America's Frontier Fund CEO Gilman Louie joins Yahoo Finance Live to discuss U.S. tech leadership, chip shortages, inflation, and the outlook for tech dominance.
- As the US looks to bring chip manufacturing back to the US, a group of venture capitalists have teamed up to create what's called America's Frontier Fund. The fund is aimed at boosting the US's economic competitiveness and prosperity. And there's got some big name backers behind the fund. Joining us now to discuss is America's Frontier Fund co-founder and CEO Gilman Louie. Gil, it's good to talk to you today. Any time you get names like Eric Schmidt and Peter Thiel behind a fund, you're going to get a lot of attention here. But this does come at a time when you've got not just the White House, but also Congress really pushing to bring chip manufacturing back home. So what is the fund attempting to do that the government cannot?
GILMAN LOUIE: One of the critical things for us to be successful in returning manufacturing, as well as many other technologies that are going to revolutionize the economy over the next decade, is to not just get alignment from the government and the research capacity of our great universities, but we've got to get our capital markets involved, right? I mean, if you look at the US as compared to a country like China, the Chinese are investing probably in the neighborhood of 10X what we're investing in these deep technology areas. And while they're $2 trillion of commitment over the next five years is a lot of money, we have $45 trillion in capital markets. And if we can direct the capital markets to start investing in these critical infrastructures like microelectronics, not only do we shore up our supply chain challenges that we have, but we also lay the foundation for the next generation of technology that we can create a trillion or more dollars of economic wealth.
- And so, you know, you've also got some big names within the national security space, like HR McMaster, who are backing this fund as well. And we've increasingly seen this issue framed as a national security issue. You've just highlighted how much money there is. I mean, is it really about just having the funds in place to accelerate the process? Or is there more to the fund as you see it that could really go beyond what the government has already attempted to do?
GILMAN LOUIE: Well, the government, particularly in our national security, national defense is highly dependent on its microelectronics underpinning, right? Faster chips, higher performing chips makes your systems smarter. Smarter is better, right?
Particularly if you think about things like artificial intelligence, quantum computing, our advanced capabilities, all driven based on our access to chips. And I think the national security, as well as the Congress realizes that 90% of our advanced manufacturing capabilities are within 110 miles of China's missiles or within 35 miles of a North Korean artillery battery. That's not a great place to be in if all your systems are dependent upon these critical chips.
And we do not want to end up, from a national security point of view, like Russia is facing in Ukraine, where they're basically desoldering chips from washing machines to keep their systems running. We need to stay in the forefront. We need to make sure our supply chains are secure. And this is a critical national security risk, and not to mention our whole economic underpinning is based on a technology infrastructure that depends on these microelectronics.
- And Gilman, given that inflation is top of mind here, arguably the number one political issue, number one election issue, and also the number one economic issue, where is the impetus for moving forward right now? I don't think anybody doubts that we need to beef up our domestic chipmaking capacity and other things of that nature. But have we lost some of the momentum that we seem to have a year ago?
GILMAN LOUIE: Well, you know, it's ironic that in technology innovation that the best periods of technology innovation happens during economic downturns. And I think the reason for that is the froth disappears. The easy monetization goes away. The technologists returns from a monetization framework into a discovery framework.
So those great vintage funds that gave us things like the current generation of processors that our entire infrastructure is built on that gave us 5G and an entire 4G LTE backbone, that gave us the cloud and the internet, right, all of those funds that invest in those tactics were done during those downturns. So while it is challenging from an economic point of view, I think it's going to really start a brand new renaissance as all of those technologists and scientists and investors return back to deep tech investing like we did back in the late 1990s.
- And you just mentioned the creation of the internet. It's funny because your project kind of reminds me of DARPA, that would be the Defense Agency Research Projects Agency-- defense-- well, anyway, I messed up the name.
GILMAN LOUIE: You got it right. You got it right.
- OK, yeah, and they created the internet. And I'm just wondering, what happens with the technology the companies that you may form? Is there some kind of exit strategy at the end, some kind of liquidity event? Or is this just something to get the research and help, I guess, maybe all companies maybe perhaps in the US here?
GILMAN LOUIE: Well, the great news is DARPA is not stopping investing. If anything, the National Science Foundation and DARPA and ARPA and ARPA-E, all of these government-led initiatives are on the increase. We're spending more on R&D today than we've ever spent. But we have to cross the chasm between R&D and technology that scales to build great companies. And one of the things that we're committed to at AFF is the building of new ecosystems.
Well, five cities benefited from all of the technology investments that we did in the last decade. There's San Francisco, it's San Jose, it's San Diego, it's Seattle, it's Boston. They account for 90% of the innovation jobs that got created in the last round of innovation.
For us to experience continued growth across other great technology centers, we have to start investing in these critical infrastructure and these critical technologies across the country in these new places where technology is being created. It's in places like Atlanta, places like Georgia Tech and Arizona with ASU and CMU up in Pittsburgh. These are great centers of excellence with great opportunities. And we think, well, if we create the Next Genetec, the next Intel, the next Qualcomm, the next Nvidia, there's huge economic output that comes with that, not to mention all the great application companies that will be built upon this new infrastructure.
But here's our challenge, right? China already has established a whole nation approach to move out on these critical technologies, right? They're investing.
They've started investing in 2016. They have clear timelines and schedules. They want to lead the world in AI by 2030, advanced manufacturing by 2035. They want to start setting the world standards. We need to meet that competition, maintain our leadership, and make sure that these technologies don't get used in authoritarian ways.
- Gilman, we got a report this week about the US potentially asking Dutch-based ASML, which provides the equipment to make these chips, potentially to not provide to China. And we're not talking about the cutting-edge equipment, but maybe one behind that. And I'm curious, when you're talking about the competition with China, can the US simply outinnovate China with the proper funds and structure in place? Or does it have to come at the expense of China, taking away tools? I mean, how do you look at that competition?
GILMAN LOUIE: Clearly, there are certain tools that can be used that are used for national defense and national security issues. And I think the issues around ASML and some of the other chip manufacturing relates to that. It's ironic though that ASML's core technology, EUV, was invented in the US. And our American tech companies took a pass on it, but they did not want to invest the capital infrastructure to convert to EUV. And it went to Europe. And now we're spending all of our energy trying to pull it back.
I think as important as the protect side of the government is and make sure technologies don't go into the wrong hands, we need to have the production side. We need to make sure that the next go round those technologies, which mostly is created in the US, right, builds great American companies that lead into the next economic leadership that also supports our military and our defense posture as well.
- We have to leave it there. But I appreciate you stopping by here. America's Frontier Fund co-founder and CEO Gilman Louis, thanks for joining us.