Of Endings and Beginnings and Bailouts
I recently left my job of 12 years at Freescale Semiconductor (née Motorola Semiconductor Products Sector) and started with a new company, essentially out of the semiconductor industry and into the realm of making money by licensing intellectual property. It has been a big change that was motivated in no small part by the precipitous decline of the semiconductor industry in the United States.
Recently, John Cole at Balloon Juice has asked in regards to the Big Three automakers in the United State, “why bail them out?” There are some who argue that car manufacturing is a “strategic industry” that cannot be allowed to leave the United States.
My question is this: how is making cars more strategic than making the integrated circuits that go into the smart bombs and missiles and computers and other high tech instruments that we now depend upon to minimize casualties on our side when we go to war?
Guess what… the industry that makes those integrated circuits has already left the country. Only one major company still has plans and the ability to build state of the art integrated circuit factories in the United States. Yet, I don’t hear anyone claiming we need to bail out the troubled semiconductor companies.
The vast majority of computer chips are now made in Taiwan or Singapore, within shouting distance of China.
Is this really how we want a truly strategic industry to be run, with the factories offshore and located near our biggest potential rival?
What is our strategic direction and are we making the right choices to support it?
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Cross-posted to Random Fate.
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7 Responses to “Of Endings and Beginnings and Bailouts”
Jack, the IC manufacturers are in Asia because that is where the customers are – the companies that build the electronics that are sold is the US. The semiconductor industry won't move back to the US until the electronic manufacturers do.
It's my understanding that the auto industry bailout is mainly a jobs program. It's being pitched as some kind of national security issue in the hope that's more acceptable to taxpayers who make less money than autoworkers.
I am not an economist, but if I recall my history the hallmarks of the Great Depression were high unemployment coupled with deflation. More of one lead to more of the other.
George is right. Estimates put 3 million jobs as being dependent on the auto industry. Imagine them going away on top of existing job losses. Sound high? Start with the factories themselves. Add in the parts suppliers. Then we move on to the businesses that move the parts and the completed cars. The dealerships with their sales people, office staff and repair people. Those are only the people directly affected. With that much purchasing power having vanished from the economy can you imagine the secondary effects on retail and restaurant business?
BTW, some of those jobs are still going to be lost even under the plan that Obama has proposed. But at least he admits that we need to do something about the jobs that the “free market” isn't providing.
Computer memories are just as strategic a commodity as oil. 30 years ago most memories were produced here. That fled our shores decades ago.
We've given up leadership in virtually ALL manufacturing industries. To do otherwise has been derided as “protectionism” for 30 years, and is to this day. If a sweatshop with no environmental controls can make it cheaper, the American way is to let them do it. “Free market capitalism” has become a mantra that excuses our sacrificing American jobs and entire industries to cheaper (for now) imports. If we continue to follow that mantra, we should let automakers and every other American enterprise sink or swim in the global economic pool.
But in fact, we need to rethink the value of jobs and self-reliance in manufacturing. We might just need our own textile industry, shoe makers, electronic companies and yes, automakers. Opinionated as I always am, though, I don't know whether bailing out automakers is a good idea or will even work. But if we do, I'd like to see some pretty heavy controls on executive compensation and management arrogance. The days of using marketing muscle to cram gas guzzlers down our throats better be over. We NEED a super efficient fleet and serious R&D toward non petroleum options.
I have a serious problem with any government spending being used to prop up a dying industry, even if that industry supports 3 million jobs. If the government does that, then we'll be perpetually supporting dead weight and not looking towards the future.
This theme exists within the car companies themselves. They've given so many guaranteed benefits to retirees that they can't invest in their future, hence they're dying. We shouldn't do the same. These companies are weak and dying, and for us to spend billions or trillions propping them up isn't doing them, or us, any favors.
That 3 million number is also dubious, for it assumes that all three will fail and none can recover from a bankruptcy. I don't find that realistic.
Now, if there are regulations or laws or tax policies that drive businesses out of the country (and that certainly is the case), then that is something else indeed. But directly funding failing businesses isn't smart, it's socialism.