Chris Coons Asks Howard Lutnick To Compare U.S. And Chinese Chip Manufacturing

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At today's Senate Appropriations Committee hearing, Sen. Chris Coons (D-DE) questioned Commerce Secretary Howard Lutnick.

Transcript

00:00Terry, look forward to working with you. You are, I believe, the first Secretary of Commerce to be a

00:05patent holder, and I personally am excited to work with you on protecting American innovation and

00:11patents. I have four different areas I want to touch on. AI chips, patents, the PTO, and IPEC,

00:19Manufacturing USA, and the MEP. Let me briefly in one sentence say I agree with comments made by

00:25members of both parties that the Manufacturing Extension Partnership is worth improving and

00:31saving, and I look forward to working with you on it. I've seen it in the field. I've seen the impact

00:36it can have. It could be modernized and focused, absolutely, but in my state, they delivered cyber

00:41tools to small manufacturers, and they've delivered state-of-the-art support. One down. Two, AI chips.

00:48What's your sense of the importance of AI to the 21st century? It's my sense that it's going to

00:54redefine our economy, our security, and our place in the world, and what's your sense of where U.S.

01:01advanced AI chip manufacturing stands relative to the Chinese right now? So I agree with you that AI

01:08and the AI industrial revolution is our revolution in our lifetime. It is the industrial revolution of

01:14our lifetime. America has invented all, all of the great chips. And how many chips will we make versus

01:22the PRC this year? Currently, we're making 200,000 wafers, right? And we have demand of 10 million.

01:30Now, the chips deal that I made with TSMC, the Department of Commerce made, increase that,

01:36we'll have 1.2 million chips, wafers. Wafers. 1.2 million wafers. So we'll be at about 12%

01:42of our demand. It's woefully inefficient. And how much will the PRC make this year of advanced chips?

01:49They say they're making them, and they are not. Okay? They do not have, we have restricted the tools

01:57to make the highest quality chips. And I think, look, the FT reports that they're making fewer

02:04than 400,000 chips. Yeah, I think probably closer to 200,000. So let's say it's 200,000 of the most

02:09advanced chips being made in the PRC, millions in the United States. Let's just agree that this is

02:16bipartisan, sustained over two administrations, and critical to our future. Because we want the

02:22most advanced frontier AI compute to be in the United States, the most advanced models to be in

02:28the United States, and this to drive this century for the United States. So- I agree.

02:33My concern is that the diffusion approach of the previous administration, the AI diffusion rule,

02:41that mandated more than half of AI compute be located in America, has been set aside without,

02:47to my knowledge, a clear replacement. And I'm concerned about the deal with the UAE,

02:53and what it means if we provide to the UAE a significant quantity of chips without a clear path

03:01for a greater amount of compute to be here in the United States. Could you just tell me how you

03:08see this new deal? I'm concerned that we are at risk of dependence on Middle East compute rather than

03:15U.S. compute, given some of our real challenges. And I don't agree with the argument that's been made

03:21by others, not by you, that if we don't provide these chips to the UAE, the Chinese will. How do you

03:27view that point? Number one, I agree, and the administration agrees, that compute, more than 50%

03:33of compute must be on our shores in America. So we completely agree. The deal with the UAE said,

03:41if you buy a significant number of chips, you will invest in America and build data centers in America

03:48for an equal amount of chips. So that investment must be dual there and here. That's required.

03:56The AI diffusion rule was very confusing in that, for example, the prime minister of Poland

04:03hunted me down and said, what did I ever do to you that you have me as a tier three?

04:10And, you know, I'm part of Europe. What are you doing? And it was illogical. It was hastily rushed

04:15through at the very end of the Biden administration. Our view is we are going to allow our allies to

04:23buy AI chips provided. They're run by an approved American data center operator. And the cloud that

04:31touches that data center is an approved American operator. So we control it while it's over there.

04:38Given the shortness of time, thank you. I look forward to working with you on this. I think it is

04:43absolutely critical. You spoke with another senator, Senator Sheehan, about the urgency of

04:47retaining steel and aluminum for our defense. AI compute is going to be absolutely central to our

04:53defense. Absolutely. You made a comment earlier. We want to make pharmaceuticals here in response to,

04:59I think it was Senator Kennedy. You're familiar with Manufacturing USA? Yes. One of the things I was

05:05pleased to see was that it retained level funding. Yes. There are institutes around the country.

05:10There happens to be one in Delaware. Are you familiar with it? It's the National Institute

05:14for Innovation in Manufacturing Biopharmaceuticals. Yes, it is. And it is two to one private sector match

05:22for government investment and is on the verge of demonstrating a new way of manufacturing at scale

05:29pharmaceuticals in the United States. It is critical to our being competitive. I'd love to talk to you

05:35about that in more detail on my last point quickly. I agree that there are too many unexamined patent

05:42applications. PTO fee diversion in the past has robbed the Patent and Trademark Office of critically

05:49needed resources to hire more and better examiners to reduce the backlog and to improve its speed. I have

05:54a bipartisan bill with Senator Tillis that would permanently prevent fee diversion, which increases the

06:01backlog. Would you work with me to support that? I'll be glad to work with you. I think the Patent

06:07Office is one of the least understood and most incredible value for the United States of America.

06:13I think we undercharge the fact that we have our amazing judicial system that you can have access to

06:20it for $2,000. $2,000. And the U.S. judicial system should just do whatever you want. Seems

06:28extraordinary. Now, we want the price to be low so that the inventor can come in. But over time, I think

06:35we should have more money. And I think that's something that we're going to talk about. So I want

06:40to make sure we capture the benefit as well as the cost that's coming from the Patent Office.

06:44There is a longstanding but underutilized capacity, the intellectual property enforcement

06:49coordinator that is meant to corral IP enforcement across the administration. I'd also like to talk

06:55to you about why I think that should be funded and why we need some function like that no matter how

07:00configured. I look forward to talking to you. Thank you, Mr. Secretary.

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