Don't blame Obama for fabless America
G. Dan Hutcheson
10/27/2010 12:57 PM EDT
The following opinion piece was contributed by G. Dan Hutcheson, chief executive and chairman of VLSI Research Inc.
Lately it’s become popular for the media to deride the Obama administration for creating a business climate of uncertainty that is causing American manufacturers to hold up on investing more productive capability in the United States. Now I am not going to get into politics here. The real issue is, should this perspective change your strategy or tactics in the immediate future? I don’t believe you should and let me explain why 'lack of trust' in the Obama administration will have little direct effect on corporate decisions. Other, more pressing issues weigh in far more heavily.
Uncertainty: Business is all about uncertainty. The future is always uncertain and the whole point about investing is that it happens when it makes business sense. There has to be some long-term expectation of profitability.
The issue with lack of manufacturing investment in the United States goes back three decades to when manufacturing employment peaked. It has little to do with the Obama administrations’ creation of an 'uncertain business climate.' You can’t blame every President since Reagan for it either.
The lack of manufacturing investment has far more to do with the unstoppable forces of globalization, digitization of workflows, exchange rate manipulation, and ultimately: greater foreign competitiveness via lower manufacturing costs.
I doubt that few would disagree that companies have been outsourcing manufacturing for three decades because that was the most profitable thing to do. This trend is not going to change until America becomes more competitive. By competitive I mean that it has to be more profitable to manufacture in the United States than in China, Vietnam, etc. Whatever it is that a country like the U.S. — or Germany and Japan — for that matter — makes, it must be cost competitive. For Germany it’s BMW’s, Mercedes, etc. For the U.S. it’s items like 22-nm microprocessors. So . . .
Intel didn’t get the memo about uncertainty and announced last week that it would be spending $6-8 billion in the United States to upgrade its manufacturing to 22-nm capability. Nowhere did they mention, or even hint, that the Obama administration had anything to do with the decision. The decision about where to invest was made on grounds of cost, best capability, and lowest risk. Now you could give me a ‘Yes, but …’ however then you have to argue about Samsung’s decision to build-out a foundry fab in Texas.
The bottom line is that uncertainty about what the Obama administration might do is having little measurable effect other than to increase worries about personal tax bills.