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tv   Hearing on Supply Chain Resiliency  CSPAN  July 26, 2021 11:10am-1:14pm EDT

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and giving you a front row seat to democracy. >> tuesday morning, u.s. capitol and d.c. officers will testify at the first hearing of the house special committee to investigate the attack on the u.s. capitol. coverage starts at 9:00 a.m. on c-span3, online at cspan.org or listen free on radio app. shop cspan.org where there is a collection of c-span products, and your purchase will support nonprofit articles. go to c-span shop.org. the senate commerce committee held a hearing to supply supply chain resiliency, industry and supply chain experts testified on supply
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chain security with the supply chain base and partnership, and competition with china. the u.s. committee on
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commerce, science and transportation will come to order. thank you all for being here. we have a distinguished group of witnesses today to talk about a very important issue to us in the united states of america, and that is the state and competitiveness of our supply chain resiliency for the future. each one of our witnesses is a distinguished dr. gary jerrefi, and dr. aboulafia, and dr. heeler, and mr. john miller all offer a variety of perspectives on the importance of this issue. i can say for me and the state of washington, aviation supply chain is something that we are proud of, and more than 150,000 people work in that supply chain that continue to innovate and create new products that, as mr.
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falapia has said in his testimony that we now call the u.s. and competitiveness act, and you can see that we trying to negotiate with the house colleagues, because we believe in making a increased investment in the supply chain. so i am sure that we are going to hear today also about the challenges that we face in the semiconductor sector, an aspect of the supply chain in which we saw great shifts over the last several decades and the consequence is obviously less jobs in the the united states of america. so needless to say, i think that congress has caught on that the supply chain is key to our economic strategies, and that a robust supply chain in the united states of america means
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that we are going to continue to have robust employment in the united states of america. without the resiliency of the supply chain, it could be complicated as to, given the experience of covid whether products can be delivered in a timely fashion, and whether our services and security could be impacted and just how important it is that we have a strategy for a global economy in which a variety of products and services can be delivered in a much more competitive fashion than in the past. that means the important investments that have been made and the steps taken to the resiliency of the supply chain and the manufacturing of the supply chain, and the resiliency of the response office within the department of commerce, and it is making tremendous
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investment into the department of energy, and support r&d in translating inventions into products and creating technology hubs and expanding the work hubs and the economy, and these important facilities the like our pacific northwest laboratory, and help with the spinoffs of new technology that are critical parts of the r&d domestic supply chain. and also, the manufacturing supply program to help in developing the resiliency and the supply chain strategies so that we can continue to have not just potential customers, and the supply chain connectors, but understanding again, how to best innovate and stay competitive. i look forward to looking for the testimony of the witnesses today, and i am looking forward
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to having this distinguished group of colleagues in front of us, and hoping that congress will learn, senator wicker, i am not sure 20 years ago we would have had the same hearing. i see our colleague senator in front of us here, sponsor of the frontier act, and that how we are changing, and the united states is staying competitive here. >> good afternoon, madam chair. good to be with you here today, and to be with the distinguished panel. what do we mean by supply chain? it is the raw material and ends with consumption. along the various steps the materials and the refinement, and the manufacturing and the distribution and resilient supply chain can withstand and quickly recover from the disruption, and we have had disruptions, but they also
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include the disease outbreaks, and severe weather international conflict and things like that. in recent decades, the manufacturing capacity has declined significantly. for 2000 and 2010 the manufacturing jobs were cut one-third with the small businesses heavily impacted. that is where we create jobs in the united states of america, small businesses. and control over the supply chain has fallen into the hands of fewer and fewer countries and most notably china, and such geographic concentration of many u.s. companies are vulnerable to disruption, and something that we are acutely experiencing. hoping the u.s. companies identify and address the areas of vulnerability will require strong partnerships and international partners and the federal government can help by investing in r&d and workforce
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development to make sure that new innovations are conceive and developed here in the united states. and the halo machine works in mississippi is a great example of one company conducts r&d in the materials handling industry, and whose innovations today are being replicated throughout the world. this committee took important steps as the distinguished chair mentioned in passing the endless frontier act now known as the united states innovation and frontier act or the usaid, and i don't like that as well. this bill is author ied by senator young, and passed by 137-62. and this is to monitor key supply chains and vulnerability. it is to support key
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semiconductor manufacturing and r&d, and this is in response to the semiconductor shortages across the nation including my home state of mississippi, and undoubtedly, we will hear about that from the distinguished panel. the legislation also includes contribution from the finance committee to combat china's manufacturing balances and threats to free and fair trade. today's hearing is a opportunity for the witnesses of the united states, and the supply chains to be more resilient. witnesses may want to share their thoughts on how the department of commerce may implement various versions of the bill, and congress may want to authorize the foundation of science bill, but it needs to take action on the broad range of top ticks covered by our legislation. the president recently issued a
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100-day supply chain review, and that identifies some of the supply chain vulnerabilities. we perhaps will hear about that today. i'm honored that among the panel is my good friend, and fellow mississippian, mr. taylor who is a leading manufacturer in mississippi. taylor builds forklifts and a variety of materials and machinery for defense materials. he has firsthand experience with the topics that we will cover, and i know him, and he and other members of the panel will make a valuable contribution to the discussion. >> thank you, senator wicker. thank you for being here. we are honored to have you before the committee and your expertise in the area. please proceed. >> thank you very much.
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madam chair cantwell, and ranking member wicker and members of the senate commerce committee, it is a pleasure and honor to be invited to testify before you today. my name is gary jeressey, and i'm a professor at duke university, and i have spent a number of decades studying supply chain resiliency. and this is the first time that my neighbors and phrenes want to talk about the topic. necessari reason, because pandemic of covid-19 have forced this come to the consciousness because of the short annals, but it is the white house report released last month that said that building the resilient supply chain,
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because supply chain resiliency is a part of the u.s. global economy in the last five decades, and it is important to be aware of the disruption and not just for personal protective equipment and other issues coming up with covid-19, but as a matter of protection. so i want to highlight, one, the nature of the research, and two of the conduct of resilience and perspective of the supply-side chain. supply chain research is recently early. businesses deal with the supply chains all of the time. it is a matter of statistics, but from the researcher point of view is challenging. one, because of the boundary problem. we are aware of the boundary
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issues. so in that way it is different. there are multiple tiers of accompanying changes to the supply tiers. so we are not as clear with the first, second, third linkages. so supply side are much more complicated and so it is harder to create the boundaries which creates a measurement problem. the other data like trade and investment data is easier when you dealing with the traditional industry, but many of the supply side linkages are not easily to find, so the researchers working in different industries will have to work to find out what those supply chains are. and this is a critical concept, and we have to look at it from different levels. there is resilience from the firm.
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but from the firm's perspective, they are looking at operational efficiency, and how to deal with risk management if the supply chains are disrupted. a second level of resiliency which are -- i don't know, sensational and national geographic resiliency. and there is resiliency with the countries that we care about, and that is national security, and this is a key emphasis in the white house report last month, and also, supply chains relating to jobs. they relate to infrastructure, and they relate to different kinds of the economic, social, and environment concerns. so when you are talking about resilience. resilience for whom? the firm, the industries themselves or for countries. in the written comment, i look at the supply from top down or
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down up. so let's look at the top down. let's look at the u.s. vantage point, and there a project that we called the north carolina project. and we looked at key industries in north carolina, and natural resource industries like tobacco anding to farming, and furniture and other high-tech technology. every state in the country has a critical industry that we start to talk about. you will look at supply chain from the bottom up, and there are things that we can learn from the supply research, and we can use that with the mapping, and i gave some of that in the written testimony. what is important to me is how the universities are tied into the initiativef how this legislation is talked about from this committee. i think that in the uscia, the
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information competitive and information act. there is a lit cal on the nsf to get him to apply is of these there is a littleton nsf to get to apply these. and so part of what we can do as technology director is how to link universities of different parts of the country to deal with common industry issues, and the kinds of initiatives imposed are important, but some of the advice that you getting from the
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private university sector folks are to help build proposals in a strong and robust way. >> thank you, doctor. we will now turn to our next witness dr. james lewis and thank you so much for being here. >> chair, ranking member wicker, thank you for the opportunity to testify. the u.s. benefited for decades from the global supply chain that provided lower costs and greater efficiency, but that era is over. our first pandemic created an understandable demand for greater resilience. second, a predatory china would use any means to displace competitors in the quest for global primacy. we are in a conflict with china, and in past conflicts, industrial strategy and industrial policy is essential. we do not need to abandon the global supply chain, be tow shrink china's role in it.
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that is why the united states' innovation and accomplishment act is so important. congress has already restricted channels to china, and the export control reform act, and now it must build technological reform. and now it must take into account what the global reform will look like in the future and the private sector and the innovation, and building trust into the innovation, and of course that includes 5g and the open radio network, and also applies to semiconductor, and matches the innovation which is the strongest in the world. and we can do this if it is implemented effectively. congress can start by funding the chip act.
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and by doing this, it is funding the act that is already critical. increased funding for research and s.t.e.m. education is essential to provide the input needed for tech leadership. congress and the white house will guide policies of implementation falls on the agencies. the commerce department plays a key role, but it faces challenges. commerce needs to predict and not react. it needs better analytical data to have reaction with the senior levels of the private sector to better anticipate tech trends. one advantage we have over china is that we have alies and a supply chain with allies increases diversifies sources and we will benefit economically
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and strategically from an allied approach. this is in usaid, and other bills, but it is crucial for moving ahead. the u.s. must as it is ahead strengthened the industries. the usaid has identified ten areas where the implementation should focus. the u.s. has used the industrial policy in every major conflict in the last century. it is one reason for the success in these conflicts. this is why usaic is so important. i look forward to testifying and answering questions. >> thank you, dr. lewis. now virtually to dr. rich aboulafia, and not sure where you are in the world, but welcome into the committee conference hearing room. >> thanks so much, madam chair
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cantwell, and thank you to you and ranking member wicker, and i bring you greetings from an island off of stockholm, so it is a rather long ways away but deeply honored to speak to you today about the supply chain and the character of the supply chain and recent challenges faced in the wake of the covid-19 pandemic and the associated market downturn and a few things that the committee might want to consider as it is deliberating for the status of the industry and other supply chains. basically, there are three things that i would emphasize about the ideation of the supply chain. first valuation and the bulk of the valuation happens at the supply chain. it is not a dig at the great
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contractors out there, but an aircraft is ostensibly the sum of the parts and up to 85% or more of the value of the plane comes from the suppliers, typically the prime, somewhere between 15, 20, 25% at most with the rest coming from the supply chain accompaniments. it is also vulnerable in an industry with very high barriers to entry and low levels of substitution. so as a consequence, there is a relatively small what seems replaceable part is not available, the airplane can't be built, pure and simple. we saw it last year with the logistical challenges associated with the covid-19 pandemic. lockheed martin had planned on building 140 f-35 striker fighters for a variety of logistical fighters, and in the
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supply chain, they were only able to build 123, so in terms of the vulnerability. well, that is where you face the problems, i'm afraid. finally, innovation, and really the overwhelming bulk of the technological progress, and the emissions reductions and passenger comfort and really anything that you associate with the aviation on the other side of the house, and the combat effectiveness that we associate with the country's fantastic combat aircraft come from the supply chain and not the prime. so it is very important that the companies in the supply chain have a steady stream of research and development resources in order to bring these new technologies to market. now the unfortunate reality of course is that we face some of
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the most devastating pandemic in history because of covid-19. looking back over the many decades of the aviation industry, typically in a really bad year you would lose 3% of the traffic year over year and after for example 9/11 or the 2008 recession or gulf war one or any of those two to three percent, but last year we lost 66% of traffic globally. that is cataclysmic, and especially for companies dependent on utilization. and financial challenges associated with unpredented -- unprecedented challenges, and for a variety of reasons most all companies have come through it, but i am concerned about their ability to access capital
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in order to hire people, and also to assimilate towards upturn following a downturn, and maybe it is counter intuitive, but in a lot of ways some of the biggest challenges that supplier companies will face is in the recovery having come through the downturn. and especially the waiver side of things. so that is why i would commend the government for the several rounds of the paycheck protection legislation, because it has been vital in retaining the skilled workers and keeping them from, well, going elsewhere or simply just being offline for whatever reason. it has been absolutely fantastic for the industry. i deeply hope it continues. other things that the committee may want to discuss, i believe that time may be right to consider basically in the delineation of the industry are
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indeed the program that the government has been historically very good at basic r&d, but when it is coming to applied r&d, and i believe there are a number of promising technologies particularly in standard sustainable initiatives that can be accelerated and with perhaps the government assistance apply a meaningful role in the company's ability to maintain competitiveness, and finally, another thing to discuss might be the issue with china, because china is the biggest single export market for aviation companies, and a great deal of uncertainty. talking about trade relations with china and with the shipments of technology and the entry into export is with a
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great deal at risk for the growth of the industry. thank you for your time. >> thank you, mr. aboulafia. i wanted to point out that we worked very hard on those packages and representative moran and i also worked very hard on those supply chain manufacturers and that just became available for the applications in the last few days, so i hope that much of the supply chain will take advantage of that, and we are hearing the impacts of both covid and now shortages of a workforce just at the time that we need to pick back up. we will now turn to mr. lex taylor. and thank you so much after that robust introduction, and we will look forward to your comments. >> chairman cantwell and ranking member wicker and the rest of the committee here and virtual,
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thank you for allowing me to be here. i appreciate the opportunity to tell you about our company. i feel like i am preaching to the choir a little bit, because we have the same goals in mind, but i hope to tell you about our company, and how it is affecting us at the same time. i hope that you can translate it to many, many companies across this nation. the taylor group is a industrial group of heavy lift trucks, and we build high power generators for commercial applications and retail manufacturer for u.s. military. the business began as taylor machine works in 1927 and still operates as family privately-owned business and proud to fly that flag in lewisville, mississippi. our products are manufactured here and exported around the world. we have 12 employees with annual sales of over $550 million and
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the products operate everyday, and every prime industry, steel or metals, wood, concrete, innermost operations to name a few. approximately 140 vendors support the components that go into the products. these businesses are based all over the world, and critical to products to support our customers. some of the supply rers our customer and the supply chain is interwoven. and we look to depend on each other to keep the wider industry going. i appreciate the committee holding this hearing to address the issue facing the supply chain and to right this ship. america is clearly headed for further economic growth at the beginning of 2020, but then the unthinkable happened. the virus, the covid-19 virus
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was the primary culprit to shut this industry down, shut the supply chain down, and it is where we are today. so where are we? yes, the supply chain is a disaster. it is in disarray and that is why we are here. delays in deliveries have forced the manufacturers like taylor to resort to unorthodox and expedited methods of getting critical supplies. this situation is causing the inflation to run rampant throughout the supply chain. so far, we have kept our lines running, but we are facing 30 to 75% price increases from our vendors and transportation companies. three examples of this are microchips and steel and container costs just to name a few. our products operate via some form of computer interface, and
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so the chip shortage affects us. so the chips to keep our product line running depends on getting the inventory on time. steal is a major part of our products. we are facing price increases weekly, and in some cases, every 24 hours. then as we have gone from $8,000 per container to $18,000 per container as i speak here today due to the low supply and high demand. major shortages of key workers are also contributing to the crisis. and also the national shortage of trucking companies are reporting to us that they are trying to fill over 2,000 driver applications today. they claim that the government
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employment subsidy is detrimental to getting the prospects to come back to work, and therefore, with all of this said, our company has in order to protect its financial liquidity and viability, we have had to institute price increases. this is happening all over the country, because inflation is rampant. the worst part is that we have orders, but we don't have confidence in the supply chain to meet the demand. we have 40 employees on layoff from the covid year. and this means 40 employees without pay or benefits. we want to hire them back and more, but we don't dare make such a large investment, when we can't committee to orders now. the same story is playing out across thousands of manufacturers in america. our manufacturing teams are doing a herculean job to keep the lines rolling, and
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satisfying the customers, but to get them on track, it cannot be sustained much longer. the vendors do not see a end to the problem until the end of 20 the 2. i expect hundreds of thousands of other family businesses facing a issue that we wake up everyday fra to maintain the lines, and keep our customer happy, but my request to the committee is not the overreact with solutions that may cause unintended consequences, and rather, i encourage you to support a free market system and allow it to do what is best, to apply solutions that are practical and driven by the private sector. chairman cantwell, thank you again, and ranking member wicker and the committee for allow manage toe speak.
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i will look forward to questions. >> thank you, mr. taylor. we will look forward to getting more questions of the business opportunities in the q&a. dr. gill, thank you for being here. we look forward to your testimony. >> i appreciate the opportunity to testify. i'm dr. gill president of ibm research and i'm responsibility for billions of dollars of r&d annual to develop cutting edge technologies on semiconductors and intelligence and i'm also a member of the national science gild. semiconductors are the beating heart of modern electronics. >> mr. gill, people want you to pull the microphone closer or
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turn it on. >> it is not working? if i can do this, is this working better? semiconductors are the heartbeat of our economy and every facet of the lives. our smartphones use semi conducks or the and 10 nano meters. and ibm unveiled the first 2 nanometer chips, and it could quadruple the battery life for the battery life and slash the carbon footprint, and show the power of r&d but for over a year, we have experienced the consequences of the semiconductor supply chain disruption, and failing to
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produce chips in the u.s. hindering the ability of future emerging technologies. the facts are simple. we only manufacture 12% of the world's capacity. global leaders turn out advanced semiconductors at 7 nanometers and 9 nanometers and yet we manufacturer nothing under 10 nanometers. and for the government with the supply chain, we have to do three things -- invest, create partners and have results to benefit all americans. we have to sustain investments in domestic manufacturing and sustain the manufacturing chips. the recipe is clear. to have a manufacturing partnership, you need to innovate and then manufacture. and to conduct the manufacturing and r&d capabilities, we are
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lagging. the research and development represents a smaller gdp today than in 1964. the president's 100-day supply chain in congress demonstrates a will to invest in addressing the supply chain challenges including boosting the leadership in advanced r&d, and the senate has provided a strong catalyst in investment by overwhelming passing the legislation. and now, talking about the partnership, and legislation fueled by partnership. the nanometer breakthrough was built on decades of collaborate efforts in new york. and the american capacity with the partnership level, and the national semiconductor center is a major first set. and ibm plans to empower it. we cannot waste time by not
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developing r&d. we could leverage billions of dollars in semiconductor infrastructure. and the home to many companies and university partners is already working on the advanced logic and path finding semiconductor technology. it is looking to scale. and ibm is looking to take a leadership role to make it a success. the nec should be a public/private led consortium to lead semiconductor r&d, and manufacturing and processing. it should enable manufacturers big and small to move semiconductors to big and small plants. we need more than plants. we need to invest in the american worker with training programs to create good paying
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jobs for opportunities for decades. this demands urgency to generate dividends for all americans, and to outline the supply chain disruptions by investing and leading effective partnerships and produce an outcome for americans today and generations to come. thank you and i look forward to the questions. >> thank you, dr. gill, for that testimony, and covering a broad view of the various sectors that we are going to talk about here. mr. miller, thank you so much for joining us, and we look forward to your testimony. >> sure. chairman cantwell, and ranking member wicker, and the members of the committee, on behalf of the i.t.i., i thank you for opportunity to testify today on the supply chain resiliency. as co-chair of the information and coinformation risk management or the itcm task force, the public/private
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partnership, i welcome the committee's interest in this topic. itc industry respects u.s. government's obligation to address the global supply chain, and the broader supply believe industry must work together along with international partners and allies to achieve the trusted supply shanes needed to protect national security which are an indispenable building block. it's also echoed in the senate's united states innovation and competition act. while my written testimony commends numerous the upper sup. for establishing a supply chain
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resiliency program and for providing increased invesinvest. we look forward to working with congress to get these important programs fully funded and over finish line. iti has urged the u.s. government to pursue this type of broad, strategic approach to supply chain policy making. crafting sound policy measures to address the global supply chain resiliency challenges that were laid bare does not guarantee the successful execution of those federal
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agencies. this hearing poses a key question. i offer four recommendations in this regard. first, commerce should develop and execute a strategic koords nated plan for implementing numerous supply chain obligations. give tennessee sheer volume of tasking laid at commerce doorsteps as well as the new responsibilitys contemplated and coordinate a strategic approach witness commerce is necessary to implement supply chain resiliency. one key feature is to identify and empower one entity within commerce to lead and coordinate this work. another is to prioritize close with industry including by leveraging existing partnership and innovation eco systems.
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not only by fully funding the chips act but by making sure the department is adequately resourced in terms of both funding and staff. commerce can help itself in this regard by focusing the scope on securing the itcs supply chain and related rule makings to ensure that covered transactions will prioritize and targeted to discreet national security risks. doing so would allow u.s. companies to conduct global business with certainty. improve u.s. competitiveness and help commerce deploy its resources. third, congress should ensure robust liability protections. we appreciate this committee
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extended protected critical infrastructure information program, liability protections as part of the supply chain resiliency program to spur much needed supply chain information. after months of careful study, the task force developed a proposal to amend the cyber security sharing act of 2015 that would provide stronger liability protection, a preferred approach. finally, commerce and other u.s. government stake holders should deepen engagement on supply chain resiliency. thank you for the opportunity to testify today. i look forward to my questions. >> thank you to the panelists. i feel like this subject is while you all have been studying it, as i said, a new day on supply chain analysis and
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impact. you gave us good ideas on that. dr. lewis you were unabashed. definitely more analysis. i want to pose my question that this notion that we try to get at about the supply chain but really just about innovation. if you're right mr. aboulafia, which i think you are right. the sector of semiconductors and yet the innovation is happening
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at mr. taylor's level or mr. taylor is seeing the world and knowing what needs to happen, how do we really get that inand that tra t.j.ic involvement. how do they get their view on the table, is my point? we have two proposals strengthening tech sectors and strengthening tech hubs. how you have big parent companies chasing the market whether it's intel chasing semiconductor markets or boeing chasing innovation markets yet the supply chain is the next level of innovation that has to happen. how is it we're going to drive the resources in innovation down to that level so that they can access that? mr. aboulafia. >> thank you for your question, madame chair. it's true. the bigger companies
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conversations and tend to have a bit more of a direct pipeline to the rnd centers within the federal government. now the good news is thanks to some of the mergers we saw over the past 15 or 20 years, a lot of the supply shanes are concentrated. i would like to see greater coordination between these first here contractors. how do you get the smaller companies involved. the ones that are also critical to innovation and production. whether that happens through the office of trade groups such as a aerospace industries and perhaps maybe just standing up other committees and organizations within say commercial air space
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director. i think it's essential. i think there's greater recognition and the importance of is suppliers. great saving aspects of this crisis has been the accelerated payment program by dod which has basically called for faster transfer of dollars from the clients to the suppliers. that kind of greater awareness of the importance of the supply chain but it's a very good question under what auspices they happen and how they happen. >> dr. lewis does it call for greater role in commerce playing a more predictive role. what do you think we should do here if the supply chain is identifying the innovation but like mr. taylor, they running
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their business every day. they know what needs to happen but they're not in control of the supply chain. >> thank you. we have a strong innovation system, it's based on research, venture capital and entrepreneurs. those three elements are who produce innovation. they're really good at it. in talking to friends at the defense innovation unit, it will
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affect the start up community. we're doing great on software. we're maybe lagging a little behind on hardware. that's one of the points have. the bill focused on. how do we get greater connectivity between the national innovation system and the industry. the market isn't working in a few places and the bill does a good job of fixing that. we can use both federal and private sector to make this work. >> mr. taylor. >> what i can relate it to, we are small business. the overhead structure that it takes for innovative work gets limited. you're focusing what you have to do on material and labor to
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produce the product and get it to the market. we use research. university system. many small businesses use that resource. i'm thinking my distinguished panelists from duke university, i'm not sure that they have there which is just 30 minutes from us. there's some rules and regulations that are governed by the state of mississippi, the institute of higher learning has a mandate that if an entity wants to invest some capital in a research of something for product innovation, engaging the university. if faculty are involved, immediately if there's patentability coming from that research, it stays at the university level. i'm not sure about that if an
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industry is willing to make the financial investment and lose the patent downside of that. there's some play in the hand in hand partnering with the university system but that's something that can be improved in mississippi. >> thank you. >> thank you. they don't claim anything on the pa tent and researchers, companies like you go right to them and say help us solve this problem. senator wicker. >> very good point. biden targets high shipping cost, as pandemic ravages global supply chain. i ask unanimous consent.
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>> without objection. that's if you lucky enough to find space on one of the much sought after cargo vessels flying to specific trade grounds. they routinely get stuck in rail yards, log jams and lead to costly and unpredictable storage fees. thank you for letting me do that. mr. taylor, you mentioned that you're 30 miles away from mississippi state university. what you unique challenges do
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folks in your position have. what suggestions do you have to make it easier for small and medium size businesses not in these large hubs? >> we're distance from distribution hubs. that plays factor in timing of dlaifr deliveries. one thing that comes to my mind, interstate highway systems are used and in state highway systems are used. this infrastructure bill that is being discussed and negotiated here in the capitol now is
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vitally important. if there's anything that can be done in that regard not only refurbish our highways, refurbish our bridges to get them to standard to use as many alternatives to source components to us and ship our products out. we see the customer base wanting bigger equipment because they are machine tools. they're processes are putting out bigger packages for efficiency. infrastructure could be passed and could cause an improvement in capacity.
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>> you mentioned liability, a liability concern. we're going to want people to participate in this monitoring program. that will be voluntary, won't it? we're not going to try to make people do that. what will be absence of a liability protection provision have on the willingness of companies to participate in. >> thank you, senator wicker. there's some significant considerations that companies have when sharing the type of
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information. it's quite candidly derogatory information about suppliers. there's a whole number of state and other causes of action that expose them to very significant legal risks if they were to say something about a supplier. for instance, this is a bad company. these is business disparagement. there's a number of different really significant legal risks and companies want to share this information but there's not a clear pathway to doing it without those types of liability protections.
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>> does anything want to tell us we didn't get the chips right and an amendment or two. if anybody would like to make a suggestion in that regard either now or on the record that would be helpful to us. anyone? we'll take that for the record. is it perfect. raise your hands. is it perfect? i think we're onto something. >> thank you. i think it's -- >> reach in for that microphone. >> that's right. i am reaching. i do think it's an excellent piece of legislation. i think the consideration we should have is how do we have a sustain effort throughout the decade. the priorities to get it passed and implemented and executed properly in next five years. the semiconductor industry is notorious for having to engage in long term planning and long term execution of road map.
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i think that hopefully these bipartisan act and consensus of getting this done would also be the basis for the success we enable to that to sustain over time. >> thank you. i yield. >> thanks. >> i'm next in the order and then i'll have the leave it. we're in the middle of a vote right now. there are two votes. we'll be settling back and forth. i want to focus on dron which may not seem to be kind of supply chain issue. the presence of drones grows literally every day, every year in this country.
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they present grave national security threat. the overwhelming number of drones in the united states remain in china. anybody agree with that proposition? i'm going by public. you may have better information. last week i had the opportunity to visit drones which is based in hartford, connecticut to tour their made in the usa facility. we talk about the need for drones and the component parts go into. some of the most advanced applications of drone technology. it's not a huge company.
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to your point, it is one that is doing research and investment. senator scott and i introduced the american security drone act which was incorporated as quite a competition passed by the senate. the act helps protect federal agencies from insecure drones and it spurs domestic alternative. it's only the beginning. the prevalence represents a security threat from the stand point of surveillance within the united states. certainly lost opportunity because the market is only
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growing for them here and around the worl and what can be done about it? anyone who would like to take a crash at that question. >> i'll go first. thank you, senator. i had dji come in when we could have meetings and demonstrate their product to me. they're really good. we are in a situation where dji, the chinese company, couple other chinese company dominate the global market and good question to ask how we got there. it could be a source for intelligence gathering.
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we include subsidies for stem education and really closing their own market. we'll need to rethink how we build our drone industry. that will not happen automatically. can we use some of that to encourage those companies to go down market. can we find ways to support the innovative start-ups like you were talking about. i don't think that's part of the legislation that i've seen but it's the motd l that you've used in u.s. ica probably needs to be
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applied to drones. it is a security risk. thank you. >> my time has expired. i'm going to turn to senator fisher. before i do i want to second what you've just said. i think that the prevalence of chinese drones because they are essentially, even if used by companies here for commercial purposes or whatever, they are essentially eyes in the sky. i, we may have a bit of a reset
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before senator fisher takes over. i want to thank all of you for being here today. it's been very useful. thank you. we're turning now to senator fisher. >> thank you. thank you to our panel today. the role is essential wen when
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he look at sound policy that strengthens our nation supply chain resiliency. it's important that policy makers avoiding top down bureaucratic approach on this issue which may be too heavy handed or slow to respond. mr. miller, you know in your testimony that the commerce department should prioritize working with industry and other federal partners to create synergies and scarce resources. in what major ways can lawmakers ensure that the government is agile and efficient in this approach? >> thank you, senator fisher. there are a variety of different ways that lawmakers can do that. i do sincerely believe you've laid out several ways in the
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bill. task force is another. i will say that the commerce department for has been participate ng the itc supply chain risk management task force as well and i think commerce department does have a long history of successful partnerships with the private sector. i'm thinking in particular of various programs that ntia have run. as i did state in my testimony, i do think that the commerce department should develop a coordinated strategy to really create synergies and maximize these efforts but i do think that there's an opportunity to
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do that and congress by authorizing these programs is going to be very helpful in that regard. thanks. >> where would you suggest that congress looks for some good examples. programs that might be valuable for us to drill down into and see if they would work at a governmental level. >> i think in terms of existing programs, some of what we have, some of the suggestions in the 100-day report is one place. i do think that having the white house involved in setting the tone there is important and
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certainly there's a lot that's going to need to be done in terms of drilling down when we look at these supply chain resiliency programs and i think some of the other, my fellow witnesses have said we making sure we have a sustained effort in implementing the chips act. it's a long game. it's not just drafting a bill and giving commerce or anyone else a pile of money. it's having a sustained strategy to follow through on these programs that hold so much promise that i think is important. >> thank you very much. in your testimony you also touch on the importance of the agile approach to address the ongoing semiconductor shortage. right now timing is the key for the next steps necessary to build american semiconductors capabilities and domestic
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production. you highlighted that the national semiconductor technology center could be the foundation for addressing supply chain disruption. you also stated that rather than creating another government program office to operate, it should use an industry led model. i appreciate the suggestion on this front. could you expand on what key elements of the model may make it more responsive or agile? >> thank you. senator. i think the model is to build on strength that we have as a nation in the entire supply chain of semiconductors. we have wonderful strengths and equipment manufacturers in electronic design industry and electronic design animation on fabulous companies as well as fabrication and rnd and the
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strengths and not only industrial sector but also within universities. i think the most important thing we got to get right is to bring a broad coalition where we bring the strengths and environment that lives all those. we have pres dent for being able to do this successfully in the past. there's been moment miss the '80s where we were confronting great challenges. where the creation of semi tech and other environments came together resulting in great success. there's precedents for us coming together and i would say that will be the number one priority that we get it to. broad coalition of leaders that i can this happen and build on strengths of previous investments and infrastructure we have had. the biggest risk we would have is to sort of ignore the strength and start something brand new.
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that sounds exciting. perhaps a little more academic but doesn't lead to the result that we're going to want. in the end, we want the manufacturing capacity in the united states. >> thank you. i see my time is up and senator klobuchar is here. thank you very much. >> thank you very much, senator fisher. thank you to the panel. we're proud of the work that has been done on this bill. the u.s. innovation and competition act and i guess i'll start with you mr. miller. part of this bill, work done with senator wicker, coons and portman create policy and it prioritizes agency coordination. we know we have a lot of agency worksing on manufacturing. can you speak to the importance of interagency when it comes to
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the supply chain? >> absolutely. thank you for the question. the importance of industry -- of interagency coordination really can't be over emphasized in this case. there's a couple of different reasons for that. number one, there really are quite a number of ongoing supply chain related activities across the federal government. i think even though i focus on the ict supply chain, it's clear and become even more clear that the goal of pandemic that global supply chains are really important to all u.s. industries. it's a situation if we're going to have a coordinated strategy, we need to be in sync to really make sure that we have every one
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pointed in the right direction. that's why the program you reference is important to really prioritize that sort of coordination. >> very good. i hear dr. gil you have a nano chip with you. i visited chi water in bloomington, minnesota. very successful chip producer. in your testimony you note the importance of this and can you speak about investing in u.s. based companies in the production of semiconductors. >> thank you for the question. it's the life plood of the electronic industry and almost every product we can imagine. the thing is being an awakening for citizens to discoffer just how ubiquitous they are and how it can affect the protection of every item they rely on.
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i think it's imperative that we maintain the do you feel mission of innovating to imagine new products and what we'll do with semiconductors. we're not only talking about traditional electronics, the world of ai and next generation wireless. that's a dual equation we have to get right. we'll lift many boats across the industry. >> very good. thank you very much. mr. miller, in your testimony you note your support for funding for supply chain resiliency program which could include the commerce department working with the private sector. do you want to elaborate on that public-private partnership as we look to the future in doing this right. >> yes.
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absolutely. i think it's been a theme that has already emerged during the hearing about how important it is for the government and the private sector to work together on supply chain challenges, in particular. there are a variety of reasons for that. not the least of which is that we are talking about massive, in many case, extended global supply chains where it will be impossible for the government to have visibility into what's happening in those supply chains without constant and continuous coordination and communication with industry. there's also limited resources i think on both sides of the ledge r. to the extend that people can combine together, forces that's really great.
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>> thank you. i want to ask one last question to mr. aboulafia. you talk about sustainable fuel, aviation fuel can play. can you touch on that for me? i'm very interested in that. >> thank you, senator. i'm afraid there's not a lot of clarity in the past towards producing emissions beyond critical development equipment. hydrogen not so promising. it seems to offer a way forward. there's an awful lot of different initiatives setting up around the world. it also seems industry on the
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same page. it's essential to make these developments. basically we should be able to put sustainable aviation in existing equipment. make sure we're working with, well, the 25,000 jets we have out there rapidly trying to invent this technology to work with it. finally, it might behoove the committee for creating a guaranteed market for when these products come online as we saw in the car industry. that might be a productive use of government resources. >> thank you, everybody. >> thank you. senator peters. >> dr. gil, i applaud the work.
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these are tiny devices. just the size of a fingernail that will shape the course of the 21st century by our cutting edge technologies and super computing. however, i think it's important for us to remember that advance chips are one part of the story. there's an entire eco system of semiconductor technologies. what our so called legacy chips. i bring this up in relation to the auto industry where the chip shortage right now of these legacy chips is forcing production step downs. i'm afraid it could become worse in the coming months. this is not just about automobiles.
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even ceo of apple said a shortage of legacy chips was causing the most problems for his company. that's why i worked with senator to include legacy chips in a 52-billion dollar package to resure domestic production which pass the senate last month through the u.s. innovation and competition act. can you elaborate and could you comment further on why passing this u.s. innovation and competition act is absolutely essential to keeping our nation at the forefront of semiconductor manufacturing globally. >> you're right. on the importance of many generations that refer to as semiconductor notes, different
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technologies that are part of automobiles and industrial equipment. aero space and defense, et cetera. undoubtedly the case we have to have great urgency on being able to address the flight change shortages, including the legacy chips. make the point the legacy chips were the future chips of a decade ago. this industry that these elements of planning for solving issues of today but planning for tomorrow is vital. what looks like advance notes right now, five years from now, seven years from now will become what referring to as legacy chips that we're confronting. now the legislation of the chips act has a number of things that are really important of the today and tomorrow. in the context of a national semitechnology center is a great emphasis on assisting with the design and portability of the
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designs, packaging and tests, et cetera. i think this legislation is going to be very consequential is helping in broad eco system. i'll continue to make the point we need to do both today and tomorrow. >> thank you. mr. miller, i serve as chair of homeland security and government affairs committee. yesterday we pass the supply chain security training act. this legislation directs gsa to develop a coordinated federal government wide training program to prepare personnel to identify and mitigate supply chains to enhance federal supply chain cyber security long term. this bill addresses federal supply security and in your testimony your mentioned quote, uncoordinated, inconsistent, approaches to supply chain resiliency and security policy, including cyber security. my question for you, how can
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mandate be improved to ensure that it is the lead agency to coordinate efforts on supply chain risk management. if so, how can resources and authorities be used to improve that mandate? >> thank you. it was a few years ago that the secretary really prioritized supply chain security in particular in kind of spearheading the formation of the ict supply chain risk management task force. i've been pleased to serve as the co-chair of that. i do think the national risk management center has a very
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clear mandate to focus on supply chain as well. in terms of making sure it's named as the lead agency there. i think we would be very supportive of that. there's many dimensions and there's a role in particular and we look through the broader lens of resiliency. we're looking at security, in particular, it's well positioned to lead there. >> thank you for that answer. >> i have a couple of questions. i'm not sure we're going to see other members here but i wanted to cover a couple of things.
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our witnesses and questions you can see. everybody is advocated for more expertise. definitely larger role for commerce. how do we get that expertise given that any one of these things as mr. aboulafia said, maybe you should have dedicated supply chain focus just on aviation and obviously we're heading that way on semiconductors. i could make the case we should have had a better analysis on aluminum given where we are with the aluminum sector that is happening. how do we -- what do we need to do if we're going to say we want a larger federal rule? what is it we need to do to have the research about the sectors if a lot of the innovation or the awareness about the next phase of innovation is the very base level of the supply chain.
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you have to turn on your microphone. >> sorry, thank you senator cantwell. in the past when we wanted focus on specific industries we had programs like national industry centers. i mentioned in my system but i think the universities involved we end up having to take a more interdisciplinary approach. that's where i think the national science foundation, technology initiative, the technology directate is a key. it does tie into universities in a very direct way. i think it has to connect, also, to those industrial clusters where the industries are located in particular parts of the
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country. it's probably one of the key ways. >> i see you nodding dr. gil, you agree with that? >> i very much agree with that. in the context serving in national science board and the evolution we see in the potential of technology are bringing the best of the university, what historically would have done in centers but imagining a new catalyst where we can bring universities and industry at all scales together to the sponsor centers, i think will be a unique model that will allow us to address some of these concerns. >> it could be more translation. it could be more informational back up the chain. i don't mean the use that word
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intermittent. i believe the world is flat. when you want to call a shot and say we need a specific rnd supply chain effort for aviation or semiconduct irs, that's something farther up at the department of commerce making that decision. >> one further comment. when we look at the existing technology areas in the u.s. that are well developed, seattle with aero space or silicone valley or austin with it or boston 128. in all of those cases we have well established universities that are equitied with private companies. one thing that's happening now is we have a whole new set of technologies that is transforming the cutting edge of research.
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all of those different areas coming out the digital revolution, that's ha we need to bring universities back into the equation because what worked 5, 10, 15 years ago is changing fast now. that to me is the real challenge. how do we have that discussion between industry and universities and government taking the next generation technologies and bringing them into the picture. >> that's where the hub and the center come together. that's maybe new fashion. did you have a comment on that? >> thank you. commerce used to have a technology administration. technology used to be one of the central missions. they got rid of it some time ago. one of the things to think about is you were talking about policy agency. do they do great work? they don't do policy. if you're going to rebuild that capability at commerce, senior
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level up the chain, we might want to look at what commerce has in place. lot of talent there. a lot of strength but not focused on the technology mission in a way it might have been ten years ago. >> thank you. i like that suggestion. it's changing so fast. you have to develop expertise. mr. aboulafia, there's this effort on thermal plastics that i've heard about. i've heard about it because on the supply chain getting material for airplanes that don't have material laws in them that you have to start over is a big deal. how do we -- how do we get the
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focus on the core technologies that need to happen in aerospace if these are just voices in the supply chain. university had associations just because tlair europe or institutes where everybody works together. what is it we need to do to identify the next generation technology that seems to be already there in the supply chain. they are small individuals trying to compete. what do we need to do? >> the fact you're hearing about this technology indicates there's some equipment and technology that are coming to public view, to your view. when it comes to materials, that's a very good example of the kind of thing that should be accelerated because it can be brought to market a bit quicker. despite the emphasis on creating
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these materials and is supply chain, it's up to the primes to specify them at the end of the day. bigger companies or someone like that could create these advanced materials or some of the smaller companies. this is one point where i'll regress myself. i think it's after the prime to identify what technologies they are willing to bring into next generation platforms. materials would be at very control systems. they might be the next to say this is something we would like to see on our next generation jet liner or next generation business jet or combat aircraft. there's a lot of work going on.
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in general, these are exactly the sort of technology that could go from basic to a more supplied level of rnd. it's noteworthy that thought of other companies or a lot of other countries are engaging in this research. one thing about this is being in the netherlands these are aviation powers. it's probably not addressable as much to the u.s. contractors. i think that's important to remember. the reason i think for the u.s. to have that greater capability and identifying the technology is well working with u.s. programs and getting them to market. >> thank you.
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senator scott. >> thank you chair cantwell. i want to thank everybody for being here today. i've been up here for about two and a half years. i'm a business guy. a lot of times what people come up here to do is they ask what can the government do to solve a problem. can you talk about what your industries are doing and what you think we could be doing without government and without increasing their debt. we have almost $30 trillion worth of debt now. can each of you talk about what private sector should be doing and what you're doing? >> thank you for the question. we have had a unwaivering commitment to i vest in rnd. i'm proud to meet the research division. we had it for 76 years. we continue to employ over 3,000 scientists who work full-time to continually invest and create
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the future of technology. the private sector needs to continue to have a strong commitment to continue to create products. that's one thing i would advocate strongly. >> one of the things we're doing as a small manufacturer is building more and more relationships with partners. there's a lot of technology that as a small company you can't do yourself. build that relationship and i'm talking about a relationship not finding a vendor but building a relationship with that vendor. that seeks long strategic approach to the innovation or the product you want to present to the consumer and these partnerships are very, very important and particularly the small manufacturers.
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that's where the expansion will be. anybody else. >> just quickly senator and thank you for the question. one thing the private sector can do and associations like you have are helpful in that needs to send clear messages to government on what would be helpful, where there are areas that go outside of the purview of the u.s. ica that we need to address like monetary policy like tax policy. we need to get those signals from the private sector on the guidance for federal policy and that would be an area where i think there's room for improvement. >> beyond the rnd investments, one thing the private sector is
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doing is lending expertise and resources to the government. as i stated earlier, particularly in the supply chain the government entities don't always have a lot of visibility into what's going on across these supply chains. partnering with the government, working on public-prieft partnerships and task forces and really devoting industry resources to help advance the shared government industry mission is something that i know that iti companies are doing and another is also partnering on some of the work force development programs and things like that to really try to help rebuild the talent pipeline. that's another thing that companies are doing. thank you. >> is there anything that any of you think the government should
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stop doing that would help the supply chain? a lot of people come up and say what we should do more. i want in business. i got tired of government. they're always just a pain in the rear. >> senator, we get fed up with it. >> oh, okay. >> go ahead mr. aboulafia. >> thank you very much. senator, if i may, there's one aspect of the government's approach to the supply chain that could probably change a bit. the pentagon has a rather patchy policy when this comes to aftermarket component and given the reliance of the supply chain and aftermarket for a lot of their profits, ultimately kind of lumpy buying habits and
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frankly absent of guidance at times is a bit of an issue for the supply chain. perhaps greater guidance from the pentagon and other government purchasers of componentry about what they're doing to fill their warehouses or when their restocking or what their purchasing patterns will be in the coming couple of years would be extremely helpful for lot of the supplier companies i speak to. be i may quickly address your previous question, a really interesting one about what private sector should be doing. many companies kind of regard them and for profit. i like to see more o of a partnership between the primes and the subs and perhaps this crisis will illustrate the
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vulnerable nature of the supply chain. >> thank you, sir.everybody. >> thank you, madam chair. thanks for this really important hearing. i want to start with a couple questions i'm going to toss out there, some related to dr. lewis and dr. gill. i was recently in south korea and taiwan with senator coons and senator duckworth. i'd like to get both of your views on this issue of selective decoupling. i was very surprised and pleased both in taiwan and in south korea meeting with their senior government leaders, but also
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senior private sector executives, how they do see this selective decouping coming and they seem very forward leaning on making the choice about being in the united states, both form investment in our country which they're starting to do and being more interested on the there's a choice, the choice is theunited states. i was very pleased by that. dr. gill, this obviously relates to semiconductors too in terms of taiwan and south korea. both of their big semiconductor manufacturing companies are looking at major investments in our country as well.
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maybe, dr. lewis, if i can start with you in taiwan the ultimate goal is for the chinese communist party is to absorb taiwan. i don't think that's a good idea, forcefully or not. >> i'm grateful to the chinese communist party because they make our task so much easier. every time they open their mouth, countries move in our direction. that's really happening. >> i think you're right. >> we need to think how do we build a unified approach with partners like taiwan and south korea. how do we streamline the path for them to work here? it would be great to have tsmc in the u.s. sure they're a competitor, but i feel confident our companies can compete. >> they're obviously strongly contemplating that, as you know. >> contemplate and location are
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not the same. how can we make it easier for them to get here? same for samsung. very strong presence in texas. we depend on samsung and tsmc. do we feel comfortable with that dependancy? mixed answers there. we may not have a choice in some cases, so how do we smooth the path to work with them? we need to think about our european allies. they're a little more ambivalent when it comes to cutting off trade with china. >> that's changing, i think. the more the chinese communist party opens its mouth, the more our european allies are realizing the reality.
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>> you're absolutely right about south korea and taiwan in terms of prediction. they represent 100% of the manufacturing capacity below the ten nanometer note. one is encourage their investments here on shore, which they do have plans to do. the signaling that the chips act does, it is sending a clear message about the importance and resurgence of the semiconductor industry in the united states and the need to invest and on top of that be able to foster think manufacturing capacity of u.s. manufacturers to complement that. i think that will be a wonderful outcome actually. this decade we have the sum of
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all of those in the united states. >> thank you, madam chair. those countries were closely tracking what was going on with our legislation in the chips act. if i can ask one final question if that's okay? dr. lewis, very quickly, it's a long question so i'll try and keep it very short. one asymmetric advantage the chinese have over us is we have an entire finance class, wall street, a lot of big private equity groups that seem very comfortable investing in not just china but chinese a.i., chinese military, chinese communist party related companies. of course, you need chinese financiers who want to invest in something related to the pentagon or something that would help us, the chinese communist party will crush them. how do we think about our own
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american -- i get disturbed by this, to be perfectly honest -- who seem happy, free, open, willing to invest in our biggest competitor, sometimes in military applications that could someday be used to kill americans? i find this very, very troubling. yet, some of our biggest finance executives seem to be completely fine with it. i'm sure they make a lot of money doing it, but it certainly isn't a patriotic undertaking in my view. any thoughts on that? >> the chinese are also closely tracking the progress of the bill. they're very upset by it, which is good. >> that's a good sign. >> this is going to be a hard problem. we're at the start of a long process of, if china continues on its current path, they will
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become more and more of an opponent, more and more of a place we will not want to do business with and we will not want our allies to do business with as well. right now there are still transactions that are safe to make. the question for policy is how do we exploit china the way they exploit us? how do we find places it's safe to do business and the places where we will need to close off? that safe space is shrinking but that's what i would look at, is let's see where the chinese come out in a few years. they're probably not so happy either, but we will have to find ways to balance making money in china, which is good, versus the national security risk. >> thank you. >> thank you, madam chair. mr. lewis, earlier this year i reintroduced the bipartisan network security trade act to
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ensure the security of our communications and infrastructures is a clear trading objective of the united states. let me just say i believe it's critical that our global communications infrastructure is not compromised by manufacturers like huawei technologies, which is supported by the chinese communist party. can you talk about this so we can address the barriers to our communications networks and supply chains? >> i think that bill is very valuable. one thing we've all learned is that the use of chinese technology creates a real risk of espionage. it's not just an american company. we've started to remove huawei technologies, but now we need to think of the other places we connect to as well. an important step is to push on
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the need for secure communications technology. that's why i think the bill is invaluable and i'm glad you reintroduced it. thank you. >> this is a follow-up related to the pandemic. that obviously has accelerated the rise of the digital economy and with more individuals and businesses online, our country has got to make smart investments in the technologies that are reshaping the way we live. what steps do we need to take to make sure communications supply chain can meet the needs of the future when we think about any technologies like 5g and a.i.? and is there a role for government to play? and if so, what is it to make sure we lead technological advancements and stay ahead of countries like china? >> thanks again, senator. i'm sure there's a number of areas where we could use a good
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collective approach with the private sector and government. the first is in standards bodies. we all know that. the u.s. is doing better in standards than you might think, but the chinese are not giving up. second r&d and s.t.e.m. the companies tell me they have workforce shortages, so we can help with that. spectrum allocations, the u.s. has made good progress in moving spectrum. we're at a new kind of national security contest. the old spectrum allocations might need to be reconsidered but we've done okay at that. finally, a larger business question, building infrastructure is good, making sure the infrastructure is secure is important, but how you use that infrastructure is also crucial. so we need to find ways to axel rate innovation in the use of 5g and dare i say it 6g. >> let's hope so. mr. miller, in your testimony
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you talk about the need for strategic plans to implement the new supply chain initiatives that are underway. are there existing public/private initiatives reviewing supply chain risks that could serve as a model? >> i think an excellent model is the cyber security and infrastructure security task force. one of the best features of that task force is that although it is sponsored, it involves about a dozen federal agencies and partners, including the commerce
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department. it includes exports and participation from across both the i.t. and communications sectors. and it's really involved government and industry rolling up their sleeves and working on developing real proactive solutions that could actually help address some of the variety of supply chain challenges. i would also say that one of the things we've been working on most recently is trying to figure out how to make sure the products are getting out into the supply chains themselves, into the bloodstream, if you will. and also specifically addressing small to medium sized businesses that comprise the supply chain and try to figure out how can we help those companies in particular. >> madam chair, i have a question i can submit for the record. >> go ahead, senator thune.
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>> you mentioned in your testimony the aviation industry experiencing several recent disruptions due to the pandemic and geopolitical concerns and aircraft groundings. what materials or components will the airline industry need over the coming years? >> labor wage inflation might be one of the biggest. we're effectively deflationary. that is to say pricing for our systems have been declining in real terms for quite some time now, i'm afraid. that deflationary trend accelerated during the pandemic in order to accelerate demand. i think we're going to be stuck
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between higher materials prices, higher energy prices and, most of all, i think higher labor prices. historically it's really the casting and forging that have typically produced bottlenecks mostly made from more exotic metals, turbine componentry and things along those lines. >> thank you, senator thune. i just have one last question. we talked about some of the aspects on the adversarial side. what about on the ally side? you've written about this as a way from your research to prioritize things. what should we be doing to think about building alliances on supply chains?
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and who in the government should be doing that? >> a lot of people on the panel have mentioned semiconductors how important alliances are. >> i think there's collaboration between the big companies and firms and their smaller suppliers. perhaps that's an area that has been less well developed.
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. that collaboration is very important. i think it's probably private sector led. u.s. government can be encouraging the kind of investment at local levels that would help that. >> anybody else on the ally front? >> sure. thank you. the tech and trade council is an important step. the europeans really wanted it, it was their idea. so they are looking for ways to partner with us. that's good. they're worried about what they're afraid might be trade nationalism in the u.s. buy america is something they react to. we should be worried about some of their tech governance issues. they say it's not aimed at american companies, but some days it sure looks that way. i was gist at a meeting with one of the european commissioners
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and there's a real desire to build partnership. we're entering a long period of dialogue that moves us in the right direction. >> mr. miller? >> thank you. i will echo both the point about investment and attracting investment from partners and allies to the u.s. as one thing for sure, as well as the useu trade and technology council. one of the features of that is that -- and i think it's already been announced that one of the things they're specifically forming a work group on is semiconductor supply chains. another note on the international front on this topic, for the past two or three years now there's been kind of
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the prague principles and focus on 5g security, which has a significant number of supply chain components and brings together several different u.s. partners and allies to focus on the security aspects of the supply chain issue. >> one other idea sort of goes back to what senator scott said and even senator thune, this investment in international business is coming here and establishing a footprint and our own american industries also. i would ask the commerce department to take a strong look at revitalizing or resupporting, whatever the word might be, the permitting processes. it's long, it's laborious. it's debilitating. it really hinders greenfield
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building growth or expansions or just additional lines or the process we all have to go through for a permit to get that innovation started, get that factory started or addition to a factory started, so i ask that be looked at. >> thank you very much. did you have one last thing you wanted to say on this point? >> 30 seconds. when we grow, our investment is being done with this piece of legislation, it really serves as a beacon for our allies to desire to partner with us much more strongly. >> i think that is a good summation. this has been a great deep dive on the supply chain. thank you all very much. thank you for your expertise and your knowledge about this. a lot of great information has come out of it. i definitely believe that we have to look at the supply chain in a more partnership way. i reflect back about what our
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discussion has been here. i keep thinking what if we would have had a better partnership on that years ago, would we be in the same position we're in now with the semiconductor industry. we are trying to have more elimination in these sectors not just from their technology sector but also what they mean for jobs. thank you very much. this record will remain open for two weeks until july 29th. anyone can submit chemical weapons for the record. with that, this concludes our hearing. thanks very much again.
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