November 12, 2018 at 5:00 am ET
On the sidelines of the on-again, off-again trade tangle between the United States and China lurks a cross-border issue that must not undermine American ingenuity and efforts to hold American-made technology manufacturing fast. While the U.S. government does restrict the sale of critically important U.S. technology companies, it does not properly restrict the sale of the underlying related production equipment and processes. America (and Europe) lost its early lead in solar, LED, and polysilicon manufacturing industries to China, in part, due to unrestricted sales of processing equipment.
But U.S. manufacturers and government alike must now come together to not make this mistake again and protect an emerging, yet vital new U.S. industry – silicon carbide. The United States is the undisputed global leader in the production of advanced silicon carbide, a material that will radically accelerate the transformation of our nation’s economy. This little-known strategic asset is one of America’s most important technology innovations. My company and a few other American businesses have developed the core underlying material technology to produce SiC crystals on a large scale; these crystals are then sliced into wafers and fabricated into semiconductor devices. Semiconductor device manufacturers are replacing traditional silicon with SiC to boost functionality and cut cost in high-power applications. SiC enables longer-range, lower-cost electric vehicles, lesser-cost renewable energy, and more-powerful, robust 5G networks. SiC is to advanced electronics what hydraulic fracturing (fracking) is to the natural gas industry- making it less costly and more productive.
SiC technology, and the related intellectual production property, are closely guarded and protected by a combination of patents and valuable trade secrets. SiC’s ingredients are simple — but the process and equipment that transform them are highly complex. If U.S. companies that have this technology export it, they will enable other countries to do what they have before – expand on the back of easy capital and, in short order, dominate the SiC market. I should know: For the last 15 years, my company sold advanced equipment and process technology to the solar, LED and polysilicon industries, which Asia, China in particular, now dominates. And after just a few years, fueled by massive capital infusions and by copying our equipment designs, Chinese manufacturers took over these industries once dominated by the United States and Europe.
In the past, selling production equipment was GT Advanced Technologies’ business model. This strategy made us a lot of money and we could make a lot more by selling SiC production equipment and process technology. However, as the chief executive, I have changed my business model and decided that as a forward-looking company in the SiC supply chain, we must protect American-developed technology, while still supporting the best interests of our shareholders, employees and community. Let me be clear: I am for free trade and hard-fought technical and commercial competition; however, my company will no longer enable losing a U.S. industry. Other countries must compete using their own sweat, their own technology innovation, their own dime, and see if they can keep up.
Much of the power to protect America’s strategic technology assets rests in with the U.S. government – specifically the Committee on Foreign Investment in the United States. Last year, CFIUS blocked the sale of U.S.-based Wolfspeed Power to Infineon Technology of Germany, because of potential risks to national security. This followed the Obama administration’s decisions to block two similar sales to Chinese buyers: LumiLEDs, a division of Dutch electronics giant Philips, and Aixtron, a German engineering, semiconductor and LED equipment company.
Our current system of protecting America’s critical technology falls short. The number of M&A deals or foreign investments that are blocked is irrelevant, when all a company needs do is buy the underlying manufacturing equipment and process; it needn’t buy the business if we allow the sale of the capital equipment as this grants the implied rights to the technology’s use. It is thus imperative that, from the jump, we prevent the sale of our intellectual know-how via manufacturing equipment sales – because the day we enable any country (China or any other) in this high-growth, strategically critical industry, is the day we will have allowed them once again to buy their way to technical parity and drive another American-birthed industry into the ground.
I cite the electric vehicle sector as just one of many industries being readied to gallop when more SiC products come to market. Here, and elsewhere, U.S. policy makers would do well to support the fundamental “Made in America” technology already in our hands.
Greg Knight is the CEO of GT Advanced Technologies, based in Hudson, New Hampshire.
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