VentureBeat: What about the argument that Silicon Valley is still here, and so we don’t need manufacturing as long as we have whatever Silicon Valley is?
Shih: I think great things happen in Silicon Valley. A huge amount of innovation happens in Silicon Valley. But what I was referring to earlier is the fact that a huge amount of innovation happens on a manufacturing floor, especially for some of those less mature processes. I’ll give you an example tonight. If you’re in the display materials business, one of the questions in my mind is, does it make sense to invest in R&D if your only path to commercialization relies on capabilities that can only be found in Asia? They’re working on it too, and they have this huge advantage of being close to where the work is done. I think it’s really problematic. The question is, as a result of letting go of those things, are there fields that you can no longer invest in that might be general-purpose and generically important? That would be my concern.
VentureBeat: How do you look at something like, say, Solyndra (the solar manufacturing company that went belly up after receiving government loans? And then Tesla, manufacturing cars here [in Fremont, Calif.]
Shih: Solyndra… They’ve had their share of criticism. The debate tends to be government-driven versus private industry-driven. I think the role for the government is in addressing basic R&D. That’s the type of stuff the government is very good at, which private industry often has a lot of difficulty doing. That’s in the definitions of public good, if you will. There’s been a lot of controversy over that on the political circuit, but if you look at what has historically served the U.S. tremendously well, it’s been investment in basic science R&D. Going back to the space program, which led to integrated circuits, computers… Defense and the space program drove a lot of things like that. The Human Genome Project really drove the biotech industry and investments there. I think government investment in basic science and R&D is really important. It’s hard as you get downstream, because then you always get accused of picking winners. It’s really hard to get that right. Governments don’t get that right very often. The truth of the matter is, venture capitalists know that they’re going to get a lot of those wrong as well, and that’s why you have to have a portfolio of these things. It’s really hard to do that. I think sticking with the basic science and the things that support the innovative environments, like education, would be a better choice in my view.
VentureBeat: Tesla seems like it should not exist here. But it somehow made things happen…
Shih: Again, auto plants also get a lot of incentives. It’s very hard for me to judge that. You have to judge the success of these things on a very long cycle. Especially something like Tesla. It’s hard to judge that after a year or two, because you’ll really see the outcome of that 10 years from now. My bias tends to be, where the government is really successful is where they do the basic R&D programs. I’ll give you one example in commercial jet engines. NASA had this program called the Energy Efficient Engine. Basic technology, increasing the combustion efficiency in the hot section of a jet engine. The world leader in large turbofans is General Electric Aviation, and then you have Rolls-Royce, both of whom benefit from government-sponsored research in the basic technology, metallurgy and things like that. But the government leaves the manufacturing and the design of the engine to those companies. I think it’s one of those tricky boundaries.
VentureBeat: Your conclusion tonight, do you know what it’s going to be?
Shih: Simple conclusions… Manufacturing is knowledge work. It’s important to preserving capabilities and preserving our ability to innovate. That’s why I think it’s so important.
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