Real Dynamics of the Chip Business

There are many myths about the chip business, which give Americans much comfort.

• It's an American lake.
• It's all about the microprocessors

In fact, as iSuppli notes, only half the top 10 semiconductor firms last year were American.  Microprocessors represent only a small part of the business these days.

Here's another myth. Intel is in trouble.

Again, false. According tot he same report AMD actually lost ground last year to Intel.

The real problem with the chip business is that it's dirty, filthy dirty. The caustic chemicals used in chip manufacturing are hell on the environment. As a result, the production side of the business was exported long ago and many countries -- especially Taiwan and China -- have taken advantage of this fact to achieve dominance.

The only area where U.S. companies are showing really good growth are among "fab-less" chip companies. These are outfits which don't have manufacturing capability at all. Most of their stuff is made in, again, China and Taiwan. The two three outfits in this area -- Qualcomm, Broadcom, and Nvidia -- are all American.

The semiconductor business depends heavily on absolutely free trade. This lets companies produce where salaries and environmental restrictions are lowest, resulting in low prices. But it is terribly short-sighted. You're still poisoning the planet and doing nothing to end it, let alone fix it. And you're giving foreign powers the ability to strangle the U.S. economy at a stroke.

Comments

[Jesse Kopelman]

My own take on the manufacturing thing is that it is a cycle like anything else. The poorer countries will take on manufacturing regardless of the quality of life impact, because they need the money. With the manufacturing will come money and with that will come the desire for higher quality of life. As the poorer countires get richer, they will end up sending the manufacturing elsewhere and the cycle will continue. Meanwhile the countries not doing the manufacturing will have the opportunity to figure out how to make money off of cleaning up the messes caused by manufacturing around the world. The great thing about Capitalism is that every problem is also an opportunity to make money.