All rights reserved. No part of this book may be reproduced, stored in, or introduced into a retrieval system, or transmitted in any form, or by any means (electronic, mechanical, photocopying, recording, or otherwise) without the prior written permission of the publisher.

This book is dedicated in loving memory of the great neohumanist Shrii Prabhat Ranjan Sarkar.

Chapter 2 - The Strategic Importance of the US Semiconductor Industry for the US Economy

Chapter 5 - Mitigation of Counterfeit Electronics through US Macroeconomic Policies

8.1 Macroeconomic Reforms Engendering the Growth of the US Microelectronics Industry

Chapter 10 - Moore’ Law for Integrated Circuits: Maintaining Its Innovation and Business Impact for the Semiconductor Industry

Chapter 11 - Socio-economic Reforms for a Brilliant Future for the US Semiconductor Industry

12.3 How to Combat the Rise of China as an Industrial Economic Power as the US Dollar Is Restored to the Gold Standard

Foreword

This is a book basically about a major industry, the semiconductor industry, of which, regrettably, I don’t know much. However, the author, Apek Mulay, sees that industry as a mainspring of something he calls mass capitalism, which is somewhat more comprehensible and which he favors in contrast to the oligopolistic system (which the author calls monopoly capitalism) in place today that we are all unhappily familiar with.

Further, Mr. Mulay speaks of his framework as embodying the precepts of noted Indian social thinker, the late Shrii Prabhat Ranjan Sarkar bearing the acronym of PROUT (Progressive Utilization Theory), which has an international following. Mr. Sarkar, over his career, authored a considerable repertoire of works aimed at enhancing social development, including Progressive Utilization Theory, the Law of Social Cycle, the Theory of Microvitum, and the Philosophy of Neohumanism. The principal feature of that system, touted in this book, is the idea of economic democracy, which is clearly a great complement to the political democracy that we all know. When we add economic democracy to political democracy, we get a broad-based stakeholder democracy, and that, in a nutshell, is the basis of the proposed plan.

In essence, the book argues for a mass-based consumer-led growth that would keep markets in equilibrium at near or close to full employment with the revival of an industry that he hopes would rekindle America’s waning industrial base and innovation. Viewed thus, the project is a very familiar Keynesian one but with the added twist of minimal government regulation, since by a reverse of Say’s Law, demand will call forth its own supply.

The book is arguing for many things that many current reformers are eager about: fair trade, instead of free trade, workers as major viii Mass Capitalism shareholders, employee-owned corporations, and markets where wage packages keep pace with productivity automatically.

How realistic all this is politically, I am not sure (meaning how we get from here to there), but what is entirely unmistakable is the author’s broad societal development, which is very welcome, given the crony capitalism we have seen take over the US economy since about the eighties.

The Sarkar system, of course, has never been tried anywhere, so it will be a novelty of sorts if actually attempted. Professor Ravi Batra is probably the best known advocate of that system, and he is a major economist with a global reputation and following. As such, I would place my bets on Ravi’s information, analysis, and advocacy in these matters.

We are living through interesting, if tough, times, and Mr. Mulay’s work is one amongst the many, no doubt, that are trying to figure creative ways of getting us out of the long-drawn quagmire we are in today.

Preface

In 1960, my late teacher Shrii Prabhat Ranjan Sarkar offered a new idea called Progressive Utilization Theory, or PROUT, that suggested that economic democracy was a way to solve the problem of poverty around the world. Later, in 2003, in Common Sense Macroeconomics, Professor Ravi Batra called economic democracy the theory of mass capitalism because in a democratic setting majority shares of large firms would be in the hands of workers. My book is an attempt to apply these ideas to the revival of American manufacturing in general and the semiconductor industry in particular.

Today, the US semiconductor industry is looking for new ways to overcome all the technological and economic barriers for sustaining its progress. Economic reforms that would help transform the present form of capitalism in the United States to a free-market enterprise system would also help in sustaining the scientific progress in this industry. Mass capitalism would ensure a robust growth in economic demand through higher consumer purchasing power. To ensure higher consumer purchasing power, mass capitalism recommends economic democracy in which wages of employees catch up with their productivity.

To ensure a free-market economy where capitalism works for the masses, mass capitalism believes that majority shares of Fortune 500 companies in the semiconductor industry should be owned by their employees, rather than by outside investors. Additionally, the number of shares held by any employee should be in proportion to his or her productive contribution to the company. This would ensure that employees who work hard towards the success of the company would get a fair compensation for their skills and diligence. In this way, mass capitalism guarantees robust growth in consumer purchasing power to generate higher consumer demand for electronic products. Thus, mass capitalism would make the high cost of investments very sustainable and would overcome the economic barriers.

In 1965, Intel co-founder Gordon Moore, in “Cramming more components onto integrated circuits” in Electronics Magazine (April 19, 1965), made the observation that, in the history of computing hardware, the number of transistors on integrated circuits doubles approximately every two years. This law is now used in the semiconductor industry to guide long-term planning and to set targets for research and development.

The capabilities (processing speed, memory capacity, sensors) of many digital electronic devices have been improving at roughly exponential rates and are, thereby, strongly linked to Moore’s law. This exponential technological improvement in the electronic devices has dramatically enhanced the impact of digital electronics in nearly every segment of the world economy. Indeed, Moore’s law has been behind the technological advancements and socio-economic developments in the late twentieth and early twenty-first centuries.

Moore’s law has had an amazing run for the past several decades with an unmeasured economic impact on the US semiconductor industry. The progress of Moore’s law has even transformed the business model of the US semiconductor industry and continues to do so. However, now the immense problems of youth unemployment, huge capital investments, unsustainable trade and budget deficits, as well as manufacturing complexities, are contributing to the bankruptcy of economic wisdom and are making it difficult to sustain Moore’s law and its economic impact on the US semiconductor industry. There is, hence, an urgent need for new ideas to deal constructively with these business and economic issues affecting the survival of the US semiconductor industry. In this book, I have provided a solution for carving out a brilliant future for the US microelectronics and semiconductor industry by transforming capitalism from monopoly capitalism to a free-market enterprise system. The suggested solutions are resilient enough to solve the economic and business problems facing this industry.

These suggested recommendations call for a radical change in the economic thinking of semiconductor industry professionals and business leaders. These recommendations challenge the stereotyped economic views, question the sustainability of existing modes of conducting microelectronics business, introduce new ideas that promote research and development (R & D), new business models, and better economic policies for the revival of the US semiconductor industry. Together, they constitute novel socio-technological and business-economic reforms towards a sustainable future of the microelectronics industry and its professionals.

In this process of exposing the reader to an economic heresy, this book also introduces a new business model for the US semiconductor industry based on the Progressive Utilization Theory mentioned above. But let us remember that John Maynard Keynes was also a heretic and so was the father of modern economics, Adam Smith. The economic orthodoxy is repeatedly failing the operation of the US semiconductor industry and its ability to sustain Moore’s law. So let heresy get a chance for continued applicability of Moore’s law and the technological business-economic growth of the US semiconductor industry towards maintaining its global leadership.

Chapter 1 exposes the reader to the crisis of capitalism because of monopoly capitalism and introduces the reader to some common-sense reforms through mass capitalism. Chapter 2 highlights the strategic importance of the US semiconductor industry to the US economy. Chapter 3 helps the reader understand the importance of the field of microelectronics economics involved in manufacturing advanced semiconductor products and the significance of retaining global leadership in this industry. Chapter 4 provides an in-depth analysis of the causes of the failure of the US economy based on its macroeconomic and trade policies. Chapter 5 deals with policies to mitigate the problems of counterfeit electronics, caused by the import of semiconductor systems from China by American companies based there. Chapter 6 then provides a detailed analysis of the impact of globalization on the US semiconductor industry.

Chapter 7 evaluates the US manufacturing supply chain and its impact on business models in the US semiconductor industry. Chapter 8 offers solutions towards a revival of the US microelectronics industry and introduces a new business model for vibrant growth of this industry. Chapter 9 forecasts the near future of the US semiconductor industry by taking into consideration the recent geopolitical events around the world, explains the importance of a vibrant domestic economy, and presents the geopolitical dangers of too much reliance of the domestic economy on foreign investments.

Chapter 10 offers solutions for sustaining Moore’s law to overcome the physical and economic limits of shrinking transistor dimensions in order to maintain the semiconductor industry’s innovation and to benefit from the business impact of Moore’s law. Chapter 11 provides socio-economic reforms for a brilliant future of the US semiconductor industry. The final Chapter 12 talks about national financial matters that would have an impact on the sustainability of the US microelectronics and semiconductor industry. It educates readers about the importance of the circulation of currency in the US economy for achieving a higher standard of living for all industry professionals

Acknowledgments

I owe my greatest intellectual debt to the great neohumanist Shrii Prabhat Ranjan Sarkar, whose monumental work on Progressive Utilization Theory (PROUT) lies at the heart of this book’s development. I am very thankful to Professor Ravi Batra for providing me constructive criticism and advice in the development of this book. The sections 6.1, 6.2, 7.1, and 8.1 are based on my co-authored articles published in Electronics.ca Publications and Truthout.org. I would like to extend my thanks to the New Delhi Prout Journal for their permission to let me use my article published in the August 2013 issue as section 11.1 in this book.

I should also express my gratitude to Electronics.ca Publications, Truthout, SemiWiki, EBN, PROUT Globe, Prout Journal, Military & Aerospace Electronics, LinkedIn, SEMI and EDFA for publishing and circulating my articles on macroeconomics and giving me the recognition as a macroeconomist of the microelectronics industry.

Above all, I am grateful to my mother who supported me in more ways that I can say.

Chapter 1 - The Crisis of Capitalism

Introduction

Capital is nothing but consumable commodities in their potentiality. Intelligent people collect more capital than others in the form of consumable goods, but since this capital cannot be stored for long, people began to keep it in the form of money. This is how capitalism originated. In a free-market enterprise system, wages of the masses catch up with their productivity. This is how free markets ensure that economic demand catches up with the supply of goods in an economy ensuring a balanced economy. Capitalism encourages acquisition of material wealth, be it land, money, metal, or other property. This acquisition, when left unchecked, leads to huge economic disparity, which transforms free-market capitalism into monopoly capitalism; the accumulation of more and more wealth by any inappropriate means reaches a point of depriving other human beings of their basic requirements, which diminishes their consumer purchasing power. This chapter explains the difference between free-market capitalism and monopoly capitalism. It also introduces the reader to mass capitalism and provides an explanation about how mass capitalism would establish a free-market economic system with minimal government intervention and lead to a sustainable progress of Moore’s law in the US semiconductor industry.

Free-market Capitalism in the United States Post–World War II

World War II led to a total destruction of economies in Europe and Asia, and afterwards, the United States became the nexus of global capitalism, as war was not directly fought on US soil, thereby protecting its manufacturing sector. In fact, World War II played a big role in the revival of the US economy from the 1930s economic depression. The war helped Americans find employment in industries that catered to the building of armaments for US allies in Europe. As a result of World War II, only physical gold was used as a medium of exchange for international transactions, and the United States accumulated huge reserves of physical gold, selling munitions to its allies for fighting the war. This shows the importance of possessing physical gold reserves for any country in times of a global economic chaos from war or other disasters.

After World War II, when Dwight D. Eisenhower took over the presidency, he continued the tax structure put in place by his predecessor, Franklin Delano Roosevelt, following the Great Depression of 1930. The important fact to remember is that, as a result of the progressive tax structure during the presidency of a Republican president, where the highest income earners paid a maximum tax rate of 92 percent, there was less hoarding of wealth and more investments in the economy. These investments led to a creation of more jobs and better macroeconomic growth. In addition, the Federal Reserve followed a monetary policy such that wages kept track with productivity. This led to a balanced economy where the supply of goods into the economy was able to catch up with economic demand for these goods. These economic policies led to a 4 percent year-over-year growth in the US gross domestic product (GDP) during the 1950s, called the golden era of free-market capitalism.

A free market is a market economy in which the forces of supply and demand are free of intervention by a government, price-setting monopolies, or other authority. A free market contrasts with a controlled market or regulated market, in which government intervenes in supply and demand through non-market methods, such as laws creating barriers to market entry or directly setting prices. In a truly free market system, the intervention of the government in the economy is minimal. Because of its centralized economy, the free-market capitalism was possible in the US economy during the 1950s only with a progressive tax structure in which high wage earners paid the highest taxes. A progressive tax structure for a centralized economy forced the Fed to follow monetary policies such that workers’ wages caught up with their productivity. As explained in subsequent chapters, since the US dollar was tied to a gold exchange standard, the Fed was not able to run any deficits during the 1950s. There were no trade deficits, and neither were there any budget deficits due to progressive taxation. This is how the United States had a balanced economy during the 1950s.

The Transformation of the US Economy from a Free-market System into Monopoly Capitalism

The free-market system, where wages keep track with productivity, transformed into a monopoly system because of unenforced anti-trust laws leading to mergers and acquisitions. Post‒World War II, US-based multi-national corporations (MNCs) influenced free-trade agreements, like the General Agreement on Tariffs and Trade and, later, the World Trade Organization, pushing for treaties to lower or abolish trade barriers between member countries, whose economies were destroyed as a result of the world war. This led to offshoring of manufacturing jobs from the United States to low-wage countries resulting in trade deficits. This phenomenon is analyzed in great detail in subsequent chapters.

In 1971, Congress passed FECA (Federal Election Campaign Act), under which corporations, unions, and individuals could contribute unlimited “non-federal money,” also known as “soft money,” to political parties for activities intended to influence state or local elections. This gave an opportunity for big money to influence US democratic elections resulting in the passage of laws that transformed its free-market economy into monopoly capitalism. As a result of monopoly capitalism, the trade deficits and budget deficits started to grow in the United States. Later chapters show how these policies not only resulted in a growing wage disparity in the United States but also affected the market value of the US dollar. The twin deficits forced the US dollar off the gold exchange standard. The monetary policies of the Fed have also resulted in a kind of financial conglomerate, whereby government officials aim to provide the social and legal framework within which monopoly capitalism can operate most effectively. This is how free-market capitalism has been transformed into monopoly capitalism.

Mass Capitalism

Mass capitalism is a panacea for the integrated progress of human society. It aims to bring about equilibrium and equipoise by totally restructuring economics towards a balanced economy. Only mass capitalism can usher in reforms towards a free-market economy to save the world from an economic depression because of monopoly capitalism. It will lead to a free-market economy whereby workers’ wages catch up with their productivity. Through the restructuring of economics, mass capitalism would make the supply chain more efficient through decentralization. Subsequent chapters explain how centralized supply chains followed by MNCs have resulted in twin (trade and budget) deficits. Decentralized supply chains lead to better cooperation between different business entities and lower possibilities of mergers and acquisitions between the entities in a supply chain. In this way, mass capitalism would lead to a wholesome decentralization of the economy.

This economic decentralization would also lower income taxes on individuals and lead to robust growth of both regional and national economies. Under mass capitalism, the majority shares of Fortune 500 corporations would be held by their employees rather than outside investors. Since, employees would become majority shareholders of corporations, it would transform monopoly capitalism into mass capitalism. Such a free-market system, which is employee owned and operated, would naturally ensure that workers’ wages catch up with productivity. This would preserve the incentive to work hard because workers, as owners, would have a stake in the success of their businesses.

Such employee-owned corporations would eliminate the problems of unemployment and would provide health insurance to their employees at competitive group insurance rates. In this way, the US government would not have to spend money for unemployment and insurance benefits of laid-off workers. This way, the budget deficits could be eliminated from the economy. Mass capitalism would also eliminate trade deficits by replacing free-trade policies with fair-trade policies. Most important, since the majority of employees (i.e., the masses) would become majority shareholders of corporations, such an economic system would minimize speculation by non-employee investors, which results in a bubble economy. Mass capitalism would also eliminate the influence of money in elections, as employee-owned and employee-run businesses would not influence government policies through lobbying. In such a framework, the majority shareholders of corporations, i.e. employees, would not let corporations influence those policies that hurt the masses.

Mass Capitalism and the US Semiconductor Industry

The semiconductor industry is strategically the most important industry for the US economy, the most capital-intensive industry, and thus, a major contributor to the US trade deficits (these concepts are elaborated with great detail in subsequent chapters). The progress of Moore’s law has helped the global semiconductor industry plan for its investments in R & D for providing consumers with the most advanced electronic gadgets. As explained in subsequent chapters, the globalization of the semiconductor industry has changed its business model from a few large integrated device manufacturers (IDMs) to several fabless semiconductor companies (a semiconductor fabrication plant or foundry is also called a fab; companies which make use of external foundries to manufacture products are called fabless semiconductor companies). While the fabless-foundry business model of the US semiconductor industry has led to the transformation of this industry, the growth of trade and budget deficits during this transformation of industry shows an ignorance of macroeconomics.

Today, along with the United States, the global semiconductor industry is also concerned about the increasing financial burden of modern semiconductor design and manufacturing. Additionally, the doors of innovation are closing due to increased consolidation that is occurring in this industry. In addition to these factors, the semiconductor industry is equally worried about the availability of a talented work force to take on the future challenges for continued progress of this industry. All these factors are presenting seemingly insurmountable challenges and threatening the demise of Moore’s law, which would bring the global semiconductor industry to a standstill. The subsequent chapters in this book offer a feasible solution for the semiconductor industry to overcome all the scientific and economic challenges impeding its progress. In fact, the physical and economic challenges for the progression of Moore’s law are truly a boon in terms of helping to bring about reforms in the US and global economies, which would lead to the progress of all human beings on this planet while preserving the incentive to work hard. It gives this most innovative industry an opportunity to prolong its existence through sustainable progress and at the same time ensure that capitalism works for all; hence, it is called “mass capitalism.”

Conclusion

Mass capitalism would lead to a balanced free-market economy, thereby establishing an economic democracy. It would result in lower taxes on individuals and a smaller government. The purchasing power of the people would be high leading to robust consumer demand. Once this new kind of economic system has been established, government intervention in the economy would be and should be minimal. In this way, mass capitalism would lead to free market reforms, enabling capitalism to work for the masses, and would take the US semiconductor industry to the next level of innovation and financial success.

References

Ghista, Dhanjoo, and Apek Mulay. 2013. “Distorted Supply Chain Caused by MNCs Manufacturing Abroad and How to Restore Its Legitimacy.” Truthout (August 19). http://truth-out.org/news/item/18140-distorted-supply-chain-caused-by-mncs-manufacturing-abroad-and-how-to-restore-its-legitimacy.

Levine, Bruce E. 2011. “The Myth of US Democracy and the Reality of US Corporatocracy.” Huffington Post (March 16). http://www.huffingtonpost.com/bruce-e-levine/the-myth-of-us-democracy-corporatocracy_b_836573.html.

Mulay, Apek. 2013. “A Failure Analysis of the US Economy.” Truthout (March 2). http://www.truth-out.org/news/item/14887-a-failure-analysis-of-the-us-economy#.

———. 2013. “Decentralize to Improve Supply Chain Efficiency.” EBN (October 11). http://www.ebnonline.com/author.asp?section_id=3315&doc_id=268703&#!.

Mulay, Apek, and Dhanjoo Ghista. 2013. “Globalization of Semiconductor Manufacturing Industry from Deception to Reformation towards Recovering US Macro-Micro Economic Losses.” Electronics.ca Research Network (June 24). http://www.electronics.ca/presscenter/articles/2071/1/Globalization-of-Semiconductor- Manufacturing-Industry-From-Deception-to-Reformation-Towards-Recovering-US- Macro-Micro-Economic-Losses/Page1.html

“Post–World War II economic expansion.” Wikipedia. http://en.wikipedia.org/wiki/Post%E2%80%93World_War_II_economic_expansion.

Sarkar, P. R. 1959. PROUT in a Nutshell. Ananda Marga Publications.

“State Monopoly Capitalism.” Wikipedia. http://en.wikipedia.org/wiki/State_monopoly_capitalism

Chapter 2 - The Strategic Importance of the US Semiconductor Industry for the US Economy

Introduction

In 1763, James Watt invented the first steam engine. The contributions that Watt made to America were essential in starting the Industrial Revolution. His invention created a need for more efficient steam engines that were faster, safer, cleaner, and even more economically functional. This made the revolution of industry grow tremendously with a faster engine, transporting more goods in a shorter amount of time, and contributing to a new era of prosperity in America. There was a tremendous growth in productivity, and this is how James Watt increased the economic growth of the United States. Just as what the steam engine has been for the Industrial Revolution, which occurred over 250 years ago, so does the semiconductor industry become a similar gateway to a new US economy with an exponential growth in productivity. It is estimated that the microelectronics revolution in the semiconductor industry has had two to four times the relative impact on the US economy that the railroad had over a comparable time.

Highlights of Productivity Gains in the Semiconductor Industry

Semiconductor investment is often considered an investment in “enabling technology,” which leads to advances in new technological consumer products, like computers, cell phones, motor vehicles, etc., which improve the quality of life of human beings, often by providing faster speeds of operation and with lower costs. This industry includes academic research on semiconductors and related industries, like computers, communications, and software. Using total factory productivity as a measure of innovation, over the period from 1960 to 2007, innovation in the semiconductor industry grew close to 9 percent per year, twenty-five times the innovation growth rate for the economy as a whole, and accounted for close to 30 percent of aggregate economic innovation. By sector, semiconductor deepening accounted for 37 percent of the growth in labor productivity in the communications equipment industry, 25 percent of the growth of the other electronic products industry, 14 percent of educational services, and 9 percent of labor productivity growth in the computer and peripheral equipment industry for 1960 to 2007.

Through growth in innovations, the semiconductor industry has produced the new digital economy. Today, it has become possible to turn any real-life information that is in analog form into digital information and to perform digital signal processing on that information to fundamentally transform our economy. The innovations in the semiconductor industry have enabled smooth and efficient functioning of several organizations around the globe with much lower costs and fewer resources. As a result of mass production in the semiconductor industry and the exponential growth in product supply chains, there is no longer any need to have huge inventories of electronics goods. With the growth in electronic commerce, today, several organizations have undergone rapid restructuring to make them more efficient and productive, which was unimaginable a century ago. The social media networks have brought the world closer than ever before. As a result of these technological innovations, the entire global economy has become very productive and efficient.

Contributions of the Semiconductor Industry to the US Economy

Today, two out of every one hundred jobs in American manufacturing are in the manufacture of semiconductors, and the semiconductor industry consists of huge capital-intensive manufacturing facilities. The manufacturing jobs in this industry pay well. Exports from US semiconductor manufacturing totaled $52.4 billion in 2006. This industry has increasingly given shape to the knowledge-based US economy because of the increase in the economic value of their products through innovation and investment. During the boom years of 2006, the semiconductor industry as a whole spent over $18 billion in R & D and over 15 percent in sales.

Being a capital-intensive business, the semiconductor industry has spent the highest percentage (12.6 percent) on capital expenditures, compared to other industries. To construct a state-of-the-art fab today costs approximately ten billion dollars in investment. Additionally, the wafer fab needs an upgrade every two to three years, as transistor technology progresses to the next advanced technology node. As a result of the invention of the integrated circuit (IC), today, consumer electronics has made our lives more comfortable and safe. Innovations in the semiconductor industry have also transformed the entire health care industry by providing real-time monitoring of patients’ health at different locations around the globe. It has also improved the success rate of complicated surgical procedures and has enabled doctors to operate on patients from remote locations.

Semiconductor technologists conceptualize technological change in the semiconductor industry as being characterized by new generations of manufacturing processes called “transistor technology nodes” (Flamm 2010). Rapid progress in transistor technology nodes and reduction in gate lengths of transistors has enabled smaller size and faster performance of consumer electronics. Mass production has reduced the semiconductor cost, while progress of transistor technology has increased the real-estate utilization of silicon on wafer. This has significantly reduced the cost of silicon, which has contributed to further reductions in costs of electronic goods. For example, the estimated 40- to 60-percent decline in the price of personal computers in 1998 was due to the corresponding decline in the price for semiconductors contained within these computers.

Due to record-breaking innovations and increased globalization of semiconductor manufacturing, the semiconductor prices have declined at extraordinary rates. In the late 1990s, the decline in prices of semiconductors was nearly 50 to 100 percent more than the weighted average for all products. In the 1990s, the US semiconductor R & D consortium SEMATECH devised a plan to accelerate the introduction of new generations of semiconductor manufacturing technology to reduce the timeframe for the introduction of new technology from three years to two years. Due to globalization, the US roadmap became the International Technology Roadmap for Semiconductors (ITRS) involving semiconductor industries in the United States, Japan, Europe, Korea, and Taiwan. The global semiconductor industry collectively shifted to a new innovation cycle, reducing it to two years between technology generations.

US Leadership in the Semiconductor Industry

Due to globalization, semiconductor manufacturing moved to Asia. As a result, the US share in what the Semiconductor Industry Association (SIA) classifies as leading-edge chip production has been declining. Leadership in this industry allows manufacturing firms to set research agenda for the global industry, and it enables the United States to lead the innovation, not just in manufacturing but also in design engineering and R & D of new products and services. Hence, in order to retain its leadership in the global electronics and semiconductor industry, the United States has to lead the world in manufacturing technology. It is only through innovation that the United States can out-compete the world in this industry, irrespective of higher labor costs in the United States, as compared to low labor-cost countries (LLCs).

There are other benefits of having a leadership in the industry. As part of the International Standards Organization (ISO), there are several engineering standards that firms around the world comply with regarding quality. Because of American technological leadership for several decades, the National Institute of Science and Technology (NIST) promulgates these standards. If the United States drops out as a leader in innovation, its influence over development of standards would go to other organizations. Hence, it is imperative that the US semiconductor industry lead others in manufacturing technology in order to boost productivity improvements leading to economic growth and high-wage employment.

Economic Growth from Semiconductor Manufacturing

There are several factors that have to be taken into consideration while setting up a top-notch wafer fabrication plant. In addition to availability of necessary raw materials for semiconductor manufacturing, the location of the wafer fabrication plant should also have ready availability of a skilled workforce, proximity to colleges and universities with highly competitive engineering programs, and the presence of neighboring strategic partnering firms in order to attract more investment. When firms with similar interests and competencies are located in the same area, it improves the economic activity of that region through competition and innovation. This has proven to be true for California’s Silicon Valley and for Austin, Texas. The interplay of innovation and knowledge between industries, academia, and research institutions is the key to business creation and economic growth. According to the research firm Semico, for each eight manufacturing jobs created at a fab, three other service jobs are created in the neighborhood, catering to services like computer sales, fab garment cleaning, security, tool maintenance, etc.

The planning and construction of a semiconductor manufacturing facility and associated engineering and utility services create a significant construction-related workforce. Hence, each new permanent, direct job creates additional 2.25 indirect jobs, creating a multiplier effect. This shows the importance of preserving semiconductor manufacturing jobs in the United States to maintain its economic dominance in the global semiconductor industry. Today, semiconductor chips are used in a wide range of applications, from consumer electronics to space applications, from defense applications to biomedical engineering devices, etc. For the United States to be at forefront of innovation in this digital age, it has to lead in innovation in its semiconductor industry. The semiconductor industry is thus strategically the most important industry for US macroeconomic growth.

References

Ehrlich, Everett M. 2008. “Manufacturing, Competitiveness and Technological Leadership in the Semiconductor Industry.” (October).

Flamm, Kenneth. 2010. “Economic Benefits from Technological Innovation in Microelectronics.” University of Texas at Austin. (November).

“How James Watt Affected the Economic Growth of Our Nation.” http://www.123helpme.com/view.asp?id=23216

Chapter 3 - Semiconductor Technology, Manufacturing, and Applications

Introduction

The term “semiconducting” was used for the first time by Alessandro Volta in 1782. Michael Faraday was the first person to observe a semiconductor effect in 1833. Faraday observed that the electrical resistance of silver sulfide decreased with temperature. In 1874, Karl Braun discovered and documented the first semiconductor diode effect. Braun observed that current flows freely in only one direction at the contact between a metal point and a galena crystal. In 1901, the very first semiconductor device was patented, called “cat whiskers.” This device was invented by an Indian scientist, Jagadish Chandra Bose. The cat whiskers was a point-contact for the semiconductor rectifier to detect radio waves. A transistor is a device composed of semiconductor material. Silicon and gallium arsenide are commonly used as semiconductor materials in the industry. John Bardeen, Walter Brattain, and William Shockley co-invented the transistor in 1947 at Bell Labs. The integrated circuit (IC) was invented in February 1959 by Jack Kilby at Texas Instruments. The planar version of IC was developed independently by Robert Noyce at Fairchild Semiconductor in July 1959.

The IC enables some electronic applications that are not possible by using discrete devices. Integration allows complex circuits, consisting of many thousand transistors, diodes, resistors, capacitors, and inductors, to be included in a single chip. This has enabled very complex circuitry to be miniaturized for use in space vehicles, large computers, and other applications where discrete components cannot be used. Integration of components on an IC not only reduces the costs but also increases the reliability of the final product manufactured.

Having a background of this chapter is important for any reader to understand the myriad applications of semiconductors and their importance to the US economy. The reader would also benefit in understanding the importance of semiconductor microelectronics, the economics involved in manufacturing advanced semiconductor products, and the significance of retaining global leadership in this industry.

A Brief History of Evolution of ICs in Microelectronics

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