I think "making them" is a bad idea and a bad precedent plus probably not allowed under a bunch of agreements. I do think tax incentives or tax code changes for manufacturing are a good idea.
Look at the tax rate for someone like TSMC in Taiwan versus the what they would pay in the US and you know why they are in Taiwan although there are also labor rate differences also contributing.
Production knowledge hasnâ??t vanished with the fabs. As EE Times articles have made clear, the leading fabless companies work in the fab with foundries during process development.
Fablessness is also richer in engineering jobs than fabs. According to a calculation detailed in our new book, â??Chips and Changeâ??, fabless companies in North America in 2005 employed about six times as many engineers as all the foundries in Asia.
I concur with both Scott and G-Linden. However, I must stress that we should focus on not just jobs for engineers, but, jobs for skilled labor. Fabs require a significant amount of skilled labor to maintain the machines, build plants, build fab equipment, etc. The next tier of operators is also an important area of jobs. It has been my experience that the people in the skilled labor sector and the operators typically nudged their children into the field of electronic engineering. It is interesting that the number of engineering students from american high schools has declined as the number of fabs has declined.
Just a thought for our dear profession of engineering.
Mark makes a good point but Michael hits the nail on the head in his comment. It's not all about engineers. When fabs and factories leave the US the skilled labor supporting them, the companies providing services to them, the communities depending on revenue from them, etc. etc. all go away. Shipbuilding is a good example. Or steel. Tax policy is the way you influence this problem of course. Create favorable business conditions and the factories and fabs will locate there. (NY may have it right.) But the U.S. as a whole has this irrational fear of using tax policy to create jobs. "We can't be in the business of picking winners and losers" is the oft heard refrain. Bull.
US workers deserve a government that actively supports reasonable, well paying and plentiful jobs or we risk becoming a nation of the un- and underemployed. (Maybe we already are?) I don't know about you but I know many talented, skilled and educated folks - many formerly associated with the high technology sector - who are pounding the pavement and/or "consulting now. A sustained and enlightened industrial policy can fix this. If you need proof that industrial policy works witness what Japan, Korea, Taiwan and China have done for their economies in the last 40 years. Compare this remarkable progress to the "gains" of Americas working middle class over the same period. It's time to bring some jobs home however we choose to do it.
If a company made a decision today to build a fab in the US, it likely couldn't get built and be qualified for production soon enough to be online when the industry transitions to 22 nm. So we're talking about a 16 nm fab which isn't a whole lot of runway before we reach the 11 nm quantum tunneling barrier (oxide thicknesses also reach a monolayer thickness) in ~2015-2016. In addition, interconnects at the 11nm node will have pitches ~50nm and the diameter of a single copper atom is ~0.25nm... so interconnect resisitivity and electromigration are going to get extremely difficult to solve at and beyond the 11nm node. See http://en.wikipedia.org/wiki/11_nanometer for other info.
I believe the more important question is in what direction will fabs go beyond the 11nm node to keep marching to the beat of Moore's Law? Will the industry uniformly transition to spin-based devices, single-electron devices or molecular devices? If the industry goes in the direction of molecular devices, integrated circuits... and the fabs that make them will be completely different animals. Since I'm unaware of there being a great deal of concensus on where the industry is going to after the 11 nm node, it sounds like a risky venture to go put tax incentives in place to build fabs that may not be compatible with the direction the industry goes after 11 nm.
Regardless, it seems as though there is a great deal of uncertainty late in the decade we're about to enter that I would like to see congeal with industry consensus behind it before I would advocate any specific policy regarding future fabs in the US.
Tax rates & labor costs are probably the biggest reason and they are big ones, but the EPA hurdles are also a factor. Manufacturing does include chemicals. Mark, I like your idea and we have leverage points you didn't mention if you progress the idea a little further. The issue skilled labor and engineering jobs are equally key. We need more than burger flippers in this country.
The US badly needs to balance its trade deficit as it is the root cause of all its problems today. A trade deficit of $840 billion is equivalent to as many jobs off shored and if we multiply the deficit by cost of manufacturing the same goods in the US, it will come close to 50% of the $14.4 trillion UD GDP.
Warren Buffet has suggested that we use import certificates to put limits on the imports to balance this deficit. An import certificate which limits the imports from a country as a function of exports to that country will eliminate this trade deficit in one go without alienating the trade partners.
Shifting manufacturing to the US will become imperative in the presence of import certificates. So it might become essential for these foundries to set up manufacturing facilities in the US for the US market or else they simply wont be able to sell in the US.
The only catch with import certificates is that they cannot be applied to commodities like crude which cannot be manufactured locally.
To be fair those EPA hurdles are there to keep our air and water reasonably clean, and unless we want to have a wage war with China (which is insane) labor costs aren't going to be going down. IIRC, didn't our corporate taxes go down a bit during the Bush years? Part of the problem with that is we have an obscene budget deficit and an even more obscene public debt, cutbacks alone wont make up for it.
"The US badly needs to balance its trade deficit as it is the root cause of all its problems today"
I'm pretty sure our massive overspending had a lot to do with both the trade deficit and the current economic crisis. We have had savings rates that have been near or below zero for several years now. Who's fault is that?
Does anyone for this idea compare the labor cost between Asian foundries and US fab? Average Asian fab operator (technican/ specialist whatever you call them, I meant those people loading/unloading wafers pod to the tools)make 700 US dollar a month, US fab average hourly rate is over 10 USD easily. You get the picture. This is beyond any incentives that can be make up, plus other labor consideration,etc. While the US fabless IC houses are still driving the cost down and making more profits than foundries. Asking around, would anyone willing to pay mcuh higher price of any electronic for the US made IC inside?
As for the consideration of losing IC fab technology leadership, no need to worry, US still have Intel/ IBM, at least Intel is way ahead of the Asian foundries in terms of IC process technology, and they are good at keeping information inside.
This kind of claims is good for patriotism, but proably not making a lot of sense in terms of economics.
Labor cost isn't such a big part of the story. A 2003 study sponsored by the SIA found that, while China's labor costs were much lower than the US, they were too small a share of manufacturing expenses to drive location decisions, and the salary differential has declined since then.
A 2004 survey-based study cited in 'Chips and Change' came up with the following primary reasons for fab location: Tax advantages, Supply of technical talent, Quality of utilities, Proximity to existing facilities, and Environmental permitting process and/or other regulations.
Are employee salaries really a significant portion of semiconductor fab costs? I don't think so... I believe a semi fab's cost is driven principally by equipment cost/depreciation. In fact, the cost of lithography equipment represents 35% of an integrated circuit's cost (http://catrene.org/web/downloads/results_medea/2T304-LIQUID-result-outMEDEA%20(8-9-09).pdf ). The US is a leader in lithography equipment (Applied Materials, IBM) and Nikon (from Japan where labor also isn't so cheap) is another leader. If you compare Applied Material's and TSMC's annual revenue ($9.7B vs. $10.2B for 2008), equipping fabs with their high-tech machines isn't so bad and the US has a few jobs as a result of developing and producing all this fab equipment.
So this thread seems to have ventured into the philosophical area of whether the rest of the world should be allowed to grow their own economies by attracting (or subsidizing) manufacturing within their borders; or mistakes of US government. In many foreign countries, the government encourages their corporations to make long-term investments in high-tech. Case in point, OLED technology was invented in the US, but no US Company has had the courage to invest for ten years in maturing this technology for high volume low cost production. On the other hand, Korea and Japan have made huge investments in this technology for more than 10 years and it is about to pay off for them. In smart phones the display costs more than all the silicon... and there are more than 1.4B (that's billion) mobile phones produced each year!
So I believe the root of the problem in the US is the almost unanimous lack of corporate leadership (that includes middle managers, executives and boards)... I'm talking about true vision and the tenacity to stay the course. But these US corporate leaders are making decisions based on how they are being rewarded... bonuses and stock based on corporate performance this year, not five years or ten years from now. So is it a surprise that US companies nearly strangle long-term R&D so short-term profits look better? It is interesting to note that Samsung doesn't even want to be traded on any of the US stock exchanges... I wonder why that is?
The survey cited by "Chips and Change" may attribute tax advantage, supply of technical talent, quality of utilities, proximity to existing facilities and environmental permitting as the reasons for fab location, but if we go back to 1987, it was the Taiwanese government that took the risk (along with Philips) and formed TSMC ( http://www.fundinguniverse.com/company-histories/Taiwan-Semiconductor-Manufacturing-Company-Ltd-Company-History.html ). Taiwan created the market for contract semiconductor manufacturing... which enabled several fabless semiconductor companies in the US (not a bad deal for a lot of US employees). That made a lot of sense for Taiwan since the semiconductor industry didn't orginate in their country... they just had the nerve to buy into the industry and learned to compete.
[quote]Case in point, OLED technology was invented in the US, but no US Company has had the courage to invest for ten years in maturing this technology for high volume low cost production. On the other hand, Korea and Japan have made huge investments in this technology for more than 10 years and it is about to pay off for them.[/quote]
I think this says a lot about the state of corporate america these days. I don't think the solution to our problem is as the author of the article suggests, and I'm not even sure if it is possible to do that. Our biggest problem is that we don't seem to invest nearly enough in our own technologies.
The lack of manufacturing fabs is a symptom, not the disease. The disease is the poisonouns belief that the "market" solves all problems, espoused since the election of Reagan in 1980. America competes with managed economies, most of which postpone instant gratification for long term benefits, and use tax policies to achieve national objectives. The Republican "free marketeers" (a polite euphamism for greed) have blocked the intelligent use of government policy and, as a consequence, we have witnessed a steady decline in American pre-eminence in a host of endeavors. Why, for example, is gasoline $2.50 a gallon here vs. $7/gallon in virtually all civilized (non-oil producing) nations? Because of thirty years of immature political "leadership" which lacked the courage to address this and other issues that inflict short term pain in exchange for a myriad of long term benefits. Republican national economic policy can be summarized simply as "lower taxes", while other countries implement nuanced tax and incentive policies which do indeed ultimately pick winners and losers. The so-called omnipotent "market" has clearly failed miserably to pick winners and losers, as we have seen in the tech bust of 2000 and the economic disintegration of 2008. Intelligent government policies could hardly have done worse.
I am assuming that this article is a mere troll, attempting to draw out the commentators. The commentary provides more meaningful insight and ideas than the main article. I would have expected more from an editor at the EE Times.
I find it sad that only "money argument" counts. Not having Manufacturing close to desing is like a athlete who wants to run 100m under 9 seconds and has no place to practise! He will do a lot of breathing excercises to steel himself, but never knows how all this will do on the run way! Foundries make their own experiences and imply to the fabless guys to do what they call "manufactureability rule". Here the link in the supply change is broken! This is bad. Back to the salary: the salary is different, that is true, however, with proper planing and improving efficiency in manufactring, one can make up the differences. Furthermore, in a 300 mm waferfab, the salary portion is small compared to the total cost! Unless the big guys take so much of the cake leaving nothing to the operators or technicians!
[quote]Not having Manufacturing close to desing is like a athlete who wants to run 100m under 9 seconds and has no place to practise![/quote]
That may have been true 50 years ago, but in todays world of overnight shipping and awesome internet connections you could send your design to a foundry overseas and get back your batch in the same week.
Regarding the quote I need to go deeper in this subject: When you follow the manufacturing rules of the foundry, you have to fit or change your layout! Normally the rule for the manufactureability is made so that the manufacturing is easy and safe. This is certainly on cost of the layout and hence chip size. If you do not have the manufacturing, you do not know how much you loose on the chip size saving! The best is the compromise between design and manufacturing rule dictation! Furthermore the manufacturing outside will make "copy" possible since the manufacturing process is known to the "copiers". The danger is that your product will soon be on the market but not under your own name!
It is about being competitve, money has no emotion other than greed. Clearly, manufacturing went offshore for a reason, it was cheaper. Follow the money: China has the fastest growing economy in the world and hence have the greatest economy of scale. China, a communist state, is outdoing the U.S. on manufacturing; who would have thought? They have free-trade areas. They can force manufacturing on their turf if you want to do business there. They have lower labour costs, but does that really matter given the automation that is available? So what can the U.S. do? Lower taxes, provide incentives, and encourage a stronger domestic economy by facilitating immigration to grow the local population, make U.S. based free-trade zones, etc. With all the education and braintrust that the U.S. has, there is really no excuse for not being competitive.
A clarification to my previous post:
The problem in the US economy right now is that Americans consume more foreign goods and services than American. This is in part because they are cheaper viz. Chinese Imports and in part because they are better viz. Japanese and German imports. This is reflected in the $840 billion dollar trade deficit that America had in 2008. Multiplying this deficit by the cost of production of these goods and services in the US will amount to close to 50% of US GDP. The fact that American's buy more foreign made stuff has made the US economy a net export oriented economy which is reflected in the inverse relation of the US Stock Markets with the strength of the US Dollar. Considering the fact that the US trade deficit has been in the hundreds of billion dollar range for quite a few years, any growth that US has seen in production over the past few years has been from exports and not domestic consumption.
Increasing domestic consumption requires that the US imports be balanced as a function of its exports. Had the US exports grown in the same proportion as its imports, it would not be in the state that it is in today. This is a reflection of the fact that the current minimum wages make the US consumer the most powerful consumer in the world. The US doesn't see any benefits from the high minimum wages because of consumption of imports in greater proportion than the consumption of domestic goods and services.
A consumption oriented trade certificate which limits US imports as a function of US exports to its trading partners will solve the high unemployment problem by bridging the trade deficit. And as the close to 500000 people get stable jobs, their tax revenue will be enough to reign in the US debt.
Since fabs were in the US some time ago then moved to other countries. It seems ironic and absurd to "require" these countries to move them back.
Please correct me if I am, but it seems to me that around the time NAFTA passed, Congress also passed legislation to remove R&D tax credits to companies as well as providing tax incentives to develop in other countries! Soon after NAFTA, the company I worked for, Telex Computer Products, moved some of its printer manufacturing to Mexico. Not long after that "Made in the USA" lost any significance.
Twenty years ago or more it would have been treasonous to do business with a Communist Country. But now, we not only have most of our manufacturing with them, we borrow massive amounts of money?? Americans just don't seem to care.
Those who lend money possess power over those that borrow. Our Nation is falling. We will only survive if the People wake up to catch ourselves from the fall.