. They have a very large university program in Brazil now, which is very strange. But a very large university program to indoctrinate people into the Intel methodology and way of working at the professor level. And so I think that you're going to have to have that top down approach where you do that, that public-private partnership that comes out like the National Semiconductor Technology Center.

Ken Miller (42:57):
That will conclude this episode of From the Crows' Nest. I want to thank my guest, Jen Santos, Geremy Freifeld, and David Hagerstrom for joining me here on part one of our discussion. Part two will be released on January 25th. You can learn more about Draper by visiting their website at Also, don't forget to review, share, and subscribe to this podcast. We always enjoy hearing from our listeners, so please take some time to let us know how we're doing. That's it for today, and again, you can follow me on Twitter @FTCNHost. Thank you for listening.