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US-China decoupling easier said than done: Western Digital CEO

Semiconductor chief doesn't want world to split into rival tech camps

A display at Semicon China: The supply and development of chips has become a national security objective for countries around the world.   © Reuters

TOKYO -- With China both a technological competitor to the U.S. and a coveted market for American companies, chipmakers like Western Digital must navigate a business landscape studded with pitfalls.

Semiconductors are essential for both the iPhones and Teslas that consumers crave and the advanced radar and precision-guided weapons that militaries demand. Yet U.S. pressure to restrict Chinese access to American supply chains shows no sign of easing under President Joe Biden.

In a recent interview with Nikkei, Western Digital CEO David Goeckeler said that governments around the world have grown attuned to the importance of semiconductors but that decoupling the U.S. chip industry from China -- or any market -- is no easy task.

In semiconductors, "you want access to global markets," and "you use that scale to reinvest in R&D," said Goeckeler, who heads one of the world's biggest suppliers of flash memory and a long-term partner of Japan-based Kioxia Holdings, formerly Toshiba Memory.

"That's how you continue to drive forward," he said. "So you want to be careful that you don't limit the markets you serve."

This goes double for China, the world's second-largest economy and home to such massive technology groups Alibaba Group Holding, Tencent Holdings and Huawei Technologies, as well as multitudes of smaller players. Goeckeler said Western Digital will take U.S. technology export restrictions in stride.

China is "a very important market for us, and we continue to pursue that," the former Cisco networking executive said.

Western Digital CEO David Goeckeler. (Photo courtesy of Western Digital)

"Right now there are some limits to where we can sell in China. ... The United States government has some rules about who we can sell to and who we're not, and we're going to follow those rules," he said. "It's just as simple as that."

On possible conflict between national security and the goals of running a global company, the CEO said technology leads to better lives for all. "And so I think it's very important," he added, "but also there's national security issues that are extremely important."

Western Digital hopes that it can navigate national security issues "and not bifurcate the technology road maps that we're driving, but it is a complicated environment," he also said.

The Biden administration has shown in back-to-back summits with Asian leaders that securing chip technology for America is a top priority.

Biden and Japanese Prime Minister Yoshihide Suga agreed in April that the U.S. and Japan would "partner on sensitive supply chains, including on semiconductors, promoting and protecting the critical technologies that are essential to our security and prosperity." This month, in conjunction with South Korean President Moon Jae-in's visit to the U.S., Seoul announced plans by Samsung Electronics to spend $17 billion on a new American chip plant.

Taiwan Semiconductor Manufacturing Co., the world's top contract chip producer, and American chipmaker Intel also have their own plans for new U.S. fabs. This will mean that the global big three of chip production will all have new capacity on American soil, advancing Washington's goal of shifting technology supply chains home.

A Western Digital office: The Biden administration "has been very supportive" of the semiconductor industry, CEO David Goeckeler says.   © Reuters

Hungry for semiconductor devices and equally committed to self-reliance, China also produced Yangtze Memory Technologies Co., a budding national champion in memory chips. YMTC emerged only in 2016 but is regarded as leading the charge in Chinese efforts to create a domestic semiconductor industry,

Asked about the prospect of such Chinese rivals catching up, Goeckeler was coy.

"Business is hard," he said. "Technology is hard. It takes an enormous amount of energy and enormous amount of brainpower to be in the technology business."

"And we all have to invest heavily to stay on the forefront" of cutting-edge technology, the CEO said. "I certainly respect all of my competitors" -- they have a "big hill to climb," and new entrants have "a long way to go," he said.

Japan's semiconductor industry has fallen from the once-commanding heights it held in the 1980s. One of the few remaining Japanese leaders in terms of chip technology is Kioxia. It sprung out of Toshiba, where NAND flash memory was invented in the 1980s. The Western Digital-Kioxia partnership is built around NAND, an indispensable part of today's digital economy, used in data centers as well as in personal computers and other devices.

While DRAM, another kind of memory, is also growing in demand, "I think it's fair to say that NAND flash memory is the fastest-growing segment of the entire semiconductor industry," Goeckeler said.

Western Digital sees Kioxia as "a model for U.S.-Japan cooperation" in the "extraordinarily important space of semiconductors," the CEO said.

Kioxia was spun off from Toshiba as part of an overhaul that gave foreign investors majority ownership of the industrial group, one of corporate Japan's crown jewels. But Kioxia's engineering talent arguably remains a Japanese asset -- one that likely holds a strong attraction for the U.S.

Asked what, if any, requests Western Digital had received from the U.S. government, Goeckeler said: "I won't get into all the details of our dealings with the government, but I think governments around the world are looking to understand the semiconductor space better."

The Wall Street Journal has reported that both Western Digital and U.S. peer Micron Technology were considering deals for Kioxia. Goeckeler declined to comment on "rumors" about the company's M&A strategy.

The pandemic has brought even greater attention to industry's importance as automakers have been forced to cut production by scarce chip supplies.

"We've seen semiconductor shortages and realize that we need to invest more in that space," said Goeckeler, who noted that the Biden administration "has been very supportive" of the industry.

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