How Crisis Reshapes the Semiconductor Industry How Crisis Reshapes - PowerPoint PPT Presentation

How Crisis Reshapes the Semiconductor Industry How Crisis Reshapes the Semiconductor Industry Clair Brown Clair Brown Economics Economics Center for Work, Technology & Society, IRLE Center for Work, Technology & Society, IRLE Solid State Technology and Devices Seminar Solid State Technology and Devices Seminar Based on book Chips and Change (MIT Press, 2009) with co- -author Greg author Greg Based on book Chips and Change (MIT Press, 2009) with co Linden. Linden. Deep appreciation to Competitive Semiconductor Manufacturing Program, gram, Deep appreciation to Competitive Semiconductor Manufacturing Pro especially PIs Dave Hodges and Rob Leachman Leachman, and , and Katalin Katalin Voros Voros. Their . Their especially PIs Dave Hodges and Rob patience in teaching us about semiconductor technology on our amazing azing patience in teaching us about semiconductor technology on our am fieldwork trips allowed economists to write this book. fieldwork trips allowed economists to write this book.

Overview Overview   Economic study of dynamics of semiconductor Economic study of dynamics of semiconductor industry since mid- -1980s 1980s industry since mid   Eight “ “crises crises” ”: How do costs and market : How do costs and market Eight conditions shape a crisis and the industry’ ’s s conditions shape a crisis and the industry response? response?   Whose perspective? Whose perspective?   Country (US, Asia) Country (US, Asia)   Firm Firm   Worker Worker   Consumer (businesses, individuals) Consumer (businesses, individuals)

Eight Crises Eight Crises 1. Loss of competitive advantage 1. Loss of competitive advantage 2. Rising costs of fabrication 2. Rising costs of fabrication 3. Rising costs of design 3. Rising costs of design 4. Consumer price squeeze 4. Consumer price squeeze 5. Limits to Moore 5. Limits to Moore’ ’s Law s Law 6. Finding talent 6. Finding talent 7. Low returns, high risk 7. Low returns, high risk 8. New global competition 8. New global competition

Labor Market for Engineers in US Labor Market for Engineers in US (Before the Great Recession) (Before the Great Recession)   How good is career path for high- -tech engineers? tech engineers? How good is career path for high   Young engineers have high initial earnings that grow with Young engineers have high initial earnings that grow with experience experience   Real earnings fall after age 50 Real earnings fall after age 50   What is return on graduate degree for high- -tech tech What is return on graduate degree for high engineers? engineers?   MS/PhD (age 40) earns 17% ($15,500) more than BS MS/PhD (age 40) earns 17% ($15,500) more than BS engineer, but MS/PhD's total career earnings up to age 40 engineer, but MS/PhD's total career earnings up to age 40 are $51,000 lower lower because of foregone earnings because of foregone earnings are $51,000   Attractiveness of engineering jobs depends on if citizen or Attractiveness of engineering jobs depends on if citizen or immigrant immigrant

Immigrant’ ’s Opportunities s Opportunities Immigrant   Engineering degree from US university Engineering degree from US university provide high living standard to students provide high living standard to students from developing countries from developing countries   Foreigners earned 63% of 6404 engineering Foreigners earned 63% of 6404 engineering PhDs with 40% to students from China, PhDs with 40% to students from China, Korea, India and Taiwan (2005) Korea, India and Taiwan (2005)   Foreigners earned 69% of PhD degrees in Foreigners earned 69% of PhD degrees in Electrical Engineering Electrical Engineering   Obtaining visas presents hurdle to Obtaining visas presents hurdle to remaining in U.S. remaining in U.S.

Role of US: Engineering PhDs Role of US: Engineering PhDs to Non- -Citizens Citizens (by Country of Origin) to Non (by Country of Origin) 1 ,6 0 0 35% of total China 1 ,4 0 0 I ndia Taiw an 1 ,2 0 0 Korea Japan 1 ,0 0 0 8 0 0 6 0 0 4 0 0 2 0 0 0 1 9 9 3 1 9 9 5 1 9 9 7 1 9 9 9 2 0 0 1 2 0 0 3 2 0 0 5

Global Competition Global Competition How quickly can China’ ’s and India s and India’ ’s s How quickly can China semiconductor industries catch up semiconductor industries catch up to U.S. position? to U.S. position? Two popular theories: Two popular theories:   “manufacturing pull manufacturing pull” ”: R&D will inevitably follow : R&D will inevitably follow “ chip manufacturing to Asia chip manufacturing to Asia   “large market pull large market pull” ”: domestic industries will : domestic industries will “ become global leaders by building on technology become global leaders by building on technology offshored by by MNCs MNCs and supported by rapidly and supported by rapidly offshored growing and potentially vast product markets. growing and potentially vast product markets.

Manufacturing Pull ( Manufacturing Pull (fab fab process R&D) process R&D)   Role of equipment manufacturers Role of equipment manufacturers   Top ten equipment suppliers (60% global sales) have Top ten equipment suppliers (60% global sales) have primary research labs near HQs in US (4 cos cos), Japan (4 ), Japan (4 primary research labs near HQs in US (4 cos), Netherlands (2 ), Netherlands (2 cos cos) )— —see Table 8.1 see Table 8.1 cos   Process Development Alliances Process Development Alliances   Japan’ ’s ASET, IBM s ASET, IBM’ ’s Common Platform Alliance, s Common Platform Alliance, Japan EU’ EU ’s IMEC. s IMEC.   Impact on U.S. innovation and engineers’ ’ knowledge knowledge Impact on U.S. innovation and engineers   TI develops digital process technology (0.032- -micron on) micron on) TI develops digital process technology (0.032 with foundry leaders TSMC and UMC. with foundry leaders TSMC and UMC.   U.S. has 15% of global 300mm fab fab capacity (Table 2.10) capacity (Table 2.10) U.S. has 15% of global 300mm

Manufacturing Pull ( Manufacturing Pull (fabless fabless chip design) chip design)   Even weaker argument for chip design Even weaker argument for chip design   U.S. leader in fabless fabless chip design companies chip design companies U.S. leader in   Taiwan is leader in foundries (contract chip Taiwan is leader in foundries (contract chip manufacture), and Taiwan’ ’s s fabless fabless sector is sector is manufacture), and Taiwan distant second in fabless fabless design companies design companies distant second in  Taiwan  Taiwan’ ’s s fabless fabless sector helped by numerous sector helped by numerous systems companies as well as foundries systems companies as well as foundries   U.S. chip design activities move offshore U.S. chip design activities move offshore usually for cost- -based or talent reasons and based or talent reasons and usually for cost not because of foundry location not because of foundry location   India as example India as example

Large- -Market Pull Market Pull Large   Large markets of China and India will Large markets of China and India will create competitive advantage create competitive advantage   Support national champions (eg eg Samsung) Samsung) Support national champions (   Lower costs for talent, land, and resources Lower costs for talent, land, and resources   Lower taxes, fewer environmental regulations Lower taxes, fewer environmental regulations   How quickly can countries move up How quickly can countries move up technology curve? technology curve?

Ability to move up technology curve: Two factors to consider   Talent: engineering capabilities and costs Talent: engineering capabilities and costs   Educational system Educational system   Integration into global brain circulation Integration into global brain circulation   Infrastructure and environment Infrastructure and environment   Role of government Role of government   Financial system and IP protection Financial system and IP protection   Access to customers (systems firms and end Access to customers (systems firms and end product markets) product markets)

China Rapidly Expanding China Rapidly Expanding Bachelor’ ’s Degree Programs s Degree Programs Bachelor Engineering, Engineering, CS 2001 and IT, 2004 110,000 137,437 U.S. Japan 110,000 - 35,000 - Taiwan China 220,000 351,537 110,000 112,000 India (multiple sources)