CHIPS Act is a 'diversified bet': Fmr. CHIPS coordinator

Nvidia (NVDA) is set to report its earnings on Wednesday amid strained relations between the US and China. Former White House CHIPS Coordinator Aaron "Ronnie" Chatterji joins Catalysts to discuss what these tensions mean for Nvidia and the chip sector as a whole.

"Five to 10 years from now, you're going to see mega factories producing chips across the United States," Chatterji explains, pointing to funding provided by the Biden Administration's CHIPS Act. He adds that the act "is a diversified bet," as it invests in multiple firms and different kinds of chips to boost all parts of the sector.

The CHIPS Act will also create new jobs, which will require training programs to be established all over the country. "It is a big hill to climb and we got to start working on it as fast as we can," Chatterji says.

Chatterji explains the act is about "building a strong industrial base in the United States for key technologies," and is both a national security and supply chain measure. He argues restrictions do not negatively impact chip companies, explaining, "You can see this with Nvidia in particular. Every time the new export controls have been announced, they designed compliant chips to send to other parts of the world. So as long as you have the interaction between the major chip designers, the companies that are manufacturing them, and all across the tech stack with knowledgeable people inside the government, I think you can get that balance right and that's what you're seeing so far."

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This post was written by Melanie Riehl

Video transcript

Nvidia earnings out on Wednesday.

Investors are looking to the chip company as the next big test for the market rally.

When we talk about NVIDIA, lots of focus has been on strained us, China relations.

Ultimately, what that means for Nvidia's business joining us.

Now we wanna bring in Ronnie Chatterjee.

He is a former White House Chips Cord and Ronnie I it's great to talk to you.

Thanks so much for making the time to join us here.

So I just wanna take a step back when we talk about the chip landscape right now here in the US.

You're instrumental helping the Biden administration implement the Chips Act.

What ultimately the disruption, what do you think the chips industry is going to look like here in the US?

Not so much a couple of months from now, but ultimately 5 to 10 years down the road?

Well, thank you for having me.

Uh 5 to 10 years from now.

You're gonna see mega factories producing chips across the United States and you've seen some announcements over the last 60 days for companies like Intel Ts MC M that was mentioned before as well as Samsung.

We are building all across the United States.

Uh Texas, Arizona, upstate New York, Oregon, New Mexico, Ohio.

And I think in 5 to 10 years you'll see the most high end chips being made in the United States as well as really important memory and mature no chips and some of the great advanced R and D that we need to bring back as well.

So that's my hope in the next 5 to 10 years based on the work we're doing with the chips program.

Well, Ronnie, I wanna talk to you about Intel specifically since you bring it up.

There's a bit of criticism around the selection of that name.

I mean, the stock is down over 30% year to date.

They may not have the capital to follow through with the promise of the Chips Act funding once that dries up and they also don't specialize in some of the chips that we had an issue with in the US during the shortage.

Things like autos, for example, do you think that the administration is selecting the right firms to be able to follow through on this investment moving forward?

And I think the key issue here is firms plural.

You'll see a number of firms have received awards.

You know, when governments try to help a particular sector for national security reasons, which is what's happening here with the chip industry, it could be a mistake to just focus on one firm.

But that's why you see the big announcements aren't just for Intel and the Ohio and Arizona facilities, but also for TS MC, for Samsung and for Miron.

And as far as those other technologies that are really important in automobiles, medical devices and the grid, you're seeing big announcements for companies like polar global boundaries, microchip.

So what you see from the Chis program is a diversified theft the way the American taxpayer would want it rather than just betting on one firm, you mentioned national security.

And I know that some studies of what the impact of the chips act is going to be is that over half of the jobs created by the chips Act could go unfilled because we just don't have the skilled labor here in the US.

The administration's messaging has been that the driving thesis of the chips Act is specific to jobs creation.

Should the focus be on national security?

Instead given the headwinds with jobs?

I think national security is the key reason why we want to make the most advanced shifts here in the United States.

But you can also create really high quality jobs.

Uh take a job like semiconductor technician.

You can do a program for a year or two years and get a really great job working in semiconductors.

You make a great point though, we need to get people more aware of these jobs.

We need to set up training programs in places like Anada Community College, America Community College.

Or among the community colleges doing this around the country and we'll trade that work force we've done in the United States before with so many tech industries, we gotta do it again, but it is a big kill decline and we gotta start working on it as fast as we can.

Ronnie.

I'm curious, can you give us some insight just in terms of how the Biden administration, at least your time when you were in that role, how you evaluate the steps that need to be taken versus the threat or maybe what we could see in terms of push back and backlash, how, how is that evaluated?

And I guess how much thought has gone in to the backlash side of things just in terms of if we do implement more restrictions, ultimately, what China's response could be and the impact that that could have on so many of these larger us companies, the way we looked at it was the legacy of the pandemic showed us that supply chains that were all about just in time sometimes needed to be more resilient for just in case.

And you saw so many things during the COVID pandemic that weren't showing up where they were supposed to and chips were part of that.

And so the Chips Act was really about building a strong industrial base in the United States for key technologies.

When you talk about the export controls, that's not a very narrowly defined set of chips, they're mostly going into military hardware.

And so as you see, in the case of NVIDIA, that's gonna release earnings on Wednesday, it hasn't dented the growth of NVIDIA.

And in fact, the stock has grown, I think eight fold since those, since those announcements uh came about.

So I see the export controls narrowly designed around things that go into military hardware.

But the chips investments in manufacturing are creating opportunities all around the United States across different kinds of chips, logic and memory.

We looked at both of those things, national security and supply chain resilience and weigh them as we were thinking about designing the chips Act and implementing it, Ronnie.

Do you think there's more restrictions that are necessary or how do you think the Biden administration is evaluating that landscape today?

I think technology is changing so fast.

You got to have people inside government with technological expertise who understand markets and I think you do have that but they also have to keep an open channel with the government.

I mean, you can see this with NVIDIA in particular, every time the new export controls have been announced, they designed compliant chips to send to other parts of the world.

So as long as you have the interaction between the major chip designers, the companies that are manufacturing them all across the tech stack with knowledgeable people inside government, I think you can get that balance right.

And that's what you're seeing.

So far.

Uh lastly, we while we have you, Ronnie, there's this idea that looser fiscal policy is happening at the same time as stricter monetary policy and a potential criticism that something like the Chips Act is inherently inflationary.

I know that you are also a p public policy professor as well.

So give us your take, what would you say to your students who might be asking you is the Chips Act inflationary or living there?

Interesting times I think because the way the Chips Act money is being distributed, it won't have the effect that most of the folks are worried about.

For example, these big announcements are just preliminary memorandum of terms.

The due diligence still needs to be conducted just like it would on a private sector deal and that money is not going to start flowing until the end of the year at the earliest.

So I think when it comes to the Chips Act, look for the investments that occur over the next several years.

That's not money that's being pumped into the economy right now because we're still working on the deals.

And that's why I'm less worried about that criticism than some folks out there.

Ronnie Chatterjee.

It was great to get your insight.

Thanks so much for joining us here in Yahoo Finance this morning.

Former White House chips coordinator.

Thanks Ronnie.