Decoding the Future of Semiconductors: Emerging Trends, Risks, and Opportunities

welcome everyone on behalf of Travelers thank you so much for spending some time with us as we decode the future of semiconductors looking at emerging Trends risks and opportunities the next decade in semiconductors promises to be a period of explosive growth profound change and significant opportunities new Innovations may enable a continuation of more law with profound implications for advanced electronics and software and in the Life Sciences industry as our Reliance on digital technology accelerates the role of semiconductors becomes increasingly critical look around the room that you're in right now I bet you can look and find five things that have some type of semiconductor device embedded in them they power our Consumer Electronics our automobiles our critical infrastructure and nearly all military systems to to seize the opportunities te semiconductor companies must also contend with a range of geopolitical operational and technological risks let's take a closer look at how they can prepare I'm Amanda Bon with Travelers and I'm so happy to have Chris Miller and Richard goo joining me in today's discussion Chris Miller serves as associate professor of international history at the Fletcher school at tus University and co-directs the school's Russia and Eurasia program he's the author of Chip War the fight for the world's most critical technology a book that explains how computer chips have made the modern world and how the US and China are struggling for control over this fundamental technology the future of computing the book argues will be determined by who controls the ability to produce the world's most advanced chips Chip War won Financial Times best business book of the Year award and was described by the New York Times as a non-fiction Thriller Chris received his PhD and Ma from Yale University and is ba in history from Harvard University Richard goo is Vice President of investor relations for Cadence Design Systems headquartered in San Jose California Cadence is a pivotal leader in electronic systems design building upon more than 30 years of computational software expertise the company applies its underlying intelligent system design strategy to deliver software hardware and intellectual property that turned Design Concepts into reality the past couple of years of semiconductor of the semiconductor industry has seen supply chain challenges decline in earnings and cost cutting measures but I actually think the future of this industry is pretty bright as companies refocus by embracing rasing supply chain diversification digitize many of their processes and most notably bring manufacturing back to the United States Travelers wants to watch how this all unfolds but we also want to play an active role in education and risk management next year our technology and Life Sciences practice will celebrate 40 years 40 Years of specialization in ensuring companies in the Life Sciences and Technology sector and specifically the semiconductor industry over these 40 years we've partnered with companies as they introduce groundbreaking product advancements and when they've experienced devastating setbacks like product liability claims fires on the production floor or cyber events that bring business to a screeching halt I think we all Chris Richard and travelers have a vested interest in better understanding the challenges and the risks because there's so much amazing material and I have a lot of questions for our panelists we're not going to take live questions today but if you do have a question put it in the chat we'll do our best to reach out let's get started Chris I'm going to start with you tell us a little bit about your background and how you got interested in the topic well first off Amanda thank you for having me today it's uh very fun and enjoyable to have the chance to discuss these issues with uh you and with Richard my background is as a historian of Russia which is a strange background in some ways for someone who ended up writing a book on semiconductors but I wanted to understand the determinance of the arms race during the Cold war between the Soviet Union and the United States and I thought it would be a story about missile systems or fighter jets but it turned out that actually all of the key defense technologies that emerged during the Cold War were fundamentally reliant on Computing sensing and Communications capabilities which in turn were only possible because of semiconductors in fact I learned as I did my research that the first chips that were invented in the late 1950s and early 1960s were used in guidance computers like the guidance computer that was in the Apollo spacecraft that sent the first astronauts to the moon but also guidance computers in missile systems and so there's been a very deep relationship between advances in Computing capabilities advances in semiconductors and the development of the US military uh as uh it sought to bring new technologies and new Computing capabilities to bear and so that's was my initial uh my initial source of interest in semiconductors but as I dug into the industry I quickly realized that as you alluded to in your introduction Modern Life simply can't function without chips and so it seemed to me that in fact whether you're trying to understand the military Dynamics in the world today which is my initial interest but also if you're looking to understand the shape of glob globalization you could understand it without looking at semiconductors and today just to give you one data point on that front China spends as much money each year importing chips as it spends importing oil in other world in other words the world's second largest economy it's International Trade flows uh can only be understood by reference to semiconductors and so everywhere you look literally in terms of around your office right now uh or figuratively in terms of the key trends that are reshaping the world all of them depend fundamentally on semiconductors I wanted to just ask you a little bit more about your book you wrote Chip War and I I loved what the New York Times called it a non-fiction Thriller you don't see that every day and you do such a nice job of taking a a really complex Topic in a really sophisticated industry and you make it really understandable and there's 500 folks out there that are listening live right now that that registered for this webinar and they're going to get a free copy but Chris there's some folks that haven't read that book so maybe give us a quick summary for our listeners on the thesis of your book Chip War well the book argues that semiconductors are the most complex devices that humans have ever manufactured if you go to the Apple Store nearby and buy a new iPhone for example this is true of basically any smartphone you'll find that inside of it are chips with tens of billions of transistors tiny little switches that turn C C on and off and each of these transistors fits on a chip roughly the size of your fingernail making them the smallest devices that humans have ever produced at scale each transistor inside of your phone for example or in your computer is roughly the size of a Corona virus and yet we produce them by the billions and billions and so bringing together uh the manufacturing and design capabilities that are needed to undertake this type of ultra Precision manufacturing involves super complex Supply chains stretch from Europe the United States Japan uh to Taiwan and so there's really no industry that is as globalized as the chip industry there's not a single country that can produce Advanced chips on its own nor is there a single company that can do it on its own as well because they all rely on suppliers and customers that have their own unique and Ultra complex capabilities and so on the one hand the chip industry is a story of extraordinary collaboration uh across the supply chain between different companies and countries but this also does create vulnerabilities because there are often just a handful of companies and in some cases just one company that have unique capabilities that nobody else can replicate and so when you look at the centrality of chips in the world today it's a story of technological progress of driving down the cost of chipm but it's also a story of complex Supply chains that increasingly are seen as a not just a strength but also at times of vulnerability Chris that's that's that's a little mind-boggling that there's this huge Global dependence on something that impacts global trade and the balance of military power and it's smaller than my fingernail my goodness I let's talk about supply chain for a second we we've all seen so many papers and news pieces about the impact the various world events have had on the supply chain in the semiconductor space so could you lay out for us maybe a high level picture of the global Supply chain and help us understand the current situation well to start if you want to make a chip you first have to design it to lay out where each of the 10 or 20 billion transistors is supposed to go and just given the numbers involved this is an extraordinarily complex task and so there are a handful of firms that produce specialized design software that help companies automate their process of laying out components on a chip and then the design itself is also highly specialized because different chips do different things in your phone for example there's one chip that manages the operating system a different chip that remembers data other chips that manage the Bluetooth or the Wi-Fi or the cell connection there's a chip that knows whether your phone is held this way or held this way and all these ships have to be designed uh to accomplish that specific task and so different companies have different expertise in in designing for these different uh types of use cases and that's just the design then you actually have to get to the manufacturing of how do you fabricate lots of viiz transistors by the billions and billions and and that itself is just as complex there's a a small number of companies that produce the tools that are capable of moving materials that almost the atomic level that's necessary to produce this Precision companies that can make tools that can deposit thin films of materials just a couple of atoms thick or etch tiny Canyons into silicon just a couple of atoms wide and these tools are among the most complex and expensive tools ever made the most expensive cost $150 million a piece so this is extraordinar complex equipment but then you actually have to do the manufacturing and that's a different set of companies that undertakes manufacturing processes and when you're talking about Advanced memory chips or Advanced processor chips there's just a handful of companies that can do either set of processes finally the the last step is once you've got your chip you have to assemble it and pack it into a device into a smartphone or into a computer and there's not a single country or a single company that can do the entire supply chain everyone has to collaborate with Partners uh in different segments of the industry thank thank you Chris I think this is a perfect time to bring Richard into the conversation and get his perspective on this especially given his expertise at Cadence um but Richard before before you do comment on that we'd love to hear a little bit about Cadence Design Systems and the role that Cadence plays um and then would love to hear a little bit about your view on the global supply chain situation thank you Amanda for having me so Cadence is a computational software company and we help our customers design chips and electronic systems as you all know all aspects of our lives are being increasingly electrified and digitized writing on the backbone of semiconductors so chips are ubiquitous these days and are powering everything around us as you mentioned Amanda so it is by far one of the greatest human inventions and is extremely complicated to design and to produce just to give you an idea the most sophisticated silicon has around 100 billion transistors on a 1 inch by 1 inch D and it's mind bogling to Fathom let alone to be designed manually for that kind of scale they can only be designed using highly sophisticated software and our software is essential and foundational to help automate and optimize the design process C thereby providing tremendous power performance area benefits and productivity Improvement for our customers which then get gets Amplified and accured to the entire society as these chips get embedded into every aspect of Our Lives I think it's fair to say that almost any chip in the world uses some form of cadence software and IP we participate in all in markets or vertical and all geographies and that's what Cadence is all about in the nutshell back to your question on the semi ecosystem and to add to what Chris just talked about upstreaming the ecosystem you also have companies such as arm that provides architectural design IP or Isa instruction set architecture for compute for computer processors so they license the uh the processor IP to other companies in order to make a chip successfully it is critical to have close collaboration amongst the architectural IP companies the Ed a companies that Cadence the semi systems companies equipment and the foundaries as you can tell us and the Western World still control important parts of the semi ecosystem except for manufacturing while the manufacturing is more concentrated in Asia hence the tension and the regulations Chris and G just touched upon back to you Amanda thank you Richard I think C Cadence is a fascinating firm and plays a pivotal role in the broader EOS system thank you for those comments Richard Chris let's go a little bit deeper on the chip shortage and the implications this has had in the industry well during the pandemic there was indeed a shortage of semiconductors for a number of use cases though I think this has often been misunderstood in in the popular perception most people are surprised to know for example there were actually more semiconductors produced every year of the pandemic more chips produced in 2020 than 2019 more chips again produced in 2021 but the pandemic brought a lot of unexpected demand patterns for example a surge of purchases of new PCS as people prepared to work from home during the pandemic and so supply and demand for different market segments uh was out of whack because it wasn't uh it didn't Accord to normal patterns and so what this meant was that for certain types of semiconductors there were extraordinary delays the best example of this is in the Auto industry uh where uh the Auto industry is estimated to have lost almost half a trillion dollars of sales if you include lost sales in the US Europe Japan and China all added together over the course of the pandemic and this is because a typical new car can have 500 or a thousand semiconductors inside of it uh and these chips are often different types of chips you need every single one to actually have your car roll out of your factory parking lot and just to delay in a single type of semiconductor uh can cause a a 40 or $50,000 car to sit in the factory until that chip arrives even if the chip itself only costs a dollar or two and car companies were the best example of uh of manufacturing uh segments that found themselves extraordinarily Reliant ON Semiconductor Supply chains that they often had very little visibility into and indeed there are great anecdotes of uh of Auto CEOs calling up uh semiconductor Manu ufacturers and asking do you produce this type of Chip I'm looking for because they often didn't know it was their component suppliers or the component suppliers of their component suppliers who are facing shortages and so there's been a major push over the past couple of years after the chip shortage for manufacturing firms to better understand what their semiconductor Supply chains look like and to rejig their purchasing processes to make sure they don't face the similar scale of difficulties that they often faced during the pandemic yeah I mean Chris for anybody that was trying to buy a car during the pandemic they they know this issue quite well Richard I'd love your view on this topic what are your thoughts on the chip shortage and the fragility of the semiconductor supply chain yes certain segments such as memory chips including like drram and nand have actually been a situation of glood over Supply as of late so there are some green shoots that indicate that this down cycle appears to be bottoming out and that that's the fascinating part of the semi industry where the product cycle are multi years right and those that can really portend the future Trends and where the market is headed in order to bet better match Demand with Supply and Innovation would be best positioned at present uh clearly the AI chips are in a high demand environment and uh is experiencing a super cycle the strong demand for that will drive both design and production activities as well as resource allocation for years to come uh the AI infrastructure buildup will be will benefit platform companies such as Nvidia broom Etc as maybe the first wave the second wave will likely be those vertical players such as data centers and hyperscalers who will Design and come up with their own custombuilt AI chips specifically tuned for their own applications the third wave will be accompanied by new applications new verticals and new use cases of AI such as digital ology back to you Amanda thanks Richard and and as we talk about supply chain risk geopolitical risk and the recent events just really have to come into the discussion here we have the Russian invasion of Ukraine and the devastating Israel Hamas War right now but we also have China and Taiwan and there are real disputes here and the relations are tense Chris tell me a little bit about the nature of the conflict and maybe the implications this has on the semiconductor industry well the the China Taiwan conflict actually predates the invention of the first semiconductors but today it's impossible to understand the China Taiwan risk without looking at the implications for the chip industry the the origins of this dispute go back to 1949 uh since then the Chinese government has claimed control over Taiwan whereas today most Taiwanese leaders say they would prefer to be treated as an autonomous or even an independent uh country and so this dispute has been going on for quite some time with the US supporting uh uh Taiwan and trying to retain the status quo which Taiwan is self-governing but not exactly independent and this matters for the chip industry today because Taiwan is an absolutely Irreplaceable manufacturer of processor chips and what when it comes to the most advanced processor chips the types of chips in your phone in your PC and if most importantly perhaps the types of chips that are undertaking AI processing in data centers what you find is that around 90% of these semiconductors are made by just one company which has all of its Cutting Edge manufacturing right now in Taiwan so if there were some sort of geopolitical escalation or military escalation between China and Taiwan the implications wouldn't just be important for the uh political impact it would also be important because it would risk disrupting the entire world's access to the most advanced processor chips and it's worth noting that every country in the world uh today depends on Taiwan for really Irreplaceable capabilities and although um many people on this uh call will have never heard of the Taiwan semiconductor manufacturing company and hardly anyone has actually bought a product from them in fact all of us throughout our daily lives rely on dozens hundreds even thousands of chips that are produced by tsmc because their chips are everywhere in data centers in the telecoms infrastructure in our smartphones we we simply can't live without them so so Chris you you touched a little bit on that there but let's go a little deeper because we're trying to decode the future in this webinar if the conflict over Taiwan were to escalate what would be those implications well I think if the chip shortages during the pandemic or any indication uh we should expect vast disruptions to manufacturing operations you if the pandemic chip shortages could cause half a trillion dollars of losses to the Auto industry despite that chip production increased every year of the pandemic imagine a situation in which a third of the new processing power that's produced each year which is the share that's produced on Taiwan is no longer available uh the implications would extend far beyond phones or PCS it would also implicate a whole set of manufacturing industries that you probably don't think of as being in the tech sector construction equipment uh for example agricultural equipment uh life sciences and medical devices today almost everything is semiconductors inside and a huge share of those chips are produced in Taiwan and so even for devices that don't necessarily require chips made in Taiwan just the collapse in Supply because the world's most important chip maker could be knocked off line would have implications for basically every sector of the economy what a great point I mean there's just such a massive World dependency on chips but of all sophistication levels right not just those that are powering data centers or AI Chris let's stay on this geopolitical risk category just a little bit longer and talk about the Russia Ukraine conflict I've also come to learn that you're an expert on Eastern Europe so given your expertise what are the implications of the Russia Ukraine conflict on raw materials specifically that are used in the semiconductor man manufacturing space well you know it's it's a really interesting and actually an unexpected question because neither Russia nor Ukraine produce hardly any chips most people were expecting the war to be Irrelevant for the chip industry relevant for the rest of the world in many ways but they weren't expecting a direct impact on semiconductors but in fact when you dig into the materials that are used in manufacturing semiconductors which includes not only the Silicon that chips are made out of but lots of layers of different metals from calt to plaum as well as all sorts of Highly specialized gases what you found is that many of those actually come from either Russia or Ukraine and there was an active effort by Russia very early on in the War uh to weaponize the supply of Neon gas before the war on half of the world's Neon gas was being produced either in Russia or in Ukraine and so the lesson of this is that even countries that might not be seen as having a big stake in the chip industry or the Computing industry more generally realized this is such a critical infrastructure uh such a critical uh set of companies and capabilities that there's an incentive often for political leaders in certain countries to try to disrupt production uh in the hopes of uh causing shortages and higher inflation uh in the west now that that effort by Russia didn't really succeed there were enough alternative sources of supply of Neon gas uh for example to be brought online fast enough that production wasn't uh seriously disrupted but I think it's a cautionary tale for future potential conflicts and uh a a reminder that we need to think through the ways that other geopolitical crises could also implicate the chip industry yeah Chris I mean weaponizing a raw material like like Neon gas that's just a frightening a frightening thing so let's let's pivot a little bit um this might be a good time to talk a little bit about policy what are policy makers doing doing to prepare for these challenges and and do you think Chris are they going to have an impact well youve you've seen over the past uh five years or so from all of the world's biggest economies China the US Europe Japan an effort to shore up each of those countries own Supply chains in the US for example there's the chips act which is uh devoting 52 billion dollar to try to stimulate chip Manufacturing in the United States today the US produces around 10% of the world's chips but consumes around 25% of the world's chips so there's a a big chunk of semiconductors that have to be imported and given the geopolitical concerns that uh we've already discussed uh in Congress and in the white house there's increasing concern that this is a security but also an economic uh vulnerability and so the US is trying to reduce the cost gap of manufacturing chips in East Asia versus in the US because it is more expensive in the US and in doing so to uh attract more investment for chipm and we already see uh that there is a major increase in investment in new facilities um relative to the prior Trend but I it's still a bit of an open question as to how sustained this uh trend of higher investment is going to be it's it's not that much of a surprise that if the government offers incentives to invest more companies will invest more the question is what happens once the incentives are gone and $52 billion might seem a lot of money it is a lot of money in many ways but to the chip industry it's actually a small amount of money just to put that money that amount of funding in comparison in in context it's uh not all that much more than the Taiwan semiconductor companies uh capital expenditure budget this year which would be around $35 billion uh so in in that context we we shouldn't look at this as a as a gain changing some of funds it'll make a difference but it's uh it's not transformative but when you look at that next to what Europe's doing which is something similar what Japan is doing which is also something similar you do see a sustained effort by Western policy makers to invest more in uh diversifying the manufacturing footprint precisely to ensure themselves against the types of risks that that we discussed to supply chains I think the second aspect is that there's a lot of new regulations and controls being uh put into place and and here you've seen uh over the past couple years in the US the Biden Administration restricting the transfer both of certain chips and also of chipm tools to China and the goal here is to limit China's ability to access the types of processors that are used in artificial intelligence training cutting a ji systems which today are basically exclusively designed by us firms and exclusively manufactured in Taiwan and so there's a a whole second set of actions that are designed to restrict the transfer of us Japanese European other types of technology to China with the aim of limiting China's AI capabilities and so both the the promoting industry and also the protecting technology transfer both of those uh remain a focus of policy makers in the US and also in other Western capitals thanks Chris so it seems like we've kind of laid the groundwork around talking about the supply chain risk and the fragility around it the geopolitical risk and some of those really wonderful insights around policy changes and the challenges associated with them at at Travelers we ensure thousands of companies in the semiconductor industry space and we partner with these customers and their agents and Brokers to help them prepare for those challenges ahead and good risk management is all about preparation mitigation and prevention so let's pause here and dive deep in that Richard and Chris from each of your unique viewpoints how can leaders in the semiconductor industry space and their and their customers prepare for these challenges Chris I'm going to start with you on that well I think the the first challenge for companies in this space is to put a lot more thought into understanding ways the regulatory environment is changing and ways the supply chain is changing the fact that every major economy is trying to reshape how the supply chain functions adds a lot more uncertainty and certainly more variables to track than has ever been the case so companies are spending more time just trying to understand the landscape than they've ever had to in the past the second aspect for customers of semiconductors is to think hard about their suppliers companies are trying harder to find second sources of Supply whether that's having two companies Supply them or at least sourcing semiconductors from two different geographies and that's not always possible there's some cases where there really is only one supplier that can produce the type of Chip you need but thinking about diversification of Supply is something that basically every manufacturer in company is doing in addition to that companies are also thinking harder about the amount of Supply they have in inventory one of the things you found with auto firms during the pandemic was that companies that had the most just in time uh in their supply chain had the most difficulty uh in responding to the chip shortage and so for certain critical components that are hard to find second sources of companies are thinking about whether they need to stockpile a bit more inventory to give them resilience in case of disruption and and finally another point that is getting more attention is thinking about potential uh security risks to Hardware as every device becomes more and more reliant on many different types of semiconductor uh there's more concern than ever on making sure that uh the security implications of sourcing from certain types of uh companies are understood and I think just like we've seen a huge growth over the last decade and focus on cyber security and software connections to the internet Hardware security I think is going to be be a growing Focus over the next decade as we understand more about the challenges of sourcing Hardware from certain supply chain actors thank you for that Chris Richard what's your view on this I think I agree with most of the points uh Chris just made I think the only thing I would add is or or Amplified is that really get the chance or the risk mitigation favors the the prepared mind right so from my vantage point having a contingency plan for various scenarios is imperative take kadence as an example we have about 26 Global Development Centers where we can shift design R&D work around and dial up or down depending on the the customer needs and the uh the circumstances in a very agile way I remember when the Russia Ukraine conflict first broke out we were able to kind of close down the office in Russia and move the workload somewhere else rapidly but again software is much easier and the physical plant and supply chain takes longer and requires really for thinking and planning thank you Richard I'll I'll round this out I think Chris and Richard you offered great suggestions um I want to underscore the point around diversification I think that's so important and I think the industry learned a lot during the chip shortages around why diversification in the product line as well as your suppliers is important but equally as is important is taking your company's robust quality control pro quality control program and ensuring that your your backup supplier can meet the level of quality that you expect from your primary supplier inferior or lower quality product can create risk and you don't want to be figuring this out when you're in a pinch for a raw material or a subcomponent so thoughtful and tested contingency plans really does reduce risk also firms in the semiconductor space are are Global of course you know they may design in the United States but they might ship or they might manufacture overseas and then ship worldwide or they might design and manufacture here in the US but the critical components are coming from overseas so having an insurance program for your foreign exposures that's just as robust as your domest prog domestic program is really important and then also making sure that those coverages are dovetailing and and also having both programs foreign and domestic with the same insurance carrier really ensures that there isn't going to be a coverage dispute between those two carriers that does reduce risk okay so let's switch gears here Richard when I started um focusing on the technology space many many years ago I was learning about the semiconductor industry and I recall learning about Mor's law and and I know Richard and Chris you guys are experts on Moors law and really familiar with it but for those that aren't this was a forecast that was made in 1965 by Gordon Moore that the number of components on a chip or an integrated circuit would double approximately every two years it's actually one of the greatest technological predictions in the last half century so Richard with that as a backdrop can you describe the current state of semiconductor technology sure it's a great question Amanda so some say mors Lor is dead and some say mors Lor is live and well I think the real answer is maybe somewhere in the middle in the mor La is slowing down uh over the past 5 10 years but there are still plenty of innovation and opportunities to be had the Nar scaling which is really the real science behind Wars law observes that the transistors are as transistor are reduced in size their power density stays constant and that stop a while back and what we have been doing over the years is really to get more space scaling as opposed to power and performance scaling so that's the reason that the chips are getting bigger and bigger these days and the power and heat dissipation are increasing inly becoming one of the key challenges as we scale the area as a matter of fact the number of transistors we're packing onto into a chip is expected to increase from 100 billion transistors right now to a trillion in a decade and so when Mor slows down it creates tremendous opportunities for many areas such as 3D I or or what we call chiplet where we can use creative packaging Technologies to interpose and connect multiple heterogen types of chips together to gain the maximum efficiency another example of the opportunity is by applying AI to or software to do more with less so generative AI is a perfect example of leveraging reinforcement learning and parallel Computing to come up with a dramatically better product while continuing to improve productivity and shorten time to Market so Richard it the technolog is becoming ubiquitous it's it's at the heart of everything all of our Lives Moore's Law is is slowing down leading to an opportunity for some Innovation it sounds like and I want you to help us tocode the future how do you see the industry evolving and maybe the new opportunities and challenges it presents yes the try so semiconductor industry has evolved over the over time right and continue to events relentlessly Downs to now like three and two nanometers now so with those Innovations and disruptions really breathe the new new areas Industries over the years such as PC Revolution internet data center the 5G and mobile and autonomous driving these days so what we are seeing is that the silicon and systems are increasingly converging together okay a great example of that is is an electric vehicle where at the heart of it is the chip that drives the key decision making but it's also a combination of hardware and software Ware mechanical and electrical all coming together more importantly it is processing millions of signals and data to help make the most informed decision so with that in mind the players that really have the breath of the portfolio to support the merge of the electrical and mechanical will win out we also add the tectonic shift of the new AI Revolution which could be by far one of the most transformative innovation in human history so what it what it will do is to free up really the human beings from mundane and repetitive tasks and focus more on the value added work if you look at the next decade the number of transistors is going to go 10x but the workload will grow even more maybe 30 to 40x due to the ever increasing complexity of the chips so ahead of us is a cliff of Labor shortage as we simply don't have enough universities and colleges to produce that many Engineers so what it means that we have we have to real r on AI and automation to do the heavy lifting and those are the real answers to help us bridge the gap and Innovation uh Innovative packaging as we just touched upon on 3D I will be critical for us to eek out more efficiency as Mor slows down and the great thing about it is that you could put heterogeneous dies together to not only gain scaling and performance but also reap the benefits of faster Innovation velocity since you don't need to redesign everything for your next gen product you just need swap out a certain piece of that and and redesign thanks for that Richard I I think it's just going to be fascinating to see how AI is bridging that Gap and helping that labor shortage or if if maybe the labor shortage will improve and it's going to be really fascinating to see how these companies continue to evolve their business model in response to a changing market so given this constantly evolving industry Richard how do you see the technology evolving and maybe some of those risks and challenges that are on the horizon that these companies need to prepare for great question Amanda I think risks are inherent part of any business and with every risk comes great opportunities too uh I give an example like Quantum Computing could be a disruptive technology down the road but it's still quite early days and it's faced with big barriers of success such as the extreme low temperatures if requires to operate and the super conducting also tying back to the discussion between you and ch on the geopolitical risk which lurk around puing some redundancy and backup plan and diversification is fairly important cyber security is a risk that we'd all have to deal with in the digital age and to fend it off requires a concertive effort from the industry both from hardware and software standpoint Richard thank you I I think we're focusing on very similar things and and your point about cyber security and the risks and threats as it relates specifically to chips I feel like we could talk for an entire hour just about that just about that topic but let's let's go deep on one area if I could and and get specific around the implications for the life sciences sector this industry is a key focus at Travelers it's it's one of our largest sectors within the practice and we're really optimistic about the potential for growth in the sector largely because of the explosion of tella Health capabilities during covid the application of of AI and medicine and then the innovations that we're seeing in the Pharma manufacturing space around new drug Delivery Systems so Richard from from what we've discussed today how do you see the technology evolving and the risks it presents specifically for the life sciences industry yeah life sciences and digital biology are really exciting New Frontiers where Technologies especially AI can be a great can be a great game changer I used to work for fizer years ago before coming to the silicum valley and I remember those days when companies were pumping pumping billions of dollars into developing a molecule and have to wait 5 to 10 years before any potential drug can be put on the market and even that is a crapshoot so what's super exciting about uh the current status is that when you peel back the onion of a drug Discovery molecular simulation and a chip design simulation the fundamental algorithms are surprisingly similar so by combining math biology and computer science We Believe technology has a big role to play in the future of drug Discovery and this is still early stage but but very promising as a Cadence we acquired a company called open ey about a year ago which leverages simulation Technologies to accelerate drug Discovery and holds a lot of potential for for for this uh this area the way we are thinking about digital biology and Life Sciences is more like a three- layered cake in the middle is the core algorithms of the drug simulation using math and computer science and biology and at the top we leverage AI to optimize and orchestrate the entire workflow and at the bottom is what we call computational Hardware where parallel Computing infrastructure such as gpus can can be like tremend can bring tremendous value you know in in terms of help us accelerate the computation a three- layer cake analogy I love that thanks for that perspective Richard I I totally agree with you I think like Sciences is an area that's really ripe for for some disruption especially around utilizing Ai and and bringing those life-saving drugs to Market faster it's really going to be fascinating to see how this all unfolds not only for the life sciences sector but but overall the impact that AI is going to have the the hopeful success of the chips act and and whether the China Taiwan tensions ease and and several other things the risk implication s from an underwriting perspective are really challenging to pinpoint right now which is honestly one of the reasons I love underwriting in the tech and Life Sciences space it's kind of a marriage of the future and the unknown with Innovation all merged together we don't know what semiconductor devices will do in the future or will they where they'll be I think Chris has one in his dishwasher I have a device in my cat and I know Richard has a cell phone with several of these devices but where will these devices be in 10 years are they going to be in my shoes are they going to be in my sandwich that I'm going to eat eat for lunch today in in addition they're they're getting even more powerful and we've seen this with the rapid advances in AI chips as of as of late so where will these devices be how will we be using them and what would their power limitations be as Underwriters we're always trying to predict the the the bad day we want to be able to predict the loss so that we can plan for it price for it but more importantly help mitigate it and this can be challenging when you don't know what the future end use of the devices will be despite the risk implications being really hard to anticipate continued partnership with our customers as they move along this exciting Innovation Journey it's going to be more important than ever and now Chris Richard we're on to final thoughts Richard let's start with you what are some of your final thoughts that you want our audience to know or or take away from today's discussion yeah first of I I'd like to thank Amanda and The Travelers group for having me and also wanted to thank Chris for his fantastic insights on the industry and his partnership so we're very fortunate to play play a role in one of the most dynamic and critical Industries for the global economy to me the risk reward for the semiconductor industry is compelling as you think about how the industry impacts the socioeconomic and technological Contours for years to come so thank you again Amanda and Chris thanks Richard on to you Chris with closing thoughts well I would just say Amanda that you you opened by calling attention to the fact that we're all surrounded by dozens hundreds even thousands of uh chips everywhere we go in our phones and our dishwashers and our Automobiles and that that's been made possible by this extraordinary Improvement and capability that moris law provided as well as extraordinary decline in cost which has been great enabling Ai and all sorts of other capabilities but it also does increase the risk because we become more and more dependent on semiconductors as every year passes and we need to think harder than ever before on about how we mitigate those risks to chip Supply given that our Our lives our society our economy nothing can work without a vast supply of semiconductors thank you for that Chris and Richard I I think our discussion do proof that this industry is complex and presents challenges that Business Leaders and Risk Managers really need to prepare for for those that are in the semiconductor industry don't worry there's plenty of help along the way be sure that you're partnering with an agent or broker that really specializes in the space in addition to an insurance carrier that does that as well like Travelers you want your carrier to deeply understand the industry as well as the evolution that the industry has seen to ensure they can help you partner on those risk mitigation strategies that will go a long way in helping your firm ensure that it can avoid the pitfalls and capitalize on those opportunities I want to thank Chris Miller and Richard goo for your partnership today thanks for helping us decode the future and to those listening we hope you enjoyed today's webinar and thanks for participating

2023-12-17 01:35

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