By Shane Tews

Technology
companies are facing some of their largest security, supply chain, and
regulatory threats ever. Members of Congress, the Joe Biden administration, and
Federal Trade Commission (FTC) are trying to require that firms allow anyone,
anywhere to repair their consumer devices — at a high cost to product quality
and individual security. Meanwhile, cyberattacks and data breaches are on the
rise, and while trying to get next-generation 5G products off the ground, both
software and hardware providers are facing massive semiconductor chip
shortages. How are large tech companies navigating these challenges?

On the
latest episode of “Explain to Shane,” I was joined by John
Godfrey, Samsung’s acting head of US public affairs and leader of their
Washington, DC team. John discusses how Samsung is grappling with “right to
repair” initiatives on Capitol Hill, congressional funding for semiconductor
production, and the growth of 5G wireless in the US and beyond.

Below is an edited and abridged transcript of our talk. You can listen to this and other episodes of “Explain to Shane” on AEI.org and subscribe via your preferred listening platform. You can also read the full transcript of our discussion here. If you enjoyed this episode, leave us a review, and tell your friends and colleagues to tune in.

Shane Tews: I want to get started with an
issue that is front and center with the Biden administration: “right to
repair.” The FTC suggested that not being able to take your device anywhere you
wish for a repair increases costs and limits consumer choice. Can you walk us
through this issue and share your thoughts?

John Godfrey:
Consumers already fully have a right to get their products repaired. What
consumers want is for the repairs to be convenient and affordable. Warranty
repairs are completely free, but a lot of this pertains to out-of-warranty
repair. People want that to be affordable, which means there’s competition among
multiple people to provide a good price on those repairs. Consumers essentially
want them to be effective and safe.  

I think the
advocates for government intervention in the repair service market are looking
for the government to intervene and require manufacturers to take extra steps outside
the free market. They’re asking manufacturers like Samsung to provide parts and
business information to effectively anyone who asks for it, who would then use them
to provide repairs to consumers. That would certainly make repair more
convenient if, theoretically, everyone could access exactly the same
information and parts, but I’d have real questions about whether that would be
safe or effective because modern products are complicated. It takes some
training to know how to repair them properly.

In terms of how
Samsung approaches this, we have a wide range of convenient and affordable
repair options for consumers, starting from Samsung in-house repair, where you
can mail in a product to Samsung or carry it in to one of our repair centers.
Or, you can work with a Samsung-certified technician within our authorized network
of repair providers. But we recognize that right-to-repair advocates want even
more choice and competition than that. So in the last year, we’ve opened up
another alternative called “independent service providers.” And earlier this
year, we announced a partnership with a company called Batteries Plus that has franchises
all over the country with access to authentic, genuine Samsung parts including
batteries, screens, circuit parts, motors, and other things on the condition
that their repair people are certified under the cellular industry’s certification
program for excellence in repair. That means the repair people have gone
through a training course and achieved certification that they know what
they’re doing.

We do that
because we really don’t want consumers to be exposed to danger from using
counterfeit parts. So it’s good that they are getting genuine parts. It’s good
that they’re getting a qualified, competent repair by someone who’s certified
so they’re not leaving the product vulnerable to a security flaw or leaving the
product in a state where it might break or, worst case, catch on fire, be
physically dangerous, and even introduce problems with customer satisfaction.

We’re doing
all of this without being told by the government to do so. We and other
companies in the industry really are trying to expand repair options and repair
competition for consumers as long as it is safe and effective.

What has Samsung been doing to increase
security of its mobile devices recently?

Samsung has
worked hard on security for many years. Part of the advantage we bring is that
as a hardware manufacturer, we make our own hardware. We don’t outsource that.
That includes the chips in the phone; some of those we source from outside, but
some we manufacture ourselves. We have created sort of a hardware-rooted
element of trust in every phone, and a tamper-proof and tamper-evident system
so that if anyone tries to replace the operating system in the phone or break
its security, the secure elements of the phone will stop working.

For a
consumer, important things like your biometric information are stored in that
tamper-proof exterior element in the root of the phone. And the phone will do a
secure boot-up so that if it detects it has been tampered with, it won’t boot
up. Above that, there are additional enhancements to the Android operating
system that we’ve worked on with the Android community.

I think the
best marker of the results of our work is that a large proportion of our
flagship phones have been certified by the Department of Defense as meeting the
common-criteria security guidelines that are required for phones to carry
top-secret information.

The pandemic has helped us realize how
important semiconductor chips are to these devices being able to function in
the first place. You guys have been on the forefront of trying to make the
semiconductor supply chain more robust for a long time. How is that going?

Samsung has
had a factory in Austin, Texas, since the 1990s, and has been through multiple
generations of reinvestment to a combined total of over $17 billion of
investment into Austin. This originally was a memory chip factory, then it
changed over to making logic chips, which are more cutting-edge and require more
advanced types of manufacturing. This is now what’s called a foundry factory.

What I think
would be useful for people to know about the semiconductor market is that the
shortages today are largely in logic chips rather than memory chips. And not
that many companies actually manufacture logic chips. Most of the companies
you’ve heard of design logic chips but they outsource the manufacturing to
someone else. They don’t own their own fabs; fabs are incredibly expensive, and
it requires incredibly complicated technology to etch the semiconductor wafers
properly.

Samsung is
the number two foundry company in the world after Taiwan Semiconductor
Manufacturing Company (TSMC). And our Austin plant is very important to the
overall semiconductor supply chain. Because there’s a shortage right now, it is
really urgent for investment to continue in building additional foundry
capacity.

One of our
top priorities in Washington, DC on the team I lead is legislation before
Congress — originally called the CHIPS Act — and it’s moving through the
legislative sausage-making process. It includes grants for building
semiconductor manufacturing in the United States and also investment tax
credits for US investment in semiconductor manufacturing. This will be really
important for diversifying the US supply chain and having at least some production
here in the United States to help alleviate that supply. So we hope Congress
will move fast on leading that.

We’ve also
announced this year that we will make an additional semiconductor manufacturing
investment in the United States. We’ll be spending $17 billion on a new
cutting-edge semiconductor facility — location to be determined, but Texas,
Arizona, and New York State are all in the running. We really look forward to
bringing that additional investment.

5G-enabled devices have been a real
benefactor of all of this. How is 5G going at Samsung?

It’s alive
and well; it’s going fast. Look, we’re in a stage in the evolution of any new
technology where the initial excitement over something that’s brand new has
died down and now people are impatient to see the revolution happen and see new
applications come along. The stage we’re in now is: Operators are deploying 5G
networks — even during the pandemic — and US operators have been deploying 5G.
You could say 5G is coast-to-coast today in the United States. All major US
carriers have 5G available — at least in populated areas nationwide. But the
problem is that it’s in the low-band spectrum where there’s not a whole lot of
capacity. And so yes, it’s 5G, but the data rates are not terribly greater than
4G. You may get some other benefits of 5G when they finish deploying the core
network elements to get some of the low latency that 5G provides, but not the
high data rates and the low bands.

Mid-band is
being deployed nationwide. T-Mobile already has it through their Sprint network
that they acquired when they bought Sprint. Verizon and AT&T bid heavily in
the C-band auction, which is mid-band. They’re now deploying that equipment and
will be able to turn it on in December of this year: 200 megahertz of
additional spectrum for the early licenses and more two years later.

I think that
is when consumers will begin to see across all three national carriers a big
speed jump in 5G. I think then, companies who want to develop new applications
and services that take advantage of 5G will really be able to do it since they
will be able to reach consumers all across the country with high speeds. 5G is
already in the phones. Samsung has really democratized 5G on the consumer side
— we’ve put it not just on our high-end phones, but on our more affordable,
mid-range phones.

The post How tech firms are managing the challenges of today’s market: Highlights from my conversation with John Godfrey appeared first on American Enterprise Institute – AEI.