After all the wailing and rending of clothes, the industrial policy worked out great and we have top tier production here in the US, transferring knowledge from TSMC to a US workforce.
This is a significant win for the US, and just the beginning of the amazing industrial policy passed over the past few years.
US manufacturing is about to be reinvigorated, and we in the US are going to be building our own future both for chips and for energy security.
One thing that I think that frequently eludes people in this discussion is that US manufacturing has pretty much been constantly growing for the past century; just its share of GDP has fallen as other sectors have grown faster. And the share of the workforce has fallen even faster, as the actual manufacturing has moved towards higher value items and greater degrees of automation.
I think the actual outcome of this policy is mixed. I think it was a big case of corporate welfare that will result in somewhat increased chip production in the US. I think this is a win for national security. I don't think the government applying such levers to change how the market allocates capital probably won't be a win for economic output or quality of life.
> One thing that I think that frequently eludes people in this discussion is that US manufacturing has pretty much been constantly growing for the past century; just its share of GDP has fallen as other sectors have grown faster. And the share of the workforce has fallen even faster, as the actual manufacturing has moved towards higher value items and greater degrees of automation.
The last part is missing something important though. If we're measuring "output" in dollars and the US is doing the parts (like aircraft manufacturing) that globally don't have a lot of competitors, the high "output" is from high prices rather than high production, and then what we're doing is surviving in the markets where there isn't a lot of competition and getting killed in the markets where there is.
There are three problems with this. The first is that it implies the US isn't competitive in competitive markets, which is a sign that something is very messed up. The second is that the markets where other countries aren't competitive tend to get eroded over time. The US essentially had a lock on the auto market in the mid-20th century; not anymore. What happens when China starts making globally competitive aircraft?
And the third is that supply chains matter. If you give up on the low margin stuff instead of figuring out how to make it competitively domestically (e.g. via automation) then foreign competitors have a leg up when it comes to making the high margin stuff for which the commodities are inputs.
> I don't think the government applying such levers to change how the market allocates capital probably won't be a win for economic output or quality of life.
Relying on "free markets" actually requires free markets. If other countries are willing to subsidize their industries until they drive manufacturing out of the US, that's not a free market. It's the equivalent of a monopolist using dumping and tying to leverage their existing monopoly into new markets, but with a country acting as the monopolist and therefore being exempt from antitrust enforcement.
Doing the same thing in return is not likely to be an efficient strategy, but neither is the status quo. The main alternative would be to realize that the thing we've been calling "free trade" is not actually that and a country that subsidizes its industries until its US competitors exit the market has to be dealt with as an abusive monopolist, e.g. via tariffs and similar policy levers, since antitrust laws don't apply to foreign governments.
We are not only measuring in dollars. We measure tons of steel, number of cars produced and so on. Not all of those measures are growing, but many are. While market share has gone down, total production is up.
Take cars - https://www.bts.gov/content/annual-us-motor-vehicle-producti... US production is up greatly in 2019 (that is before Covid - the chart doesn't have after Covid numbers to work with). US production is up by a lot since 1960. However in 1960 the US population was lower, and your typical family only had one car (women often didn't even have a drivers license). Thus you see market share is down while production is up.
The ratio of domestic sales and domestic production has widened over the same period. In 1970 the ratio of domestic production to domestic sales was .933, in 2019 that ratio is .796.
Though we are making more total cars, were making a smaller percentage of all cars sold.
As another commenter pointed out, the cars we make today are amalgamation of parts and design work done overseas. That isn't necessarily a bad thing if you view globalization favorably, but it is another factor when considering the value created in the US with regards to vehicle production.
Eh this is bending the word "produced". In 1960 all the parts were made in the US likely from raw materials mined & refined in the US. That's very different from today.
Can you explain how tariffs are an effective tool against foreign governments subsidizing industries? It has been my understanding that tariffs typically end up being tit-for-tat and relatively zero-sum.
> Can you explain how tariffs are an effective tool against foreign governments subsidizing industries? It has been my understanding that tariffs typically end up being tit-for-tat and relatively zero-sum.
They neutralize the subsidy's effect on pricing and prevent the subsidizer from taking over your market, at least.
> It has been my understanding that tariffs typically end up being tit-for-tat and relatively zero-sum.
The subsidy is already a tit, the tariff is tat. Zero-sum is at least better than just taking the blow and having a negative-sum outcome for yourself.
Because they are doing so to erode your manufacturing base through unfair competition.
From a national security standpoint this can be deadly in a hot conflict.
From an industrial strategy standpoint, it’s the same as any other monopolist practice - they will erode your base, take over your market, then raise prices to fleece your population’s wealth while increasing their own.
Industrial bases are economic strongholds that shouldn’t be lost, particularly not to great power competitors.
> From a national security standpoint this can be deadly in a hot conflict.
What about a cold conflict? How much do the tariffs and protectionist policies cost in the middle to long run?
For example, the Jones Act costs billions per year and has been going on for a lot of years. How many additional aircraft carriers and submarines and so on could the US have bought with that money?
Tariffs and protectionist policies are unfairly maligned. They are effectively the only way countries build and rebuild industries. The idea that they are bad is an invention of bad economists who don't study history. See the book "How Asia Works" for an accurate economic history of the growth of industrial power in Asia, how it was based on Germany's ascension before it, and how it was al built on the RIGHT kind of policies. https://www.gatesnotes.com/How-Asia-Works
Tariffs that merely offset subsidies in the other country has zero net effect on competition, and doesn't harm producers on either side unduely.
The net effect is merely a net transfer from the foreign government to the domestic one.
Tariffs that go BEYOND the subsidies in the foreign country has a net protectionist effect. This CAN cause stagnation in the industry in question. But less so if there is still healthy domestic competition.
Subsidies are potentially the most destructive measure. This is especially true for protectionist subsidies, and less so for export subsidies. But in general, subsides sets up a cash transfer facility between a government and local industry, often removing incentives to innovate. In turn, this means that the subsidies need to increase year by year to have the desired effect.
This can lead to the subsidized industry dying a sudden death once public patience for the growing subisides (and so the subisides themselves) come to an end.
Read “How Asia Works” on how subsidies can be used effectively.
The book calls it “export discipline”, that is, you keep the subsidised firms on their toes by demanding them to be exporters and win the global market, thus making them remain competitive.
I don't disagree, you can definitely build more industries with tariffs and protectionism. I just don't see the point.
I'm a consumerist at heart. As long as consumers get to consume, it does not matter to me whose industry is doing the producing.
I get that your foreign suppliers can turn on you and raise prices. I think the money you make during peacetime by not putting tariffs will let you buy more weapons and bribe more allies so that the foreign suppliers don't try anything too awful with the supply chains. Stockpiles can buy a lot of time to restart industry in an emergency or at least find a different foreign supplier.
Take a look at Russia, they are sanctioned by half the planet and they still keep going on a reduced industry because they had huge stockpiles of tanks, artillery and so on. Imagine something like that but with a military that doesn't suck. Nobody would even dare try a sanction.
The point is that unfortunately geopolitics ends up in an eternal competitive state.
Losing your industrial base and giving it away to a geopolitical competitor is almost certainly an error in the long run.
Large industrial bases also are correlated with healthier middle class societies, according to Vaclav Smil, and in my experience, he’s exactly right.
So losing the industrial base is fine for you, a service sector worker, but it’s bad for the country and it’s bad for society, if you want it to have a healthy middle class.
Most of the country works in the service sector. It's not like I'm some kind of out of touch elite.
The ones who are most hurt by tariffs, most affected by higher prices, are the working class. Sure, the workers of the specific industries that are lucky enough to be protected, the ones with the most persuasive lobbies, will certainly benefit. But every other worker will be a little worse off.
If you are concerned about the people who got hurt by globalization, maybe the government should collect money from people like us and spend it on people like them. They can set up the tax in such a way that rich people pay the most.
But if you use tariffs to help the people who got hurt by globalization, you cannot set it up in such a careful way. It's a blunt instrument that hurts productivity across the board and increases the prices to the end consumer. It becomes an implicit tax that poor people pay the most. An actual explicit tax would hurt much less.
> The ones who are most hurt by tariffs, most affected by higher prices, are the working class.
Perhaps in the short to medium term, the people who had their livelihoods decimated and partially compensated for the decline in their standard of living by buying cheap imported products, will be most affected.
But tariffs should be a component of a longer term plan of tradeoffs to revitalize the protected industries.
> If you are concerned about the people who got hurt by globalization, maybe the government should collect money from people like us and spend it on people like them.
That idea is past its sell-by date. It's the neoliberal Democrat's response to the economic damage done by globalization: put the losers on welfare indefinitely. IMHO, that money should be
>I don't disagree, you can definitely build more industries with tariffs and protectionism. I just don't see the point.
You don't see the point of building up, say, your domestic chip building capacity? Really?
>Take a look at Russia, they are sanctioned by half the planet and they still keep going on a reduced industry because they had huge stockpiles of tanks
Russia can "keep going" because they have vast reserves of fossil fuels that Europe, currently, can't live without.
> Because they are doing so to erode your manufacturing base through unfair competition.
I wouldn't say it's unfair, if other countries actually value domestic manufacturing then they'll provide the subsidies and incentives to cultivate it.
For the same reason we disallow severe product dumping - it's a ploy to build marketshare in an attempt to become hostile to consumers down the road. We don't let companies dump products for a reason.
China subsidizes EV manufacturers. Non-Chinese manufacturers can’t compete with the companies that get tons of free money from their government and go out business. Now only China makes EVs, so they can raise prices.
> Sure, but if they raise prices, then US manufacturing becomes more competitive again.
Manufacturing isn't something you can just turn on like a computer program. It takes time develop the infrastructure, talented labor and product designs. For something like cars we're talking about many years. It took China decades of concerted effort and heavy subsidies to get where they are now. Without subsidies, starting this process takes even longer and may even be impossible.
Accordingly, if you already have this industrial capacity it would be mind blisteringly moronic to let it slip away from you. What can be destroyed in a few years will take many more years to build back, and won't be built back at all unless you reverse the moronic policies that let it get away from you in the first place.
It's a favor in the short term but a blow in the long term because you lose ability to manufacture. Manufacturing capacity is a use-it-or-lose-it thing.
I think I'm looking for a more substantial answer.
> The subsidy is already a tit, the tariff is tat. Zero-sum is at least better than just taking the blow and having a negative-sum outcome for yourself.
> To be more clear, I meant that it was typical for foreign governments to impose retaliative tariffs.
And in the context of massive trade deficits, so what? IIRC, when the Trump tariffs went into effect, there was a lot written that the Chinese didn't have many levers to pull to respond, because of the US trade deficit. I think they implemented a tariff against soybeans (and some other non-tariff actions), and that was about it.
> To say nothing of who actually pays the cost of tarrifs.[0][1]
Who cares who technically pays, especially when they're correcting for some other market distortion? Focusing on that is a hallmark of libertarian anti-tariff propaganda that's pretty monomaniacally focused on free trade dogma and prices to the exclusion of all other considerations.
> And in the context of massive trade deficits, so what?
I was thinking more in the context of consumer inflation. Countries tend to go back and forth in a tariff war, effectively raising taxes and lowering incomes for their citizens.
>> And in the context of massive trade deficits, so what?
> I was thinking more in the context of consumer inflation. Countries tend to go back and forth in a tariff war, effectively raising taxes and lowering incomes for their citizens.
That's monomaniacal focus on short-term "prices to the exclusion of all other considerations." An artificially low subsidized price isn't a good deal, especially when its competing with your local industry.
or you trade industries .. you get our manufacturing but respect our ips. indirect class warfare. white collar vs blue collar.
Then one generation later it all bloes up in your face, destroying your democracy .. but you get to pretend your actions where innocent . its just like the weather , cant do anything about that ..
I'd like my critical supply chains to be in North America. Ideally, I'd have a free trade zone with Mexico and Canada. Tariffs, two-sided, reduce trade, and bring me closer to that reality. I'm okay paying slightly more for that security.
I'd like the same thing in the EU too, and in other major world blocks.
There's a slight efficiency gain from specialization, where each country brings a skillset, but it's totally not worth it to me versus the brittleness which comes with it.
Remember how the Covid supply chain disruptions cascaded? That's a tiny fraction of a really bad natural disaster.
>Can you explain how tariffs are an effective tool against foreign governments subsidizing industries?
Because the US is a huge market, and if you can't sell your goods here competitively (because tariffs price you out), it hurts your business. It's a negotiating tool.
> typically end up being tit-for-tat and relatively zero-sum.
That pretty much sums up all economic policy honestly. It will always be tit for tat since one aide can only respond to the other and doesn't directly control their economy.
The outsourcing mania forfeited vertical integration to please Wall St. Collateral damage included knowledge, culture, and ability to innovate.
> ...not likely to be an efficient strategy
Per principle of no free lunch, greater efficiency at the expense of resiliency.
> ...tariffs and similar policy levers...
Yup. The Rudyard Kipling School of Economics doesn't acknowledge realpolitik, will to power, balance of trade, finance, labor relations, foreign interests, etc.
The Econ 101 glasses give a very myopic view of the world. It's just an introductory model for a very complicated system.
Do you have a source for this? In the past when I've been told this, the statistics referenced where based on whether a company was classified as being in in the manufacturing sector, not based on which jobs were classified as manufacturing. This included companies that were classified that way due to historical inertia, or based on their global industry but actually had little to no manufacturing in the US. Based on that I have a hard time knowing what to believe, and would love to be pointed to more accurate information.
Average productivity per manufacturing worker in the US grew on average by 3% per year in the 1950–1980s and 4% per year in 1990s (https://www.bls.gov/opub/mlr/2002/06/art4full.pdf), i.e. its current output is comparable with that of ~50m people working in 1969, so a 30% decrease in total manufacturing employment was probably well compensated for (putting aside the social welfare point of view).
There's a vibrant high-tech contract manufacturing segment of the economy, led by behemoths like Foxconn and several other Asian players who specialize in consumer electronics & computing gear (Compal, Pegatron, Quanta, etc). That doesn't mean manufacturing doesn't exist in the US, though, and there are still very large EMS firms with significant presence domestically, like Jabil, Flex, Celestica, Sanmina, and plenty of others. The difference between now and 25 years ago is that it hasn't been cost effective to manufacture high volume, low complexity electronics in the US for a full generation. But, the majoarity of high complexity, low volume (NPI, very large PCBs, PCBs with many complex layers) stuff is still made in the west, and there will always be meaningful demand for high tech manufacturing in regulated industries (defense, medical), too. For example, CGMs are made in Alabama & Ireland, avionics for Apache helicopters are made in Alabama, data center server racks for Meta are assembled in Finland, Germany & San Jose. Same for Netflix CDN racks.
It goes on and on. The majority of what has been outsourced to China (and Taiwan and Singapore and India and Vietnam) is the "face" of high tech electronics, and the majority of electronic piece parts components, but not final assembly and not much of the tricky stuff. I don't think we'll see a quick ramp of high-vol/low-mix mfg coming back anytime soon because too much of the supply chain is in Asia, but it could if there were sufficient demand.
How does this square with 5G radios being almost entirely made in Asia? As in the entire chain from antenna design to finished chip happens >90% in Asia by dollar value.
None of the things you mentioned come even close in terms of complexity, on a per cubic volume basis at least.
There are reams of economic literature trying to estimate whether government intervention in the market was a good idea. Most of the time it doesn't turn out great. So the parent's suggestion "probably won't be a win for economic output" is a pretty safe bet.
Often governments will use "security" as an argument to keep steel, shipbuilding, etc, in the country. That argument is not really possible to evaluate on economic grounds.
> That the favoured industry (or company) is doing well isn't necessarily a sign that the policy is overall good for the country's economy.
You are answering specifics with generalities.
If Taiwan didn't support and nurture TSMC so that today it's a national champion that prints money, what development path do you think they could have taken that would've brought at least the same economic success? Please be specific.
There's plenty of other companies in Taiwan already today, and that's without the counterfactual of leaving more money in people's hands.
I can't predict specifically what other things would have happened. If people could do these kinds of predictions well, maybe central planning would actually work?
You are saying planning never works without even the ability to point to any specific cases. Why do you swallow your own ideology so uncritically?
Does Soviet-style central planning work? It didn't seem to work well in the few societies that really tried it.
Dos all planning fail? Seems unlikely, given the amount of fairly centralized planning that went on (and still goes on today) in East Asian countries, countries that are the rare "success stories" of developmental economics.
In fact the original East Asian success story was Meiji-era Japan, basically the only society outside of the West that managed to industrialize itself during the 19th century. And if one sits down to read a history book one quickly realizes that what the Meiji government did was highly top-down and planned with the explicit goal to catch up to the European colonial powers. It did not resemble classical laissez-faire economics.
Huh? Where did I say that planning _never_ works? Please read more carefully, lest you argue against strawmen.
I said that planning and forecasting is _hard_, and that _I_ can't tell you on the spot what counterfactually would have replaced TSMC. Many different options are possible. Or perhaps TSMC would have still happened, but in a different way.
> In fact the original East Asian success story was Meiji-era Japan, basically the only society outside of the West that managed to industrialize itself during the 19th century. And if one sits down to read a history book one quickly realizes that what the Meiji government did was highly top-down and planned with the explicit goal to catch up to the European colonial powers. It did not resemble classical laissez-faire economics.
If I have an ailment and go to a chiropractor to fix that ailment, and later my ailment goes away, that doesn't necessarily mean that the chiropractor helped. In fact, those guys are dangerous and more likely to make things worse.
For another Japanese example, see how eg Sony had to fight and dodge the much vaunted MITI more often than not, especially in the beginning. (Sorry, I'm not up to date on all the Meiji-era stuff. It's a fascinating period of history, though!)
---
Just to be clear, central planning can 'work' up to a point; it doesn't necessarily lead to famine. Eg seen on its own East Germany was the most successful socialist economy ever. Out of the ashes of war torn quarter-country they rebuilt a reasonably high standard of living---the highest among all socialist countries, and pretty decent by global standards---all while paying enormous war reparations to the Soviet Union. (I was born in East Germany.)
Their system had many aspect of Soviet-style central planning. But over most of its life the regime wasn't nearly as totalitarian as Stalin's Soviet Union.
It's just that East Germany pales compared to more market oriented West Germany. (And West Germany pales compared to even more market oriented Switzerland.)
> The government support are a combination of low interest loans, import controls and financial subsidies.
There is a very well-understood formula on how to go for from an agrarian society to an industrial one, which has been used going back to the late 1800s:
https://www.amazon.com/Just-Get-Out-Way-Government/dp/193086... is an alternative view at development economics. The title is a bit provocative, (even the author wasn't really happy with it, when I had a chat with him about it). The main thesis of the book is that honest and competent civil servants are the most rare and precious resource a country has, especially a poor one, so policies should economies on their labour.
So eg you should privatise a state-owned company by auctioning it off in one piece to the highest cash-bidder open to all comers from anywhere, no questions asked. Instead of having your civil servants set up a complex system or worse trying to evaluate proposed business plans. Complexity breeds corruption in the worst case, and in the best case still takes up civil servants' limited time.
> On a trip to Turkey in 2018, I read How Asia Works, by Joe Studwell. Despite the fact that it didn’t get everything right, it’s probably the best nonfiction book I’ve ever read.
> As any longtime reader of mine will know, my favorite book about economic development is Joe Studwell’s How Asia Works. If you haven’t read this book, you should definitely remedy that. In the meantime, you can start with Scott Alexander’s excellent summary.
The book goes over what actually happened: it's not theory, it's history. What worked in each country (often the same/similar things), the variations, and where things were tried but went badly (often with analysis on why).
> The book goes over what actually happened: it's not theory, it's history. What worked in each country (often the same/similar things), the variations, and where things were tried but went badly (often with analysis on why).
Alas, in the absence of randomised controlled experiments, it's very hard to infer causality purely from observations. You need a theory to guide you. But observations are still extremely useful, of course.
Just because countries did X and Y happened later, doesn't necessarily tell you X causes Y. In addition to the usual causation vs correlation dilemma, in economics you can even have what looks like reverse causation that goes back in time, because intelligent actors anticipate the future.
(Silly example, if there's a clear sky, and you see many people carrying raincoats and umbrellas, it's likely to rain later. But that doesn't mean that umbrellas cause rain.)
Many of the successful countries in 'How Asia Works' share some ethnic similarities. (Eg many have at least sizeable Chinese minorities or have outright Chinese majorities.) Many of the success stories also have some land reform in their past. The author decided that the latter 'worked' (ie was a causal factor), and ignores the former as perhaps a mere coincidence. Similarly, the author decided that the bouts of industrial policy and protectionism are praiseworthy causal factors.
He almost arbitrarily excludes Singapore as purely a financial centre, even though we have a pretty diversified economy these days, and in the past during the fast catch up growth, we weren't a global financial hub yet. That early development owes much more to the typical 'sweatshop' model that we see in many successful industrialisers, ie (light) manufacturing for export.
> 'How Asia Works' is not exactly economic orthodoxy, to put it lightly.
And yet it describes the historical record of several countries (in the case of Japan, how they did it twice: post-Meiji Restoration and post-WW2).
It goes over countries deemed 'successful' (Japan, Korea, etc), and others (Philippines).
What (particular?) "economic orthodoxy" would you suggest countries follow? What are countries (if any) have followed them, and what are the results? Are there book(s) that you would recommend on how to implement this/these orthodoxies, with case studies or historical examples of implementations?
Does “government intervention” include subsidies and R&D, in your account? I can think of more than a few industry segments (aerospace, biotech, etc.) that likely wouldn’t exist or be nearly as lucrative as they currently are without the extensive government intervention that helped build them.
> I can think of more than a few industry segments (aerospace, biotech, etc.) that likely wouldn’t exist or be nearly as lucrative as they currently are without the extensive government intervention that helped build them.
And continues to make. The NHS, for example, is a major source of funding for research into new drugs and treatments. mRNA vaccines came from decades of NHS funded research that the manufacturers are just now picking up and running with.
It should also be pointed out that economic goodness is not and should not be the be-all end-all reason for government spending. Governments building parks, for example, is a social good with little economic value (or at very least hard to quantify benefits).
In the case of things like medicine, government spending there has a social good of limiting communicable disease which is more important than how much money a drug company can make off a drug.
For something like TSMC putting plants in the US, even if it's somewhat economically disadvantageous we are still talking about bringing onshore more jobs and training for US citizens which will generally increase our capabilities here and the satisfaction of those employees.
Trying to get onshore development of electronics, the government basically has 2 levers to pull, either subsidizing building new manufacturing or applying tariffs to incoming tech goods. One of those levers has the negative consequence of raising prices on tech goods for everyone while we wait for manufacturing to build out.
That’s simplistic and assumes a baseline where the relationship with the government starts at zero.
The company pays taxes. There can be negotiations over the tax rate, which is not a subsidy so much as a ‘tax you less’ type arrangement. This can happen at multiple levels for a company like Apple, even beyond the state/federal thing. The repatriation of billions of dollars of earnings is also in play.
TSMC doesn't pay taxes to the US government (at least, not significant taxes until recently). And that's what we are trying to onshore, the fabrication capabilities.
We could try and incentivize a company like Apple to fabricate in the US, but the simple fact is that (until recently with the new TSMC fabs) we did not have the fabrication capabilities in the US needed to make apple silicon. Apple does not have the capabilities to make these fabs either.
You can cut taxes to 0 for US fabrication plants, but there are simple overhead costs that are hard to get away from. That's why an actual subsidy is needed.
I mean, you could exempt fabrication plants from employment and environmental laws to allow them to operate cheaper... but that's sort of monstrous.
The main reason for TSMC to build plants in the US is as a hedge against a Chinese invasion of Taiwan.
That outweighs anything like jobs or economic efficiency (given no such war) by a couple of orders of magnitude.
And this really applies whether or not the US would join the war on Taiwan's side. TSMC production would be likely to be shut down for 5-10 years, regardless.
> For something like TSMC putting plants in the US, even if it's somewhat economically disadvantageous we are still talking about bringing onshore more jobs and training for US citizens which will generally increase our capabilities here and the satisfaction of those employees.
Out of the examples, aerospace engineering was helped by many government interventions such as war-time buying and development of titanium working.
On the other hand, it's also hindered by government regulations making all new development much more expensive than what it could be.
I'd think all the industry segments would exist as the do provide clear benefits to everyone but the development paths taken could be different from what they're now.
> I can think of more than a few industry segments (aerospace, biotech, etc.) that likely wouldn’t exist or be nearly as lucrative as they currently are without the extensive government intervention that helped build them.
Likely, yes, but even if they are, it’s impossible to say whether that’s a net win for society. Possibly, if the government hadn’t subsidized them, but instead had had lower taxation, other industry segments would have blossomed, and gotten better benefits for society.
As an example, US government support for the Internet may have led to larger automation, making labor relatively more expensive, and because of that decreasing the size of the middle class. Opinions will differ on whether that’s a net positive.
I think there’s too many layers of counterfactuals here: much of the government’s economic intervention stems from a (perceived) need that transcends ordinary economic concerns. Think wars, epidemics, famines, etc.
In other words, I think we’d need to presume the absence of those concerns to intelligibly consider the absence of taxation-funded interventions. And that’s more of a minarchst fever dream than a thing that could actually happen.
Sure. Maybe the market will provide food security in 98% of years on its own, but we need more 9's. And we obviously need our government to be coercive enough to protect us from outside, less benevolent, forms of coercion.
At the same time, this isn't a "yes/no" question. This is thousands of sliders that we adjust for each industry.
You always have to consider the opportunity cost. Sure, perhaps we've ended greater security and have also ended up with vibrant industry A at the end of it; but we maybe had to pay by hurting industries B, C, and D. It might be worth it; but it doesn't mean it makes sense to do it for industry Z where there is a smaller security benefit.
A lot of people would prefer to pay no taxes, but that’s presumably not your point. Per-dollar, I think the average American taxpayer is probably very happy with the government’s investment in, for example, the Heavy Press Program (= modern airplane airframes) and resilient packet switched networking (= the Internet).
Or more directly: it’s hard to even imagine a contemporary national or international industry without the economic interventions that produced those things.
I know, imagining things is hard. But that's not much evidence either way.
Yes, there might be some government programs that look like a good deal in retrospect. Just like some lottery tickets are winners.
The heavy press program even turned a profit, if I remember right. Though private enterprise is usually pretty good at funding these kinds of projects, even with long lead times. (See eg how Amazon or Tesla or even Microsoft took ages to return capital to investors, but still had enthusiastic shareholders.)
I don't know specifically about packet switching, but you hear similar arguments about the invention of the computer.
In our reality, programmable electronic computers owe a lot to government and specifically military funding. But as a thought exercise, perhaps you can imagine an alternative history without WW2: IBM already made computing devices for business long before the war, and it's relatively easy to see how they would have eventually come up with a programmable electronic computer.
Compare also Konrad Zuse's work in Germany:
> After graduation, Zuse worked for the Ford Motor Company, using his artistic skills in the design of advertisements.[14] He started work as a design engineer at the Henschel aircraft factory in Schönefeld near Berlin. This required the performance of many routine calculations by hand, leading him to theorize and plan a way of doing them by machine.[21]
> Beginning in 1935, he experimented in the construction of computers in his parents' flat on Wrangelstraße 38, moving with them into their new flat on Methfesselstraße 10, the street leading up the Kreuzberg, Berlin.[22]: 418 Working in his parents' apartment in 1936, he produced his first attempt, the Z1, a floating-point binary mechanical calculator with limited programmability, reading instructions from a perforated 35 mm film.[14]
Zuse Z1 replica in the German Museum of Technology in Berlin
> In 1937, Zuse submitted two patents that anticipated a von Neumann architecture. In 1938, he finished the Z1 which contained some 30,000 metal parts and never worked well due to insufficient mechanical precision. On 30 January 1944, the Z1 and its original blueprints were destroyed with his parents' flat and many neighbouring buildings by a British air raid in World War II.[22]: 426
> Zuse completed his work entirely independently of other leading computer scientists and mathematicians of his day. Between 1936 and 1945, he was in near-total intellectual isolation.[23]
In our real history, the US and UK armed forces came first, but a world with more resources in the hands of the private sector (and also with less war) would have surely accelerated some of these private computing experiments (IBM or Konrad Zuse or someone else), and we would have seen computers at roughly the same time as in ours, or perhaps even sooner.
Similarly, the real history of packet switching is heavily intertwined with some US government projects. But even just browsing Wikipedia https://en.wikipedia.org/wiki/Packet_switching tells you about other attempts and projects going on around the same time. So the government's investment probably did not speed up things by that much, even before you consider that in our counter-factual the private sector would have more resources.
> I know, imagining things is hard. But that's not much evidence either way.
Imagining is easy; "hard to imagine" is an English idiom for "that seems implausible" :-)
You're providing examples that counter the impact of government innovation, but it's unclear to me whether these are true counterexamples. The history for IBM, for example, is almost entirely intertwined with IBM's role as a defense contractor. Zuse's second computer (the Z2) was funded directly by the German government, presumably because it aligned with Nazi military interests.
(As a whole, these things are impossible to extricate: it's clear that the government doesn't create every possible idea, and there are an infinite number of innovations that can't be assigned back to government sponsorship. But I think there's general academic consensus that computing, aerospace, and biotech all progressed at rates beyond their equivalent private sector capacity due to government investment, and that the resulting progress was "worth it" in terms of returned economic and social value.)
Yes, that's why I talked about Zuse's earlier work. And IBM also had plenty of private business (and would have had more).
> But I think there's general academic consensus that computing, aerospace, and biotech all progressed at rates beyond their equivalent private sector capacity due to government investment, and that the resulting progress was "worth it" in terms of returned economic and social value.
It depends on your counterfactual. If government had taxed the same funds, but spent it on something else, yes, we would have had less progress in these specific sectors.
If they had taxed and intervened less, perhaps we would have had more?
And, of course, we picked these sectors out after the fact. There's plenty more examples of failed government investments.
I don't know why people say this. The reason China beat us out in manufacturing of many goods is BECAUSE of government interference. They have a much more top-down leadership style that allows these gains in efficiency. They've streamlined.
But even looking at the US' history this hasn't been the case. The only reason we got out of the Great Depression was because of the most radical government-backed economic policy ever: The New Deal. Even today HUGE sectors of our economy, like defense, are paid for on government money. Those are jobs, companies, entire industries.
There really, truly, isn't. Classical economists can't handle being wrong, but given an alternative reality did not happen, it was a success.
We can speculate and play armchair economist all day. But the hard reality is that the New Deal revitalized the economy and created countless jobs to pull the US out of the Depression. Maybe a "do nothing" approach would've worked too, eventually. When I unlock the secrets to interdimensional travel, I'll let you know.
Armchair economists set up an argumentative scenario where they cannot be wrong. You see, if they're wrong about a situation then secretly they're right, because if you did what they suggested instead it would've worked too (and better!). But if they happen to be right then of course they're right, and countering suggestions are obviously wrong and would've caught the economy on fire.
Well I do think the security argument does stand, you don't want to outsource navy carrier construction to China for example. Just don't expect a thriving economy to be built around it.
Yet the most successful nations on the planet go against this economic wisdom and do subsidize industries they deem important and/or protect them with tariffs. The US did this until the 1960s. China does this now.
> There are reams of economic literature trying to estimate whether government intervention in the market was a good idea. Most of the time it doesn't turn out great.
These sentences are just propaganda. There’s no factual basis for them.
There are no markets without government intervention. Statements like this are more like religious incantations than appeals to “research” of some kind.
Yes they do. Consider weed. It was well established before being legalized. Legalization brought higher taxes and interference. The black market continues as an alternative to the free one.
For obvious reasons a market for a product that is banned by the government is a poor example of a market that exists "without government intervention"
Functional markets require a strong mechanism for protection of property rights. The fact that we have some historical systems where that has taken a different form than a conventional government doesn't negate that the only practical mechanism that we have to protect property rights and support markets is a government.
Ancap fantasies aside, of course.
And then, there's lots of situations where externalities exist. If I poop in the river and you're downstream, it costs me nothing; I have no reason to stop.
> Functional markets require a strong mechanism for protection of property rights. The fact that we have some historical systems where that has taken a different form than a conventional government doesn't negate that the only practical mechanism that we have to protect property rights and support markets is a government.
Even if we grant that argument, that's at most an argument in favour of a minimalist nightwatchmen state. Not the full blown Leviathan.
> And then, there's lots of situations where externalities exist. If I poop in the river and you're downstream, it costs me nothing; I have no reason to stop.
It means that markets rely on the rule of law. From monopoly regulation to the prohibition on outright theft, markets literally cannot exist without governance.
> In economics, a public good (also referred to as a social good or collective good) is a good that is both non-excludable and non-rivalrous.
If you ever sat in a traffic jam, you will have experienced that road use is rivalrous. And toll roads show that it's rather easy to exclude people from using roads.
Building roads with general taxpayer money and making them available without payment by the users might or might not be good policy. I don't know. But roads ain't a public good.
Most roads are difficult to exclude. Most spend most of their time with excess capacity and are not rivalrous. They're clearly not a typical private good.
And they're usually a natural monopoly, too. Not to mention that the acquisition of land to make a road is often problematic.
Basically, there's a lot of reasons to expect market failure in a market for roads. That's not to say the only solution is for the government to provide them, but that laissez-faire, completely hands off solutions are probably not going to turn out great.
Nowadays it's fairly easy to exclude people from roads: just put up a sign that says you can only use them if you paid. (You can also use a camera and some machine learning to catch offenders; or otherwise cheap overseans workers who manually review footage.)
> Most [roads] spend most of their time with excess capacity and are not rivalrous.
Most cars sit around idle most of the time. I'm not sure what your argument shows?
> And they're usually a natural monopoly, too. Not to mention that the acquisition of land to make a road is often problematic.
That's a different discussion. Though I'm more optimistic.
They are a massive transfer to public land to whoever occupies the road, and the person occupying the road might not even be in their steel box for days on end.
Well, it depends on how the roads are financed. You are right that roads financed out of general taxation and free to use can be seen as direct or indirect subsidies to the car industry.
But the same physical road, but financed out of user-fees (or by voluntary contributions from nearby shops to attract shoppers etc) by a profit-driven private company, are not subsidies to the car industry.
Or take the hypothetical from the last paragraph, and add massive taxes on top, and all of a sudden it's the opposite of a subsidy. But the physical road stays the same.
How is stopping trucks on the road to check their papers, and holding up the delivery for some period of time, on a semi-random basis, not ‘intervention’ of some kind?
I would argue it 100% is. You can make MUCH more money if you steal or perhaps keep slaves. We're just so used to these preventative measures that we don't really consider them, but this is, in essence, a huge "tax" on the private sector.
Playing by the rules is very expensive as compared to not.
Even if you buy that argument (and I'm skeptical), that's at most an argument for a minimal nightwatchmen state; not for further government intervention.
If you're skeptical about whether governance is required for markets to function, launch your next startup on the darkweb or in a failed state. I fail to see how one could imagine any kind of healthy market operating without basic governance, reliable infrastructure etc. It's a religious idea (anarchocaptialism or something similar) at that point.
Past that, actually engaging with business (as a customer or employee) should be a rapid reminder of how much we have regulation to thank for. From not being poisoned (immediately or over the course of a lifetime) by our food, burned alive by non-fire retardant furniture (and the absence of a fire service), to having weekends off, our wages reliably paid, to being free from physical and the more obvious forms of psychological abuse. It's right there - you engage with the rights and privileges afforded by legislation daily.
Just astonishing to me that this kind of market fundamentalism is still actively engaged in. People can disagree on the extent and fundamental structure of government, but to deny it's role in the basic functioning of business in a society as complex as ours seems outright absurd.
As people get richer they demand better quality stuff and can afford it.
That includes taking weekends off.
It's perfectly legal where I live to work on the weekend. There's also no minimum wage here. Yet, most people get weekends off and get paid more than zero.
It's also entirely legal here to offer jobs without reliable pay (as long as the contract doesn't promise reliable pay).
There's plenty of long term poisonous food available in all countries: you can mainline eg pure sugar to your heart's content. Most people in most countries opt for tastier and healthier fare, because they can afford it. There's also plenty of immediately poisonous substances available, like strong alcohol.
People also regularly opt for more than the legal minimum in terms of furniture safety. Eg Ikea sells you kits to bolt your cabinet to the wall, so it doesn't fall on your child trying to climb up on it. So the legal minimum's don't seem particularly binding: people voluntarily exceed them.
> Just astonishing to me that this kind of market fundamentalism is still actively engaged in. People can disagree on the extent and fundamental structure of government, but to deny it's role in the basic functioning of business in a society as complex as ours seems outright absurd.
Governments do stick their hands into many pies, but that doesn't mean that them doing that is required by some physical or natural law.
> If you're skeptical about whether governance is required for markets to function, launch your next startup on the darkweb or in a failed state.
Yes, governments control some of the best real estate on earth. That doesn't mean they necessarily contributed much to that happy state of affairs; often just the opposite.
Btw, many companies are trying to escape even basic functions provided by government, and are going for private arbitration instead, because it's more efficient.
Sorry, I should have picked a clearer term. There is broad agreement among economists that _regulating_ markets is needed to have an optimal outcome for society. I was referring to government subsidies specifically, in that case the distortion is rarely beneficial. Especially when taking into account that the money could have been applied elsewhere with bigger gains to society.
There’s a lot of navel gazing around these sorts of analyses. Consider that the entirety of the tech industry exists in its current form due to federal spending.
The Silicon Valley story is well known; the SAGE project really created the classic IBM.
One of the greatest examples is the DARPA VLSI project of the late 70's and 80's. The ROI of that program is crazy.
If you are interested in this time, I 100% recommend the book The Dream Machine which is centered on J.C.R. Licklider but covers most of the people and projects that lead to personal computers. Stripe Press has a beautiful hardcover version of the book, but the font is tiny. I had to switch to an ereader version in order to read it.
> US manufacturing has pretty much been constantly growing
By dollar value, perhaps, but that mostly means the US makes lot of high-value microchips, a field that has made (well-documented) exponential progress over the past decades. It is still consistent with US manufacturing capabilities regressing in other key aspects, such as machine tools, injection molding, shipbuilding, consumer goods, and so on.
Indeed, by revenue the U.K. is a bigger manufacturer than it has ever been. But it’s all things like jet engines and other high value items. Whether that’s a good or bad thing is a matter for protracted debate.
I heard an econtalk pod a long time ago claiming that the long pole wasn't even dollar value, it was hedonic adjustments for Intel microchips that kept the graph of US manufacturing output looking like a tailspin since 2000.
> "The computer industry, in turn, is an outlier and statistical anomaly. Its extraordinary output and productivity growth reflect the way statistical agencies account for improvements in selected products produced in this industry, particularly computers and semiconductors. Rapid productivity growth in this industry—and by extension the above-average productivity growth in the manufacturing sector—has little to do with automation of the production process. Nor is extraordinary real output and productivity growth an indicator of the competitiveness of domestic manufacturing in the computer industry; rather, the locus of production of the industry’s core products has shifted to Asia"
Not sure what podcast you're talking about, but since we're trading vague recollections, my recollection was opposite. Manufacturing as % of GDP certainly went down, but gross value added did not.
Also, hedonic adjustments are typically applied to CPI figures, not figures like GDP or value added, so I suspect you have some facts crossed.
Note I think this evidence and discussion is all ambiguous, but hedonic adjustments absolutely affect real GDP.
When comparing to a past year's GDP, you need to make an adjustment for the differing value of money, and you can't calculate the differing value of money without considering the changes in the qualities of what you can buy with it.
We were only temporarily good at shipbuilding in the world wars. The United States just don't have much of an aspiration to be world class in building ships.
Given that we have the largest navy in the world, it would behooves us to grow our shipbuilding capabilities to be at least competitive.
It's pretty easy to make a limited case that should convince you, though not very amusing, I'm afraid.
> [The Jones Act] requires that all goods transported by water between U.S. ports be carried on ships that have been constructed in the United States and that fly the U.S. flag, are owned by U.S. citizens, and are crewed by U.S. citizens and U.S. permanent residents.
Repeal all provisions save for the requirement of having to be constructed in the US.
It's not what I would suggest (an outright repeal would be better), but it's easy to see how this partial repeal would strengthen the US shipbuilding industry: you are making their products more useful and cheaper to operate.
For comparison, you can have a look at eg German shipbuilding. Germany isn't exactly a low-cost country, has no equivalent of the Jones Act, and is doing some shipbuilding. (They aren't the biggest player in building whole ships, but the world loves to import German Diesel engines. Division of labour and all that.)
The US was a shipbuilding superpower because it had what Europe did not, access to vast untapped timber. It wasn't until globalization that the US lost its shipbuilding industry.
> The US was a shipbuilding superpower because it had what Europe did not, access to vast untapped timber. It wasn't until globalization that the US lost its shipbuilding industry.
Where did you get this information? The Spanish-American war wasn't considered much of a war by Americans at the time since the American fleet had been built with steel vs the Spanish that still used wooden ships. Those ships were run on coal. The US lost its shipbuilding industry because of cheaper competition from Japan and S. Korea in the civilian sector and Congress favors aircraft carriers over smaller ships like frigates and destroyers from what I read.
??? Scandinavia is full of it. But I suppose in the 1600's it was the Netherlands that cut down all the forests, they were the shipbuilding superpower at the time.
It was the same situation for Spain. Its rise as a naval superpower in the 15th and 16th centuries came at a high environmental cost too. To build its fleet, including those iconic Spanish galleons, Spain logged high amounts of oak and pine, especially from northern regions like Cantabria and the Basque Country.
As ship production ramped up, there were growing concerns about resource depletion. To the point that by the late 16th century, Spain was forced to start importing timber from its colonies to keep up with demand.
What I find so chilling and reminding about this history is that to this very day, the spanish peninsula remains largely deforested because of that fleet they had 500 years ago.
>The Swedish Navy planted oak trees on the island beginning in 1831 to provide strategically important timber for future ship construction. Once the timber was ready to harvest it was no longer required for ship construction.
Fun fact: the word "Holland" comes from "Houtland" meaning "Wood" land. There is almost no forrest left there now because they turned the trees into boats during their golden age.
how is this measured? Because if it's by total vessels it's a poor comparison. If it's by total aircraft carrier, it's also a poor comparison.
Basically measuring this is difficult, but this is contrary to my only knowledge of this which was a Wendover video (that was an enjoyable watch), but I wouldn't hold in the highest standard.
Before adding up ship tonnage, we should subtract one US carrier for every, I dunno, two ASBMs possessed by the PRC, and if (lol, I mean when) we get to zero, move on to, say, the Arleigh Burke class.
I guess we can give the US some bonus points here for each SM-6 they have, but pretty sure those'll run out in a week too.
On the "plus" side, China is food-insecure, so the US can cause millions of civilian deaths via famine. So it can/would still win, just via genocide. It would take a decade though, and require a strong campaign by the media to maintain domestic support.
Actually, no, I'm overstating things. The strategy would not be so much to kill so many people, as to "make the economy scream" (as in South and Central America), so as to hopefully bring about regime change. The net result might actually be an increase in immigration from China to the US (to the extent that people are able to make that migration). In the long run that'd be a net win for the US, actually.
Indeed, you could say that the first shots of that campaign have already happened. Look at Chinese youth unemployment.
I think the number is a lot higher than two ASBM per carrier. There's always a group of carrier, cruiser, and a destroyer squadron that provide a layered defense. So it's probably not that simple.
China and the US have been at war for decades now. Both an economic war and cyber war. Chinese nation-state hackers have hacked into tons of Fortune 500, Aerospace and defense companies, and tech companies to steal R&D from them. They take this R&D and use it for themselves but additionally, they also give it to private industry to use for themselves as well. China plays the long con game. Whatever it takes to make China the number one super power country eventually.
Markets cease to function efficiently in the presence of massive concentrations of wealth. But if by saying America is good at "markets" we actually mean the latter, then yes.
Not the OP, but one reason is because concentrated wealth allows you to adjust the rules of the market or suppress competition. Another reason is that the market only rewards you for delivering value to people who can pay for it, so wealth concentration skews the production of goods towards a small quantity of luxury items, which lack the economies of scale for efficient production. This may still be a Pareto efficient market but not one that maximizes national wealth or welfare.
The self-balancing mechanism of markets requires "skin in the game", which is to say, there must be incentive for individual actors to make wise decisions backed by the risk of loss. However, as wealth accumulates, the marginal value of a dollar decreases. Beyond a certain point of wealth accumulation, losing money is no longer a punishment, which means wise decisions are no longer systematically incentivized. This gives individual actors unilateral power to keep markets irrational for longer than wise actors can remain solvent, creating market failure.
There's a fixed supply of money (ish, the real life stuff money represents is actually scarce). If wealth disparity is great that means that less money is available for working people. You can't really gain a dollar here without losing a dollar there.
The problem here is working people ARE the economy. If they no longer have the power of consumption everything crumples. Of course it's a sliding scale, but even just a bit less consumerism can be catastrophic for some industries.
Money is just a proxy for time spent, so yes there is a fixed amount because we all have only so much time.
You can make gains by new technology(printing press vs handwritten), cutting quality(cheaper inputs/materials) or improving efficiency(work cell design).
Looking at it from a view of consumerism paints a bleak picture, if you look at if from a view of social stability without a functioning economy everyone will starve since the fertilizer, DEF fluid, John Deere tractor code and everything that ties all those together are so far spread out that is has become like a spider web facing a hurricane.
Excellent quote. While the effect of American music is huge without a doubt let me go off on a personal tangent because it's related.
I have immigrated from my homeland (first to Canada and then Malta) and I usually say "I had the bad luck to be born in Hungary but I fixed that when I could". In other words, I am not particularly fond of the country / people living in there. But it being my mother tongue, growing up there has an interesting effect: some Hungarian songs have a much stronger emotional effect than any in say English. These are not even songs I knew as a child. I am actually quite curious whether there has been scientific research in this.
Nelson Mandela had a famous quote about the power of speaking someone's native language:
"If you talk to a man in a language he understands, that goes to his head. If you talk to him in his language, that goes to his heart."
The idea here is pretty straightforward: speaking to someone in a language they merely understand reaches them intellectually, but speaking in their mother tongue resonates on a deeper, emotional level. You can imagine now why songs in Hungarian resonate more to you than the ones in English.
I shall follow you down your personal/Hungarian tangent...
There was a guy called Jackie Orszaczky who was a Hungarian jazz/funk musician - bass player, bandleader, and singer - here (in Sydney, Australia) who made some of my most loved jazz/funk music.
Snow Crash is tongue-in-cheek. The line above is the inner monologue of a samurai-sword-wielding high-speed pizza-delivering super-hacker martial artist.
> US manufacturing capabilities regressing in other key aspects, such as machine tools, injection molding, shipbuilding, consumer goods, and so on.
But this is exactly what Econ 101 tells you to expect to happen (and I teach Econ 101 ;) . Countries specialize to maximize comparative advantage. If you are the US and can manufacture high value items at a lower opportunity cost (or high value services at a lower opportunity cost), you will, but this means giving up on doing other things you could use the resources for.
The net result is that US manufacturing output in real dollars has increased 4x, in the past 70 years. At the same time, its share of the economy has shrunk (because other sectors have outgrown it), and many lower value manufacturing subsectors have been largely abandoned.
Maybe our economic policy should go deeper than 101-level economics then! Because comparative advantage is a dynamic quantity which changes over time, and while some advantages (like geography) are fixed, others are built by investment.
Here's a video [1] which explains why, in 1955, manufacturing household goods was cheaper to make in the US than in China (and why, at the time, they thought this manufacturing dominance was the thing that backed the US position as a global superpower). It's not because Americans worked more cheaply than Chinese workers, it's because American factories had a well-developed tool-and-die expertise, which meant that when anyone in the world wanted to make something, they were well-advised to travel the US to get it made.
Econ 101's comparative advantage is true at an instantaneous point in time, which is a good start, but if perhaps it's just "knowing enough to be dangerous". Economic policymakers (and company leaders) would do well to think about comparative advantage as planning an optimal trajectory over time, which can mean sacrificing a short-term optimum in exchange for a long-term optimum, and if there even is a textbook solution for that, it's going to look less like a 101-level intersection of straight lines, and more like an iterative optimization over nonlinear differential equations.
> it's because American factories had a well-developed tool-and-die expertise, which meant that when anyone in the world wanted to make something, they were well-advised to travel the US to get it made.
Also because you couldn't offshore production to China or most other places even if you could provide all that due to various geopolitical, economic, social, institutional and other reasons.
mostly container shipping didn't exist, but things like tool and die products cost enough per kilogram that even air shipping is economical, to say nothing of integrated circuits
I think you're missing the point of what I'm saying. The US has steadily moved away from those past competencies because there was more profit to be made elsewhere.
And, sure, there are absolutely network effects with related goods and industries that have steepened that movement. If it was a win to change the allocation of resources when e.g. steelmaking was strong in the US, it's even more of a win after steelmaking withered.
> and if there even is a textbook solution for that,
It's not quite what you're saying, but the closest work I have read is 'Dynamic Optimization: The calculus of variations and optimal control in economics and management' by Kamien et al. It is all about estimating gradients and plotting trajectories in dynamical economic systems.
The feeling of misunderstanding is mutual! I agree that there was more profit to be made elsewhere. But I'm arguing that those profits were short-term profits which may well have come at long-term expense. If you follow the local gradient of profitability, you'll always find great short-term returns selling off your seed corn. Unlike what Econ 101 asserts about maximizing comparative advantage being the most profitable strategy, there is absolutely no guarantee that following a locally-optimal comparative-advantage strategy is globally optimal over a long-term window, where advantages are path-dependent.
Manufacturing is the core example of path-dependent advantages, because (unlike what any econ 101 textbook teaches), marginal costs decline with increasing production quantity in the manufacturing sector. This means the more you make, the better you are at making more things!
Fun fact: You should sell your seed corn, because the best hybrid seeds, crossed from especially made inbreds that you'd never want to use for yield, are so much better than the second generation crossing that you'll always lose money replanting.
There is never any guarantee that profits are long term or short term, or that your manufacturing specialization is going to remain useful, instead of being a dead end. Retaining specialization on, say, cathod tubes wasn't exactly profitable. See all the camera manufacturers that zigged when they should have zagged, and used their manufacturing strength to unprofitability. All of this is hidden by talking about 'manufacturing' in very large terms, but the real world doesn't work like that. Specifically, semiconductors were a very nice place to keep expertise in, and paid off. Internal combustion engines, and filaments for incandescent lighbulbs probably not.
Even in cases where we are looking at the same kind of manufacturing in multiple places, competitive advantages are lost. There are parts of Europe taht still have metallurgy and never attempted to divest, but lost comparative advantages because better technology came in at the wrong time in the capital depreciation curve: They invested heavily at the slightly wrong time, still had expensive labor, so they became far less competitive, at least for a while. Did they not pray enough to the manufacturing god? Did the Netherlands get lucky, or was sufficient dedication to manufacturing that led them to have ASML in their borders? Is the fact that Novo Nordisk found the most important pharmaceutical in the world a matter of Danish superior industrial policy, or did they just get lucky compared to the many other places with large investments in pharma that didn't get anywhere near that lucky?
The path dependence is not so predictable, and the path that makes you better today can lead you down a cliff. It's all gambles, and whoever claims they can predict what is the right one in the long run is being overconfident
ASML's success is partly (gross simplification) because it was the biggest local tech company (Philips) realising that they're too big to be effective, so they made a startup-esque new company which allowed them to be lean and engineering-focused. It's a good story of proper accounting allowing good company structures to persist inside of a bloated company.
Van den Brink gave a great interview some time ago, I'll see if I can translate it and post it here.
Pharma has plenty of examples of things like that. Discovery is made, nobody thinks it’s worth pursuing, the world and knowledge base changes, someone goes back and says “this deserves another look”.
A lot of the GLP-1 success is based on progress made in the diabetes space (incidentally so), the refinement of molecules and better understanding of how obesity could be treated.
>Manufacturing is the core example of path-dependent advantages, because (unlike what any econ 101 textbook teaches), marginal costs decline with increasing production quantity in the manufacturing sector. This means the more you make, the better you are at making more things!
Looking at how Apple said it would be impossible to get US chips, so much this. It needed a lot of investment to onshore chip production again. And we should onshore more high value manufacturing to keep the supply chain working in one place.
The EU has been better at keeping manufacturing competence, but I see a lot of these short term comparative advantage econ 101 ideas taking over in the EU as well.
The thing is there are also network effects, expertise building and marginal cost improvements to be built up in high value items and services.
The United States was able to build a tremendous economy by building up those systems while continuing to benefit from its older manufacturing base for decades.
The United States economy is far from perfect, but it hasn’t traded away a long-term asset for only short-term ones as you’re suggesting.
That last statement is absolutely true, but if you have a constrained domestic supply chain, high employee cost, and/or constrained margins on finished products, you're still going to have come out behind if you persist with domestic manufacturing rather than offshore. This is the calculus OEMs faced in the 1990s-2000s. The big bet that they all made is to assume relatively stable geopolitics, and that there wouldn't ultimately be a squeeze on the potential manufacturing constraints (labor, supply chain, capacity). Ultimately, it's proven to have been by far the smartest decision for high-vol / low-mix stuff: electronic components and consumer electronics (not to mention apparel and many industrial products).
Like I said in my previous comment, though, this doesn't mean the capability to build has left the US (or Europe). Just that the decision to continue investing in manufacturing things that aren't competitively profitable has been made and the capacity has been allocated to higher margin manufacturing (regulated industries, complex products, and products where customers are less price sensitive).
> The big bet that they all made is to assume relatively stable geopolitics
It's not just geopolitics. China required partnering with local companies and sharing IP. Even if they were geopolitically friendly, Western countries set up to build their own Chinese competition from scratch in exchange for lower labour costs, believing that either they could out-innovate China at design (even when Americans no longer understand how their own products get made), or that they'd be retired by the time it did matter.
> . Unlike what Econ 101 asserts about maximizing comparative advantage being the most profitable strategy, there is absolutely no guarantee that following a locally-optimal comparative-advantage strategy is globally optimal over a long-term window,
I think there's little doubt that our change in allocation of resources has been advantageous versus staying an economy focused on primary metals and relatively simple manufacturing. Do you really feel otherwise?
Of course, economic assessments and the behavior of markets generally assumes free choice by participants. So there's always:
1. Geopolitical risks: state leverage can turn a local absolute advantage in e.g. producing war materiel into other advantages.
2. Sure, we could back ourselves into a corner, ultimately, by not being able to provide a key part of the value chain by following that gradient. (Geopolitics can be related, too, in that states can gather together lots of small advantages and use them in coordinated ways against other states).
So our state, of course, needs to focus on countering those actions of other parties. And maintaining some diversity beyond what is economically optimal can add resilience.
(One point I make in class: our textbook pretty much says that price controls are always dumb... but that there are plenty of reasons that a country might desire to have a surplus of food or to not be dependent upon another country).
The track record of those who would seek to centrally plan and optimize for some future outcome instead of following that profit gradient has been very poor. Not to say that it's never worked: but generally following the profit gradient has yielded better outcomes.
> because of (unlike what any econ 101 textbook teaches), marginal costs decline with production quantity in the manufacturing sector.
Unlike what any econ 101 teaches? Talking about LRATC, returns to scale, etc, is a big part of my unit 3. If you're not referring to that and instead e.g. Wright's law, that too is mentioned.
I wasn't talking about "base metals and relatively simple manufacturing". Were you? When Tim Cook explained, in 2017, why the iphone had to be made in China, he explained that it's because China dominates advanced manufacturing, and has skill that cannot be replicated elsewhere.
The behavior of markets assumes free choices by participants that rewards the participants who make those choices. I do not dispute that the CEOs who were responsible for shipping supply chains to China were following their incentives, and it worked out well for them. I would argue that there are alterations to regulations on corporate governance which would increase long-term profitability of those corporations overall, but that the key people in the corporations aren't properly incentivized to pass them, nor are shareholders sufficiently informed or coordinated.
> Talking about LRATC, returns to scale, etc, is a big part of my unit 3
In your unit 3, do you draw LRATC curve as a parabola? Because that's the wrong shape for manufactured goods. Not only do average costs decrease, so do marginal costs, and this is monotonic over all but the shortest timescales. Wright's law is about half of the reason, yes.
> I wasn't talking about "base metals and relatively simple manufacturing". Were you?
A whole lot of the decline that we're talking about has been in those sectors. Microchips and aerospace grew; simple consumer goods and steel manufacturing fell through the floor.
> The behavior of markets assumes free choices by participants t...
Incentives can be, and often are misaligned. However, the context of our discussion is talking about large overall economic growth that has outpaced manufacturing growth, even though it is still positive. This isn't evidence of misaligned incentives.
> In your unit 3, do you draw LRATC curve as a parabola? Because that's the wrong shape for manufactured goods.
It's absolutely a bathtub.
It's steep-downward sloping, mostly flat for a loooooonnnggg time, and then upward sloping. Indeed, this understanding of the shape of LRATC originally comes from study of manufactured goods. At some point coordination gets hard and further increases in quantity require using resources that are not well suited for the task.
Of course, the quantity at which costs slope upwards may be at an impractically large quantity for any industry-- in which case that industry is likely to be a natural monopoly. And there are some recent arguments that coordination is easier thanks to information technology and that it is even harder to reach diseconomies of scale.
I endeavour to convince you that you are teaching your students a falsehood. Natural resource industries have bathtub-shaped average costs. Average costs fall strictly monotonically for manufacturing, and marginal costs either fall or remain constant. Constant marginal costs are what you get if you don't even bother to solve coordination problems, and just copy-and-paste your whole assembly line instead (except even then you can't help but gain economies of scale, if only from your tooling suppliers). The misconception that it's a bathtub does not come from the study of manufactured goods, it comes from thought experiments about manufactured goods done by people who never managed quote requests at a real factory. Empirical studies done on actual firms almost never show rising marginal costs at any quantity.
That this error has permeated introductory economics is a very, very big problem.
> Constant marginal costs are what you get if you don't even bother to solve coordination problems
You still have coordination problems on the supply and distribution side.
> Average costs fall strictly monotonically for manufacturing
This is an extraordinary claim that is easy to refute with simple thought experiments. e.g. You think that if I want 103% of the units that a set of equipment from ASML can deliver, that average costs will be lower than producing 100%? Or do you mean "strictly monotonically" in some other sense?
Being able to vary your capital in the long run doesn't mean that you can have 10.3 sets of photolithography apparatus.
> and just copy-and-paste your whole assembly line instead
If you copy and paste and have everything truly independent, without the need for any coordination of resources, what you effectively have is multiple firms. In practice, firms still need to allocate scarce resources among lines.
> The misconception that it's a bathtub does not come from the study of manufactured goods , it comes from thought experiments about manufactured goods
This is a falsehood. Bain conducted reams of real-world research on manufacturing, plant size, firm size, and returns to scale, and this informs today's idea of LRAC. Of course, this research is 70 years old, and recent data is more ambiguous. As I've said, some believe that information technology has changed everything.
I’ve been interested in Henry Charles Carey, the chief economic advisor to Abraham Lincoln. He wrote a book called the “Harmony of Interests” about the need for state policy + markets (to contrast with purely free markets). Lots of data and rigorous argumentation.
Apparently this was known as the “American School” of economics — and it dominated from the mid-late 1800s for over a century.
it seems that you both agree that it depends on the timescale; asml's next model of machine may be able to produce 10% more, or 91% less, and in either case that extra 3% of your demand will lower the average costs
> and marginal costs either fall or remain constant
Not true. If your factory can make N widgets per year, and you want to make N+1 widgets, the marginal cost of the N+1th widget is vastly greater than the Nth widget.
I think the parent comment was talking about building factories and amortizing their costs over your unit production, whereas you assume the factory is a fixed cost with fixed capacity and looking at the marginal cost to produce a unit, which is really rare in many real world situations.
For most goods, the factory doesn't run anywhere near N, and the fixed costs are 6 or more orders of magnitude higher than the marginal widget costs, so your business is well served just by finding any method to use that plant more effectivly. As an example, I was quoted $60,000 for a mold which would have produced parts at $0.005. (Very small plastic widgets.) At that ratio, any amount of scale will increase my profit, since the marginal costs, even if they increase by a factor of 10 or 100, are negligible to the cost of the tooling. (And the global market for this widget is measured in hundreds of units.) Any amount of reusing the mold is going to save me money. Sure we have problems if we need N+1 widgets in less than 1/N more time, but if we expected to need 2N widgets, we could reuse the tooling design at a second factory, and marginal costs actually do keep dropping.
But in real life, by the time you received orders for N/2 widgets, you were already breaking ground on your next factory. And if you get an order for 100N, you smile because now you can switch to a higher productivity manufacturing method, like stamping instead of machining; at 10000N you can invest in mass-producing the machines-that-make-the-machines. This is how we end up being able to make even complex products like cars so cheaply that we have more cars than people.
You know, part of the problem with the massive youth unemployment in China is that the Chinese, just like most people, don't want to work in blue collar advanced manufacturing. You might call jobs like consulting or investment banking as "useless jobs", but that kind of comfy white collar job is what everyone is sending their kids to university for.
They didn't do a very good job of pricing in politics.
Just because they're "lower value" subsectors doesn't mean they have significant real-world impacts.
This sort of announcement will inevitably be used shortsightedly for political reasons. Someone will interpret "We have 3nm at home" as "We can do something foolhardy with Taiwan" or "We can throw up a big, non-surgical tariff". This will soon be followed by "did anyone mention that the 3nm chip is useless without a galaxy of half-cent supporting parts that we outsourced decades ago?" or "people consume products other than highly binned silicon dies, and now we have supply crunches and price spikes from televisions to toasters to turmeric?"
> The net result is that US manufacturing output in real dollars has increased 4x, in the past 70 years.
All of that manufacturing growth is semiconductors, and most of that measured semiconductors growth is simply Moore's law. I don't think anybody would say that the US is worse at making transistors today than it was in 1970, but that's table stakes; everybody is better at making transistors than they were in 1970. Automotive manufacturing has also done well (in part thanks to trade barriers). When it comes to everything else -- vacuum cleaners, fans, washing machines -- that manufacturing output is not doing so well.
i'm pretty sure the small fraction of transistors that are made in the usa are cheaper, better, and more diverse than they were in 01970, even if those made elsewhere are far more abundant and cheaper still
I don't teach economics 101 nor taken a class. What about the other corporate departments that are being outsource?
The company I previously worked for not only outsourced product manufacturing to South Korea with assembly in the USA, after I left. They also outsourced customer service (CSR) to south Asia. Texas VCs bought the company and are trying to maximize all returns on their investment.
Companies like American, that produce branded products, have a whole department that helps their sales reps with moving customer support, be it email, physical letter, and or phone, to south Asia to reduce office management costs in the USA. They also could just be outsourcing invoicing while CSR is a local provider.
Manufacturing is a simple concept that is heavily politically pushed. The other departments that are needed to support products seem to be ignored. ML has a great likelihood of perpetuating this with real-time vocal transitioning. The CSR in India can sound like some person from New Jersey and break the accent barrier. This would put the customer at ease when sharing the same vocal tones. Consumers would be none the wiser.
At the end of the day, everything but 1) product development (R&D) and 2) corporate leadership are fungible and prone to outsourcing to the lowest cost locations until they get moved to a place where quality drops off enough that the company backpedals a bit. All those corporate departments are largely filled with commodity staff, so this shouldn't be surprising.
I'm not saying that in a judgmental or harshly negative way -- I've personally worked in cost centers for most of my career, and although I think highly of myself and my peers, we're still just assessed bluntly as part of COGS.
It wasn't a naive belief, people did choose to get along economically and everyone benefited. The naive part is thinking that economic interdependence means political submission and that political and economic development are necessarily related.
Sure. As I pointed out, something like the CHIPS Act may be good for US resilience and national security, but is unlikely to be good for US economic output.
I think that's largely the point. Obviously, it's a balancing act, but when market forces create a situation that is incompatible with national security it really is the governments job to address the situation even if, as in the case with Chinese EVs, it means a bit of pain for consumers.
It doesn’t elude people, they just think that the 80% of manufacturing that isn’t high end shouldn’t have left and that it was criminal for it to have been shipped overseas at the expense of middle America.
A lot of it stuck around. I grew up in the rust belt and tons/most of my friend's parents worked at one of the many factories that were, and are still around. Think dog food, plastic molding, car part manufacturing, and glue. Not the big stuff that people think of when they think of manufacturing though.
I think if you start to deep dive into the industries that left, you'll find the reasons were often more complicated than simple labor costs. American companies did get out-competed by foreign firms in a lot of key areas.
America is large, but they can't expect to be the best in the world at every industry. If an entire country focuses on a specific niche for long enough, it's possible they will become the best. Samsung and TSMC are incredible companies that didn't happen by accident. And yeah, the USA might not compete at that level on the global stage, but the American economy is also not so completely dominated by one megacorp either.
Also, a lot of manufacturing, especially the high tech stuff, is highly automated. So these massive factories don't generate the same number of jobs they once did. And the jobs they do generate are often technical. More maintenance and calibration of machinery, and less putting bottle caps on.
Tell me specificly which niche that Samsung focuses on:
>Product: Clothing, automotive, chemicals, consumer electronics, electronic components, medical equipment, semiconductors, solid-state drives, DRAM, flash memory, ships, telecommunications equipment, home appliances
>Services: Advertising, construction, entertainment, financial services, hospitality, information and communications technology, medical and health care services, retail, shipbuilding, semiconductor foundry
Don't get me wrong though, we shouldn't roll back our regulations but we should however ensure that what we buy is manufactured in that same conditions that we would demand at home.
Governments being laser focused on building a specific domestic industry and winning. I.e., as you point out, Samsung. It's hard to win a battle where an entire country has decided to push to become the best in the world in one field.
I mean, how are people supposed to afford all this high tech shit if they can't work decent paying jobs without a degree and the welfare state has been hollowed out? Manufacturing used to provide that.
Are companies just going to fight for a constantly shrinking middle class? Or just turn into gacha companies looking to hook a whale? Sell a single doll for $46,000?
Tektronix lifted the Portland Oregon region right up. Was called silicon forest.
At that time, Tek was funding startups its employees thought up after working for Tek, getting great education provided directly by the company as well as through college partnerships.
Tek also literally trained a workforce here by educating any of its employees and by doing programs with suppliers to do the same.
I am a product of that time.
A drive through this region in the 80's and early 90's was awesome! Shops of all kinds, Tek itself had COMTEK which could make damn near anything, and opportunities abounded!
Howard Vollem died and the MBA took over.
COMTEK was torn down, work was sent overseas, education stopped, startup funding stopped, and soon a drive through this region looked very different: hair nails and laundry.
While large scale manufacturing has grown, the rest has suffered huge!
Our military can't find the capacity it needs! And they, along with aerospace, are the best customers there are, with auto in some parts too.
The rest has been gutted.
That is what we need to fix. It matters.
If companies won't do what Tek did, and that is invest in the region and it's people, and they won't because getting max dollars at any cost matters more than sustainable business does, then we must have robust small to mid sized manufacturing.
Where else will our future skilled labor come from? And I left for higher end professional work and software. I can make anything I can draw, it was damn good at it too. Saw way too many places close and there's no way I can raise a family on that and I quit ... tons of us did.
The skills I have are rare and in high demand. Young people today can't get them like I did, and that adds right the hell up.
You think your arguments make sense. And you are not wrong. They do, but that is not the problem.
The problem is for your argument to make sense, a ton of people and manufacturing potential is lost and nobody seems to recognize the massive opportunity costs in all that.
And frankly if large companies aren't going to do it and get a return on that investment, then our government damn well should. We do really put our national security at risk doing otherwise.
This has a lot more to do with the stance of the past 30 years to manufacture defense materiel at relatively constant, small rates. There was no capital investment, because why pay to have a huge line that isn't being used. We spent our military dollars on wonder-weapons that would probably win a direct war quickly, but that we can't give to allies in a proxy conflict. Going so far was a strategic mistake.
> And they, along with aerospace, are the best customers there are,
Military are terrible customers, especially if you're a subcomponent manufacturer. Gravy might pour, it might not; it's very unpredictable. You spend a lot of effort and business just evaporates.
> Howard Vollem died and the MBA took over.
On the flip-side, can you imagine being the high-cost Tek of old in today's test equipment marketplace? Tek already struggles to compete against cheaper, adequate solutions. So much of that market has commoditized out.
> nobody seems to recognize the massive opportunity costs in all that.
Actually, that's exactly what I'm talking about, in both directions. Having a ton of manufacturing means we would have opportunity costs in the other direction. We've traded the manufacturing we had 50 years ago for other things. It's not possible to specialize in "everything."
> There was no capital investment, because why pay to have a huge line that isn't being used.
I'd like to suggest that what Tek did worked back then, and the same insightful leadership wouldn't simply copy the solutions from 20 years ago.
Thus the problem is "there was no capital investment, because there was no visionary leadership," and the problem is also that the short-sighted leadership simply saw "a huge line that isn't being used," instead of a workforce ready to take your company into the next century.
> Military are terrible customers ... You spend a lot of effort and business just evaporates.
This only applies to companies that lack vision, that seem to only be able to keep stamping out the same widget as 20 years ago.
> Tek already struggles to compete against cheaper, adequate solutions.
Seems like a lack of leadership, instead of an existential proof that Tek can't compete.
> We've traded the manufacturing we had 50 years ago for other things. It's not possible to specialize in "everything."
This actually sounds like the kind of visionary leadership that Tek or the larger Portland metro needs.
If I sound combative, please only read this in a curious voice. What kind of visionary leadership could rise from the ashes of the Silicon Forest?
> > There was no capital investment, because why pay to have a huge line that isn't being used.
I was specifically talking about war materiel. The US is not doing great at making things like low-tech artillery shells, because we've not had a large line running for them for quite some time. In retrospect, it would have been better to have a bigger stockpile and to be paying for more line capacity.
Things are steadily ramping, but it's taken a good year and a half to get to the quantities we now want.
> > Military are terrible customers ... You spend a lot of effort and business just evaporates.
> This only applies to companies that lack vision, that seem to only be able to keep stamping out the same widget as 20 years ago.
Nah, vision or not: political winds change and projects get killed. Being involved in an early program is exceptionally high risk: you need to start ramping to do the whole thing and you may get a good return on capital or a pittance.
> Seems like a lack of leadership, instead of an existential proof that Tek can't compete.
The overwhelming majority of the test equipment marketplace has commoditized out. This is a problem if you're still mostly a test equipment vendor. It would be even worse if Tek had higher costs.
> This actually sounds like the kind of visionary leadership that Tek or the larger Portland metro needs.
In those sentences, I'm not talking about Tek: I'm saying the United States has, as elementary economics predicted, specialized in areas where it has a comparative advantage over other countries. It is not possible to have a comparative advantage in "everything."
>Nah, vision or not: political winds change and projects get killed. Being involved in an early program is exceptionally high risk: you need to start ramping to do the whole thing and you may get a good return on capital or a pittance.
Often, people wonder about the higher cost associated with government cobtract work. One does need to cost out those risks and include them in project costs.
"Elementary Economics"
Economics is not a science. We cannot execute the scientific method on Economics because we have no way to repeat and or establish controls needed to understand results.
Policy drove "elementary economics", and made it predictive. And the policy was driven by strong advocacy dressed up as real science too. That advocacy was produced by people of significant means wanting more and more control.
Change the policy, and we will see the Economics change too.
Fact is we gutted a lot of small to mid sized manufacturing, and with it went many strong opportunities for people to take advantage of. Those people require help to make it because the opportunities they did find, if they found them at all, do not pay enough to make it, or should they, the labor burden and often painful scheduling makes for tired people lacking often the means and energy required to build skill on their own.
>Economics is not a science. We cannot execute the scientific method on Economics because we have no way to repeat and or establish controls needed to understand results.
You could say the same thing about mathematics, but it remains the case that it is useful to know some math.
Of course math is not a science either. Ultimately, math is a reasoning tool and in the economic context, it is not a complete tool.
There is policy, and that has a major league effect on what will make good economic sense.
The current policy could change, and that would impact what is worth what and why and the math can tell us what it always has.
Here is one:
For a long time we have ignored anti monopoly laws.
When competition is present, margins are less, people tend to get higher value for the dollar. When it is not present, margins are higher and people get much less value for the dollar.
Right now, big grocery is wanting to do one more merger to basically put Krogers in charge of grocery stores, with its competition being Walmart and maybe Amazon.
So far, each merger has reduced the number of products available to people and higher prices. But someone somewhere is banking more and paying less.
I like competition. I like higher value for the dollar and choice in business. I bring this up because I personally dislike Kroger and it is all about the much lower value per dollar.
How this all goes is political. Policy may be to preserve competition to prevent price gouging and all that comes with a monopoly.
The math may say more dollars are made by having one company, but that same math says it comes at the expense of the people too.
Does not, and I would argue, should not go that way.
And by the way the cost reductions that the guy above was talking about and other things were all in progress. And there was plenty of capital to invest.
What happened was the MBA crew took it right out of the fucking company, gutted the rest and we have a a shell of what we had before today.
All of the contemporary competitors of Tek were also bought out except for Keysight. Why? Low margins an incomplete lineup and commoditization of the asics.
Tek would have cost reduced that gear and it was in progress when it was all torn down. Tek would have also continued to make more great gear. That spirit stopped.
Tek was also getting nice returns on several of the more successful startups.
Vollum was no fool.
Snark mode = 1
You mean traded our future for baubles and trinkets today?
Yeah, I agree!
Snark mode = 0
I will ask again:
Where does our next generation of skilled labor come from?
And don't tell me we won't need it because automation. I have automated many things and will do so again, but I never managed to find a robot looking for a good meal, or a home, etc...
At some point we need to look at this in terms of our own, or we will be living in even more of a dystopia than the already growing one threatens to be.
If we do not ask and answer the question, "how do our future leaders and builders, mechanics make it?", they won't. And the cost on that is a lot higher than many will admit it is.
> Where does our next generation of skilled labor come from?
I don't really want to talk to you because you're being deliberately abrasive. But I will leave you with one answer.
Your question presupposes that all the other areas of the economy that have eclipsed still-growing manufacturing do not produce "skilled" labor. I do not think this is a valid assumption.
Hey I marked the snark. I guess I don't want to talk to you either if you can't handle a little real discussion.
And that helps nobody, yourself-included. There's nothing on this thread that you should turn your back away from. There's nothing on this thread that should even hurt!
And finally, I'll always talk to the other people. Keeping that door open is the only way we get progress. Just consider that for the future.
What's your calling abrasive is passion. I actually do really give a shit. Consider that too.
There's infinite people to talk to on the internet-- indeed there's more people to talk to on this thread that share your views than I can manage. I don't need to pick the sub-branch which is unnecessarily unfriendly.
edit: I care, too. I mean, I went into education where I'm teaching future high-skilled labor and building human capital ;) And--- where I am, the kids are alright.
They are all right for now. No joke. The ones who can afford to see you that is. ( education is currently expensive, not a slight on you at all)
There are good reasons why the percentage of people who agree with me are high.
Edit: yes you absolutely do get to pick and choose and I support your ability to do so! However I will observe that you are operating at a disadvantage by doing so
I'm at a private high school, so sure I breathe rarefied air.
But they're doing stuff like machining aerospace gear that will fly in space, doing structural and thermal analysis, designing and assembling circuit boards, implementing LQG controllers. Or just doing carpentry and fabrication for theater productions to the highest aesthetic standards.
And I go to competitions against other schools and see a ton of what we would have before considered "high skilled" adults, except they're 13-16 year old kids. They're going to go to university and further develop the ability to work with their head and their hands. But they're not going to go supervise a press stamping out the same part over and over, and they're not going to reinvent the wheel that they can buy for 30 cents per unit.
> There are good reasons why the percentage of people who agree with me are high.
This isn't a very good argument for the validity of an idea.
> Edit: yes you absolutely do get to pick and choose and I support your ability to do so! However I will observe that you are operating at a disadvantage by doing so
Avoiding being trolled is not "operating at a disadvantage." There's plenty of reasonable discussion, and the points you raise have already been answered and debated in cousin threads. I'm choosing to answer you a little more because you've been a little nicer.
>This isn't a very good argument for the validity of an idea.
Indeed it is not in terms of a convincing argument, however is is more than sufficiently compelling for others to think about, perhaps ask "why?" In this, they often will entertain more conversation that has real advocacy potential and that is just fine, intended.
I have taught in those programs and have also provided resources and equipment. Frankly that's all pretty darn good stuff! I'll bet you're having a pretty good ride too.
I will just say what you and others are doing is not enough.
Meta:
I was nice the whole time. There are no words of mine here to fret over. That is deliberate intent too. Some style choices are aimed at passersby and to provoke thought. Nothing more. Others may not be so nice. I get that.
Whether you answer me or not has no impact on my choices.
To be 1,000 percent clear, you were never trolled by me. Frankly I could probably do it and not even get under your radar. That sounds something I choose to do. The single most likely reason you answer is my speech here is compelling enough to warrant an answer.
It does produce some skilled labor, but those skills aren't always the same as the ones needed to make things and make them well and make them inexpensively and make them sustainably.
And by percentage it's no replacement for what we had before. All one needs to do is take a look at massive numbers of young people looking for opportunity not able to find it to understand what this all means.
And suddenly it wasn't 1960 and the PCBs were in mass production.
Suddenly it was 1990 and only the true high end low volume (space and mil) paid for their own custom silicon and fabs.
Finally it was the year 2010 and the front end of a scope was a mass produced part for pennies with an fpga and the scope was a hobbyist and auto mechanics tool.
Sure the scope did change, and Tek made those moves as they should have.
There was a great argument for trading some capability to continue to build new products on now current processes, with the same rapid feedback loop in place.
That should have happened rather than the very aggressive tear down and brain drain we actually saw.
The key point being ongoing and regular investment in the company and people would have yielded more and better products that would compete just fine, not just be the cheapest.
That organization would be smaller, but still potent and a lot more nimble, able to continue supporting technical engineering across many fields.
And as I have mentioned up thread, couple that with returns from smart spin-off investments and an ongoing innovation culture rather than just a cost cutting one and we would have seen more than we did.
I would also argue the big push to apply software was sexy, and took the air right out of hardware efforts. Lack of investment there was not about the lack of returns, and it still is not about that. They are just a different kind and over a longer time.
Ignoring those has bled the region of a lot of capability. It is much harder to make things and here we are trying to understand how the next generation makes it on hair, laundry and food.
Making things is important. And it is not the cheapest way of course. Having a large percentage of people unable to build lives is and will continue to be very expensive. Crime, need for government services and more abound.
Early on, the promise of new tech and automation was a reduced need to work as much and or at the least maintaining respectable standards of living.
Put simply, it was supposed to cost less to live and for the most part these things did not happen.
> I don't think the government applying such levers to change how the market allocates capital probably won't be a win for economic output or quality of life.
Even the premise that it was always cheaper to manufacture abroad is flawed in many respects as Congress subsidized offshoring over many years as part of an effort to encourage globalization.
Companies often receive massive tax breaks with write-offs to close US plants, tax credits, zero percent import duties, and lower overall tax rates by shifting their profits and losses through offshore banks.
In many respects profitability has most often been determined by the policies we subsidize. and for decades those policies were essentially all in for the benefit of offshoring.
Comparing the actual cost of production by location is far more complicated than just the cost of materials and labor when there are so many subsidies and policies involved.
Not to mention the demonetization of the working class(i.e. the dumb redneck stereotype) and the job class itself with the association of manufacturing jobs as dirty and unneeded with the goal of a service economy as the new future.
...compared to what? Growth is just one way of representing market health, and it's one that is typically pushed by capital for obvious reasons.
If you're talking about efficiency or productivity, you don't need markets for either of these, you just need any kind of economy to work with. Industrialization only intersects with markets (or capitalism for that matter), they aren't the same thing.
This might be true, but the number of jobs has fallen. It kind of comes from our measurement of GDP. If you have a high-tech factory that employees 10 people to make a $10,000 unit price electronic, that can easily become more GDP per factory than one that sells nails and screws for a penny each with 100 employees.
> One thing that I think that frequently eludes people in this discussion is that US manufacturing has pretty much been constantly growing for the past century; just its share of GDP has fallen as other sectors have grown faster.
> ...I don't think the government applying such levers to change how the market allocates capital probably won't be a win for economic output or quality of life.
I think the problem you're having is you're thinking of manufacturing in terms of dollars, like an aloof economist.
Yeah China has only ever really been a major player for about 3 decades. In a third of a century it has Actually SHRUNK American manufacturing to the point where there was genuine knowledge loss. It was cheaper to manufacture things in China so we used China, and now America doesn't even have the capacity to manufacture anything on the scale of China.
>just its share of GDP has fallen as other sectors have grown faster
I think this is inn-accurate. You're looking at a century of data but China only took 1 decade to overtake the US. We're now three decades in and the overall decline of American manufacturing is pretty evident.
True. That shift would be in the last couple of years. Maybe Vietnam is next China. But this is still an emerging event. What China did to the US already happened.
Vietnam doesn't have the population to be the next China. I wish them the best, but their time will not last nearly as long as China. (or more likely it lasts as long but it is shared with a bunch of other countries in Asia, Africa, and/or South America)
Nowadays, with so much automation going around, Vietnam can afford to become the next China even without a comparable population. Not that I think it will, but see the story of the Four Asian Tigers to realize how smaller countries can suddenly have a much bigger importance to the world economy.
china has been a major player in manufacturing technology for 4000 years, with several minor exceptions of roughly a century or two, one of which ended about 30–40 years ago
Just about all "made in USA" products today are "assembled in the USA from global materials/components." This usually means that the absolute bare minimum of work is done in the USA in order to claim US origin. For example, pillows that are sewn over seas from foreign fabric and the only part that is done here is inserting the filling and closing the final stitch.
The US was once a global leader in textiles and now virtually all of that industry is gone. The same goes for many many other industries.
From the 1930s until the 1990s, Rawlings Sporting Goods produced high quality sporting goods in Missouri. In my home town they made hand-stitched Baseball Gloves, Footballs and starting in the 1980s, Injection Molded baseball helmets. They also made all of the team jerseys for little league and high school sports in another town near by. They employed ~200-300 people in my town and probably 1000 more in a couple of other factories in other towns. In the late 90s all of that was moved to China. The same thing happened with hundreds of companies across almost every industry. Anyone who claims that industry in the USA wasn't totally gutted in the 80s and 90s is using some creative accounting or just flat out lying.
The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups
I think politicians hook onto manufacturing as an ideal of an industry which should pay well and has a low barrier to entry. If manufacturing grew 15% every year but employed 15% fewer people every year due to automation, it would be considered a catastrophe.
The reason most people want more manufacturing in the US is because they want manufacturing jobs. It is only within the last few years since the pandemic that we started to care about domestic manufacturing as a matter of national security
The real benefit of local manufacturing is that it makes related industries dramatically more efficient. For example electronics in the pearl river delta. You can buy everything locally and get prototypes in hours.
that US manufacturing has pretty much been constantly growing for the past century;
Really? Every time I see this claim its based on some citing some statistical mismash that the person citing does not understand and cannot explain.
How much tonnage of merchant shipping does the USA build in 2020s versus the 1960s?
How many TVs and computer monitors does the United States make in 2020s versus 1990s?
How many tons of steel does the USA make in the 2020s versus the 1970s? Of tool steel?
How many nuclear reactors are produced in the USA in 2020s versus the 1970s?
How many railway rails graded for high-speed trains are produced in the USA in 2020s versus 1980s?
How many CNC mills are produced in the USA in the 2020s versus the 1980s?
How many artillery shells are produced in the USA in 2020s versus the 1980s?
How many jet engines are produced in the USA in the 2020s versus the 1980s?
How many car engines blocks are produced in the USA in the 2020s versus the 1980s?
How many computer hard drives are produced in the USA in the 2020s versus the 1990s?
How many motherboards are produced in the USA in the 2020s versus the 1990s?
(Also, adjust all the comparisons above for population growth, we should be comparing manufacturing production per capita)
If you think that these comparisons are misleading because there are 'quality changes' please tell me exactly how you quantify these changes in quality.
Ignoring the thrust of the argument above, and missing the entire subthread where the nuance of how the US has redeployed its economy for comparative advantage is discussed and debated, to type that over and over was a bit of a waste of your time, IMO. Reading it wasn't a good use of mine.
If you read the surrounding argument and want to discuss some further point not covered, I'm here.
I've read the thread and have been very familiar for decades with these debates.
There are two separate questions:
1) Has USA manufacturing increased or declined in its output (measured in things, not $)?
2) If output has declined in terms of things, is this ok because of comparative advantage? Is this ok because the US mains a competitive edge in the highest value most technically advanced products?
As for 1), you say "The net result is that US manufacturing output in real dollars has increased 4x, in the past 70 years." Are you familiar with the term "researcher degrees of freedom"? "manufacturing output in real dollars" is an impossibly complicated statistical construct with infinite researcher degrees of freedom. There are infinite opportunities for "Getting Eulered" https://slatestarcodex.com/2014/08/10/getting-eulered/ That is why I insist on starting with the most straight-forward numbers -- how many cars? How much steel? And then layering on adjustments on top of that. If steel is down but it is compensated by some other high value product being up, OK, but show me the calculation, show me the work. Otherwise your argument boils down to "Trust the US government's impenetrable statistical calculations, we are getting richer comrade"
As for 2), when I first heard that argument from the most prestigious and credentialed economists twenty-five years ago, my toys and clothes said "Made in China" while advanced technical products like my computer motherboard was made in the USA. Now it's OK that the motherboards are all made abroad and because the most technically sophisticated motherboards are made in the USA. Well, it seems to me like the areas where the USA has comparative advantage in making the most technically advanced products is becoming a smaller and smaller every year. Just this year we are made aware of how much Boeing has lost ground to Airbus. Seems to USA is increasingly reliant on low-tech exports like soybeans, or worse, exporting dollar bills. It seems to me like our trade deficit is gaping wide, which means our real export is living off our status as the global reserve currency. Which feels nice until ones military might is no longer able to support that status (see 16th century Spain). Seems to me that the US is losing ground on military relevant manufacturing -- particularly drones but also steel, ships, etc. And without that, it will not be able to maintain its status as reserve currency in the long run.
Whether manufacturing grows, on its own or as % of GDP, has nothing to do with any particular segment of manufacturing has grown or declined, or emerged or disappeared.
As a thought experiment, you can do the same analysis with any number of technologies from the 20th century—typewriters, vacuum tubes, plate-based printing presses, analog telephones—and the point is obvious.
I didn't include typewriters on my list of goods. I only included items like cars and motherboards that were as economically relevant at the beginning measurement point as they are at the endpoint.
If you think that the manufacturing output in some of the things I listed declined or stagnated -- but it is countered by the fact that US manufacturing of other newly invented goods has increased -- then please specify what those goods are. Seems to me like the US manufacturing also lags in newly invented goods -- like drones.
> I think it was a big case of corporate welfare that will result in somewhat increased chip production in the US.
I see two issues with this:
One, this is the same kind of subsidies and meddling with the markets that we accuse China of doing. If we are adopting state-led approach, it can be done in a serious manner without being hypocrites. But that would also require admission of some mistakes.
Two - why is it seen as okay to give tax breaks to an engineering company, why not give tax breaks to engineers themselves instead? Companies are imaginary, people are real, why not give incentives to individuals?
At least that money won’t be squirrelled away in tax heavens.
Moreover, share of GDP has been falling because prices of manufacturing goods have been all falling vs inflation, pressured by foreign competition and by productivity improvements, while rest of the economy - services - face none of that: they usually (except corner cases like call centers) can't be outsourced abroad, and output there depends strongly on labor inputs (e.g. waiters) thus making productivity stagnant almost by definition.
So there isn't a problem about manufacturing, never has been. Problem is strictly about manufacturing employment, which is of course, inexorably falling and will continue doing so and every politician promising to reverse it is a blatant liar. It's falling much like farm employment has been falling 40-70 years ago, sure it's traumatic, ruins livelihoods of millions of families many of which will never recover, destroys not just their personal finances but their source of pride and sense of self in many ways. But just like it didn't result in decrease in food output back then (quite the opposite happened), it doesn't result in dearth of manufacturing products now.
You could outsource more services and automate them more. But many service industries are protected by laws and regulations from such competition and improvements.
> I think this is a win for national security. I don't think the government applying such levers to change how the market allocates capital probably won't be a win for economic output or quality of life.
National security and global freedom of navigation are essential preconditions for our current level of economic output and quality of life. In the long run, it’s not an either/or.
Well maybe your quality of life but for the common man in the US? There only seems to be hopelessness on the horizon. It makes you think, who are we really fighting for?
As someone who also feels like the future is trending downward, I hope we can at least get some crumbs from the top.
And you would imagine that quality of life would be better if the U.S. found itself on the losing side of a major war? Your premise that there seems to be hopelessness is more of a media driven phenomenon than reality. There is just no evidence that "the future is trending downward" - at least in the U.S. Every measure you look at shows that for Americans life has improved and continues to - especially in comparison with our global contemporaries.
I'd go as far to say that even a credible threat of war against the USA would have a substantial negative impact on our economy and by extension our quality of life; practically all of us would be impacted. People who don't see that are missing how much the OVERWHELMING majority of Americans have benefitted from USA hegemony over the past several decades.
Think of it another way, the US is only 5% of the global population. That means that 5% is benefiting at the expense of the other 95% due to this hegemon and the other 95% is trying to chip away at this and seems to be failing (as far as we can see but there is so much BS on both sides who really knows)
But wait, of that 5% we can clearly see many negative indicators among at least half (if not more) of the population.
If you are not in tech or part of the asset owning class then your wages have been flat or in decline. With the ever increasing amount of inflation in most goods, your lifestyle has been in decline.
So really only a subset of that 5% has been the beneficiary of the hegemon. Does that look like a thing to be proud of? A small in-group of people have got it going while everyone else is trending negative either now or going in that direction in the future.
It begs asking the same question I mentioned in my original post: Who are we really fighting for? The answer to this question really depends on if you have empathy for others or if you just care about yourself or your "tribe".
>practically all of us would be impacted.
To be fair, I did also point out that I hope that people in this bucket at least receive some crumbs from the top. Thats all we could hope for. But if you continue on that thought process, if the hegemon dies at least there would be some justice if it took out the top with everyone else.
2. My focus was deliberately very generalized to focus on the way the US benefits itself by pushing others down on a global level. We could drill down on a country by country basis and find ways in which the US can benefit the country and ways in which it benefits at the expense of said country. If you take the entire world population as a whole you can make the argument that it is a net negative and that maybe a stable multi-polar world might have different results. I don't follow Indian geopolitics as closely as others but sure the US Navy's efforts to patrol the oceans to benefit their main trading partners in Europe and Asia also helps to benefit countries such as India and Pakistan by helping secure trade but also secure a stable source of fuel and food (which is starting to slowly break down now) while at the same time, their clear efforts in deposing democratically elected Imran Kahn because he started to shift away from the US is a net negative to Pakistan's future.
The ideal future would be a US that is checked by other rivals that can equal its might.
This would have multiple repercussions: The idea of an evangelical christian fueled "end times" would be over, the propping up of Israel would be much more painful than it is now which would result in severe scrutinization.
The chances of other economies given a chance to emerge might be higher if the cost of the west meddling in its affairs gets more expensive.
Life would be harder for people like me, but there would be more peace when going to bed at night.
Interesting hypothesis; I would encourage you to test your hypothesis by moving to Russia, China, Iran, or North Korea, and help those countries to grow its might equal to US. And also see how hard your life becomes
Yeah this is the standard response the right wingers and the pro-corporate Dems love to give. Just really low effort as usual.
Let me propose an alternative and just try to consider it: How about we let those countries develop and if they can have a sustainable system then great, more competition is good for humanity or if it does not shake out then they will collapse or be forced to pivot and then we will know for sure.
What isn't cool is deliberately trying to cut their legs out because we want to remain unchallenged (Venezuela, Iran, Russia, China) or quietly control their government preventing any chance of democracy (This year Pakistan, a few years back Venezuela etc.)
I'm pretty sure we let Russia develop after their collapse in 1990, right up until they invaded Ukraine again in 2022. And we let China develop after they liberalized in 1979, right up until they turned dictatorship in 2017, snuffed out Hong Kong in 2019, and became close war ally with Russia in 2023. Those are pretty long time I would say.
This history is tarnished by years of propaganda on both sides. We could have a deep discussion on how this is not the case in many aspects as well as how it may be true in some cases. If I haven't made it clear already in my other responses in this thread, in geopolitics nothing is black and white. But since you gave such a typical Republican/Corporate Dem answer before I dont think you are one of those people worth wasting time on so I bid you farewell.
The last time we had a multipolar world with multiple competing rivals, millions of people were slaughtered in a world war. Have fun with that if you want but I prefer the way things have been for the past 79 years.
> There only seems to be hopelessness on the horizon. [...] As someone who also feels like the future is trending downward, [...]
What are you talking about? We are living in an age of unprecedented global peace and prosperity. Most people never had as good as today, and things are set to improve further.
There are clear trends even acknowledged among the most pro-American analysts that the coming world will see a reversal of good fortunes by many in the world. We are living in a environment propped up by many things that are going away. There are many risks that can contribute to that. Of course if I knew exactly what would happen down to the day, i'd be betting in the stock market so these are more general trends which is what I was referring to.
Poor leaning trends include:
1. The collapse of governments that were pushed to the end by the US and its partners: Pakistan(deposed leader), Iran(sanctions, deposed leader), Venezuela(sanction, attempted to depose leader in 22), and I guess you can now throw Ukraine and possibly Russia there as well(collapsed economy, massive population casualties + collapse level birth rates)
2. The US has essentially acted as a bully towards many countries in the global south and while many of them have had to just take it, they now have another bully (China) that they can play off of each other.
In the short term it will be painful as the US tries to keep people on their side through backhanded efforts (Pakistan, Bolivia) but in the end the countries know that the China is a unreliable ally that only wants to dump their manufacturing overflow and take resources back while the US is an unreliable ally that bullies everyone into positions that favor itself(4 years loudly and then the next 4 years quietly) so with no other hope, the best move to play is trying to extract as much as they can from both sides (Djibouti for example). Not sure if you can make the argument that "unprecedented global peace and prosperity" is coming to these countries, they are just trying to get by with what they can.
3. Lets not forget climate change: Overwhelming % of historical emissions caused mainly by the west and with the consequences to be dealt mainly to the third world. Where is the justice in that?
>Why are you so focused on the US? The world is a big place, and everyone has agency.
The post is about the US, the thread is about the US and the message I originally replied to was about the US....
If you are talking more generally, I am baffled as to why you would ask that. The US's actions are reducing/removing free agency for a significant percentage of people on the planet. I am pro-humanity. Those people are no less deserving of all the possibilities that life has to offer but just as importantly, they deserve every chance to improve their lot. Since we have concrete proof that the US has acted to cause problems in other countries, they will be criticized.
Well, sure. The essential tradeoff is always figuring out how much to economically kneecap yourself in the short term to maintain economic independence in the long term.
And, of course, if you overshoot and the other guys outgrow you as a result, that limits your ability to be secure as well.
Not all economic growth contributes to national security the same way. In particular, outsourcing a large share of your manufacturing to your primary geopolitical adversary is a poor strategy.
People in mainland China have gotten massively richer over the last few decades, but America did not have to pay more for imports. If anything, the increase in productivity made Chinese imports relatively cheaper.
It's simple. If one day we run out of people willing to work on goods for us for pittance, the price of goods we consume will rise and our quality of life will drop, because we won't be able to afford as much stuff. Right now, there are still billions in people living in poverty in countries that are friendly to capitalism (so, easy to set up a factory, a sewing sweatshop etc. there), so that risk is far from us.
I’m not convinced… there’s so much room for technology to fill the gap. Companies that fail to properly invest in tech to replace this labor will be beaten by those who do, and quality of life may actually improve as the marginal cost of production marches ever downward.
Manufacturing fell from 25% of GDP in 1947 to 12% in 2015... but real GDP increased by 10x. So, the value of manufacturing output went up by ~4x over that span.
Just further evidence of the accelerating returns to capital. It just makes less and less sense for America to be engaged in highly wealth-distributive (i.e. labor intensive) activities, more sense for it to engage in capital-intensive ones which, by definition, accrue further benefit to the owners of that capital. Yikes!
But industry cries out for more immigration to suppress wages because they don't have enough workers (or at least, not enough leverage in the labor market as they would like), so I'm not sure if that tracks.
They will keep crying that, no matter the actual labor market situation. My country has low wages, high unemployment, and yet businesses similarly cry for more immigration, as they always want to find the most desperate worker who accepts the lowest wage possible. That's the reality of modern capitalism.
Of course they are humans like everybody else. But I do not support mass migration as a tool for bringing the wages further down and exploiting workers. I think the rich should be taxed much more, and that money used to reduce poverty & improve education globally. It's not migration itself that is the problem, but the fact many migrants are in a position where they can be exploited more easily than native workers.
In ideal world businesses would have to pay a fair livable wage, no matter where they build factories, or receive migrants from.
Nobody would be investing in labor intensive industry because it doesn't return as well, so there would be a huge oversupply of labor, so prices would already be at their floor.
Economic systems aren't typically describable with terms like "nobody." There's an equilibrium in investment levels between capital- and labor-intensive sectors, and that equilibrium is moving. If there was a huge oversupply of labor, then it'd make it more compelling to invest in labor-intensive sectors, which would both shift the equilibrium and eliminate the oversupply (which is what has already happened/is happening every hour of every day, thus there's no massive oversupply).
Let me echo back what I understand to be your argument: “If there were accelerating returns to capital moving the equilibrium of labor/capital-intensiveness mix, then there would be no demand to further reduce the cost of labor”
My argument is: regardless of where that equilibrium is at any given point in time, it will almost never be 0% labor-intensive, and anyone engaged in labor-intensive production would always have a preference for even lower-cost labor.
So the answer to the question of, “why do businesses want immigration despite a more capital-intensive mix of production” is “because cheaper labor is better regardless of how much labor you need.”
You're replying to basically a strawman I wrote. I didn't say that is what's happening, I said that's what would be happening if investment was all going into capital and not labor intensive industry as OP said.
Not confused at all, the person with the fallacy that wage intensive activity is insignificant in importance is. Clearly as you say returns are balanced, and the balance that has been arrived at is desperately crying out for more and cheaper labor.
EDIT: Oh, OP is you! No wonder you're getting touchy. Your original comment is wrong.
The jobs, and in many cases the expertise held by the people working those jobs.
I think this was the angle epistasis was coming from: not just that chips are physically being formed within the boundaries of the US, but that citizens are involved, being trained and garnering the practical experience that comes with being intimately involved.
So, so much of this sort of experience has been lost over the past few decades, and the fallout is palpable: how many discussions have played out right here surrounding the challenges of manufacturing anything, even trivial bits of plastic, at scale without spending years traveling across the world, dealing with language and cultural mismatches, ensuing mistakes and quality issues?
We're in a weird place now, wrt manufacturing skill - there are still plenty of individual crafters, folks who can make one-off or small runs of high-quality goods... For a pretty high cost per/ea. But scaling is troublesome; to hit that economy of scale requires a lot more people with maybe journeyman-level skill, folks who cut their teeth in a large operation and are looking to specialize - and those large operations aren't here.
> US manufacturing has pretty much been constantly
Middle class manufacturing jobs have fallen off a cliff and completely destroyed huge swaths of our country. Take a tour around Bridgeport, CT sometime as a great example. The northeast is littered with towns like this. These executives and their buddies in Congress mortgaged our middle class for profits by sending all our industry to Asia.
> I don't think the government applying such levers to change how the market allocates capital probably won't be a win for economic output or quality of life.
We've got China cheating with their massively deflated currency, so how the market allocates capital is already screwed.
you probably didn't read news lately. your CNY deflation theory is no longer being cooked by your MSM for a good reason - if the CNY deflation claim is true, then it means the Chinese economy has probably already surpassed the US economy not just in PPP but in real term as well. That would cause huge load of issues for the US which is never prepared to be the No.2.
> transferring knowledge from TSMC to a US workforce.
No, no it's not.
When semiconductor manufacture moved to Asia, this was generally done under a "technology transfer agreement", which was an explicit agreement for US companies to transfer their (usually older) tech to an independent local company who would then be allowed to manufacture it and develop it.
This is how TSMC started, by doing a deal with Philips to manufacture for them but also to trained on the tech and to be allowed to use it themselves.
This TSMC US fab (and Samsung's new fab) are not under such an agreement, it is directly run by TSMC with no explicit goal to transfer technology.
I think it was a mistake for the US CHIPS act funding to go to such a venture without a clause for technology transfer back to a US company.
I’ve seen this attitude in other fields and while it is conceptually true, the more complex the field, the more workers have to „walk away“ with their knowledge to have enough knowledge to be of any use
I would say as a company having an extra foundry in a less earthquake prone part of the world is a good idea to keep the company alive in the case of a major disaster.
nope, US would not give an inch of taiwan in case of invasion
we talking about geo politic here. if china attack taiwan so would be north korea (this is their best chance)
for south korea and japan this is their existensial crisis, having china and north korea close to their home even for a kilometer is basically death sentence
You cant forget also US literally spends billions of dollar to keep balance of power in Europe,Middle-East and Africa
do you think US would ignore Asia where 30+-% world trade and resources happen??? you dnt need expert to figure it out
These workers didn't create the fab equipment and don't know how to design or create the machinery used there. They also don't have access to the software source code. Most US workers hold maintenance or managerial positions, while those with the deep technical expertise come from Taiwan. There will be no knowledge transfer, aside from how to operate the fab, which is something Intel US employees already know.
The US workers are almost certainly limited to people who are low to mid level techs who don't know anything useful. Everyone with actual cutting edge knowledge is from Taiwan and almost certainly under the tightest of NDAs and NCAs.
Even high level people in the plant still aren't that useful. What's useful are the insanely expensive, insanely complicated extreme-ultraviolet lithography equipment from ASML. Nobody in the world makes the stuff they do. At least, that we know of. It wouldn't surprise me if the NSA has funded designing and building an EUV lithography system, or just stole the designs from ASML. We know they do a lot of their own ultra-miniature silicon, so they have a strong interest in this sort of tech.
American companies already know how to manufacture older chips. It’s not like TSMC is light years ahead of Intel. They’re ahead, but not by so much that their older generation tech would be transformative.
Semiconductor R&D is very multi-dimensional (despite the media only talking about the one dimensional made up measurement of node size), there are many things Intel could learn from TSMC, and the other way around too.
TSMC is ahead because it adopted ASML's EUV tech earlier than Intel (huge blunder by Intel). The real tech breakthroughs came from ASML, and Intel now has that technology too (and is trying to leapfrog TSMC by being the first to get the new High-NA EUV from ASML, though it won't actually producing sub-3nm chips with it until 2025 or maybe 2026).
Depends what you mean by "adopted".
Pretty sure Intel had EUV prototypes before TSMC (or at least very close), but it was slower to transition its high volume production to it due to execution issues.
> The real tech breakthroughs came from ASML
I know this how the media portrays it now a days but there's so much more to semiconductor manufacturing than lithography, especially since the serious slowdown of lithography scaling with around 193 and 193i litho.
Great example is GlobalFoundry which sent its EUV machine back because it realized it could not compete on the R&D needed to keep up with the other foundries.
> Depends what you mean by "adopted". Pretty sure Intel had EUV prototypes before TSMC (or at least very close), but it was slower to transition its high volume production to it due to execution issues.
EUV by ASML was not possible until there was a technology to create focusing lenses for it. Intel decided not to "wait" and use their existing technology to beat everyone.
There was recent news of Japan (OIST) developing a new more efficient type of EUV, and also of Canon having a new alternate "nanoimprint" chip manufacturing technology.
Japan has been working on EUV for a long time but is very far from a working machine, despite developing IP.
Notice how that article only mentions simulation tests; very very far from getting all the pieces needed for EUV litho.
On the nanoprint technology: as far as I understand it, this will have economic advantages in trailing nodes but is not currently seen as a way to scale past EUV.
Aren’t Philips and ASML both effectively under American control anyway? Is the TSMC part of the stack that special in terms of actual IP (versus more squishy organizational know-how)?
> Aren’t Philips and ASML both effectively under American control anyway?
IDK about Philips but ASML follows US export restrictions due to a deal it agreed to when it bought a US company a few decades ago, yes.
> Is the TSMC part of the stack that special in terms of actual IP (versus more squishy organizational know-how)?
I don't want to go into too many details as I work in the Intel Foundry but it's certainly both. We'd be very happy to know how TSMC does some specific things, let me put it that way.
At the same time, our execution has been dubious since 10 nm.
IIRC it wasn’t because of an acquisition but part of a joint venture with ASML, Intel, and some other companies to develop EUV with a bunch of Department of Energy funding that started in the late 1990s.
> In 1997, ASML began studying a shift to using extreme ultraviolet and in 1999 joined a consortium, including Intel and two other U.S. chipmakers, in order to exploit fundamental research conducted by the US Department of Energy. Because the CRADA it operates under is funded by the US taxpayer, licensing must be approved by Congress.
ASML follows US restrictions because of US power. That purchase is just convinient excuse. If they never bought it, US would force them other way (e. g. access to banking).
Europe has banking, too. Even better: nobody in Europe sends paper checks around anymore, we use instant wire transfers here! European banking is way ahead of US banking in a lot of ways.
So, banking is not exactly something that the US can use to coerce a European company. There are much more effective avenues for coercion, though. But IIRC, in this case, the US gov basically convinced the Dutch gov that making ASML adhere to US restrictions would be in the best interest of both of them, and not much coercion was necessary. After all, both countries are on the same side when it comes to the system conflict with China.
Philips as far as im aware doesnt contribute that much anymore. NXP split off forever ago. Philips may have build TSMC together with the taiwanese government but its hardly relevant nowadays.
Philips spun off both NXP and ASML years ago, so all their relevancy in chip manufacturing disappeared and went to both companies. Same happened with LED manufacturing, going to Signify NV.
Philips has only kept its expertise in medical devices and a large pool of patents for many technologies (MPEG-2, H264, Ambilight, BluRay, OLED, etc.)
I actually think the extreme density and breadth of manufacturing in China is going to continue to outpace US manufacturing. They have multiple enormous manufacturing hubs connected by high speed rail lines over a wide geographic area. The US has no equivalent to the likes of Shenzhen and Guangzhou, where you can finish a PCB design in the morning and have the prototype in hand that evening. You can go to the Huaqiangbei Electronics Market and find exactly the right motor and controller for your specs, pick up specialized sensors, and build your next rev overnight.
I have lived in the Bay Area my entire adult life. We used to have Halted/HSC, we used to have Weird Stuff. We used to have Triangle Machinery Co in Santa Clara. Now everything is gone.
I think it’s great that we built a semiconductor manufacturing plant. That’s important for strategic manufacturing. But we’ve so thoroughly destroyed our manufacturing base, let the factories rot, and financialized property value that the “weird place with random electronics” can no longer even afford to do business. Starbucks makes more money, so in it goes.
US politicians love to shout about manufacturing. “Manufacturing jobs jobs economy growth.” But these people DO NOT understand how things get made. They have no serious industrial policy. They do not know the value of a high speed train connecting manufacturing centers. And even if they did, the entire apparatus of our government is set up to stop it.
Manufacturing workers need education. They need housing, transit, health care, maternity and sick leave. They need secure jobs and extra income that allows them time off to take classes to learn new skills.
I’m glad we passed the inflation reduction act, and the CHIPS act. We need that investment. But it’s going to take much more than that to “bring manufacturing back” and I’ve have seen time and time again that we do not have the vision or capability to move in the ways that would be required.
I hope manufacturing comes back. We desperately need it. But I’m quite frustrated that despite some marginal progress, the serious changes we need are not on the horizon nor seemingly beyond it.
I came here to say something like this. I've worked in product development in the Bay Area for 30+ years and brought numerous products to market, mostly manufactured in China. There's nothing like the density and ability of manufacturing that's in China (and more broadly in other parts of Asia). In the US I've worked with great molders and toolers, PCB fab, machine shops, CMs, etc. but the ability to turn on a dime and get stuff done quickly in southern China is insane. In the Bay Area you see billboards for esoteric SaaS products and credit cards for startups, in parts of China, they are for molding machines and CNC tools. You drive by rows of roll up doors in the base of apartment blocks and each stall/shop is filled with bar stock, plastic pellets, CNC machines, injection molding machines, etc.
You'll also see people doing complex repairs of mobile phones sitting on a stool on the sidewalk. The level of skill and access to tools/spare parts that is endemic there is completely different than the US.
Perfect comment, it's important to celebrate but more important to keep in mind it's a tiny piece of the public infrastructure and government inertia we need to do this correctly. We need exactly what you describe, and I want to bolster the mention of education. China produces 2x the stem phds we do every year. Sure, bigger population, but they also have a growing share of citations. (source for both is suleyman's book "the coming wave")
Ignoring how we define "serious", they do have an industrial policy. You just may not agree with the wisdom of the outcomes wrought by the regulatory regime. I don't know how you ever compete with the developing world that has a surplus of people and comparatively lax regulatory framework for everything from labor to the environment.
The policy is to move all the dirty work to someone else's back yard. It seems to work as long as the shipping lanes stay open and the other economies have something to gain (room to grow and raise standards of living).
Those who tout Free Trade and Globalism as well as those who look at Wall Street numbers and claim that is success.
>Production offshoring, also known as physical restructuring, of established products involves relocation of physical manufacturing processes overseas,[22] usually to a lower-cost destination or one with fewer regulatory restrictions.
>Physical restructuring arrived when the North American Free Trade Agreement (NAFTA) made it easier for manufacturers to shift production facilities from the US to Mexico.
>This trend later shifted to China, which offered cheap prices through very low wage rates, few workers' rights laws, a fixed currency pegged to the US dollar, (currently fixed to a basket of economies) cheap loans, cheap land, and factories for new companies, few environmental regulations, and huge economies of scale based on cities with populations over a million workers dedicated to producing a single kind of product. However, many companies are reluctant to move high value-added production of leading-edge products to China because of lax enforcement of intellectual property laws.
I've long been of the belief that, much like uranium enrichment, supply chain integrity of semiconductors will become a national security issue. We've seen it already in reverse with export controls being placed on GPU cards, and of course there is a reason the NSA operates its own chip fab. The threat to western economies of (for lack of a better term) "poisoned" chips making their way into phones, laptops, industrial SCADA equipment, etc. is real if nascent.
On-shoring top-tier manufacturers like is absolutely a win not just for the high-tech manufacturing sector but also for the US and allied countries.
I wonder how Taiwan feels about this. From their perspective jobs are getting offshored from their country because of massive subsidies, and the strategic shield of having most critical semiconductors coming from them is getting getting thinner. At the same time they can't complain because only the US could defend them from China.
I've always thought there's some geopolitical chess at here. The US can't abide being completely dependent on the island of Taiwan. So if TSMC wasn't willing to do this, the US might fund an alternative. This could leave Taiwan no leverage at all.
Now, with some US based production, TSMC is still in charge, and more resilient to disruption. So it may still be a very strong move.
I am not sure if Taiwan has any real leverage. If Taiwan is destroyed or otherwise compromised by China, the US would probably seize the American branch of TSMC, force the sale of the American branch to a western company, or force TSMC America become an independent company.
Isn't that like China seizing an iPhone factory and declaring that they are going to make the next iPhone? I doubt that a TSMC US fab can function independently for very long in the case of invasion, the Taiwanese govt presumably did this calculation before signing off on it.
Reactions to active conflict have a different threshold than normal civil operations. The interests of the US are biased towards continued peace. War is inherently value destructive (even if the military industrial complex gets to sell more stuff for a bit) so a majority of the population from a multitude of perspectives would rather remain fat and happy with their circuses (sports-ball).
That balance changes, as it has since the dawn of western history times, when outside forces disrupt the regular machinations of the people. When events like Pearl Harbor, the turn of the century terrorist airplane hijackings that turned them into missiles and America's citizens into hostages to our own national security theater paranoia, or some country turning the place all of our iPhone and computer brains are fabricated in into a war zone.
> fat and happy with their circuses (sports-ball).
You are protecting your ego. The modern circus is the algorithmic feed. And we are consuming it more obsessively then any previous form of entertainment.
It’s looking really bad for Taiwan to be honest and I don’t think the US has the political will to face off a full on invasion of China against Taiwan. Our military could handle it, but I don’t think the public will is there. I don’t think that China will come away with much other than more land though, the Taiwanese will not hand over their factories and IP to CCP companies, they will blow them up.
Any conflict would leave the small island looking like Gaza, a pyrrhic victory for everyone involved -- if you're trying to seize more than land. It's conceivable that the country making islands in the SCS would see a mere land grab as a win, doubly so if they can weather the global hit to chip production better than their rivals. It's untenable for the US to have so many critical eggs in such a vulnerable basket.
Isn't this better for Taiwan because it strengthens their ally, The USA?
If China would just wipe out Taiwan's ability produce chips, and disables part of the US information tech supply chain, then it would be bad for Taiwan right?
What? All the knowledge can be transferred to the USA in case of an invasion via open refugee status and brain drain from Taiwan to the USA under the circumstances.
I’d suggest you post a small/medium quantity machining RFP on MFG.com with a medium to high complexity. I’ve been quite discouraged that US vs China price differences are 5-10x. (My part was a custom M0.8 screw in quantity ~500.)
It seems that without a vibrant base of small businesses, it will be very challenging to truly reinvigorate US manufacturing. And that would require reforming the finance sector/allocation of capital that currently is skewing really heavily towards “scale”.
One can only hope that the US learned from its mistake, and doesn't allow chip manufacturing to go offshore to that degree again in future peaceful times.
It wasn't really a mistake. At the time Taiwan and South Korea were advancing into semiconductors, the US was more concerned with Japanese domination of the industry so having 2 small countries as alternatives to compete with Japan in some sectors of the industry was beneficial.
One of those small countries has a belligerent neighbor to the north, and the other is coveted by a much larger superpower that thinks it still owns it.
The NK situation was obviously widely known at the time, but that the US population/government didn't forsee or take seriously enough the rise of China is perplexing to some of its allies.
Tell that to Russia, its economy is - military production aside - in shambles due to Western sanctions and especially the brain drain.
The idea of economically enforced peace only works for democratic countries where the government has to show at least a bare minimum of respect towards its citizens, but not in countries that follow the whims of their respective Dear Leader.
Putin is surrounded and supported by people who are probably losing a ton of money right now. When he finally learns his lesson, it's probably going to be a harsh one.
Too bad for them they can only spend it in Russia on Chinese stuff. (My father in law lives in Moscow. Muscovites pay more for old Japanese cars than brand new Chinese cars)
At the time international trade was still fairly minor, so although a war would be deeply unprofitable it'd still be possible. Today's economy looks quite different, with even basic consumer goods coming from overseas. If international trade were to suddenly cease, most major countries would be in serious trouble really quickly.
The most extreme example of this is the European Union. Its economies are so deeply interwoven that they act as a single entity. Separating them to the point that one of its members can independently support a war economy would take decades, so it does indeed make intra-European wars virtually impossible.
Make's war more unappealing to those that are rational, which is the best you can hope for because there is no sure fire way of dealing with the irrational.
Although I think wars do often have an irrational element, economic considerations aren’t the only ones that should influence rational decision making.
We survived the Cold War because the U.S. and the Soviet Union were able to rationally agree on not using nuclear weapons. I sure believe countries today can rationally agree on avoiding war for fear of the economic consequences.
> US learned from its mistake, and doesn't allow chip manufacturing to go offshore to that degree again
I don't think USA made any mistake. It was always heavily invested in South Korea and Taiwan. Neither of them would even exist today without USA's investment, interest, and stewardship.
On top of that, the US outsourced of a very very ecologically damaging part of industry. The remains of Silicon Valley, literally named after the hotbed of what was manufactured there, are the largest concentration of Superfund sites in the US.
Is it that ecologically damaging? Maybe in the old times when silicon wafers where produced in Silicon Valley and when no-one thought or cared much about the environment. But today, I would assume the damaging effects of semiconductor manufacturing are less profound. But I do not know. Any inputs are welcome.
> But today, I would assume the damaging effects of semiconductor manufacturing are less profound
Manufacturing chips of just TSMC accounts for 5% (!) of Taiwan's entire electricity consumption, Intel's Arizona fab produces thousands of tons of hazardous waste a year [1]. It's far from the old days, but still a massive impact.
The free market is an innocent scapegoat that never existed in any government. As long as the State makes the laws, it is a form of state planning. The only different between Soviet Russia and modern Western countries is how heavy the hand of the state tries to move the needle of the market.
But I agree on the sentiment: everybody seems to have decided the state should control the market even further than it did three decades ago. Free market was never given a chance.
The free market often needs nudges in the right direction. The free market is a rule of thumb and not an actual Scientific Law. When left unchecked it ultimately eats itself
What are you doing with these 70TB of storage? I was meant to ask the other day when you reached the front page, but someone asked me a question during the meeting I was in.
(Your comment made me giggle so I went looking for more banter on a potential blog, sorry for creeping up)
This is a move with swinging geopolitical implications. But the value and urgency of the reinvigoration of the American manufacturing centre cannot be overstated.
China's gonna be a bit salty though.
What I really want them building in America though is low-end AMD chips for development boards.
4-Core/8-Thread CPU, 4-Core GPU, 16 GB ram, sane IO, and however many of Xilinx's FPGAs they can put on it without overdoing it.
People would be able to make some pretty decent things with that.
...transferring knowledge from TSMC to a US workforce. This is a significant win for the US...
I get what you're saying and I agree, but there's some heavy irony in saying that considering that's exactly how TSMC started out but from the opposite side; Transferring knowledge from "the west" (RCA from US and Philips) with ITRI it evolved into a project of Taiwanese state which culminated in TSMC.
It's also terrible/impossible news from a USD perspective if the US produces things nationally in a significant way (importing less, selling less printed USD in exchange for goods).
Printing insane amounts of USD to allow for systemic government over-spending and huge untenable government debt doesn't go hand in hand with not importing most goods. You can't keep your currency strong if you can't force others to buy your currency.
If you have a lot of production in the US, this is going to cause hyperinflation to come sooner.
In the long term it won't matter, the end result is the same, but if production significantly moves back to the US it will be very scary from a currency perspective.
I don't see the argument here. Importing less leads to selling less USD (yes), somehow leading to devaluation of USD? Is the implication that the dollar is strong because the US government "forces others" (foreign manufacturers) to buy it? Isn't that the opposite of the first thought, which implied that "selling less printed USD" was the reason that domestic manufacturing would be inflationary? I don't understand the causality, and it doesn't match my mental model ("a country that can build things domestically at a competitive price point should be deflationary because now there is more supply of stuff and equal supply of money"), so I think this could do with some expanding.
That's not really true, afaict. This press release[1] states that Fab 21 (Arizona) phase 1 is 4nm, which is not the best but clearly is enough to manufacture the A16, phase 2 opening in 2026 will be 3nm, and phase 3 will be 2nm or better. I'm not a semiconductor engineer so maybe there's some process nuance that I don't know, but it certainly seems that this is at or near the top of TSMC's process list.
Those are decently advanced nodes, but if 3nm isn't coming until 2026 then this is absolutely a last-gen fab. For reference, Samsung is considered a "last-gen/trailing gen" fab, and they'll be shipping 2nm in 2026 on their roadmap.
Taiwan's TSMC will have a process and sampling edge for the foreseeable future, unless they change the roadmap.
> US manufacturing is about to be reinvigorated, and we in the US are going to be building our own future both for chips and for energy security.
Don't count on it. For every high-end chip you need hundreds of commodity parts to support them, and nobody is investing in US factories to make $0.001 capacitors or $0.10 connectors. You just can't compete with cheap Chinese labor, so the US supply lines will never be able to equal a city like Shenzhen.
Unless the US is willing to get rid of capitalism and switch to a plan economy, most of those expensive high-end chips will just be shipped to Asia for assembly. So much for building your own future.
> most of those expensive high-end chips will just be shipped to Asia for assembly
I get the first part of your comment, but why wouldn't all the missing components be imported for assembly in the US? SMT lines in particular don't need that much cheap labour to operate. Even Brits can assemble PCBs!
Those components are not used in military products. Specialized vendors manufacture passives for the military. AVX, CDE and Vishay are just the first three I recall.
> After all the wailing and rending of clothes, the industrial policy worked out great and we have top tier production here in the US, transferring knowledge from TSMC to a US workforce.
> This is a significant win for the US, and just the beginning of the amazing industrial policy passed over the past few years.
I'm not sure these conclusions are justified. It's the 'seen vs unseen'.
Wave the flag and have colourful fireworks with hand at the heart and tears in the eyes, this is a glorious moment the children will cheer its glory in glorious essays!
This is (only a few years later than the rest of the world's) state-of-the-art manufacturing, built only with the expertise of a Taiwanese company, that relies on the technology of a Dutch company, that in turn purchased (and has since monopolized) its IP from another US company, twenty years ago, and only then because a number of other companies (notably Canon and Nikon, both in Japan) were excluded from using it.
It is not something to be celebrated. What TSMC and ASML are doing is amazing, but we could be so much further ahead.
If you look at it from a geopolitical angle, it's much to be celebrated. It means US can rely on its democratic like minded friends to help protect the supply chain of cutting edge chips, against the now very visible alliance of dictatorships (Russia, China, North Korea, Iran).
And make no doubt about it, there is a democratic alliance vs dictatorships here. Russia is aggressively sourcing artillery shells from North Korea, ballistic missiles from Iran, and financing and weapons from China. China incidentally is the economic caretaker of Iran and North Korea.
> If you look at it from a geopolitical angle, it's much to be celebrated.
I'm not sure. Taiwan is already a democratic ally. They are relying on the chip manufacture to keep them safe politically. Without that they'll quickly get "absorbed" by China.
The US decoupling and isolating technologically/economically from the rest of the world, likely makes war more likely. Not less.
China has already been working hard on decoupling from the West, likely because they are anticipating conflict in the future, so I don't think we'd be doing ourselves a favor by continuing to rely on our supply chains in Asia. In-sourcing doesn't make that conflict more likely, but it does increase our options to react if push comes to shove.
Sadly the State Dept.'s moral panic over a non-aligned Military Complex rings somewhat hollow against the backdrop of 'very substantial' support in an on-going genocide.
Coincidentally, it was Chinese intervention that brought an end to the last genocide the State Dept. was facilitating; the delineation of allies likely warrants reflection
Why is democracy relevant here? Seems like a rather random words thrown in to support your point, without any actual relevance. We're talking supply-chain here. And capitalism. Both really dont care what and if people voted.
They kind of do. The reason various Asian companies pulled ahead in their own respective industries is top-down leadership and support. You dump money into them, tell them what to do, and lower the overhead of competition and you can create a world-class company.
We, in the US, can't really do that. We try a little bit, but we don't fully commit so it doesn't work out.
Ah, ok. If we're going to be throwing in personal takes on geopolitics, then here's mine.
Less of the "democracies vs dictatorships". It's more like "western imperialism (essentially US & vassals) vs the rest of the world (who wants out of imperialism, endless sanctions, endless wars, the odd genocide or two)"
I don't think that's true. I see Europe and US and much of the rest of the world giving weapons and financial support to Ukraine. I don't see any other country giving weapons and financial support to Russia besides China, North Korea, Iran, and India who is buying more of Russian oil.
There is more than Weapons though. Brazil is supporting the Chinese peace plan - the plan that China built without talking to Ukraine and looks like give Russia everything they want. A lot of Africa nations are drawing closer to Russia - they don't have much to give now, but may in the future. (just them not developing is a win for Russia)
"vassals" is a common phrase/tactic used by netizens in China to try to drive a wedge between US and rest of its allies. Nevermind that they never mention their allies like Russia or Brazil/Italy who seeks economic alignment as vassals.
I think some number of them are probably just legitimately psychopaths living in the West. Though maybe they latch onto the term after hearing it as a PRC talking point. If you genuinely can't imagine mutually beneficial positive relationships based on consent, then it's only natural that seeing the US work together with so many other countries would be scary and look like "US & vassals".
"A billion people" and "thousands year old civilization" are also Chinese talking points I've noticed. Hence why I included it in my comment, to both call out the really degrading "vassals" narrative and also point out these dictatorships aren't as special as they like to pretend.
You can't post like this here. Since I believe you have a long history of abusing HN, and have reverted to doing so again, I've banned the account.
If you don't want to be banned, you're welcome to email hn@ycombinator.com and give us reason to believe that you'll follow the rules in the future. They're here: https://news.ycombinator.com/newsguidelines.html.
You broke the site guidelines extremely badly and repeatedly in this thread. We have to ban accounts that do that, regardless of how other commenters may be behaving.
I'm not going to ban you right now because it doesn't look like we've warned you before, but please make sure to stay on the right side of the guidelines in the future—especially because this isn't the first time you've broken them. (For example, comments like https://news.ycombinator.com/item?id=40734213 and https://news.ycombinator.com/item?id=38963324 are also unacceptable.)
dang, seriously. What is wrong with those posts you linked to. Please take a look at them yourself, and tell me. Genuinely asking.
Whenever I've engaged on this topic (not just this thread), there seems to be an unwritten rule somewhere that absolutely any vile stuff is acceptable, no matter how debunked by journalists, as long as it's on one particular side of this narrative. And any pushback is abused, downvoted, etc.
It seems almost impossible to present an anti-genocide case, on this site.
No, they aren't. Having allied forces deployed on your soil by mutual agreement is not occupation.
> Once a US base gets established in your territory, you can never get it out.
There are quite a long list of counterexamples; the US has closed lots of overseas bases (both in countries that remain on good terms with the US and in those where the relationship soured.)
> Just ask the Iraqi's.
"Iraqis", and the US closed large numbers of Iraqi bases in the 2020-2021 drawdown and the US and Iraq are currently (last I checked) in discussions on a complete drawdown of US military presence which would close the remaining bases.
I would encourage you, if you claimed so in this thread that you are a US and UK citizen, to quickly move out of US and renounce your US citizenship. So the torture and rage that you're displaying here and the paradox of your identity doesn't drive you insane. Also you should renounce your UK citizenship, as UK and US are very close allies. Maybe try moving to Russia? I heard they're having another military mobilization, and is paying pretty well.
The persecution complex is odd too. Calling themselves a "dissenter", and invoking "exile", because their hypocrisy got called out and their factual claims are easily disproved.
They are going back currently, as they're invited to. You know, because that's how consent works, when you don't see everyone else as objects in a conspiracy.
Actually, the US just finished leaving Niger this week:
Does it matter? They played pretend opposition like they always do. Democrats can pass this stuff no problem but people elected the opposition party to advance meaningful democratic reforms like better health care, dealing with housing, increasing minimum wage. They haven't done anything. Its blatantly obvious this chips bill was a giant handout to corporations. Sure the plens get a few breadcrumbs but its pointless to point to republicans when both sides are not really enacting fundamental change for the common man.
> My bet, is TSMC was given a “you build in the US or we wont give you defense contract work” in 2018-2020 timeframe lol
My bet is that TSMC recognizes they are a crazy geopolitical pawn. And is frankly playing their part.
Once China develops chip production abilities similar (but not necessarily better) to TSMC, they’re free to destroy Taiwan. Then they’ll be the sole cutting-edge producer, meaning that everyone will continue to do business with them despite their behavior.
TSMC and the US recognize this. If TSMC bring their tech to America, they’ll at least be safe to continue manufacturing (“for the shareholders”). It also is self-serving because it changes the geopolitical game. It increases the risks to China of an invasion, and favors to the US increase the odds of US intervention (good for their patriotism).
Finally, it’s pretty well established that the US defense industry prefers local factories for security purposes. They’re obviously interested in preserving this ability domestically, and most companies recognize that and accommodate.
Then check out Beijing giving Moscow "very substantial" help to beef up its war machine, and in return Russia is handing over its closely guarded military tech on submarines and missiles, in 2024 https://www.politico.eu/article/united-states-accuse-china-h...
Do you think Dictatorships care about any well being of anyone besides the ruling class?
> My bet, is TSMC was given a “you build in the US or we wont give you defense contract work” in 2018-2020 timeframe lol
TSMC is in an extremely precarious geopolitical situation; China's hardball is a lot scarier than Trump's. Expanding their geographical redundancy through billions in handouts is pretty appealing to investors.
TSMC improves the geopolitical situation of Taiwan by building here, too. China doesn't have the possibility of being "the best logic manufacturer left standing" after an invasion and TSMC being destroyed, if some of TSMC's world-class fabs are also located in North America.
So, there's two factors here, that move in opposite directions:
1. China is less likely to secure a semiconductor advantage over the West, if TSMC has a US location. Instead, China is likely to take out the nearby, high quality fab, and whatever they are left with domestically is more likely to be inferior to distant capabilities.
2. Because of #1, China is less likely to secure a massive advantage over the US by invading Taiwan; as a result the US may feel it less likely to support Taiwan.
I'm inclined to think #1 is the more important one. #1 makes the risk of an invasion much higher. #2 makes the reward for an intervention somewhat lower, but I don't think it changes China's calculation of how likely the US is to intervene that much.
> > China is likely to take out the nearby, high quality fab
Yes.
If China's domestic fabs are second best or close --- and China may manage to crawl into this position --- destroying the best fab increases their relative standing and significantly hurts Western security. Whatever crumbs they get from Taiwan (the proportion of expertise that decides to roll over and help, and whatever capital equipment survives to be reverse engineered) are just a bonus.
If China's domestic fabs are not --- because there's a fab tied for first place in North America-- destroying the neighboring fab that they benefit from clearly doesn't benefit them.
I think it falls back on lots of elites feeling that only “one special group” can do a thing. The pendulum swung too far into the “globalist”agenda and now it’s swinging back. I’m sure it will overshoot and we’ll be back to globalism within a decade, but I for one welcome anchoring more things to the domestic economy; the US is a huge country with lots of resources and lots of untapped potential (despite not being China big) and we could use some of that trickle down economy that the globalists have been hoarding for a while now.
I think you are overly optimistic, this is an older process, which means that next iphones will need to source their CPUs from TSMC fabs in Asia, not from US. There also will be no knowledge transfer, that was not part of the deal. It's more of a national security political message than a real change. I guess it's better than nothing. I wouldn't call it a significant win, but it’s a step in the right direction.
Maybe you should visit the rust belt/midwest before SV starts patting itself on the back for single-handedly re-invigorating the economy.
I get the spirit, but flyover country is not doing great. Unemployment is rising and there is a severe lack of decent paying jobs. Chips are great, but everything else is made in Asia. Increased automation is making a ton of jobs obsolete and there is no solution in sight yet. Chips ain't gonna do it.
Maybe you should look at actual stats for what's going on in the economy before being completely cynical.
The investment in factories is absolutely massive over the past few years. The Inflation Reduction Act is bringing massive amounts of manufacturing into the US, starting with the lowest value add of assembly, and after that additional suppliers lower down the chain will be built up too.
It is not SV reinvigorating the economy, it's not happening in SV, it's happening in small towns all over the country. It's happening due to the bills that Democrats passed over Republican opposition, but because of politics, it's not being trumpeted as a partisan win in the towns where factories are being built.
> The investment in factories is absolutely massive over the past few years.
The fascinating thing is people don't want to believe this. They'll make every excuse before admitting that it's true. They want to be in a declining empire when the reality is the opposite.
That's because reality that is readily observable by these people does not match the reality reported by the media and the reality portrayed in Democrat speeches. In that alternate reality manufacturing-heavy towns are booming and not dying out. US-made automobiles are the most advanced and Detroit is a world-class city. And it's simply not true, much like what Pravda would report back in the day.
https://www.youtube.com/watch?v=aqhTRQ--x_Q #video on #China/#USA politics trying to keep out electric vehicles with 100% tariffs while US car companies spend their government EV research grants on stock buybacks. High-end electric cars, electric dumptrucks, and even electric mopeds support battery-change recharging; it’s commercially deployed. They’re very impressed with how advanced all the Chinese cars are, and also positively impressed with how accommodating the auto parts manufacturers they met with were, especially by contrast to US and Canadian companies.
a thing i didn't mention in that bookmark is that the prc-company-made equivalent to the (prc-made) tesla model y (still the most popular car in the prc) is one fourth of the price
my bookmarks file has 14601 entries, including dozens of entries about that trade war.† i find that it's helpful to be able to cite sources when discussing topics with other people, and summarizing them helps me understand them better to start with
the video itself is only incidentally political; it's a 'custom car build show' from canada with 700k subscribers which primarily focuses on things like engine performance, welding machines, impact wrenches, and fixing dilapidated machinery. but a month ago the guys that make the show decided to go to china to see if they could source some car parts for their custom builds, and they were absolutely blown away by how much more advanced chinese cars were than usa-made cars, to the point that they filled a half-hour video mostly marveling at that
to me this seemed relevant to the thread
______
† i'm interested in things that seem likely to result in hundreds of millions of deaths in the next few years, so there are lots of entries about drones and the ukraine war too, for example
A democratic speech would be something about the right of the people to elect a government that represents them (as opposed to being told they are Nazis for wanting to do so). A Democrat speech is any speech delivered by a Democrat.
The USSR also had fanatical members of the Youth Comsomol who'd loudly denounce anyone who questioned the party line as either insane or "anti-Soviet". That's what you and your comrades are doing.
But really, it doesn't matter if Pravda reports a new record in farm production every other week - the people still see the empty shelves in the grocery stores.
US manufacturing growth is manufactured as follows: use tariffs to ban much cheaper (and frequently better) goods and demand that they are produced locally. Or even better: make components for a fleet of ships that costs $4B each and that nobody needs and that gets canceled (see: Zumwalt). Step 2: use the ridiculously inflated costs as proof that manufacturing is growing (hey, you just need a big number).
This is some sort of weird projection, where you have swallowed lots of propaganda, accuse anybody with actual facts as being "insane," and then accuse others of exactly what you are doing.
Meanwhile, back in reality
Bloomberg: US South Accounts for Lion’s Share of Factory Construction Boom https://archive.is/URbMw
"So one was just like, "Oh yeah, they got those higher starting wages." If you're walking in with no background in manufacturing, no skills that you could point to, the starting wages are in the like $17.50 to $22 an hour range depending on the role" https://www.volts.wtf/p/how-is-new-clean-energy-manufacturin...
This is not from tariffs, it's from carrots in tax incentives, used to build up the entire supply chain, not just a few factories.
If you have empty shelves in grocery stores, where the hell are you living? You expect me to not believe my own eyes, and imagine some empty grocery store shelves? If so, it's your own area's politics that are causing the problem. Wages are waaaaay up, especially on the lower end, much less on the top end.
The economy in the US is blowing away China, Europe, etc. We are so strong right now. If you are not doing well in your own micro area, look internally to see how your area is fucking up so much when there's opportunity everywhere.
Empty grocery shelves are you not being able to read, and taking a comparison literally. However, they could be observed not long ago in much of the country. There were supply chain issues during COVID with most anything. And even after COVID there were disruptions like a sudden unavailability of eggs.
Starting wages increasing by 20% for the first time in a decade doesn't even keep up with inflation.
You are so strong you have to completely change trade policy to a protectionist one. China is the one to watch for the next decade.
I don't think so. Rather, we are being told repeatedly that investment in factories is real bad and we should just continue to do what we did. We, then, respond to that - and that gets interpreted as "oh so you don't believe the situation is getting better?"
It is getting better, but there's still a lot of opposition and the opposition still needs to be addressed and their concerns heard.
Investment in factories != investment in american communities.
Legal immigrants with special protected status, Medicare coverage, and some basic income from the government are given these manufacturing jobs because then the investors don't have to pay for health benefits, can severely under pay, plus they have the bonus of having a desperate, captive workforce.
The investment class thinks workers need to be knocked down a couple pegs. This stuff will not end well.
You are completely correct. But the chips have immense strategic value. Not being able to manufacture them would be catastrophic in the event that China cut us off.
There is a lag between policy and results, I don't think you can fairly say that because it's happening NOW it's biden's doing (though i'll give credit to Biden for now ending the changes Trump enacted). But Trump should get credit for completely reorienting our trade policy.
I give Trump credit for approving the American departure from Afghanistan. Even with how that was executed, the current state of Americans not being there is a good thing caused by his past decision.
In 2016-2020 the economy was good, jobs were plentiful and there was mostly peace. Then the Democrats mismanaged COVID and the Munich peace conference in 2022, then doubled down and sent Pelosi to stir up the pot in Taiwan.
Now we have cold or hot war everywhere, and a TSMC plant is built for election purposes.
Trump absolutely started the U.S. manufacturing drive, sometimes he does not push things through. Still, the world would be in a much better shape had he been elected in 2020.
Well, one of the three fabs did. The newer two fabs, including the one with the most advanced processes, started in '22 and '24 respectively; that was thanks to the Biden Admin, per TSMC.[0][1]
Biden, Democrats and the moderate Republicans that came together to support this deserve the credit here. It's game changing stuff, a big chunk of which could be on the chopping block if the extreme takes power again.
You’re missing the forest for the trees. The cause to celebrate is not that Apple chips are being made. It’s to celebrate that chips of such high calibre are being made.
It’s only a start, but it’s a huge deal in an economic, technological and geopolitical context.
Yes, basically. I don't like seeing what appears to be a whole ecosystem in the US centered on Apple. I really don't want to see a future where so much production is Apple-centered in America, that it's "un-American" to use non-Apple devices (because the Apple devices are mostly American-made, whereas the competitors are foreign-made). So seeing the US fabbing cutting-edge CPUs for a whole range of mobile devices from different vendors would be great.
Oh i'm going to be downvoted into oblivion for this one.... but I think this is a win we can give to Trump. It was a hard focus of his, I think he put the right people in place to do it, and I think time is going to prove he was right to do it.
I didn't vote for him in 2016, but I think it's important to acknowledge it.
I understand, but I was commenting specifically around the comment "US Manufacturing is reinvigorating" which it is, and which is more general than chips.
I think when the Trump admin renegotiated trade policies (and I'll given Biden credit for keeping them) the economic incentives were rebalanced. I think the result is complex/low volume manufacturing is starting to return to the US, and simple high volume manufacturing is moving to Mexico (which we have a very good relationship with... i'll discredit Trump for being so stupidly aggressive with them in the first few months of his administration though)
>This is a significant win for the US, and just the beginning of the amazing industrial policy passed over the past few years.
I don't consider it a win. I consider it a loss. This is a desperate move by the US. Intel making better chips then TSMC is a win. The government strong arming Taiwan with "protection" from China in order to gain this technology is a display of American incompetence.
But then again maybe is't not about fair play. If the US wins by unfair means, it's still a win? A pathetic win but a win none the less.
I’m an American though. But yes, of course China will be pissed. I suspect China wants this though. Once the US has Taiwan semiconductor technology there’s no need to protect Taiwan and China can move in. Symbolically Taiwan represents more to China than some island that makes great chips.
I still think it’s better if intel was able to pull it off, but i don’t think us Americans have the capability.
You really think it's a success to force Apple to lose money to make US politicians look like they are "doing something" about a world economy that is increasingly leaving the US in the dust?
Meanwhile in China, 1000 engineers (to one in the US) are building all kinds of electronics and embedded systems on shoestring budgets that truly force them to learn engineering. China's industrial policy architects are likely laughing at this big folly on the part of the US.
The worst is the 100% tariff on EVs which keeps the US in an artificial economy of gigafactory, high-end nonsense when the rest of the world will be getting true economies of scale from EVs which are actually simple, reliable and low cost.
It's deeply embarrassing that the US must suffer poltical rule of its economy along with the double embarrassment of seeing other nations do it so much more effectively.
Industrial policy should be measured in terms of person months of career acceleration (experience) per dollar. The US focuses on helping prolong the dominance of internal combustion engines and taxing high profile, high-end companies that do not offer skills that transfer well into the rest of the economy. How many Apples are there? Will forcing manufacture in the US suddenly result in another company doing 2nm process and competing with Apple? It's absurd.
I know of a variety of small and medium sized US tech companies (aerospace and 3d printing / robotics) that were almost sunk by US "industrial policy" becasue they relied on a small number of China-manufactured inputs that suddenly became unavailable, forcing unplanned re-engineering and work the companies could not afford. Sadly, one went under. Meanwhile, the US firms that import finished goods are thriving selling Chinese manufactured gear -- Chinese companies didn't have to pay US tariffs on the same inputs. Utterly absurd.
Politicians should stay out of the economy and focus on moving us closer to nuclear war and promoting the religion of American Exceptionalism.
>“It's deeply embarrassing that the US must suffer poltical rule of its economy along with the double embarrassment of seeing other nations do it so much more effectively.”
The Chinese Communist Party exerts far, far more control over all sectors of their economy than US politicians do over the US economy.
China hsa an actual strategy, not just an attempt for politicians to pay lip service and win a few rust belt states.
Also, China had a policy for years of dramatically suppressing its economy, so of course a few small changes result in massive growth (once some of the suppression was removed).
On the other hand, this is a protectionist policy that has been straining US' relations with its allies. That development means the US empire is a little less mutually beneficial, and a little more beneficial to the core.
Its success requires these allies not to reciprocate, and this is a long-term prospect that only time will confirm.
I feel like I've read a few articles on Bloomberg and/or NYT (drawing a blank on the exact source) that a very large portion of the workforce was taken directly from Taiwan and the American workers were having a hard time adopting to the Taiwanese way of doing things (long hours, on call all the time, constantly stepping outside your predefined roll, etc.). Is this currently now, or will it in the future, affect the overall success of the factory? (It also might simply be untrue for all I know.)
Morris Chang, the founder of TSMC was reported [1] by Nikkei Asia in March 2023 as saying this about the work culture:
> "Design is the U.S.'s competitiveness. On the other hand, Taiwan, Japan and South Korea have competitiveness in manufacturing...It's also about the work culture and the people."
> The TSMC founder cited chip production equipment as an example. Because these machines are so expensive, they need to be running 24 hours a day to justify their cost. "If it breaks down at 1 in the morning, in the U.S. it will be fixed in the next morning, but in Taiwan, it will be fixed at 2 a.m."
> "If an engineer [in Taiwan] gets a call when he is asleep, he will wake up and start dressing. His wife will ask: 'What's the matter?' He would say: 'I need to go to the factory.' The wife will go back to sleep without saying another word," Chang said. "This is the work culture."
This isn't all so unusual if its written into the job description. SREs in tech companies are expected to respond within a few minutes if they're paged in the middle of the night. They are usually compensated for their oncall time, however.
Expecting a worker to come to the factory out of fear or good will is not the way. Just write it into the contract/expectations/evaluations.
All European tech companies I know compensate fairly well for oncall.
There's a rate for simply being on call (you'll get paid extra without even getting any calls), there's a rate that gets summed on top for actually working off hours and this rate increases depending on the time of the day you worked, whether it's the weekend or a holiday.
Yes, in Germany all months when you are expected to in the oncall rotation are basically an addendum to your usual contract that you sign and receive more money even if nothing ever happened during your shifts.
As a person who runs manufacturing in the US, this is our work culture too. Also the same at the other 3 previous places I have been at. The company culture asks for something, if it is not provided, you find someone who wants to be a part of that type of culture. There is an expectation to pay for it though.
Having to wake at 2 am on call is just bad for cardiovascular health, it's really just paying for one's life at retirement age and there's no real salary that can level that. Young people have an invisibility bias in psychology, they underestimate the physical toll of late nights and workplace stressors, which is cumulative over time.
Having to wake at 2 am on call is just bad for cardiovascular health, it's really just paying for one's life at retirement age and there's no real salary that can level that.
As far as I know, they do. I think the bigger problem of the US manufacturing industry is that the most talented and motivated people have gravitated towards Wall Street and the "ads" companies. They not only pay significantly higher (due to cost/revenue structure) but also have a comfy working environment compared to factories.
The west has the same work culture when the industry and the pay demand it. The difference is that it may well be the woman who tells the man she's on the way to the factory. Or the wife who tells the wife. Thank goodness for liberalism.
Hard to feign sympathy when companies trout the "no one wants to work" line when they always forget the second part of the statement that is always implied: "for how little we pay."
If you believe there has been a decline in American work ethics, this actually seems like a good thing. Optimistically they could reach a good middle ground here.
I am not sure framing it as work ethic is right. It is simply the cost of labor. Some people might argue American's are more or less productive the hours they are working, which means just because someone from Taiwan is willing to be oncall 24/7, doesn't mean you'll have to hire exactly 3 American workers at 8 hours each to match productivity. You might need 5 because Americans truly are that lazy, or you might only need 2 because the on-call isn't that demanding since Americans are more productive.
Not saying any of these specifics are true, but framing it as work-ethic is not accurately capturing why it is more expensive to run factories in one country vs another.
I was commenting on a story about how americans had problems adapting to taiwanese work culture, and saying how they could benefit from this cultural exchange to optimize their productivity. Like you, I also do not thing this really captures why it's more expensive to run factories here, because I've never even suggested this.
Many of those articles came out before TSMC received CHIPS Act grants. As soon as the CHIPS Act money was committed to TSMC, the factory was suddenly ahead of schedule. Noah Smith called it out here:
> Three months after TSMC announced further delays at its $40 billion Arizona fabs, the chip manufacturer has now said the plant is expected to be operating at full capacity by the end of [2024].
> The announcement comes several weeks after it was first reported that TSMC is set to be awarded more than $5 billion in federal grants under the US CHIPS and Science Act…
I've seen those same articles, but also ones saying that was largely a ploy. There were billions of dollars in subsidies that took some time to lock down, and the reported problems with American workers evaporated right after the money was committed to TSMC.
It seems likely the new iPhone SE will be released in the next 12 months, and if so, and it follows past patterns, it'll roughly use the iPhone 14 hardware and thus, the A16.
Going by past practices and current rumors, I would expect an iPhone 14 body and display (FaceID, OLED, and no large bezels) with the current flagship model SOC and a single recent gen camera module.
It will be interesting to see how much they bump up the RAM for Apple Intelligence.
I’m just telling you that if it follows past SE pattern it’ll be an A18. And they won’t skimp on the RAM because Apple Intelligence is clearly going to be rolled out across their entire product line.
Apple Intelligence is a bunch of new tech they haven't really released yet. In typical Apple fashion, they start slow, and will improve it year over year.
Apple rarely backports new tech to older devices. It probably could run on the older chips, but it doesn't look like Apple isn't going for the widest possible rollout. They are launching it for the newest chips only, and are not wasting time porting it to old chips, when they don't even know yet how it's going to scale. So right now they are focussing on English speaking markets and newest devices only.
They are skating to where the puck is going to be, and in a few years no-one will care if their tech runs on the A16 or not. Right now they are focussing on getting this thing launched, and backward compatibility would only slow them down.
And its a selling point to get people to buy new iPhones, so it's win/win for Apple.
While I can think of a few examples where they have done back ports given time (but not at launch). I still very much see this the same way as you do for Apple Intelligence. Firstly because they're unlikely to announce it for older phones unless they can get every model working well. Secondly because I notice they've been careful about which of the new AI upgrades are classified as Apple Intelligence, versus those which have been packaged into iOS 18 without fanfare.
I'll give an example:
The iOS 18 photos app, without "Apple Intelligence", still has an improved search function. This is driven of course by a new AI model that tags images with more detail and fidelity than earlier iterations.
However "Apple Intelligence" also features further upgrades to photo searching where a user can request images with highly specific details, expressions or interactions. The example they give is "Katie with stickers on her face", and beta testers have shown examples which demonstrate that other than just tagging individual objects, those items themselves are described and searchable. (E.g. The difference is like between being able to search for photos with a "dress", versus "a red dress", "a wedding dress", <person> "wearing polka dot dress", etc.)
Ironically the DMA is telling Apple to reduce privacy to make Apple Intelligence work in the EU, it’s just a populist political attempt at regulating a market.
No sane person actually thinks Apple isn’t private enough for EU standards, they’re just not being allowed to compete because they aren’t allowing anyone else access to local user context, which would be a privacy nightmare if done incorrectly.
I agree that Apple being stubborn is part of this, but also the point of the DMA / antitrust in general is that large companies that control their own markets can't do some of the same things that less influential companies in the same space can do.
Apple Intelligence is a set of features for a platform (iOS) which the EU has determined to be a Gatekeeper platform which comes with special restrictions and oversight.
There's a regulatory difference between that and just releasing an LLM accessible via the web or an app download.
Yeah why are these chips still produced at all? The iPhone 16 just came out and the 14/15 stockpiles will be sold off for cheaper just to get rid of them. What am I missing?
AppleTV, HomePod, a new display. Could be anything. There could also be government or corporate contracts requiring the mass production of a slightly older chip for something.
Also, doesn't chip manufacturing require a lot of water? Water is not the first thing that comes to mind when I hear Arizona. I think I'm about to learn a lot with this.
Yes, ~10 million gallons per day (equivalent to 33,000 households). But the plant's water recycling and re-use is very efficient, so it's mostly a one-time hit up front.
From what I read the overriding factor was geological stability. Apparently these factories are very sensitive to vibrations. I guess when you do precision work at nanometer scale these things matter.
Arizona isn't water rich, but it manages to keep the 4 million people around Phoenix hydrated, so there is water.
It's notoriously unsustainable. Those water intensive crops would be wildly infeasible if the farmers had to pay anything close to a market price for the obscene amounts of limited water they consume.
Elon Musk did it with his Giga Factory somewhere in the range of 11 to 14 months in Texas. It’s 5 times the size of the pentagon and they build more than just top of the line Tesla Chips there.
Some states have less regulations than others. He said if he tried that in California, it would take an unlimited and indefinite time to complete (100 years+) due to so many permits and regulations.
One of the chiplets of Intel's Meteor Lake laptop processors launched at the end of last year is made on "Intel 4"; the rest of the chiplets are TSMC N5 and N6. It was not a meaningful improvement over Intel's preceding generation that was made on "Intel 7" aka. the iteration of 10nm where the process was finally good enough for their whole product line.
Intel's Lunar Lake low-power laptop processors shipping in a week will be the first all-TSMC x86 processor from Intel. Their desktop/high-power laptop processors (Arrow Lake) will also be all-TSMC, and should be launching this fall. After that, Intel intends to resume using their own fabs for consumer processors with their 18A process. There are some datacenter processors using "Intel 3" and the 20A process was cancelled in favor of the more fully-featured 18A.
(In case of nitpicks: Intel is also manufacturing the silicon interposers that the chiplets are mounted on, but since these dies are completely passive and have no transistors, I'm not giving them credit.)
With Intel 4, Intel has not succeeded to obtain clock frequencies as high as with Intel 7, which is why the older Raptor Lake laptop CPUs still beat the Meteor Lake CPUs in single-threaded benchmarks.
Moreover, the new Intel 4 process had low fabrication yields, so Intel has produced less Meteor Lake CPUs than it could have sold.
Nevertheless, the Intel 4 process has demonstrated a much greater energy efficiency than the previous Intel 7 process, which is why the Meteor Lake CPUs beat easily the older Intel CPUs in multithreaded benchmarks, where the CPU performance is limited by the power consumption.
Yeah I was surprised to hear this is already at a point where they can produce chips. From what I've heard it takes a really serious amount of effort and expertise to calibrate the machines, and get the water filtration and other chemistry working in a new location.
Genuine question: what upside does it have against supply chain attacks?
Is it possible that an adversary to implement a backdoor into a chip design, without Apple noticing it?
I'm not a chip designer so perhaps the answer is obvious to some of you guys, but I'd expect some verification mechanism at Apple's side of the manufactured chips to match their original design to verify that they aren't tampered with?
Very much possible. Talking more generally about microelectronics - You can imagine the DoD is very interested in making sure they're not putting 'bad' chips in their military hardware, whether 'bad' means backdoored or merely counterfeit.
Manufacturing chips in the US means the DoD can investigate the acutal fabs and put cleared personnel on the manufacturing line to make sure nothing untoward is going on. Another strategy is to investigate the chip after it's been manufactured somewhere else and prove that it's the same chip you designed, but that's quite difficult.
If you're interested you can read up on the Trusted & Assured Microelectronics (T&AM) program.
Apple has a top notch logistics and security processes which had mitigated the issue of supply chain attack in China which his willing and capable of producing such attacks.
Moving some production to the USA might induce some sloppiness in this due a perceived inferior risk.
Also, some security measures requested by Apple to manufacturers in other countries are probably illegal in the USA.
The article doesn't mention supply chain attacks. What context are you referring to?
I'll take a guess and agree with TOMDM. It's about China invading or blockading Taiwan (remember the US attack/blockade against Cuba? Exactly that.) and thus denying America physical chip shipments.
Isn’t Taiwan’s success in creating a TSMC correlated to the pyramid of their workforce which supplied skill at every level commensurate for high tech manufacturing’s demands? They have a high number of post-grads in their population AND also a large number of what we in the US call vocational/technical-educated working class. How are we doing as a country over time by the same measure?
It's hard to not cost more than employees who think it's literally a patriotic duty to sacrifice yourself for a profitable company. American execs Dream of this kind of non-monetary influence on the work force
IIRC morris chang indicated US operated fabs would cost ~50% higher, which is not cost competitive, well not something buyers would sign for without something happening behind the scenes (i.e. US gov pushes Nvidia and Apple to use Intel foundries). If A16 is $100 from TSMC TW, it's $150 from TMSC US, presumably $50 to BOM is something Apple can afford, but most others might not. List of companies who are willing to source at 50% limited (unless incentives).
Some of that has to be offset by shipping, importing fees, etc. But I do think the end goal is to get Apple/Nvidia/etc back on US soil manufacturing wise.
Don't these chips still need to be sent to China for assembly by Foxconn? If anything this will increase costs even more and seems like import fees could potentially be even higher due to the current US-China trade war. Unless there is a plan to assemble everything in the US/Mexico as well. But then the costs would be way higher to assemble outside of China: certainly in US but probably also in Mexico, and I don't think they have any factories there.
$100/$150 would be the "shelf price" of the Apple chips if they were in a box for sale like an Intel/AMD one
I believe you that the cost of the delivered (roll of) plastic chips is 50% bigger in the US. Probably less but it might be (also need to include the logistic cost to send it back to assembly on iPhone, etc)
Apple (pre-)pays for stuff and probably doesn't have any orders where Qty is under 7 digits with these big vendors.
The idea that the US only cares about Taiwan because of chips is popular on HN but just dead wrong. Taiwan has been part of the China containment strategy before TSMC was founded.
I think it cares about Taiwan as a democratic country but I think the chip fabs are becoming a geo-political factor as much as oil fields or other resources.
i.e. we don't want [Russia/China/Whoever] to invade Country X as Country X is an ally and a democracy, but as Country X has [Oil fields/Chip Fab/Lithium Mine] we REALLY don't want them to invade.
The difference between an oil field and a chip fab is that the equipment is more easily destroyed in a chip fab, vs a hole for an oil well. Not to mention that expertise in human capital required for chip fab is way higher than that of an oil field.
Even a successful invasion of taiwan guarantees either the people important to the fab will leave, and the equipment evacuated, or destroyed if unable to evacuate.
As Saddam’s Iraq unfortunately proved when invading Kuwait, it is really easy to destroy oil fields, and much harder to clean up the damage. I can’t see much difference between that and destroying chip fabs.
Well, yeah… The US doesn’t really have allies (the one exception some would say is Israel) - why would Taiwan be any different from the others? Interestingly, TSMC only became a stand-out player in the last 15 years, before then there were basically zero reasons for the US to care about Taiwan except to contain China. Now they have one reason apart from containing China, but it’s still mostly just about China.
The United States has many allies. Obviously the US and UK have a “special relationship.” Then there is AUKUS. Then NATO. DoD calls a number of SEA countries “allies,” including Japan and Korea.
Stating that the US has no allies other than Israel is unequivocally false.
The really before the claim suggests that GP is referring to internal attitudes, I would imagine that they are aware that NATO is technically an alliance.
They do not. China sometimes — though not always — endorses and enforces Security Council sanctions against North Korea, and acts as a moderating force in its contacts with North Korean leadership. Substantial differences of opinion between the U.S. and the U.K., not to mention actual policy antagonism, is very rare.
Depends. China's obsession with Taiwan is a mix of domestic signaling and posturing internationally and the latter is mostly aimed at the US.
China could choose to be more aggressive over Taiwan, as the US should care less.
But, since the US care less about Taiwan, perhaps China will turn its saber rattling to other strategic interests of the US, giving the Taiwanese some reprieve.
Not so. Apple's new mobile processors are routinely the fastest processors in the world (single threaded) when they come out. The A17 pro is currently the 17th fastest CPU, and the M3 (which is in MacBook airs and iPads) is number 2.
Sure these don't have the scope or number of transistors of like an NVIDIA Blackwell or something but in terms of performance/watt these are ultra high-end ICs.
No one is competing on CPU though. Its like having the highest RPM lawnmower, no one cares, its not useful.
To make it worse, they arent even the best. Its getting mid tier, and in 2024, its nearly unreasonable to buy mid-tier when low-tier is good enough for everything.
Not sure about that, the consumer CPU market is probably more competitive right now than it's been in a decade, primarily on efficiency.
Also not sure what that has to do with the original point, which is that the A15 is not an impressive chip to be manufacturing in the US because it's designed by apple and meant for mobile devices, neither of which are reasons to discount the complexity of the chip.
This should go a long way to ensuring our national security does not suffer. We don’t need TSMC level volume production, plenty of non Taiwan entities exist to balance the risk.
We do need latest edge tech to be within our borders and TSMC and Samsung will deliver that in 2-3 years.
There's a lot of chip packaging in Taiwan, Malaysia, and maybe Singapore so these A16s are probably racking up frequent flier miles. Probably not China though.
I think "for assembly" here means iPhone assembly, ie. the final SoC will be sent to China to assemble the iPhone. I don't think GP is referring to packaging.
The dies themselves are "assembled" - cut from the wafer, bonded to the wires (or solder bumps) that carry signals to the rest of the system, and packaged for physical protection and thermal management.
In recent times, multi-chiplet architecture has added its own layer of complexity to that process.
Looking back on some of the comments from this thread^, especially those claiming that TSMC building a factory in the US was infeasible/impossible, was entertaining in light of the current thread.
With fairness to those commentators, Taiwan will still have a process lead on US fabs until 2030 at least. It's entirely feasible that an American TSMC fab will get beaten on both density and price by Intel and Samsung in the immediate future - these fabs won't be manufacturing flagship nodes.
The article says that the A16 processors being produced here are using the N4P process, and are referred to as both 5nm and 4nm, confusingly. But they are used in the iPhone 15 and 15 Plus which are still available.
A little-known fact is that Donna Dubinsky, the CEO of Palm/Handspring in its glory days, is on the staff of the Dept. of Commerce specifically to help with the CHIPS Act.
Wow that was fast, is this a regular timeframe to get a new fab working?
From the conversations about China catching up on smaller chips I got the impression that it takes loads of iterations around how to calibrate the machines but it seems TSMC nailed it not only on Taiwan but also overseas very fast.
> US and Japan are close to a deal to curb tech exports to China’s chip industry.. export controls are designed to close loopholes in existing rules.. make it harder for China to obtain critical chipmaking tools — restrictions that would have the biggest impact on ASML in the Netherlands and Tokyo Electron in Japan.. to restrict servicing, including software updates, and maintenance of the tools..
That's great to hear. I hope other countries, like Canada and the EU, also do this. I think it's important for all major nations to have this sort of critical capability in house.
Covid showed this well, despite being allies, countries tended to get vaccines to their own people first, even breaking agreements with allies. That's likely normal, and a bit of mutual distrust is healthy.
Knowing all the efforts that the US government has had to devote in order to push Apple to bring those jobs home, for other countries that do not have as much muscle as in financial and industrial leverage, their industrial future must look quite bleak.
It's really not about the jobs, it's about national security. The US needs the ability to fabricate chips on its own soil where the threat of China invading Taiwan isnt a concern.
That's OK. It's on US soil with US employees and can be nationalized if and when need be. I'm sure ASML will be happy to comply or else risk their US operations being nationalized too. Like their DUV/EUV light sources office https://www.asml.com/en/company/about-asml/locations/san-die...
It doesn't need to be a viable replacement. Even if it only ever makes chips that are 1-2 years behind, it's still a huge strategic benefit for the country.
TSMC is governed by the Taiwanese ruling class. If the Chinese launches a widespread attack on Taiwanese soil tomorrow, nothing would happen to any of these people. These people are not your random neighbors harboring nationalistic views.
You don't have to be a rabid nationalist to not wish for your country to be invaded and annexed by others. You don't even have to live there. I'm sure a large percentage of Taiwanese living in countries outside of Taiwan would not wish for it to be invaded.
I'm not even Taiwanese, don't know anyone of Taiwanese descent well, and I don't want Taiwan invaded.
The suggestion that there's some kind of weird oligarchy class of TSMC-controlling Taiwanese who couldn't give a toss if Taiwan was invaded is a mustache-twirling level of caricature.
TSMC is governed by the Taiwanese government, which is a puppet government controlled by the US government and military. TSMC answers to the US directly, as without US support, Taiwan falls to China almost instantly. Nobody besides the US can prevent a blockade of Taiwan
This claim is based on... Them wanting not to be invaded?
If anything they had the foresight and took advantage of US companies not wanting to fab their chips at higher prices domestically. This has led to cooperation between the two.
I see this argument in some fashion every day, claiming US allies are puppets. When in fact, they just find commonalities and cooperate.
the strength of the US defense commitment is likely proportional to the strategic value of the economic assets they still hold. the taiwanese have every incentive to do just well enough at the AZ plant for the $39 Billion checks to clear and no better
While true, TSMC has a stronger incentive for its own survival than the survival of Taiwan. If it's easier for them to shift operations to the US and continue to make $$$, I suspect they'd do that over retaining operations in Taiwan and hoping it will convince the US to protect the country.
This factory is not for economic independence or economic strategy. It is for geopolitical strategy. This factory is meant to build smarter munitions if war breaks out, not the latest cellphone. The US gov does not give a fuck about Apple's stock price and product plans if war breaks out with China, since, you know, there's real adult problems going on.
The dependency on Taiwan isn't going to go away any time soon, nor is the Taiwan Relations Act (which replaced the Mutual Defense Treaty between the United States and the Republic of China in the late 70s).
Its a mobile CPU chip, and its Apple. This isn't going to move any markets, its insignificant. Maybe its politically useful for Apple and the US government for PR purposes, but there is no rush for CPU chips, or Apple hardware.
America isn't the only country with a roadmap to manufacture 3nm silicon by 2026. If history has anything to say in the matter, it's likely that Samsung will have the US fabs beat on yield and price for a long time.
Since US manufactured products are traditionally reputed to be low quality, should we expect to have to look for serial numbers to get iphones with non buggy A16 chips?
"Traditionally reputed" is a vague allusion containing multiple logical fallacies; can you cite some actual sources? Because it's nonsense. Quality is a factor of cost (and cost reduction), not the country of origin.
Unless this is election propaganda, which very well it might be, this is huge news. I know there were a lot of problems for this facility and wasn't aware they were this far advanced in production.
ASML for those who don't know is a Dutch company, and supplies the EUV machines for both TSMC and Intel (It is not clear to me if Samsung uses EUV in its current process nodes). I believe they are the only EUV supplier in the world. There are certainly other suppliers other that ASML, since there is a lot of other equipment other than lithography, but that's a critical one for modern process nodes.
And GlobalFoundries (ex-AMD, ex-IBM). There's also less cutting edge process stuff at ONSemi, TI, Micron, Analog Devices, Diodes Inc and I'm sure I'm missing a few.
They picked up the old Maxim fab in San Jose almost 10 years ago. Not sure what's happening in there now and I assume the people who do aren't likely to spill the beans :) unless its as shuttered I guess.
The San Jose facility is active. There was some controversy surrounding it recently as some members of the public have been complaining that they’ve been illegally releasing solvents into the environment, which resulted in some EPA investigation/enforcement action [1].
According to some reports they may be developing micro-LED display tech there, not necessarily chips.
Build a workforce with the world's leading company. Pull those people into senior positions at new companies nearby. An industry is born and competition can grow. All with export limits so the jobs hopefully can't be outsourced.
Find me a modern US exec willing to actually invest in a risky hardware prospect, rather than throwing a billion dollars into real estate or "content" that can be filled with ads.
Considering how Intel doesn't tend to hold grudge-matches with their customers, I seriously doubt there was any risk in the first place. If TSMC yields were too low to mass-produce Apple Silicon, they could easily ship out another copy-paste Macbook iteration with Magic Keyboard and nobody would care what chip it had inside.
With the benefit of hindsight, it feels more like Intel and Apple were in a race to see who would outsource the Mac chip first. Since Apple already had the supply chain set up for the iPhone, cutting Intel out of the equation was mostly just a matter of designing an SOC. They took the opportunity, and now we're seeing Intel glumly admit that they too can be energy-efficient if they swallow their pride and pay TSMC.
TSMC and other ASML customers build the designs that let those fancy printers create transistors and then logic gates, as well as a basic library of arrangements for those logic gates (PDK). They also provide all of the raw materials and processes and physics that go into said printers.
Apple and other design customers then compile RTL using that PDK to produce a design that can be manufactured using the fab’s process steps.
The printers are A hard part but far from The hard part. If you have an ASML machine it is useless to you unless you have also figured out how to build a 3D transistor in layers. Good luck!
Apple doesn't design on ASML equipment.
Apple (and other fabless companies) designs to a PDK (process design kit, basically rules about how to layout transistors and passives on the die), which is given to them by their foundry (TSMC in this case).
There's a lot of steps between circuit design on the PDK to a working high volume process; and ASML machines are only part of that.
There are a lot of steps involved in making the chips - lithography is only one of them. You have to have the supply chains set up for massive amounts of silicon, you have to have a process for doping the silicon properly, you need quality control, you need to actually build a fab to house the lithography machines, I could go on.
ASML makes tools for only a small part of the semiconductor production process. It's true that EUV lithography is the big limiting factor right now, and that it is a field dominated by one manufacturer. So it's reasonable to credit ASML "as much as" TSMC for the current dominance of their high end nodes.
Nonetheless if it was as simple as buying ASML boxes there would be more than one fab at the top of the heap, and there isn't. TSMC absolutely "contributes" to their own dominance, arguing otherwise is silly.
Exactly what does “manufacturing in America” mean? It could be as little as final assembly with most of the work still being done in Taiwan. Like Cook said Mac Pros were “being made in America”.
Everyone seems to be celebrating this as a victory for the US, but I can’t help but think of David Ricardo’s Law of Comparative advantage. National security concerns aside for a second, what high tech sectors will the US necessarily be investing in less now that we are putting those valuable resources into chip-making? Are these sectors more or less valuable/profitable than chip-making? I don’t have an answer, but this is the framework that needs to be used to address the question. The US can’t do everything, especially with current immigration restrictions on high tech workers.
Less adtech and crypto? Fewer gamified dating apps?
I can think of a lot of negative/zero sum things that have next to no return or longer term advantage than monopoly seeking or greater foolism. They already got plenty of investment when interest rates were near zero.
If there hadn't already been a significant semiconductor industry, or if there was some similar employment for those employees/grads to go maybe it would be different. If there wasn't large local demand for the product (and I'm including the packaging which is another issue) it would be different. Given what the US has it makes long term sense to put some 4nm and even 2nm Fabs in the US. Creating geopolitical risk by outsourcing ALL supply is sort of silly, quarterly profits be damned. (even $50B is <0.2% of annual GDP).
Fun fact: If you read Ricardo you will find the modern form of "Comparative Advantage" isn't really there.
Taiwan doesn't have a "natural climate for chipmaking". In a modern industrial economy, endowments are not natural/fixed by the result of previous rounds of investment.
> what high tech sectors will the US necessarily be investing in less now that we are putting those valuable resources into chip-making?
There is no evidence it is actually zero-sum
> especially with current immigration restrictions on high tech workers.
Yes, more immigration would be greatly appreciated. Probably won't happen until we unfuck housing, however.
> Everyone seems to be celebrating this as a victory for the US, but I can’t help but think of David Ricardo’s Law of Comparative advantage
This theory has always been an overly simplistic model designed to promote the ideology of free trade.
The most obvious problem with it is that it only works in a static world where everything stays the same and as such specializing makes sense. But the world isn't like that, and if everybody invests only in the places where they have a comparative advantage, then you have set up a trade network that is very vulnerable to asymmetric shock: if one good becomes irrelevant or too desired, then the system starts failing.
Germans are learning it the hard way now that ICE cars are getting out of fashion.
As always, there's a yield/resilience trade off, and at nation scale, favoring yield is a recipe for disaster.
>Germans are learning it the hard way now that ICE cars are getting out of fashion.
Sadly, "the hard way" is the only way Germany learns lessons. All that national pride on German ICEs is coming home to roost. I remember when I was working for a large German auto company a while back, a division manager laughed at a Chinese auto company in a presentation that "they have tradition since 1995 lol". The arrogance aged like milk.
It's not a nation that values proactive thinking and adapting to change but stubborn pride and conservativism.
All this because Donald Trump claims (contrary to nearly all economists) that forcing companies to manufacture products on US soil is beneficial in some way that he (Trump) feels confident will make America great again. It is so embarrassing that these outdated ideas are entertained for even a second by HN readers.
only because of the outsized political importance of a few states that happen to specialize in outdated manufacturing technologies and happen to have enough electoral votes that politicians have an incentive to subsidize them.
It's a massive tax on the economy all to provide a tiny bit of welfare to a small number of workers. Better to just pay them a welfare check!
The world is the most unstable it has been in decades. If/when a war kicks off, you have to have your supply chain local because the oceans will be instantly impassable until we can work out how to counter submarines.
This has little to do with welfare and everything to do with national security.
Uh, having entrenched trade relationships across oceans dramatically reduces the chance of war. Trump launched the tariffs to reduce "dependency" on China because it was the "dependency" that held back the typical rhetoric that leads to war.
Yeah, optimizing for economic output isn't the only factor to consider. Having some degree of geopolitical independence and leverage matters when things go off of the happy path for whatever reason.
What does "geopolitical independence" mean? The ability to disregard international law? The ability to make war without worrying about the target being a trading partner?
To me it means some degree of being able to continue with necessary production despite global disruptions due to political disagreement, war, disaster, etc.
For example, a major push to bring more semiconductor production to the US was motivated by supply shortages during the COVID pandemic.
A globally interconnected and inter-tangled trade economy has a lot of benefits, but it can also be disrupted. So some degree of resilience against this kind of disruption may be beneficial.
The pandemic was part of it, but a lot of the shortages were related to the trade war started by Trump and the failure of the US collaborate with public health authorities in China to stop the pandemic sooner.
From the perspective of Trump, those shortages were a good thing because they forced US firms to find other inputs and to resent China and feel suspicious of relationships they had depended on for years.
A friend of mine whose company ultimately failed due to the tariff-induced shortages watched his 90% US-based manufacturing business go under after it couldn't keep up with lower-cost Chinese-manufactured goods -- Chinese manufacturers got all the parts cheaper with no tariffs so their resulting BOM cost was a lot lower. All because he did most of it in the US and relied upon a small number of Chinese manufactured parts.
Lesson learned. Now he isn't even in business anymore so there are fewer voices to complain about the tariffs.
Empirical studies show that governments typically do not introduce policies that result in benefits overall, and the costs of those polices are typically higher than if everyone had just paid a tax that was given as welfare to the small number of workers in the effected industry.
What position is a homeowner in when they decide to hire someone else to mow their lawn? Economic specialization generally a good thing.
US politicians get enamored by industrial policy when they see what happened to the "asian tiger" economies over the past decades. They forget that those nations were so destroyed by war that the "growth" was less due to the policies than to the people's motivation to live in a free and peaceful society.
China is also now the poster child for industrial policy. China had many years of intentional economic suppression in the name of societal harmony (preventing chaos resulting from some regions being poor and isolated and others being rich). In recent years China has managed to use some of the wealth to undertake a social policy (plus industrial policy) of bringing wealth from the coastal manufacturing regions into the agricultural regions, training workers, etc.
Even in spite of all this, China's GDP is still significantly lower than it would be without all the policies, but the societal order is preserved and there is likely greater social stability.
China faces unique challenges in these areas relative to other countries (largely due to geography) which is why it had suppressed its economy so much for so long.
We are getting a glimpse at what a modern approach to Chinese capitalism will look like and it has already left the US in the dust in terms of productivity. It's ironic that the US mis-attributes the success to the industrial policy rather than to the repeal of it.
There is a difference between having manufacturing capabilities and trade tariffs. You can in fact build your own chips AND trade with other countries for the same items at the same time.
Well actually, Alexander Hamilton is the father of mercantilism. And it's been followed and promulgated by pretty much every country at some point in time.
It's not wrong, it's one strategy given the political goals of a nation. There are other strategies and other goals, like economic liberalism.
Saying a behavior or approach is wrong and/or outdated shows a particular misunderstanding of what policy is for.
What "most" economists believe in the West (and "believe in" is a perfect way to put it, because it's a belief) is economic liberalism. Underlying/embedded in that belief are a number of assumptions, policy goals, and desired outcomes.
For a limited subset of countries on earth that worldview has been incredibly successful. However, for the vast majority of countries on earth economic liberalism has been a failure, and a costly one.
Unfortunately, there aren't many new alternatives out there, and the current system is heavily biased towards economic liberalism.
But it's important to remember that all this is relatively new. The era of modern states is relatively new, and the current postwar order is well, 80 years old or so. The Wealth of Nations was only published in 1776, Report on Manufctures was in 1791, and Das Kapital was in 1867.
These are good points. In my view the idea that "making America great" entails illiberal economic policies which benefit a small fraction at the expense of the rest of the population is a non-starter because in my view "greatness" does not come from propping up outdated industries (coal extraction, steel production) and taxing everyone else to do it.
I don't think economists are ideologically opposed to central planning. There are simply enough empirical studies that show how badly it fails. In fact most of the "economic liberalization" failure stories you refer to are actually centrally planned thefts that benefit specific firms but were sold as liberalization.
China is an example of a state that does very smart central planning. Everything from its central bank to its subsidization of small businesses doing embedded systems (hence all the super cheap gear on Amazon sent via subsidized shipping to customers around the world) is intended to enhance the capability of the workforce and guide the workforce toward a future of technological change and rapid (but not too rapid) advancement.
In other words, China's industrial policy is forward-looking, America's is backward-looking. The very phrase "Make America Great Again" is backward-looking.
China's policy is essentially an education policy disguised as trade policy. Corporate espionage leads to more knowledge, subsidized shipping leads to more low-end consumer devices and engineers who need to learn to build them, etc. There thousands and thousands of low-end consumer electronics, test equipment, etc., manufactured in China that are built upon the many low-end DSP chips and microcontrollers. This is not an Apple-esque 2nm process, it's much lower tech, lower cost but it offers far, far better experience to so many more workers than all but the best educational background can offer. What percentage of first or second year US EE grads could build and ship a $50 spectrum analyzer?
In my view, China has already overtaken the US in key areas of technological innovation and the US is "copying" by deploying industrial policy that has the opposite effect and entrenches and protects top US firms while having minimal educational impact on US workers and minimal impact on educational and early career choices for US workers.
It's funny how (supposedly liberal) opponents of Trump will strategically whine about economic theory when generally otherwise if you were to make appeals on the basis of economics you're labelled heartless, etc.
You know what? I like when jobs are based in America because people need domestic careers that can sustain communities. There are non-monetary costs to outsourcing that are not mere quantities for an economist to decide for us.
Ross Perot was wildly successful running on a platform like this, at least relative to any other third party in American politics, and as soon as he appeared to be a threat to the establishment, strange stuff started happening to him much like the assassination attempts in this election.
Heartless? In my view it is inappropriate for the government to prohibit or tax peaceful, voluntary activity such as trade.
The US grew economically due to the interstate commerce clause prohibiting states from imposing tariffs on each other, and now we are supposed to believe that Trump and Perot are economic geniuses because they want to subsidize coal extraction and tax EVs so that Americans have to pay double?
Most of the big wars started because countries got protectionist and isolated and had no economic reason not to fight each other.
Yes it is heartless, because it's talking about complete dissolution of communities and swaths of the country due to corporate decisions that are all made under certain regulatory regimes and strategic policies of foreign nations (in many cases enemies). Look at H1B, I've never seen a good justification for it based on working in many large corporations, there's absolutely no reason we can't be finding actual citizens that could fill these jobs and build their careers.
From what I've seen most economists have extremely short-sighted thinking. Their theories are almost comically naive.
Yes, economically in the short term (< 50 yrs) putting your eggs in your few specialized industries will give you big economic growth. But, in the long term this is economically extremely risky - because you're relying on remaining competitive in those few, high price, more advanced industries. If that happens to change, you're screwed.
And it CAN change due to geopolitical factors (something economists don't understand). A dictatorship of the future can 100% make more efficient supply lines than you. Even somewhere in-between and you can be screwed - just look at the Chinese automobile industry.
For decades, the automobile industry has been the darling child of the US. This has, and will continue, to no longer be the case. The reality is China subsidizing their industry and providing top-down support means they can make better cars cheaper. The only reason this hasn't completely fucked that portion of our economy is because we don't let them in.
We can't keep outsourcing all our manufacturing while we sit on our asses and rely on our darling child industries to grow.
Take a look at what happened during the global communist revolutions. Those communist countries were scary to us because they have the potential to make more shit and make it cheaper. They can out manufacture us.
Luckily we were not completely braindead (and the tech did not exist) to outsource our manufacturing to them. But if we did, it could have been catastrophic for our economy in the long-term.
- Electric vehicles are inherently much cheaper and have way fewer moving parts. Just because an entry level internal combustion vehicle costs $25K doesn't mean an EV has to. But with 100% tariffs it can!
- Every day that American workers spend building heavily government subsidized internal combustion powered vehicles is a day we fall farther and farther behind. All those low-end "hoverboards" that everyone bought a few years ago, all the electric scooters. The engineers who design those in China are the ones designing low-cost EVs that utterly out-compete what the US can do. US policy to subsidize mediocrity (Tesla, over-priced, over-hyped, impossible to maintain) HARMS the entire US economy. How many people need to pay an extra $500 to $1000 a month in payments that are effectively a subsidy of outdated tech? Most people with a car payment are doing just that.
Meanwhile we keep getting into wars over petrol which is why we don't keep track of how much we spend on the military because nobody cares, of course it's worth it to keep the oil flowing!
Economics is about information. Price is a function of supply and demand. As much as governments may wish that internal combustion tech was competitive with low-cost EV tech, it's not. As much as everyone wishes healthcare was free, it's not. We have to choose our subsidies wisely. US industrial policy is a disaster and it is fraught with so many misconceptions.
If it's really a national security issue, where is the US stockpile of raw steel, copper, lithium, 555 timers, etc.? Politicians would rather rant and impose tariffs and get photo-ops near coal factories than actually do something simple and strategic that would take away the possibility that a conflict would disrupt crucial supply chain.
Economic specialization is a good thing. Economies are not so simple as importer and exporter. Most companies are both importers and exporters. China's government knows this and adopts sensible policies like subsidizing oceanic shipment of goods so that shipping costs of the $25 electronic device aren't $100. This lets an engineer build and sell something and learn and grow.
China has an economically-aware industrial policy, the US has a backward-looking, short-term, electorally driven one.
A strategic triumph for both the current and previous administrations. Both Trump and Biden handled the situation adroitly. These may not be the absolute bleeding edge tech but it’s a proof of concept that we can wean ourselves from Chinese tech if it becomes necessary.
It comes at the cost of many, many Chinese jobs in the midst of a devastating economic downturn there. They are victims of repeated local and geopolitical malpractice by the current emperor.
EDIT: User lotsofpulp pointed out that we don’t make any strategic chips in China. That is of course true. I meant that the game of economic chess played by the current and previous administrations has been highly effective in reducing China’s options.
They don’t. I was unclear. What I meant to say was that our tightening of sanctions against China has harmed their economy greatly. It is an act of economic war against their acts of economic war.
That's because a lot of news was dominated by him tweeting about his daily ablutions or something. I'm not convinced how much Trump himself was involved in all that to be honest.
Apple seems to have pretty tight quality control. Thought it is true, they are likely starting with lower scale production of an older chip to work the bugs out of the system.
I can't believe iPhone chips, almost the supreme luxury good, are considered worthy of Federal subsidies.
Surely a better path would have been to slap imported silicon with tarriffs at least equal to their gov't subsidies?
(Unpopular opinion: The people that spent the last 30 years giving away US & EU manufacturing to the Far East - no doubt with plenty of "10% for the big guy" type deals behind the scenes - should all be shot.)
This is troubling news, as we could soon be paying $2,500 for an iPhone within the next three years. The original reason for outsourcing was to keep costs down, and now, with this trade war, it's clear consumers will bear the burden.
While some may see the return of manufacturing to the U.S. as a win for national pride, the reality is more complex. The high cost of U.S. labor, combined with excessive bureaucracy, leads to higher production costs, which ultimately get passed on to consumers. There's nothing inherently beneficial about manufacturing in the U.S. other than symbolic gestures tied to identity politics.
Most consumers want affordable, high-quality products, not overpriced goods that may be touted as "Made in America" but offer no real value beyond that label. Instead of focusing on where products are made, the priority should be on ensuring that they are durable and not part of a system of planned obsolescence. We want iPhones that last longer, not cost more, yet U.S. manufacturing may drive up prices without offering real improvements in quality or longevity.
Unfortunately, the consumer is losing in this scenario—stuck paying for rising costs while receiving little in return. We need to reassess the real benefits of domestic manufacturing and whether they justify the inevitable price hikes. It’s clear that without a shift in strategy, we're moving toward a future where innovation is stifled by political posturing and unnecessary cost inflation.
Chip manufacturing is critical for national security, which is to say world security, if you like the Pax Americana (and you should). This is not some trade war thing. My only actual concern about this is that it may make the US less willing to intervene if the CCP invades Taiwan, and we absolutely should intervene if that happens.
I get the national security part, but not sure about world security part.
Why should I, as an example, who is neither a US citizen nor Taiwanese nor Chinese, should trust a chip being manufactured in the US vs. somewhere else?
I'd say it is neutral in regards to world security, not better.
I suppose it depends on where you are from and your politics, but I think many people outside the US would feel safer with chip production in the US than under Chinese control. I don't think most would really jump at the chance to buy the same chip from a US manufacturing plant vs. a Taiwanese one, but if China were to make a move on Taiwan, I'm not sure the world's computing resources would be particularly safe. (Not to mention, I wouldn't be surprised if the secret back-room plan was to raze Taiwan's chip manufacturing capability to the ground if it looked like China was going to win a takeover of the island.)
Even ignoring the specific players, having critical advanced technology manufactured in more than one place increases world security. What if, say, a catastrophic earthquake were to significantly damage Taiwan's chip manufacturing? Having expertise and working, active manufacturing elsewhere is a good thing.
I mean that the world is best off if the US continues to maintain the global maritime order, and this means there being no credible way of cutting off the US military from being able to mass produce weapons.
Sure, this costs US taxpayers a lot, but whatever, it's worth it.
> and now, with this trade war, it's clear consumers will bear the burden.
"Now"? The trade war has been on since what, 2017?
> There's nothing inherently beneficial about manufacturing in the U.S. other than symbolic gestures tied to identity politics.
While I think that argument can be made in general, if you consider certain sectors and certain products, the calculus changes. Onshoring chip production is a matter of national security. Not necessarily in the "big bad China will take over Taiwan and put backdoors in our chips" sense (though that's certainly a concern), but in the sense of not being dependent upon an adversarial state for fundamental advanced technology.
> Most consumers want affordable, high-quality products
Sure, but that's not sustainable. You end up playing "chase the country with the worst worker protections". This isn't the case of chips (yet?), but there are quite a few things where China used to be the go-to for manufacturing, but production has moved elsewhere because costs went up, and it's cheaper to stop doing it in China. The long-term end result of all this is that everywhere has labor costs that have gone up enough that offshoring doesn't really buy you all that much.
Of course you can say, "okay, maybe that's true, but at least I can get my cheap iPhone now, and moving production to the US hurts that now, rather than decades from now". And I'm somewhat sympathetic to that. But ultimately Apple may just have to change how it prices things if it costs more to make iPhones. They already make solid profit on each unit, and perhaps they'll just have to make do with less of a markup.
> Instead of focusing on where products are made, the priority should be on ensuring that they are durable and not part of a system of planned obsolescence
I feel like Apple is a pretty bad example for you to use here. I had to replace my perfectly-functional, four-year-old Pixel 4 last year because it stopped getting software updates after three and a half years. Meanwhile my wife has a six-year-old iPhone that will update to the latest major version of iOS tonight, and it will likely keep getting updates for a couple more years. My new Pixel 8 will supposedly get major OS updates for seven years. If I break the screen on my phone or the battery gets bad, I can get them replaced fairly affordably. These are improvements!
Apple's repair situation is worse, but that's a choice Apple has made. If they wanted to focus on repairability, next year's iPhone would be the most repairable phone on the market. But they don't want to do that. Moving manufacturing around is orthogonal to all that.
After all the wailing and rending of clothes, the industrial policy worked out great and we have top tier production here in the US, transferring knowledge from TSMC to a US workforce.
This is a significant win for the US, and just the beginning of the amazing industrial policy passed over the past few years.
US manufacturing is about to be reinvigorated, and we in the US are going to be building our own future both for chips and for energy security.
This is great news, and we should celebrate.
> US manufacturing is about to be reinvigorated
One thing that I think that frequently eludes people in this discussion is that US manufacturing has pretty much been constantly growing for the past century; just its share of GDP has fallen as other sectors have grown faster. And the share of the workforce has fallen even faster, as the actual manufacturing has moved towards higher value items and greater degrees of automation.
I think the actual outcome of this policy is mixed. I think it was a big case of corporate welfare that will result in somewhat increased chip production in the US. I think this is a win for national security. I don't think the government applying such levers to change how the market allocates capital probably won't be a win for economic output or quality of life.
> One thing that I think that frequently eludes people in this discussion is that US manufacturing has pretty much been constantly growing for the past century; just its share of GDP has fallen as other sectors have grown faster. And the share of the workforce has fallen even faster, as the actual manufacturing has moved towards higher value items and greater degrees of automation.
The last part is missing something important though. If we're measuring "output" in dollars and the US is doing the parts (like aircraft manufacturing) that globally don't have a lot of competitors, the high "output" is from high prices rather than high production, and then what we're doing is surviving in the markets where there isn't a lot of competition and getting killed in the markets where there is.
There are three problems with this. The first is that it implies the US isn't competitive in competitive markets, which is a sign that something is very messed up. The second is that the markets where other countries aren't competitive tend to get eroded over time. The US essentially had a lock on the auto market in the mid-20th century; not anymore. What happens when China starts making globally competitive aircraft?
And the third is that supply chains matter. If you give up on the low margin stuff instead of figuring out how to make it competitively domestically (e.g. via automation) then foreign competitors have a leg up when it comes to making the high margin stuff for which the commodities are inputs.
> I don't think the government applying such levers to change how the market allocates capital probably won't be a win for economic output or quality of life.
Relying on "free markets" actually requires free markets. If other countries are willing to subsidize their industries until they drive manufacturing out of the US, that's not a free market. It's the equivalent of a monopolist using dumping and tying to leverage their existing monopoly into new markets, but with a country acting as the monopolist and therefore being exempt from antitrust enforcement.
Doing the same thing in return is not likely to be an efficient strategy, but neither is the status quo. The main alternative would be to realize that the thing we've been calling "free trade" is not actually that and a country that subsidizes its industries until its US competitors exit the market has to be dealt with as an abusive monopolist, e.g. via tariffs and similar policy levers, since antitrust laws don't apply to foreign governments.
We are not only measuring in dollars. We measure tons of steel, number of cars produced and so on. Not all of those measures are growing, but many are. While market share has gone down, total production is up.
Take cars - https://www.bts.gov/content/annual-us-motor-vehicle-producti... US production is up greatly in 2019 (that is before Covid - the chart doesn't have after Covid numbers to work with). US production is up by a lot since 1960. However in 1960 the US population was lower, and your typical family only had one car (women often didn't even have a drivers license). Thus you see market share is down while production is up.
The ratio of domestic sales and domestic production has widened over the same period. In 1970 the ratio of domestic production to domestic sales was .933, in 2019 that ratio is .796.
Though we are making more total cars, were making a smaller percentage of all cars sold.
As another commenter pointed out, the cars we make today are amalgamation of parts and design work done overseas. That isn't necessarily a bad thing if you view globalization favorably, but it is another factor when considering the value created in the US with regards to vehicle production.
Eh this is bending the word "produced". In 1960 all the parts were made in the US likely from raw materials mined & refined in the US. That's very different from today.
Can you explain how tariffs are an effective tool against foreign governments subsidizing industries? It has been my understanding that tariffs typically end up being tit-for-tat and relatively zero-sum.
> Can you explain how tariffs are an effective tool against foreign governments subsidizing industries? It has been my understanding that tariffs typically end up being tit-for-tat and relatively zero-sum.
They neutralize the subsidy's effect on pricing and prevent the subsidizer from taking over your market, at least.
> It has been my understanding that tariffs typically end up being tit-for-tat and relatively zero-sum.
The subsidy is already a tit, the tariff is tat. Zero-sum is at least better than just taking the blow and having a negative-sum outcome for yourself.
> The subsidy is already a tit, the tariff is tat
Why is someone else subsidizing the price of a thing you buy bad?
The subsidy is doing you a favor by reducing your input costs, or freeing up your work and capital to produce something else.
Because they are doing so to erode your manufacturing base through unfair competition.
From a national security standpoint this can be deadly in a hot conflict.
From an industrial strategy standpoint, it’s the same as any other monopolist practice - they will erode your base, take over your market, then raise prices to fleece your population’s wealth while increasing their own.
Industrial bases are economic strongholds that shouldn’t be lost, particularly not to great power competitors.
> From a national security standpoint this can be deadly in a hot conflict.
What about a cold conflict? How much do the tariffs and protectionist policies cost in the middle to long run?
For example, the Jones Act costs billions per year and has been going on for a lot of years. How many additional aircraft carriers and submarines and so on could the US have bought with that money?
Tariffs and protectionist policies are unfairly maligned. They are effectively the only way countries build and rebuild industries. The idea that they are bad is an invention of bad economists who don't study history. See the book "How Asia Works" for an accurate economic history of the growth of industrial power in Asia, how it was based on Germany's ascension before it, and how it was al built on the RIGHT kind of policies. https://www.gatesnotes.com/How-Asia-Works
Successful Asian powers studied history, not Milton Friedman. https://en.wikipedia.org/wiki/Historical_school_of_economics
Tariffs that merely offset subsidies in the other country has zero net effect on competition, and doesn't harm producers on either side unduely.
The net effect is merely a net transfer from the foreign government to the domestic one.
Tariffs that go BEYOND the subsidies in the foreign country has a net protectionist effect. This CAN cause stagnation in the industry in question. But less so if there is still healthy domestic competition.
Subsidies are potentially the most destructive measure. This is especially true for protectionist subsidies, and less so for export subsidies. But in general, subsides sets up a cash transfer facility between a government and local industry, often removing incentives to innovate. In turn, this means that the subsidies need to increase year by year to have the desired effect.
This can lead to the subsidized industry dying a sudden death once public patience for the growing subisides (and so the subisides themselves) come to an end.
Read “How Asia Works” on how subsidies can be used effectively.
The book calls it “export discipline”, that is, you keep the subsidised firms on their toes by demanding them to be exporters and win the global market, thus making them remain competitive.
I don't disagree, you can definitely build more industries with tariffs and protectionism. I just don't see the point.
I'm a consumerist at heart. As long as consumers get to consume, it does not matter to me whose industry is doing the producing.
I get that your foreign suppliers can turn on you and raise prices. I think the money you make during peacetime by not putting tariffs will let you buy more weapons and bribe more allies so that the foreign suppliers don't try anything too awful with the supply chains. Stockpiles can buy a lot of time to restart industry in an emergency or at least find a different foreign supplier.
Take a look at Russia, they are sanctioned by half the planet and they still keep going on a reduced industry because they had huge stockpiles of tanks, artillery and so on. Imagine something like that but with a military that doesn't suck. Nobody would even dare try a sanction.
The point is that unfortunately geopolitics ends up in an eternal competitive state.
Losing your industrial base and giving it away to a geopolitical competitor is almost certainly an error in the long run.
Large industrial bases also are correlated with healthier middle class societies, according to Vaclav Smil, and in my experience, he’s exactly right.
So losing the industrial base is fine for you, a service sector worker, but it’s bad for the country and it’s bad for society, if you want it to have a healthy middle class.
Most of the country works in the service sector. It's not like I'm some kind of out of touch elite.
The ones who are most hurt by tariffs, most affected by higher prices, are the working class. Sure, the workers of the specific industries that are lucky enough to be protected, the ones with the most persuasive lobbies, will certainly benefit. But every other worker will be a little worse off.
If you are concerned about the people who got hurt by globalization, maybe the government should collect money from people like us and spend it on people like them. They can set up the tax in such a way that rich people pay the most.
But if you use tariffs to help the people who got hurt by globalization, you cannot set it up in such a careful way. It's a blunt instrument that hurts productivity across the board and increases the prices to the end consumer. It becomes an implicit tax that poor people pay the most. An actual explicit tax would hurt much less.
If the consumer becomes richer by brining industry back to your country you might actually end up a victor in that transaction.
> The ones who are most hurt by tariffs, most affected by higher prices, are the working class.
Perhaps in the short to medium term, the people who had their livelihoods decimated and partially compensated for the decline in their standard of living by buying cheap imported products, will be most affected.
But tariffs should be a component of a longer term plan of tradeoffs to revitalize the protected industries.
> If you are concerned about the people who got hurt by globalization, maybe the government should collect money from people like us and spend it on people like them.
That idea is past its sell-by date. It's the neoliberal Democrat's response to the economic damage done by globalization: put the losers on welfare indefinitely. IMHO, that money should be
>IMHO, that money should be
Should be...?
>> IMHO, that money should be
> Should be...?
Sorry. Should be used to offset any short-term difficulties caused by tariffs, that occur as part of a longer term plan.
>I don't disagree, you can definitely build more industries with tariffs and protectionism. I just don't see the point.
You don't see the point of building up, say, your domestic chip building capacity? Really?
>Take a look at Russia, they are sanctioned by half the planet and they still keep going on a reduced industry because they had huge stockpiles of tanks
Russia can "keep going" because they have vast reserves of fossil fuels that Europe, currently, can't live without.
Tariffs specifically targeting subsidies are good. Tariffs in a vacuum are bad. Protectionist policies are bad.
> Because they are doing so to erode your manufacturing base through unfair competition.
I wouldn't say it's unfair, if other countries actually value domestic manufacturing then they'll provide the subsidies and incentives to cultivate it.
> …they'll provide the subsidies and incentives to cultivate it.
Incentivize it by…taxing imported manufactured goods, for example, to make the domestic manufacturers more competitive?
For the same reason we disallow severe product dumping - it's a ploy to build marketshare in an attempt to become hostile to consumers down the road. We don't let companies dump products for a reason.
China subsidizes EV manufacturers. Non-Chinese manufacturers can’t compete with the companies that get tons of free money from their government and go out business. Now only China makes EVs, so they can raise prices.
That’s the plan.
Sure, but if they raise prices, then US manufacturing becomes more competitive again.
Even if the US lost capacity to build, EVs arent such advanced technology that manufacturing couldn't return if the conditions were right.
> Sure, but if they raise prices, then US manufacturing becomes more competitive again.
Manufacturing isn't something you can just turn on like a computer program. It takes time develop the infrastructure, talented labor and product designs. For something like cars we're talking about many years. It took China decades of concerted effort and heavy subsidies to get where they are now. Without subsidies, starting this process takes even longer and may even be impossible.
Accordingly, if you already have this industrial capacity it would be mind blisteringly moronic to let it slip away from you. What can be destroyed in a few years will take many more years to build back, and won't be built back at all unless you reverse the moronic policies that let it get away from you in the first place.
It's a favor in the short term but a blow in the long term because you lose ability to manufacture. Manufacturing capacity is a use-it-or-lose-it thing.
Because you are a producer, and not just a consumer.
I think I'm looking for a more substantial answer.
> The subsidy is already a tit, the tariff is tat. Zero-sum is at least better than just taking the blow and having a negative-sum outcome for yourself.
To be more clear, I meant that it was typical for foreign governments to impose retaliative tariffs. e.g. https://www.trade.gov/feature-article/foreign-retaliations-t...
To say nothing of who actually pays the cost of tarrifs.[0][1]
[0] https://taxfoundation.org/blog/who-really-pays-tariffs/
[1] https://www.cato.org/publications/separating-tariff-facts-ta...
> To be more clear, I meant that it was typical for foreign governments to impose retaliative tariffs.
And in the context of massive trade deficits, so what? IIRC, when the Trump tariffs went into effect, there was a lot written that the Chinese didn't have many levers to pull to respond, because of the US trade deficit. I think they implemented a tariff against soybeans (and some other non-tariff actions), and that was about it.
> To say nothing of who actually pays the cost of tarrifs.[0][1]
Who cares who technically pays, especially when they're correcting for some other market distortion? Focusing on that is a hallmark of libertarian anti-tariff propaganda that's pretty monomaniacally focused on free trade dogma and prices to the exclusion of all other considerations.
> And in the context of massive trade deficits, so what?
I was thinking more in the context of consumer inflation. Countries tend to go back and forth in a tariff war, effectively raising taxes and lowering incomes for their citizens.
>> And in the context of massive trade deficits, so what?
> I was thinking more in the context of consumer inflation. Countries tend to go back and forth in a tariff war, effectively raising taxes and lowering incomes for their citizens.
That's monomaniacal focus on short-term "prices to the exclusion of all other considerations." An artificially low subsidized price isn't a good deal, especially when its competing with your local industry.
or you trade industries .. you get our manufacturing but respect our ips. indirect class warfare. white collar vs blue collar.
Then one generation later it all bloes up in your face, destroying your democracy .. but you get to pretend your actions where innocent . its just like the weather , cant do anything about that ..
I can explain it.
I'd like my critical supply chains to be in North America. Ideally, I'd have a free trade zone with Mexico and Canada. Tariffs, two-sided, reduce trade, and bring me closer to that reality. I'm okay paying slightly more for that security.
I'd like the same thing in the EU too, and in other major world blocks.
There's a slight efficiency gain from specialization, where each country brings a skillset, but it's totally not worth it to me versus the brittleness which comes with it.
Remember how the Covid supply chain disruptions cascaded? That's a tiny fraction of a really bad natural disaster.
Maybe zero sum on a global scale but not zero sum in terms of where industry gets developed.
>Can you explain how tariffs are an effective tool against foreign governments subsidizing industries?
Because the US is a huge market, and if you can't sell your goods here competitively (because tariffs price you out), it hurts your business. It's a negotiating tool.
> typically end up being tit-for-tat and relatively zero-sum.
That pretty much sums up all economic policy honestly. It will always be tit for tat since one aide can only respond to the other and doesn't directly control their economy.
Nitpick, I know, but
> but with a country acting as the monopolist and therefore being exempt from antitrust enforcement.
This is the US. what antitrust enforcement?
Preaching to the choir, yes and:
> ...supply chains matter.
A corollary (?) is that competency matters too.
The outsourcing mania forfeited vertical integration to please Wall St. Collateral damage included knowledge, culture, and ability to innovate.
> ...not likely to be an efficient strategy
Per principle of no free lunch, greater efficiency at the expense of resiliency.
> ...tariffs and similar policy levers...
Yup. The Rudyard Kipling School of Economics doesn't acknowledge realpolitik, will to power, balance of trade, finance, labor relations, foreign interests, etc.
The Econ 101 glasses give a very myopic view of the world. It's just an introductory model for a very complicated system.
Do you have a source for this? In the past when I've been told this, the statistics referenced where based on whether a company was classified as being in in the manufacturing sector, not based on which jobs were classified as manufacturing. This included companies that were classified that way due to historical inertia, or based on their global industry but actually had little to no manufacturing in the US. Based on that I have a hard time knowing what to believe, and would love to be pointed to more accurate information.
If you go by manufacturing jobs, BLS seems to have the data going back to 1939. Peaks at 18.4m jobs in 1969. Currently at about 12.9m.
N.B. the current U.S. population is 1.6x the population of 1969.
https://data.bls.gov/timeseries/CES3000000001
Average productivity per manufacturing worker in the US grew on average by 3% per year in the 1950–1980s and 4% per year in 1990s (https://www.bls.gov/opub/mlr/2002/06/art4full.pdf), i.e. its current output is comparable with that of ~50m people working in 1969, so a 30% decrease in total manufacturing employment was probably well compensated for (putting aside the social welfare point of view).
There's a vibrant high-tech contract manufacturing segment of the economy, led by behemoths like Foxconn and several other Asian players who specialize in consumer electronics & computing gear (Compal, Pegatron, Quanta, etc). That doesn't mean manufacturing doesn't exist in the US, though, and there are still very large EMS firms with significant presence domestically, like Jabil, Flex, Celestica, Sanmina, and plenty of others. The difference between now and 25 years ago is that it hasn't been cost effective to manufacture high volume, low complexity electronics in the US for a full generation. But, the majoarity of high complexity, low volume (NPI, very large PCBs, PCBs with many complex layers) stuff is still made in the west, and there will always be meaningful demand for high tech manufacturing in regulated industries (defense, medical), too. For example, CGMs are made in Alabama & Ireland, avionics for Apache helicopters are made in Alabama, data center server racks for Meta are assembled in Finland, Germany & San Jose. Same for Netflix CDN racks.
It goes on and on. The majority of what has been outsourced to China (and Taiwan and Singapore and India and Vietnam) is the "face" of high tech electronics, and the majority of electronic piece parts components, but not final assembly and not much of the tricky stuff. I don't think we'll see a quick ramp of high-vol/low-mix mfg coming back anytime soon because too much of the supply chain is in Asia, but it could if there were sufficient demand.
How does this square with 5G radios being almost entirely made in Asia? As in the entire chain from antenna design to finished chip happens >90% in Asia by dollar value.
None of the things you mentioned come even close in terms of complexity, on a per cubic volume basis at least.
> Do you have a source for this?
There are reams of economic literature trying to estimate whether government intervention in the market was a good idea. Most of the time it doesn't turn out great. So the parent's suggestion "probably won't be a win for economic output" is a pretty safe bet.
Often governments will use "security" as an argument to keep steel, shipbuilding, etc, in the country. That argument is not really possible to evaluate on economic grounds.
A few counter examples:
1. TSMC (supported by the ROC government[https://dominotheory.com/tsmc-and-taiwans-government-two-boa...])
2. Korean chaebols (Samsung, Hyundai, LG etc, supported by ROK government[https://www.investopedia.com/terms/c/chaebol-structure.asp])
3. Japanese heavy industries (Japanese government support)
The government support are a combination of low interest loans, import controls and financial subsidies.
That the favoured industry (or company) is doing well isn't necessarily a sign that the policy is overall good for the country's economy.
As an analogy: weapons manufacturers do well when there's a war on, too, but that doesn't mean war is good for prosperity.
> That the favoured industry (or company) is doing well isn't necessarily a sign that the policy is overall good for the country's economy.
You are answering specifics with generalities.
If Taiwan didn't support and nurture TSMC so that today it's a national champion that prints money, what development path do you think they could have taken that would've brought at least the same economic success? Please be specific.
There's plenty of other companies in Taiwan already today, and that's without the counterfactual of leaving more money in people's hands.
I can't predict specifically what other things would have happened. If people could do these kinds of predictions well, maybe central planning would actually work?
You are saying planning never works without even the ability to point to any specific cases. Why do you swallow your own ideology so uncritically?
Does Soviet-style central planning work? It didn't seem to work well in the few societies that really tried it.
Dos all planning fail? Seems unlikely, given the amount of fairly centralized planning that went on (and still goes on today) in East Asian countries, countries that are the rare "success stories" of developmental economics.
In fact the original East Asian success story was Meiji-era Japan, basically the only society outside of the West that managed to industrialize itself during the 19th century. And if one sits down to read a history book one quickly realizes that what the Meiji government did was highly top-down and planned with the explicit goal to catch up to the European colonial powers. It did not resemble classical laissez-faire economics.
Huh? Where did I say that planning _never_ works? Please read more carefully, lest you argue against strawmen.
I said that planning and forecasting is _hard_, and that _I_ can't tell you on the spot what counterfactually would have replaced TSMC. Many different options are possible. Or perhaps TSMC would have still happened, but in a different way.
> In fact the original East Asian success story was Meiji-era Japan, basically the only society outside of the West that managed to industrialize itself during the 19th century. And if one sits down to read a history book one quickly realizes that what the Meiji government did was highly top-down and planned with the explicit goal to catch up to the European colonial powers. It did not resemble classical laissez-faire economics.
If I have an ailment and go to a chiropractor to fix that ailment, and later my ailment goes away, that doesn't necessarily mean that the chiropractor helped. In fact, those guys are dangerous and more likely to make things worse.
For another Japanese example, see how eg Sony had to fight and dodge the much vaunted MITI more often than not, especially in the beginning. (Sorry, I'm not up to date on all the Meiji-era stuff. It's a fascinating period of history, though!)
---
Just to be clear, central planning can 'work' up to a point; it doesn't necessarily lead to famine. Eg seen on its own East Germany was the most successful socialist economy ever. Out of the ashes of war torn quarter-country they rebuilt a reasonably high standard of living---the highest among all socialist countries, and pretty decent by global standards---all while paying enormous war reparations to the Soviet Union. (I was born in East Germany.)
Their system had many aspect of Soviet-style central planning. But over most of its life the regime wasn't nearly as totalitarian as Stalin's Soviet Union.
It's just that East Germany pales compared to more market oriented West Germany. (And West Germany pales compared to even more market oriented Switzerland.)
> The government support are a combination of low interest loans, import controls and financial subsidies.
There is a very well-understood formula on how to go for from an agrarian society to an industrial one, which has been used going back to the late 1800s:
* https://www.goodreads.com/book/show/16144575-how-asia-works
Of course you have to actually follow it, and not get sidetracked with cronyism and such, like the Philippines did:
* https://en.wikipedia.org/wiki/Crony_capitalism
'How Asia Works' is not exactly economic orthodoxy, to put it lightly.
Is that an indictment of the book or of economic orthodoxy?
The book.
I would like to hear how that book is viewed by the orthodoxy, if you have any pointers.
I'm trying to pull some things together.
Mostly, a big part of the book is just a warming up of the tired 'Infant Industry argument'. See https://en.wikipedia.org/wiki/Infant_industry_argument
For now, have a look at https://mises.org/journal-libertarian-studies/prejudice-free... to get an alternative look at Malaysia, one of the recurring example in 'How Asia Works'. (That paper is also just a really good read by itself.)
I don't particularly like Noah Smith (he's also in favour of protectionism and 'industrial policy'), but his https://www.noahpinion.blog/p/the-polandmalaysia-model has some good points also about Malaysia.
https://www.amazon.com/Just-Get-Out-Way-Government/dp/193086... is an alternative view at development economics. The title is a bit provocative, (even the author wasn't really happy with it, when I had a chat with him about it). The main thesis of the book is that honest and competent civil servants are the most rare and precious resource a country has, especially a poor one, so policies should economies on their labour.
So eg you should privatise a state-owned company by auctioning it off in one piece to the highest cash-bidder open to all comers from anywhere, no questions asked. Instead of having your civil servants set up a complex system or worse trying to evaluate proposed business plans. Complexity breeds corruption in the worst case, and in the best case still takes up civil servants' limited time.
Directly about 'How Asia Works' https://www.astralcodexten.com/p/book-review-how-asia-works mentions some critiques in the 'Conclusion' section. See also https://open.substack.com/pub/astralcodexten/p/book-review-h...
> I don't particularly like Noah Smith (he's also in favour of protectionism and 'industrial policy'), but his https://www.noahpinion.blog/p/the-polandmalaysia-model has some good points also about Malaysia.
Yeah:
> On a trip to Turkey in 2018, I read How Asia Works, by Joe Studwell. Despite the fact that it didn’t get everything right, it’s probably the best nonfiction book I’ve ever read.
* https://www.noahpinion.blog/p/the-developing-country-industr...
> As any longtime reader of mine will know, my favorite book about economic development is Joe Studwell’s How Asia Works. If you haven’t read this book, you should definitely remedy that. In the meantime, you can start with Scott Alexander’s excellent summary.
* https://www.noahpinion.blog/p/what-studwell-got-wrong
The book goes over what actually happened: it's not theory, it's history. What worked in each country (often the same/similar things), the variations, and where things were tried but went badly (often with analysis on why).
> The book goes over what actually happened: it's not theory, it's history. What worked in each country (often the same/similar things), the variations, and where things were tried but went badly (often with analysis on why).
Alas, in the absence of randomised controlled experiments, it's very hard to infer causality purely from observations. You need a theory to guide you. But observations are still extremely useful, of course.
Just because countries did X and Y happened later, doesn't necessarily tell you X causes Y. In addition to the usual causation vs correlation dilemma, in economics you can even have what looks like reverse causation that goes back in time, because intelligent actors anticipate the future.
(Silly example, if there's a clear sky, and you see many people carrying raincoats and umbrellas, it's likely to rain later. But that doesn't mean that umbrellas cause rain.)
Many of the successful countries in 'How Asia Works' share some ethnic similarities. (Eg many have at least sizeable Chinese minorities or have outright Chinese majorities.) Many of the success stories also have some land reform in their past. The author decided that the latter 'worked' (ie was a causal factor), and ignores the former as perhaps a mere coincidence. Similarly, the author decided that the bouts of industrial policy and protectionism are praiseworthy causal factors.
He almost arbitrarily excludes Singapore as purely a financial centre, even though we have a pretty diversified economy these days, and in the past during the fast catch up growth, we weren't a global financial hub yet. That early development owes much more to the typical 'sweatshop' model that we see in many successful industrialisers, ie (light) manufacturing for export.
> 'How Asia Works' is not exactly economic orthodoxy, to put it lightly.
And yet it describes the historical record of several countries (in the case of Japan, how they did it twice: post-Meiji Restoration and post-WW2).
It goes over countries deemed 'successful' (Japan, Korea, etc), and others (Philippines).
What (particular?) "economic orthodoxy" would you suggest countries follow? What are countries (if any) have followed them, and what are the results? Are there book(s) that you would recommend on how to implement this/these orthodoxies, with case studies or historical examples of implementations?
Does “government intervention” include subsidies and R&D, in your account? I can think of more than a few industry segments (aerospace, biotech, etc.) that likely wouldn’t exist or be nearly as lucrative as they currently are without the extensive government intervention that helped build them.
> I can think of more than a few industry segments (aerospace, biotech, etc.) that likely wouldn’t exist or be nearly as lucrative as they currently are without the extensive government intervention that helped build them.
This is the central thesis of Mazzucato:
* https://en.wikipedia.org/wiki/The_Entrepreneurial_State
Has an entire chapter on the iPhone and its technologies (GPS, touch screens, Siri, etc), which would be applicable to most smartphones.
And continues to make. The NHS, for example, is a major source of funding for research into new drugs and treatments. mRNA vaccines came from decades of NHS funded research that the manufacturers are just now picking up and running with.
It should also be pointed out that economic goodness is not and should not be the be-all end-all reason for government spending. Governments building parks, for example, is a social good with little economic value (or at very least hard to quantify benefits).
In the case of things like medicine, government spending there has a social good of limiting communicable disease which is more important than how much money a drug company can make off a drug.
For something like TSMC putting plants in the US, even if it's somewhat economically disadvantageous we are still talking about bringing onshore more jobs and training for US citizens which will generally increase our capabilities here and the satisfaction of those employees.
Trying to get onshore development of electronics, the government basically has 2 levers to pull, either subsidizing building new manufacturing or applying tariffs to incoming tech goods. One of those levers has the negative consequence of raising prices on tech goods for everyone while we wait for manufacturing to build out.
> the government basically has 2 levers to pull
That’s simplistic and assumes a baseline where the relationship with the government starts at zero.
The company pays taxes. There can be negotiations over the tax rate, which is not a subsidy so much as a ‘tax you less’ type arrangement. This can happen at multiple levels for a company like Apple, even beyond the state/federal thing. The repatriation of billions of dollars of earnings is also in play.
TSMC doesn't pay taxes to the US government (at least, not significant taxes until recently). And that's what we are trying to onshore, the fabrication capabilities.
We could try and incentivize a company like Apple to fabricate in the US, but the simple fact is that (until recently with the new TSMC fabs) we did not have the fabrication capabilities in the US needed to make apple silicon. Apple does not have the capabilities to make these fabs either.
You can cut taxes to 0 for US fabrication plants, but there are simple overhead costs that are hard to get away from. That's why an actual subsidy is needed.
I mean, you could exempt fabrication plants from employment and environmental laws to allow them to operate cheaper... but that's sort of monstrous.
The main reason for TSMC to build plants in the US is as a hedge against a Chinese invasion of Taiwan.
That outweighs anything like jobs or economic efficiency (given no such war) by a couple of orders of magnitude.
And this really applies whether or not the US would join the war on Taiwan's side. TSMC production would be likely to be shut down for 5-10 years, regardless.
> For something like TSMC putting plants in the US, even if it's somewhat economically disadvantageous we are still talking about bringing onshore more jobs and training for US citizens which will generally increase our capabilities here and the satisfaction of those employees.
And completely ignores customers.
The NHS? Are you referring to the UK national health service? They are not mentioned at all in the history of mRNA vaccines... https://www.nature.com/articles/d41586-021-02483-w
Sorry, NIH is what I meant. I get those two mixed up in my head.
Out of the examples, aerospace engineering was helped by many government interventions such as war-time buying and development of titanium working.
On the other hand, it's also hindered by government regulations making all new development much more expensive than what it could be.
I'd think all the industry segments would exist as the do provide clear benefits to everyone but the development paths taken could be different from what they're now.
> I can think of more than a few industry segments (aerospace, biotech, etc.) that likely wouldn’t exist or be nearly as lucrative as they currently are without the extensive government intervention that helped build them.
Likely, yes, but even if they are, it’s impossible to say whether that’s a net win for society. Possibly, if the government hadn’t subsidized them, but instead had had lower taxation, other industry segments would have blossomed, and gotten better benefits for society.
As an example, US government support for the Internet may have led to larger automation, making labor relatively more expensive, and because of that decreasing the size of the middle class. Opinions will differ on whether that’s a net positive.
I think there’s too many layers of counterfactuals here: much of the government’s economic intervention stems from a (perceived) need that transcends ordinary economic concerns. Think wars, epidemics, famines, etc.
In other words, I think we’d need to presume the absence of those concerns to intelligibly consider the absence of taxation-funded interventions. And that’s more of a minarchst fever dream than a thing that could actually happen.
Sure. Maybe the market will provide food security in 98% of years on its own, but we need more 9's. And we obviously need our government to be coercive enough to protect us from outside, less benevolent, forms of coercion.
At the same time, this isn't a "yes/no" question. This is thousands of sliders that we adjust for each industry.
You always have to consider the opportunity cost. Sure, perhaps we've ended greater security and have also ended up with vibrant industry A at the end of it; but we maybe had to pay by hurting industries B, C, and D. It might be worth it; but it doesn't mean it makes sense to do it for industry Z where there is a smaller security benefit.
And that's not necessarily a good thing.
All those subsidies had to come out of some tax payers pocket, and they could have spent it on something more worthwhile (to them!).
A lot of people would prefer to pay no taxes, but that’s presumably not your point. Per-dollar, I think the average American taxpayer is probably very happy with the government’s investment in, for example, the Heavy Press Program (= modern airplane airframes) and resilient packet switched networking (= the Internet).
Or more directly: it’s hard to even imagine a contemporary national or international industry without the economic interventions that produced those things.
I know, imagining things is hard. But that's not much evidence either way.
Yes, there might be some government programs that look like a good deal in retrospect. Just like some lottery tickets are winners.
The heavy press program even turned a profit, if I remember right. Though private enterprise is usually pretty good at funding these kinds of projects, even with long lead times. (See eg how Amazon or Tesla or even Microsoft took ages to return capital to investors, but still had enthusiastic shareholders.)
I don't know specifically about packet switching, but you hear similar arguments about the invention of the computer.
In our reality, programmable electronic computers owe a lot to government and specifically military funding. But as a thought exercise, perhaps you can imagine an alternative history without WW2: IBM already made computing devices for business long before the war, and it's relatively easy to see how they would have eventually come up with a programmable electronic computer.
Compare also Konrad Zuse's work in Germany:
> After graduation, Zuse worked for the Ford Motor Company, using his artistic skills in the design of advertisements.[14] He started work as a design engineer at the Henschel aircraft factory in Schönefeld near Berlin. This required the performance of many routine calculations by hand, leading him to theorize and plan a way of doing them by machine.[21]
> Beginning in 1935, he experimented in the construction of computers in his parents' flat on Wrangelstraße 38, moving with them into their new flat on Methfesselstraße 10, the street leading up the Kreuzberg, Berlin.[22]: 418 Working in his parents' apartment in 1936, he produced his first attempt, the Z1, a floating-point binary mechanical calculator with limited programmability, reading instructions from a perforated 35 mm film.[14] Zuse Z1 replica in the German Museum of Technology in Berlin
> In 1937, Zuse submitted two patents that anticipated a von Neumann architecture. In 1938, he finished the Z1 which contained some 30,000 metal parts and never worked well due to insufficient mechanical precision. On 30 January 1944, the Z1 and its original blueprints were destroyed with his parents' flat and many neighbouring buildings by a British air raid in World War II.[22]: 426
> Zuse completed his work entirely independently of other leading computer scientists and mathematicians of his day. Between 1936 and 1945, he was in near-total intellectual isolation.[23]
In our real history, the US and UK armed forces came first, but a world with more resources in the hands of the private sector (and also with less war) would have surely accelerated some of these private computing experiments (IBM or Konrad Zuse or someone else), and we would have seen computers at roughly the same time as in ours, or perhaps even sooner.
Similarly, the real history of packet switching is heavily intertwined with some US government projects. But even just browsing Wikipedia https://en.wikipedia.org/wiki/Packet_switching tells you about other attempts and projects going on around the same time. So the government's investment probably did not speed up things by that much, even before you consider that in our counter-factual the private sector would have more resources.
> I know, imagining things is hard. But that's not much evidence either way.
Imagining is easy; "hard to imagine" is an English idiom for "that seems implausible" :-)
You're providing examples that counter the impact of government innovation, but it's unclear to me whether these are true counterexamples. The history for IBM, for example, is almost entirely intertwined with IBM's role as a defense contractor. Zuse's second computer (the Z2) was funded directly by the German government, presumably because it aligned with Nazi military interests.
(As a whole, these things are impossible to extricate: it's clear that the government doesn't create every possible idea, and there are an infinite number of innovations that can't be assigned back to government sponsorship. But I think there's general academic consensus that computing, aerospace, and biotech all progressed at rates beyond their equivalent private sector capacity due to government investment, and that the resulting progress was "worth it" in terms of returned economic and social value.)
Yes, that's why I talked about Zuse's earlier work. And IBM also had plenty of private business (and would have had more).
> But I think there's general academic consensus that computing, aerospace, and biotech all progressed at rates beyond their equivalent private sector capacity due to government investment, and that the resulting progress was "worth it" in terms of returned economic and social value.
It depends on your counterfactual. If government had taxed the same funds, but spent it on something else, yes, we would have had less progress in these specific sectors.
If they had taxed and intervened less, perhaps we would have had more?
And, of course, we picked these sectors out after the fact. There's plenty more examples of failed government investments.
> Most of the time it doesn't turn out great.
I don't know why people say this. The reason China beat us out in manufacturing of many goods is BECAUSE of government interference. They have a much more top-down leadership style that allows these gains in efficiency. They've streamlined.
But even looking at the US' history this hasn't been the case. The only reason we got out of the Great Depression was because of the most radical government-backed economic policy ever: The New Deal. Even today HUGE sectors of our economy, like defense, are paid for on government money. Those are jobs, companies, entire industries.
There is debate about the new deal. Its not clear it was a success.
There really, truly, isn't. Classical economists can't handle being wrong, but given an alternative reality did not happen, it was a success.
We can speculate and play armchair economist all day. But the hard reality is that the New Deal revitalized the economy and created countless jobs to pull the US out of the Depression. Maybe a "do nothing" approach would've worked too, eventually. When I unlock the secrets to interdimensional travel, I'll let you know.
Armchair economists set up an argumentative scenario where they cannot be wrong. You see, if they're wrong about a situation then secretly they're right, because if you did what they suggested instead it would've worked too (and better!). But if they happen to be right then of course they're right, and countering suggestions are obviously wrong and would've caught the economy on fire.
Well I do think the security argument does stand, you don't want to outsource navy carrier construction to China for example. Just don't expect a thriving economy to be built around it.
> to estimate whether government intervention in the market was a good idea. Most of the time it doesn't turn out great.
Is this really accurate? Most places regulate, surely there is a reason for that? It works pretty well compared to the infamous ‘self regulation’.
Yet the most successful nations on the planet go against this economic wisdom and do subsidize industries they deem important and/or protect them with tariffs. The US did this until the 1960s. China does this now.
> There are reams of economic literature trying to estimate whether government intervention in the market was a good idea. Most of the time it doesn't turn out great.
These sentences are just propaganda. There’s no factual basis for them.
There are no markets without government intervention. Statements like this are more like religious incantations than appeals to “research” of some kind.
> There are no markets without government intervention.
Of course there are. Black markets pop up everywhere to route around government intervention
Yes they do. Consider weed. It was well established before being legalized. Legalization brought higher taxes and interference. The black market continues as an alternative to the free one.
For obvious reasons a market for a product that is banned by the government is a poor example of a market that exists "without government intervention"
> There are no markets without government intervention.
David Friedmann (and others) would like to object, I am sure. See eg http://daviddfriedman.com/Legal%20Systems/LegalSystemsConten... for how many legal systems work without (or despite!) government intervention.
Functional markets require a strong mechanism for protection of property rights. The fact that we have some historical systems where that has taken a different form than a conventional government doesn't negate that the only practical mechanism that we have to protect property rights and support markets is a government.
Ancap fantasies aside, of course.
And then, there's lots of situations where externalities exist. If I poop in the river and you're downstream, it costs me nothing; I have no reason to stop.
> Functional markets require a strong mechanism for protection of property rights. The fact that we have some historical systems where that has taken a different form than a conventional government doesn't negate that the only practical mechanism that we have to protect property rights and support markets is a government.
Even if we grant that argument, that's at most an argument in favour of a minimalist nightwatchmen state. Not the full blown Leviathan.
> And then, there's lots of situations where externalities exist. If I poop in the river and you're downstream, it costs me nothing; I have no reason to stop.
See https://en.wikipedia.org/wiki/Coase_theorem
> There are no markets without government intervention
What does this mean?
It means that markets rely on the rule of law. From monopoly regulation to the prohibition on outright theft, markets literally cannot exist without governance.
I think law and order needs to exist, or enforced rules, but that's not "government intervention".
It’s rather vague as to where the line is, but as you say, ‘government intervention’ is a term with political baggage in financial theory.
https://policonomics.com/government-intervention/
Yeah, even there:
> beyond the mere regulation of contracts and provision of public goods
Building roads or enforcing rules: not intervention, according to that.
Roads are not public goods.
> In economics, a public good (also referred to as a social good or collective good) is a good that is both non-excludable and non-rivalrous.
If you ever sat in a traffic jam, you will have experienced that road use is rivalrous. And toll roads show that it's rather easy to exclude people from using roads.
Building roads with general taxpayer money and making them available without payment by the users might or might not be good policy. I don't know. But roads ain't a public good.
Most roads are difficult to exclude. Most spend most of their time with excess capacity and are not rivalrous. They're clearly not a typical private good.
And they're usually a natural monopoly, too. Not to mention that the acquisition of land to make a road is often problematic.
Basically, there's a lot of reasons to expect market failure in a market for roads. That's not to say the only solution is for the government to provide them, but that laissez-faire, completely hands off solutions are probably not going to turn out great.
Nowadays it's fairly easy to exclude people from roads: just put up a sign that says you can only use them if you paid. (You can also use a camera and some machine learning to catch offenders; or otherwise cheap overseans workers who manually review footage.)
> Most [roads] spend most of their time with excess capacity and are not rivalrous.
Most cars sit around idle most of the time. I'm not sure what your argument shows?
> And they're usually a natural monopoly, too. Not to mention that the acquisition of land to make a road is often problematic.
That's a different discussion. Though I'm more optimistic.
> Roads are not public goods.
They are a subsidy to the car industry.
They require ongoing maintenance.
They are a massive transfer to public land to whoever occupies the road, and the person occupying the road might not even be in their steel box for days on end.
Well, it depends on how the roads are financed. You are right that roads financed out of general taxation and free to use can be seen as direct or indirect subsidies to the car industry.
But the same physical road, but financed out of user-fees (or by voluntary contributions from nearby shops to attract shoppers etc) by a profit-driven private company, are not subsidies to the car industry.
Or take the hypothetical from the last paragraph, and add massive taxes on top, and all of a sudden it's the opposite of a subsidy. But the physical road stays the same.
How is stopping trucks on the road to check their papers, and holding up the delivery for some period of time, on a semi-random basis, not ‘intervention’ of some kind?
> but that's not "government intervention"
I would argue it 100% is. You can make MUCH more money if you steal or perhaps keep slaves. We're just so used to these preventative measures that we don't really consider them, but this is, in essence, a huge "tax" on the private sector.
Playing by the rules is very expensive as compared to not.
Even if you buy that argument (and I'm skeptical), that's at most an argument for a minimal nightwatchmen state; not for further government intervention.
If you're skeptical about whether governance is required for markets to function, launch your next startup on the darkweb or in a failed state. I fail to see how one could imagine any kind of healthy market operating without basic governance, reliable infrastructure etc. It's a religious idea (anarchocaptialism or something similar) at that point.
Past that, actually engaging with business (as a customer or employee) should be a rapid reminder of how much we have regulation to thank for. From not being poisoned (immediately or over the course of a lifetime) by our food, burned alive by non-fire retardant furniture (and the absence of a fire service), to having weekends off, our wages reliably paid, to being free from physical and the more obvious forms of psychological abuse. It's right there - you engage with the rights and privileges afforded by legislation daily.
Just astonishing to me that this kind of market fundamentalism is still actively engaged in. People can disagree on the extent and fundamental structure of government, but to deny it's role in the basic functioning of business in a society as complex as ours seems outright absurd.
As people get richer they demand better quality stuff and can afford it.
That includes taking weekends off.
It's perfectly legal where I live to work on the weekend. There's also no minimum wage here. Yet, most people get weekends off and get paid more than zero.
It's also entirely legal here to offer jobs without reliable pay (as long as the contract doesn't promise reliable pay).
There's plenty of long term poisonous food available in all countries: you can mainline eg pure sugar to your heart's content. Most people in most countries opt for tastier and healthier fare, because they can afford it. There's also plenty of immediately poisonous substances available, like strong alcohol.
People also regularly opt for more than the legal minimum in terms of furniture safety. Eg Ikea sells you kits to bolt your cabinet to the wall, so it doesn't fall on your child trying to climb up on it. So the legal minimum's don't seem particularly binding: people voluntarily exceed them.
> Just astonishing to me that this kind of market fundamentalism is still actively engaged in. People can disagree on the extent and fundamental structure of government, but to deny it's role in the basic functioning of business in a society as complex as ours seems outright absurd.
Governments do stick their hands into many pies, but that doesn't mean that them doing that is required by some physical or natural law.
> If you're skeptical about whether governance is required for markets to function, launch your next startup on the darkweb or in a failed state.
Yes, governments control some of the best real estate on earth. That doesn't mean they necessarily contributed much to that happy state of affairs; often just the opposite.
Btw, many companies are trying to escape even basic functions provided by government, and are going for private arbitration instead, because it's more efficient.
Clearly not true as markets exist outside the government (black markets).
But that’s beside the point. Even if most markets rely on government intervention, it tells you nothing about how much intervention is optimal.
It’s like saying “no human survives without food”, which is true but tells you nothing as to how much food is good.
Someone must police the rules of the market I suppose? Also, a truly free market benefits those who own the market, no?
I have no idea what you could mean by this unless you have a very specific personal definition of “government intervention in the market”.
The literature makes it clear that government intervention in markets is broadly necessary; the disagreement is around the how and what and why.
Sorry, I should have picked a clearer term. There is broad agreement among economists that _regulating_ markets is needed to have an optimal outcome for society. I was referring to government subsidies specifically, in that case the distortion is rarely beneficial. Especially when taking into account that the money could have been applied elsewhere with bigger gains to society.
There’s a lot of navel gazing around these sorts of analyses. Consider that the entirety of the tech industry exists in its current form due to federal spending.
The Silicon Valley story is well known; the SAGE project really created the classic IBM.
One of the greatest examples is the DARPA VLSI project of the late 70's and 80's. The ROI of that program is crazy.
If you are interested in this time, I 100% recommend the book The Dream Machine which is centered on J.C.R. Licklider but covers most of the people and projects that lead to personal computers. Stripe Press has a beautiful hardcover version of the book, but the font is tiny. I had to switch to an ereader version in order to read it.
Thanks for the book recommendation!
> US manufacturing has pretty much been constantly growing
By dollar value, perhaps, but that mostly means the US makes lot of high-value microchips, a field that has made (well-documented) exponential progress over the past decades. It is still consistent with US manufacturing capabilities regressing in other key aspects, such as machine tools, injection molding, shipbuilding, consumer goods, and so on.
Indeed, by revenue the U.K. is a bigger manufacturer than it has ever been. But it’s all things like jet engines and other high value items. Whether that’s a good or bad thing is a matter for protracted debate.
It’s a terrible thing.
De industrialisation in the UK led to the annihilation of the middle class.
I heard an econtalk pod a long time ago claiming that the long pole wasn't even dollar value, it was hedonic adjustments for Intel microchips that kept the graph of US manufacturing output looking like a tailspin since 2000.
Yes. Here's an example: https://research.upjohn.org/cgi/viewcontent.cgi?referer=&htt...
Excerpt:
> "The computer industry, in turn, is an outlier and statistical anomaly. Its extraordinary output and productivity growth reflect the way statistical agencies account for improvements in selected products produced in this industry, particularly computers and semiconductors. Rapid productivity growth in this industry—and by extension the above-average productivity growth in the manufacturing sector—has little to do with automation of the production process. Nor is extraordinary real output and productivity growth an indicator of the competitiveness of domestic manufacturing in the computer industry; rather, the locus of production of the industry’s core products has shifted to Asia"
The whole document is well worth a read.
Here's another article: https://qz.com/1269172/the-epic-mistake-about-manufacturing-...
Not sure what podcast you're talking about, but since we're trading vague recollections, my recollection was opposite. Manufacturing as % of GDP certainly went down, but gross value added did not.
Also, hedonic adjustments are typically applied to CPI figures, not figures like GDP or value added, so I suspect you have some facts crossed.
Note I think this evidence and discussion is all ambiguous, but hedonic adjustments absolutely affect real GDP.
When comparing to a past year's GDP, you need to make an adjustment for the differing value of money, and you can't calculate the differing value of money without considering the changes in the qualities of what you can buy with it.
We were only temporarily good at shipbuilding in the world wars. The United States just don't have much of an aspiration to be world class in building ships.
Given that we have the largest navy in the world, it would behooves us to grow our shipbuilding capabilities to be at least competitive.
Well, you can (partially) thank the Jones Act for US ship building being so abysmal.
> Well, you can (partially) thank the Jones Act for US ship building being so abysmal.
Or you can thank it for there being any shipbuilding left at all.
I would like to hear the case for how repealing the Jones Act would strengthen the US shipbuilding industry. I imagine it would be quite amusing.
It's pretty easy to make a limited case that should convince you, though not very amusing, I'm afraid.
> [The Jones Act] requires that all goods transported by water between U.S. ports be carried on ships that have been constructed in the United States and that fly the U.S. flag, are owned by U.S. citizens, and are crewed by U.S. citizens and U.S. permanent residents.
Repeal all provisions save for the requirement of having to be constructed in the US.
It's not what I would suggest (an outright repeal would be better), but it's easy to see how this partial repeal would strengthen the US shipbuilding industry: you are making their products more useful and cheaper to operate.
For comparison, you can have a look at eg German shipbuilding. Germany isn't exactly a low-cost country, has no equivalent of the Jones Act, and is doing some shipbuilding. (They aren't the biggest player in building whole ships, but the world loves to import German Diesel engines. Division of labour and all that.)
The US was a shipbuilding superpower because it had what Europe did not, access to vast untapped timber. It wasn't until globalization that the US lost its shipbuilding industry.
> The US was a shipbuilding superpower because it had what Europe did not, access to vast untapped timber. It wasn't until globalization that the US lost its shipbuilding industry.
Where did you get this information? The Spanish-American war wasn't considered much of a war by Americans at the time since the American fleet had been built with steel vs the Spanish that still used wooden ships. Those ships were run on coal. The US lost its shipbuilding industry because of cheaper competition from Japan and S. Korea in the civilian sector and Congress favors aircraft carriers over smaller ships like frigates and destroyers from what I read.
> access to vast untapped timber
??? Scandinavia is full of it. But I suppose in the 1600's it was the Netherlands that cut down all the forests, they were the shipbuilding superpower at the time.
It was the same situation for Spain. Its rise as a naval superpower in the 15th and 16th centuries came at a high environmental cost too. To build its fleet, including those iconic Spanish galleons, Spain logged high amounts of oak and pine, especially from northern regions like Cantabria and the Basque Country.
As ship production ramped up, there were growing concerns about resource depletion. To the point that by the late 16th century, Spain was forced to start importing timber from its colonies to keep up with demand.
What I find so chilling and reminding about this history is that to this very day, the spanish peninsula remains largely deforested because of that fleet they had 500 years ago.
They didn't have enough.
>The Swedish Navy planted oak trees on the island beginning in 1831 to provide strategically important timber for future ship construction. Once the timber was ready to harvest it was no longer required for ship construction.
https://en.m.wikipedia.org/wiki/Visings%C3%B6
Fun fact: the word "Holland" comes from "Houtland" meaning "Wood" land. There is almost no forrest left there now because they turned the trees into boats during their golden age.
We have forests, but not like the US. We had to carefully manage our forests in order to keep them.
China has the largest navy in the world. And the gap with the US keeps growing.
Times are changing.
how is this measured? Because if it's by total vessels it's a poor comparison. If it's by total aircraft carrier, it's also a poor comparison.
Basically measuring this is difficult, but this is contrary to my only knowledge of this which was a Wendover video (that was an enjoyable watch), but I wouldn't hold in the highest standard.
> China has the largest navy in the world.
China has the most ships.
Most of those ships are tiny.
By tonnage, the US comes _way_ out on top.
Before adding up ship tonnage, we should subtract one US carrier for every, I dunno, two ASBMs possessed by the PRC, and if (lol, I mean when) we get to zero, move on to, say, the Arleigh Burke class.
I guess we can give the US some bonus points here for each SM-6 they have, but pretty sure those'll run out in a week too.
On the "plus" side, China is food-insecure, so the US can cause millions of civilian deaths via famine. So it can/would still win, just via genocide. It would take a decade though, and require a strong campaign by the media to maintain domestic support.
Actually, no, I'm overstating things. The strategy would not be so much to kill so many people, as to "make the economy scream" (as in South and Central America), so as to hopefully bring about regime change. The net result might actually be an increase in immigration from China to the US (to the extent that people are able to make that migration). In the long run that'd be a net win for the US, actually.
Indeed, you could say that the first shots of that campaign have already happened. Look at Chinese youth unemployment.
I think the number is a lot higher than two ASBM per carrier. There's always a group of carrier, cruiser, and a destroyer squadron that provide a layered defense. So it's probably not that simple.
https://totalmilitaryinsight.com/aircraft-carrier-defense-sy...
America innovates. China replicates.
China and the US have been at war for decades now. Both an economic war and cyber war. Chinese nation-state hackers have hacked into tons of Fortune 500, Aerospace and defense companies, and tech companies to steal R&D from them. They take this R&D and use it for themselves but additionally, they also give it to private industry to use for themselves as well. China plays the long con game. Whatever it takes to make China the number one super power country eventually.
"There's only four things we do better than anyone else:
music
movies
microcode
high-speed pizza delivery”
-― Neal Stephenson, Snow Crash, 1992
Markets
Singapore (for example) is better at markets than the US.
Markets cease to function efficiently in the presence of massive concentrations of wealth. But if by saying America is good at "markets" we actually mean the latter, then yes.
> Markets cease to function efficiently in the presence of massive concentrations of wealth
Why?
Not the OP, but one reason is because concentrated wealth allows you to adjust the rules of the market or suppress competition. Another reason is that the market only rewards you for delivering value to people who can pay for it, so wealth concentration skews the production of goods towards a small quantity of luxury items, which lack the economies of scale for efficient production. This may still be a Pareto efficient market but not one that maximizes national wealth or welfare.
The self-balancing mechanism of markets requires "skin in the game", which is to say, there must be incentive for individual actors to make wise decisions backed by the risk of loss. However, as wealth accumulates, the marginal value of a dollar decreases. Beyond a certain point of wealth accumulation, losing money is no longer a punishment, which means wise decisions are no longer systematically incentivized. This gives individual actors unilateral power to keep markets irrational for longer than wise actors can remain solvent, creating market failure.
There's a fixed supply of money (ish, the real life stuff money represents is actually scarce). If wealth disparity is great that means that less money is available for working people. You can't really gain a dollar here without losing a dollar there.
The problem here is working people ARE the economy. If they no longer have the power of consumption everything crumples. Of course it's a sliding scale, but even just a bit less consumerism can be catastrophic for some industries.
Money is just a proxy for time spent, so yes there is a fixed amount because we all have only so much time.
You can make gains by new technology(printing press vs handwritten), cutting quality(cheaper inputs/materials) or improving efficiency(work cell design).
Looking at it from a view of consumerism paints a bleak picture, if you look at if from a view of social stability without a functioning economy everyone will starve since the fertilizer, DEF fluid, John Deere tractor code and everything that ties all those together are so far spread out that is has become like a spider web facing a hurricane.
My guess is that it has to do with index funds.
Huh, how?
Excellent quote. While the effect of American music is huge without a doubt let me go off on a personal tangent because it's related.
I have immigrated from my homeland (first to Canada and then Malta) and I usually say "I had the bad luck to be born in Hungary but I fixed that when I could". In other words, I am not particularly fond of the country / people living in there. But it being my mother tongue, growing up there has an interesting effect: some Hungarian songs have a much stronger emotional effect than any in say English. These are not even songs I knew as a child. I am actually quite curious whether there has been scientific research in this.
Nelson Mandela had a famous quote about the power of speaking someone's native language:
"If you talk to a man in a language he understands, that goes to his head. If you talk to him in his language, that goes to his heart."
The idea here is pretty straightforward: speaking to someone in a language they merely understand reaches them intellectually, but speaking in their mother tongue resonates on a deeper, emotional level. You can imagine now why songs in Hungarian resonate more to you than the ones in English.
I shall follow you down your personal/Hungarian tangent...
There was a guy called Jackie Orszaczky who was a Hungarian jazz/funk musician - bass player, bandleader, and singer - here (in Sydney, Australia) who made some of my most loved jazz/funk music.
This is one of his bands: https://www.youtube.com/watch?v=Hydb0dyB9GQ
Sadly, he died about 15 years back, way too early. Fuck Cancer.
Apparently he was "a big deal" in Hungary, at least amongst music circles. https://en.wikipedia.org/wiki/Jackie_Orszaczky
I'd bet the culture that produced the singers and songwriters mattered more than the language, but how could I measure those independently
Update: https://reddit.com/r/cogsci/comments/1fjo6f7/song_lyrics_in_... this is a very helpful comment pointing out there is, indeed research on the subject.
Debatable.
Snow Crash is tongue-in-cheek. The line above is the inner monologue of a samurai-sword-wielding high-speed pizza-delivering super-hacker martial artist.
You are dead on
> US manufacturing capabilities regressing in other key aspects, such as machine tools, injection molding, shipbuilding, consumer goods, and so on.
But this is exactly what Econ 101 tells you to expect to happen (and I teach Econ 101 ;) . Countries specialize to maximize comparative advantage. If you are the US and can manufacture high value items at a lower opportunity cost (or high value services at a lower opportunity cost), you will, but this means giving up on doing other things you could use the resources for.
The net result is that US manufacturing output in real dollars has increased 4x, in the past 70 years. At the same time, its share of the economy has shrunk (because other sectors have outgrown it), and many lower value manufacturing subsectors have been largely abandoned.
Maybe our economic policy should go deeper than 101-level economics then! Because comparative advantage is a dynamic quantity which changes over time, and while some advantages (like geography) are fixed, others are built by investment.
Here's a video [1] which explains why, in 1955, manufacturing household goods was cheaper to make in the US than in China (and why, at the time, they thought this manufacturing dominance was the thing that backed the US position as a global superpower). It's not because Americans worked more cheaply than Chinese workers, it's because American factories had a well-developed tool-and-die expertise, which meant that when anyone in the world wanted to make something, they were well-advised to travel the US to get it made.
Econ 101's comparative advantage is true at an instantaneous point in time, which is a good start, but if perhaps it's just "knowing enough to be dangerous". Economic policymakers (and company leaders) would do well to think about comparative advantage as planning an optimal trajectory over time, which can mean sacrificing a short-term optimum in exchange for a long-term optimum, and if there even is a textbook solution for that, it's going to look less like a 101-level intersection of straight lines, and more like an iterative optimization over nonlinear differential equations.
[1]: https://www.youtube.com/watch?v=QU6nsfoNWDI
> it's because American factories had a well-developed tool-and-die expertise, which meant that when anyone in the world wanted to make something, they were well-advised to travel the US to get it made.
Also because you couldn't offshore production to China or most other places even if you could provide all that due to various geopolitical, economic, social, institutional and other reasons.
mostly container shipping didn't exist, but things like tool and die products cost enough per kilogram that even air shipping is economical, to say nothing of integrated circuits
I think you're missing the point of what I'm saying. The US has steadily moved away from those past competencies because there was more profit to be made elsewhere.
And, sure, there are absolutely network effects with related goods and industries that have steepened that movement. If it was a win to change the allocation of resources when e.g. steelmaking was strong in the US, it's even more of a win after steelmaking withered.
> and if there even is a textbook solution for that,
It's not quite what you're saying, but the closest work I have read is 'Dynamic Optimization: The calculus of variations and optimal control in economics and management' by Kamien et al. It is all about estimating gradients and plotting trajectories in dynamical economic systems.
The feeling of misunderstanding is mutual! I agree that there was more profit to be made elsewhere. But I'm arguing that those profits were short-term profits which may well have come at long-term expense. If you follow the local gradient of profitability, you'll always find great short-term returns selling off your seed corn. Unlike what Econ 101 asserts about maximizing comparative advantage being the most profitable strategy, there is absolutely no guarantee that following a locally-optimal comparative-advantage strategy is globally optimal over a long-term window, where advantages are path-dependent.
Manufacturing is the core example of path-dependent advantages, because (unlike what any econ 101 textbook teaches), marginal costs decline with increasing production quantity in the manufacturing sector. This means the more you make, the better you are at making more things!
Fun fact: You should sell your seed corn, because the best hybrid seeds, crossed from especially made inbreds that you'd never want to use for yield, are so much better than the second generation crossing that you'll always lose money replanting.
There is never any guarantee that profits are long term or short term, or that your manufacturing specialization is going to remain useful, instead of being a dead end. Retaining specialization on, say, cathod tubes wasn't exactly profitable. See all the camera manufacturers that zigged when they should have zagged, and used their manufacturing strength to unprofitability. All of this is hidden by talking about 'manufacturing' in very large terms, but the real world doesn't work like that. Specifically, semiconductors were a very nice place to keep expertise in, and paid off. Internal combustion engines, and filaments for incandescent lighbulbs probably not.
Even in cases where we are looking at the same kind of manufacturing in multiple places, competitive advantages are lost. There are parts of Europe taht still have metallurgy and never attempted to divest, but lost comparative advantages because better technology came in at the wrong time in the capital depreciation curve: They invested heavily at the slightly wrong time, still had expensive labor, so they became far less competitive, at least for a while. Did they not pray enough to the manufacturing god? Did the Netherlands get lucky, or was sufficient dedication to manufacturing that led them to have ASML in their borders? Is the fact that Novo Nordisk found the most important pharmaceutical in the world a matter of Danish superior industrial policy, or did they just get lucky compared to the many other places with large investments in pharma that didn't get anywhere near that lucky?
The path dependence is not so predictable, and the path that makes you better today can lead you down a cliff. It's all gambles, and whoever claims they can predict what is the right one in the long run is being overconfident
ASML's success is partly (gross simplification) because it was the biggest local tech company (Philips) realising that they're too big to be effective, so they made a startup-esque new company which allowed them to be lean and engineering-focused. It's a good story of proper accounting allowing good company structures to persist inside of a bloated company.
Van den Brink gave a great interview some time ago, I'll see if I can translate it and post it here.
Novo Nordisk didn't find GLP-1s, they commercialized them. The current dean of Harvard medical school says he had a startup on them in the 80's.
https://x.com/jflier/status/1826985844684570747
Pharma has plenty of examples of things like that. Discovery is made, nobody thinks it’s worth pursuing, the world and knowledge base changes, someone goes back and says “this deserves another look”.
A lot of the GLP-1 success is based on progress made in the diabetes space (incidentally so), the refinement of molecules and better understanding of how obesity could be treated.
>Manufacturing is the core example of path-dependent advantages, because (unlike what any econ 101 textbook teaches), marginal costs decline with increasing production quantity in the manufacturing sector. This means the more you make, the better you are at making more things!
Looking at how Apple said it would be impossible to get US chips, so much this. It needed a lot of investment to onshore chip production again. And we should onshore more high value manufacturing to keep the supply chain working in one place.
The EU has been better at keeping manufacturing competence, but I see a lot of these short term comparative advantage econ 101 ideas taking over in the EU as well.
The thing is there are also network effects, expertise building and marginal cost improvements to be built up in high value items and services.
The United States was able to build a tremendous economy by building up those systems while continuing to benefit from its older manufacturing base for decades.
The United States economy is far from perfect, but it hasn’t traded away a long-term asset for only short-term ones as you’re suggesting.
That last statement is absolutely true, but if you have a constrained domestic supply chain, high employee cost, and/or constrained margins on finished products, you're still going to have come out behind if you persist with domestic manufacturing rather than offshore. This is the calculus OEMs faced in the 1990s-2000s. The big bet that they all made is to assume relatively stable geopolitics, and that there wouldn't ultimately be a squeeze on the potential manufacturing constraints (labor, supply chain, capacity). Ultimately, it's proven to have been by far the smartest decision for high-vol / low-mix stuff: electronic components and consumer electronics (not to mention apparel and many industrial products).
Like I said in my previous comment, though, this doesn't mean the capability to build has left the US (or Europe). Just that the decision to continue investing in manufacturing things that aren't competitively profitable has been made and the capacity has been allocated to higher margin manufacturing (regulated industries, complex products, and products where customers are less price sensitive).
> The big bet that they all made is to assume relatively stable geopolitics
It's not just geopolitics. China required partnering with local companies and sharing IP. Even if they were geopolitically friendly, Western countries set up to build their own Chinese competition from scratch in exchange for lower labour costs, believing that either they could out-innovate China at design (even when Americans no longer understand how their own products get made), or that they'd be retired by the time it did matter.
> . Unlike what Econ 101 asserts about maximizing comparative advantage being the most profitable strategy, there is absolutely no guarantee that following a locally-optimal comparative-advantage strategy is globally optimal over a long-term window,
I think there's little doubt that our change in allocation of resources has been advantageous versus staying an economy focused on primary metals and relatively simple manufacturing. Do you really feel otherwise?
Of course, economic assessments and the behavior of markets generally assumes free choice by participants. So there's always:
1. Geopolitical risks: state leverage can turn a local absolute advantage in e.g. producing war materiel into other advantages.
2. Sure, we could back ourselves into a corner, ultimately, by not being able to provide a key part of the value chain by following that gradient. (Geopolitics can be related, too, in that states can gather together lots of small advantages and use them in coordinated ways against other states).
So our state, of course, needs to focus on countering those actions of other parties. And maintaining some diversity beyond what is economically optimal can add resilience.
(One point I make in class: our textbook pretty much says that price controls are always dumb... but that there are plenty of reasons that a country might desire to have a surplus of food or to not be dependent upon another country).
The track record of those who would seek to centrally plan and optimize for some future outcome instead of following that profit gradient has been very poor. Not to say that it's never worked: but generally following the profit gradient has yielded better outcomes.
> because of (unlike what any econ 101 textbook teaches), marginal costs decline with production quantity in the manufacturing sector.
Unlike what any econ 101 teaches? Talking about LRATC, returns to scale, etc, is a big part of my unit 3. If you're not referring to that and instead e.g. Wright's law, that too is mentioned.
I wasn't talking about "base metals and relatively simple manufacturing". Were you? When Tim Cook explained, in 2017, why the iphone had to be made in China, he explained that it's because China dominates advanced manufacturing, and has skill that cannot be replicated elsewhere.
The behavior of markets assumes free choices by participants that rewards the participants who make those choices. I do not dispute that the CEOs who were responsible for shipping supply chains to China were following their incentives, and it worked out well for them. I would argue that there are alterations to regulations on corporate governance which would increase long-term profitability of those corporations overall, but that the key people in the corporations aren't properly incentivized to pass them, nor are shareholders sufficiently informed or coordinated.
> Talking about LRATC, returns to scale, etc, is a big part of my unit 3
In your unit 3, do you draw LRATC curve as a parabola? Because that's the wrong shape for manufactured goods. Not only do average costs decrease, so do marginal costs, and this is monotonic over all but the shortest timescales. Wright's law is about half of the reason, yes.
> I wasn't talking about "base metals and relatively simple manufacturing". Were you?
A whole lot of the decline that we're talking about has been in those sectors. Microchips and aerospace grew; simple consumer goods and steel manufacturing fell through the floor.
> The behavior of markets assumes free choices by participants t...
Incentives can be, and often are misaligned. However, the context of our discussion is talking about large overall economic growth that has outpaced manufacturing growth, even though it is still positive. This isn't evidence of misaligned incentives.
> In your unit 3, do you draw LRATC curve as a parabola? Because that's the wrong shape for manufactured goods.
It's absolutely a bathtub.
It's steep-downward sloping, mostly flat for a loooooonnnggg time, and then upward sloping. Indeed, this understanding of the shape of LRATC originally comes from study of manufactured goods. At some point coordination gets hard and further increases in quantity require using resources that are not well suited for the task.
Of course, the quantity at which costs slope upwards may be at an impractically large quantity for any industry-- in which case that industry is likely to be a natural monopoly. And there are some recent arguments that coordination is easier thanks to information technology and that it is even harder to reach diseconomies of scale.
> It's absolutely a bathtub.
I endeavour to convince you that you are teaching your students a falsehood. Natural resource industries have bathtub-shaped average costs. Average costs fall strictly monotonically for manufacturing, and marginal costs either fall or remain constant. Constant marginal costs are what you get if you don't even bother to solve coordination problems, and just copy-and-paste your whole assembly line instead (except even then you can't help but gain economies of scale, if only from your tooling suppliers). The misconception that it's a bathtub does not come from the study of manufactured goods, it comes from thought experiments about manufactured goods done by people who never managed quote requests at a real factory. Empirical studies done on actual firms almost never show rising marginal costs at any quantity.
That this error has permeated introductory economics is a very, very big problem.
> Constant marginal costs are what you get if you don't even bother to solve coordination problems
You still have coordination problems on the supply and distribution side.
> Average costs fall strictly monotonically for manufacturing
This is an extraordinary claim that is easy to refute with simple thought experiments. e.g. You think that if I want 103% of the units that a set of equipment from ASML can deliver, that average costs will be lower than producing 100%? Or do you mean "strictly monotonically" in some other sense?
Being able to vary your capital in the long run doesn't mean that you can have 10.3 sets of photolithography apparatus.
> and just copy-and-paste your whole assembly line instead
If you copy and paste and have everything truly independent, without the need for any coordination of resources, what you effectively have is multiple firms. In practice, firms still need to allocate scarce resources among lines.
> The misconception that it's a bathtub does not come from the study of manufactured goods , it comes from thought experiments about manufactured goods
This is a falsehood. Bain conducted reams of real-world research on manufacturing, plant size, firm size, and returns to scale, and this informs today's idea of LRAC. Of course, this research is 70 years old, and recent data is more ambiguous. As I've said, some believe that information technology has changed everything.
I’ve been interested in Henry Charles Carey, the chief economic advisor to Abraham Lincoln. He wrote a book called the “Harmony of Interests” about the need for state policy + markets (to contrast with purely free markets). Lots of data and rigorous argumentation.
Apparently this was known as the “American School” of economics — and it dominated from the mid-late 1800s for over a century.
it seems that you both agree that it depends on the timescale; asml's next model of machine may be able to produce 10% more, or 91% less, and in either case that extra 3% of your demand will lower the average costs
> and marginal costs either fall or remain constant
Not true. If your factory can make N widgets per year, and you want to make N+1 widgets, the marginal cost of the N+1th widget is vastly greater than the Nth widget.
I think the parent comment was talking about building factories and amortizing their costs over your unit production, whereas you assume the factory is a fixed cost with fixed capacity and looking at the marginal cost to produce a unit, which is really rare in many real world situations.
For most goods, the factory doesn't run anywhere near N, and the fixed costs are 6 or more orders of magnitude higher than the marginal widget costs, so your business is well served just by finding any method to use that plant more effectivly. As an example, I was quoted $60,000 for a mold which would have produced parts at $0.005. (Very small plastic widgets.) At that ratio, any amount of scale will increase my profit, since the marginal costs, even if they increase by a factor of 10 or 100, are negligible to the cost of the tooling. (And the global market for this widget is measured in hundreds of units.) Any amount of reusing the mold is going to save me money. Sure we have problems if we need N+1 widgets in less than 1/N more time, but if we expected to need 2N widgets, we could reuse the tooling design at a second factory, and marginal costs actually do keep dropping.
But in real life, by the time you received orders for N/2 widgets, you were already breaking ground on your next factory. And if you get an order for 100N, you smile because now you can switch to a higher productivity manufacturing method, like stamping instead of machining; at 10000N you can invest in mass-producing the machines-that-make-the-machines. This is how we end up being able to make even complex products like cars so cheaply that we have more cars than people.
You know, part of the problem with the massive youth unemployment in China is that the Chinese, just like most people, don't want to work in blue collar advanced manufacturing. You might call jobs like consulting or investment banking as "useless jobs", but that kind of comfy white collar job is what everyone is sending their kids to university for.
They didn't do a very good job of pricing in politics.
Just because they're "lower value" subsectors doesn't mean they have significant real-world impacts.
This sort of announcement will inevitably be used shortsightedly for political reasons. Someone will interpret "We have 3nm at home" as "We can do something foolhardy with Taiwan" or "We can throw up a big, non-surgical tariff". This will soon be followed by "did anyone mention that the 3nm chip is useless without a galaxy of half-cent supporting parts that we outsourced decades ago?" or "people consume products other than highly binned silicon dies, and now we have supply crunches and price spikes from televisions to toasters to turmeric?"
> The net result is that US manufacturing output in real dollars has increased 4x, in the past 70 years.
All of that manufacturing growth is semiconductors, and most of that measured semiconductors growth is simply Moore's law. I don't think anybody would say that the US is worse at making transistors today than it was in 1970, but that's table stakes; everybody is better at making transistors than they were in 1970. Automotive manufacturing has also done well (in part thanks to trade barriers). When it comes to everything else -- vacuum cleaners, fans, washing machines -- that manufacturing output is not doing so well.
The US is worse at manufacturing discrete transistors. It is almost all offshore with all the other commodity parts.
i'm pretty sure the small fraction of transistors that are made in the usa are cheaper, better, and more diverse than they were in 01970, even if those made elsewhere are far more abundant and cheaper still
I don't teach economics 101 nor taken a class. What about the other corporate departments that are being outsource?
The company I previously worked for not only outsourced product manufacturing to South Korea with assembly in the USA, after I left. They also outsourced customer service (CSR) to south Asia. Texas VCs bought the company and are trying to maximize all returns on their investment.
Companies like American, that produce branded products, have a whole department that helps their sales reps with moving customer support, be it email, physical letter, and or phone, to south Asia to reduce office management costs in the USA. They also could just be outsourcing invoicing while CSR is a local provider.
Manufacturing is a simple concept that is heavily politically pushed. The other departments that are needed to support products seem to be ignored. ML has a great likelihood of perpetuating this with real-time vocal transitioning. The CSR in India can sound like some person from New Jersey and break the accent barrier. This would put the customer at ease when sharing the same vocal tones. Consumers would be none the wiser.
At the end of the day, everything but 1) product development (R&D) and 2) corporate leadership are fungible and prone to outsourcing to the lowest cost locations until they get moved to a place where quality drops off enough that the company backpedals a bit. All those corporate departments are largely filled with commodity staff, so this shouldn't be surprising.
I'm not saying that in a judgmental or harshly negative way -- I've personally worked in cost centers for most of my career, and although I think highly of myself and my peers, we're still just assessed bluntly as part of COGS.
Product Development, R&D, etc is absolutely fungible and outsourced, even by some ostensibly big names.
If C-level could be outsourced while keeping shareholder returns, it would be
See IBM
The companies I had direct involvement with that outsourced R&D at least partially had names starting with J and N.
At least with J, if they outsourced the full part of one of the project, we would have it done faster and better XD
> but this means giving up on doing other things you could use the resources for.
Aka giving up the security and being more vulnerable to volatility. The pendulum can swing too far, as resilience cannot be measured in dollars.
Up until recently we all naively believed 'a rising tide lifts all ships' meant we'd all choose to get along and everyone would benefit.
It wasn't a naive belief, people did choose to get along economically and everyone benefited. The naive part is thinking that economic interdependence means political submission and that political and economic development are necessarily related.
Sure. As I pointed out, something like the CHIPS Act may be good for US resilience and national security, but is unlikely to be good for US economic output.
Econ 101 is mostly nonsense. Read up Steve Keen.
> I think this is a win for national security.
I think that's largely the point. Obviously, it's a balancing act, but when market forces create a situation that is incompatible with national security it really is the governments job to address the situation even if, as in the case with Chinese EVs, it means a bit of pain for consumers.
It doesn’t elude people, they just think that the 80% of manufacturing that isn’t high end shouldn’t have left and that it was criminal for it to have been shipped overseas at the expense of middle America.
A lot of it stuck around. I grew up in the rust belt and tons/most of my friend's parents worked at one of the many factories that were, and are still around. Think dog food, plastic molding, car part manufacturing, and glue. Not the big stuff that people think of when they think of manufacturing though.
I think if you start to deep dive into the industries that left, you'll find the reasons were often more complicated than simple labor costs. American companies did get out-competed by foreign firms in a lot of key areas.
America is large, but they can't expect to be the best in the world at every industry. If an entire country focuses on a specific niche for long enough, it's possible they will become the best. Samsung and TSMC are incredible companies that didn't happen by accident. And yeah, the USA might not compete at that level on the global stage, but the American economy is also not so completely dominated by one megacorp either.
Also, a lot of manufacturing, especially the high tech stuff, is highly automated. So these massive factories don't generate the same number of jobs they once did. And the jobs they do generate are often technical. More maintenance and calibration of machinery, and less putting bottle caps on.
Tell me specificly which niche that Samsung focuses on: >Product: Clothing, automotive, chemicals, consumer electronics, electronic components, medical equipment, semiconductors, solid-state drives, DRAM, flash memory, ships, telecommunications equipment, home appliances >Services: Advertising, construction, entertainment, financial services, hospitality, information and communications technology, medical and health care services, retail, shipbuilding, semiconductor foundry
https://en.wikipedia.org/wiki/Samsung
Samsung is also very closely tied to the Korean government.
>I think if you start to deep dive into the industries that left, you'll find the reasons were often more complicated than simple labor costs
Care to share any of the reasons?
Here are reasons that I know about; EPA regulations, OSHA regulations, their supply base relocating.
https://www.forbes.com/sites/stevedenning/2011/08/17/why-ama...
Don't get me wrong though, we shouldn't roll back our regulations but we should however ensure that what we buy is manufactured in that same conditions that we would demand at home.
> Care to share any of the reasons?
Governments being laser focused on building a specific domestic industry and winning. I.e., as you point out, Samsung. It's hard to win a battle where an entire country has decided to push to become the best in the world in one field.
I mean, how are people supposed to afford all this high tech shit if they can't work decent paying jobs without a degree and the welfare state has been hollowed out? Manufacturing used to provide that.
Are companies just going to fight for a constantly shrinking middle class? Or just turn into gacha companies looking to hook a whale? Sell a single doll for $46,000?
RE: National Security see his sobering thoughts on the supply chain: https://timculpan.substack.com/p/what-supply-chain-security-...
Let me tell you a story:
Tektronix lifted the Portland Oregon region right up. Was called silicon forest.
At that time, Tek was funding startups its employees thought up after working for Tek, getting great education provided directly by the company as well as through college partnerships.
Tek also literally trained a workforce here by educating any of its employees and by doing programs with suppliers to do the same.
I am a product of that time.
A drive through this region in the 80's and early 90's was awesome! Shops of all kinds, Tek itself had COMTEK which could make damn near anything, and opportunities abounded!
Howard Vollem died and the MBA took over.
COMTEK was torn down, work was sent overseas, education stopped, startup funding stopped, and soon a drive through this region looked very different: hair nails and laundry.
While large scale manufacturing has grown, the rest has suffered huge!
Our military can't find the capacity it needs! And they, along with aerospace, are the best customers there are, with auto in some parts too.
The rest has been gutted.
That is what we need to fix. It matters.
If companies won't do what Tek did, and that is invest in the region and it's people, and they won't because getting max dollars at any cost matters more than sustainable business does, then we must have robust small to mid sized manufacturing.
Where else will our future skilled labor come from? And I left for higher end professional work and software. I can make anything I can draw, it was damn good at it too. Saw way too many places close and there's no way I can raise a family on that and I quit ... tons of us did.
The skills I have are rare and in high demand. Young people today can't get them like I did, and that adds right the hell up.
You think your arguments make sense. And you are not wrong. They do, but that is not the problem.
The problem is for your argument to make sense, a ton of people and manufacturing potential is lost and nobody seems to recognize the massive opportunity costs in all that.
And frankly if large companies aren't going to do it and get a return on that investment, then our government damn well should. We do really put our national security at risk doing otherwise.
> Our military can't find the capacity it needs!
This has a lot more to do with the stance of the past 30 years to manufacture defense materiel at relatively constant, small rates. There was no capital investment, because why pay to have a huge line that isn't being used. We spent our military dollars on wonder-weapons that would probably win a direct war quickly, but that we can't give to allies in a proxy conflict. Going so far was a strategic mistake.
> And they, along with aerospace, are the best customers there are,
Military are terrible customers, especially if you're a subcomponent manufacturer. Gravy might pour, it might not; it's very unpredictable. You spend a lot of effort and business just evaporates.
> Howard Vollem died and the MBA took over.
On the flip-side, can you imagine being the high-cost Tek of old in today's test equipment marketplace? Tek already struggles to compete against cheaper, adequate solutions. So much of that market has commoditized out.
> nobody seems to recognize the massive opportunity costs in all that.
Actually, that's exactly what I'm talking about, in both directions. Having a ton of manufacturing means we would have opportunity costs in the other direction. We've traded the manufacturing we had 50 years ago for other things. It's not possible to specialize in "everything."
> There was no capital investment, because why pay to have a huge line that isn't being used.
I'd like to suggest that what Tek did worked back then, and the same insightful leadership wouldn't simply copy the solutions from 20 years ago.
Thus the problem is "there was no capital investment, because there was no visionary leadership," and the problem is also that the short-sighted leadership simply saw "a huge line that isn't being used," instead of a workforce ready to take your company into the next century.
> Military are terrible customers ... You spend a lot of effort and business just evaporates.
This only applies to companies that lack vision, that seem to only be able to keep stamping out the same widget as 20 years ago.
> Tek already struggles to compete against cheaper, adequate solutions.
Seems like a lack of leadership, instead of an existential proof that Tek can't compete.
> We've traded the manufacturing we had 50 years ago for other things. It's not possible to specialize in "everything."
This actually sounds like the kind of visionary leadership that Tek or the larger Portland metro needs.
If I sound combative, please only read this in a curious voice. What kind of visionary leadership could rise from the ashes of the Silicon Forest?
> > There was no capital investment, because why pay to have a huge line that isn't being used.
I was specifically talking about war materiel. The US is not doing great at making things like low-tech artillery shells, because we've not had a large line running for them for quite some time. In retrospect, it would have been better to have a bigger stockpile and to be paying for more line capacity.
Things are steadily ramping, but it's taken a good year and a half to get to the quantities we now want.
> > Military are terrible customers ... You spend a lot of effort and business just evaporates.
> This only applies to companies that lack vision, that seem to only be able to keep stamping out the same widget as 20 years ago.
Nah, vision or not: political winds change and projects get killed. Being involved in an early program is exceptionally high risk: you need to start ramping to do the whole thing and you may get a good return on capital or a pittance.
> Seems like a lack of leadership, instead of an existential proof that Tek can't compete.
The overwhelming majority of the test equipment marketplace has commoditized out. This is a problem if you're still mostly a test equipment vendor. It would be even worse if Tek had higher costs.
> This actually sounds like the kind of visionary leadership that Tek or the larger Portland metro needs.
In those sentences, I'm not talking about Tek: I'm saying the United States has, as elementary economics predicted, specialized in areas where it has a comparative advantage over other countries. It is not possible to have a comparative advantage in "everything."
>Nah, vision or not: political winds change and projects get killed. Being involved in an early program is exceptionally high risk: you need to start ramping to do the whole thing and you may get a good return on capital or a pittance.
Often, people wonder about the higher cost associated with government cobtract work. One does need to cost out those risks and include them in project costs.
"Elementary Economics"
Economics is not a science. We cannot execute the scientific method on Economics because we have no way to repeat and or establish controls needed to understand results.
Policy drove "elementary economics", and made it predictive. And the policy was driven by strong advocacy dressed up as real science too. That advocacy was produced by people of significant means wanting more and more control.
Change the policy, and we will see the Economics change too.
Fact is we gutted a lot of small to mid sized manufacturing, and with it went many strong opportunities for people to take advantage of. Those people require help to make it because the opportunities they did find, if they found them at all, do not pay enough to make it, or should they, the labor burden and often painful scheduling makes for tired people lacking often the means and energy required to build skill on their own.
>Economics is not a science. We cannot execute the scientific method on Economics because we have no way to repeat and or establish controls needed to understand results.
You could say the same thing about mathematics, but it remains the case that it is useful to know some math.
Of course math is not a science either. Ultimately, math is a reasoning tool and in the economic context, it is not a complete tool.
There is policy, and that has a major league effect on what will make good economic sense.
The current policy could change, and that would impact what is worth what and why and the math can tell us what it always has.
Here is one:
For a long time we have ignored anti monopoly laws.
When competition is present, margins are less, people tend to get higher value for the dollar. When it is not present, margins are higher and people get much less value for the dollar.
Right now, big grocery is wanting to do one more merger to basically put Krogers in charge of grocery stores, with its competition being Walmart and maybe Amazon.
So far, each merger has reduced the number of products available to people and higher prices. But someone somewhere is banking more and paying less.
I like competition. I like higher value for the dollar and choice in business. I bring this up because I personally dislike Kroger and it is all about the much lower value per dollar.
How this all goes is political. Policy may be to preserve competition to prevent price gouging and all that comes with a monopoly.
The math may say more dollars are made by having one company, but that same math says it comes at the expense of the people too.
Does not, and I would argue, should not go that way.
And by the way the cost reductions that the guy above was talking about and other things were all in progress. And there was plenty of capital to invest.
What happened was the MBA crew took it right out of the fucking company, gutted the rest and we have a a shell of what we had before today.
All of the contemporary competitors of Tek were also bought out except for Keysight. Why? Low margins an incomplete lineup and commoditization of the asics.
Tek would have cost reduced that gear and it was in progress when it was all torn down. Tek would have also continued to make more great gear. That spirit stopped.
Tek was also getting nice returns on several of the more successful startups.
Vollum was no fool.
Snark mode = 1
You mean traded our future for baubles and trinkets today?
Yeah, I agree!
Snark mode = 0
I will ask again:
Where does our next generation of skilled labor come from?
And don't tell me we won't need it because automation. I have automated many things and will do so again, but I never managed to find a robot looking for a good meal, or a home, etc...
At some point we need to look at this in terms of our own, or we will be living in even more of a dystopia than the already growing one threatens to be.
If we do not ask and answer the question, "how do our future leaders and builders, mechanics make it?", they won't. And the cost on that is a lot higher than many will admit it is.
> Where does our next generation of skilled labor come from?
I don't really want to talk to you because you're being deliberately abrasive. But I will leave you with one answer.
Your question presupposes that all the other areas of the economy that have eclipsed still-growing manufacturing do not produce "skilled" labor. I do not think this is a valid assumption.
Hey I marked the snark. I guess I don't want to talk to you either if you can't handle a little real discussion.
And that helps nobody, yourself-included. There's nothing on this thread that you should turn your back away from. There's nothing on this thread that should even hurt!
And finally, I'll always talk to the other people. Keeping that door open is the only way we get progress. Just consider that for the future.
What's your calling abrasive is passion. I actually do really give a shit. Consider that too.
There's infinite people to talk to on the internet-- indeed there's more people to talk to on this thread that share your views than I can manage. I don't need to pick the sub-branch which is unnecessarily unfriendly.
edit: I care, too. I mean, I went into education where I'm teaching future high-skilled labor and building human capital ;) And--- where I am, the kids are alright.
They are all right for now. No joke. The ones who can afford to see you that is. ( education is currently expensive, not a slight on you at all)
There are good reasons why the percentage of people who agree with me are high.
Edit: yes you absolutely do get to pick and choose and I support your ability to do so! However I will observe that you are operating at a disadvantage by doing so
I'm at a private high school, so sure I breathe rarefied air.
But they're doing stuff like machining aerospace gear that will fly in space, doing structural and thermal analysis, designing and assembling circuit boards, implementing LQG controllers. Or just doing carpentry and fabrication for theater productions to the highest aesthetic standards.
And I go to competitions against other schools and see a ton of what we would have before considered "high skilled" adults, except they're 13-16 year old kids. They're going to go to university and further develop the ability to work with their head and their hands. But they're not going to go supervise a press stamping out the same part over and over, and they're not going to reinvent the wheel that they can buy for 30 cents per unit.
> There are good reasons why the percentage of people who agree with me are high.
This isn't a very good argument for the validity of an idea.
> Edit: yes you absolutely do get to pick and choose and I support your ability to do so! However I will observe that you are operating at a disadvantage by doing so
Avoiding being trolled is not "operating at a disadvantage." There's plenty of reasonable discussion, and the points you raise have already been answered and debated in cousin threads. I'm choosing to answer you a little more because you've been a little nicer.
>This isn't a very good argument for the validity of an idea.
Indeed it is not in terms of a convincing argument, however is is more than sufficiently compelling for others to think about, perhaps ask "why?" In this, they often will entertain more conversation that has real advocacy potential and that is just fine, intended.
I have taught in those programs and have also provided resources and equipment. Frankly that's all pretty darn good stuff! I'll bet you're having a pretty good ride too.
I will just say what you and others are doing is not enough.
Meta:
I was nice the whole time. There are no words of mine here to fret over. That is deliberate intent too. Some style choices are aimed at passersby and to provoke thought. Nothing more. Others may not be so nice. I get that.
Whether you answer me or not has no impact on my choices.
To be 1,000 percent clear, you were never trolled by me. Frankly I could probably do it and not even get under your radar. That sounds something I choose to do. The single most likely reason you answer is my speech here is compelling enough to warrant an answer.
It does produce some skilled labor, but those skills aren't always the same as the ones needed to make things and make them well and make them inexpensively and make them sustainably.
And by percentage it's no replacement for what we had before. All one needs to do is take a look at massive numbers of young people looking for opportunity not able to find it to understand what this all means.
And suddenly it wasn't 1960 and the PCBs were in mass production. Suddenly it was 1990 and only the true high end low volume (space and mil) paid for their own custom silicon and fabs. Finally it was the year 2010 and the front end of a scope was a mass produced part for pennies with an fpga and the scope was a hobbyist and auto mechanics tool.
Sure the scope did change, and Tek made those moves as they should have.
There was a great argument for trading some capability to continue to build new products on now current processes, with the same rapid feedback loop in place.
That should have happened rather than the very aggressive tear down and brain drain we actually saw.
The key point being ongoing and regular investment in the company and people would have yielded more and better products that would compete just fine, not just be the cheapest.
That organization would be smaller, but still potent and a lot more nimble, able to continue supporting technical engineering across many fields.
And as I have mentioned up thread, couple that with returns from smart spin-off investments and an ongoing innovation culture rather than just a cost cutting one and we would have seen more than we did.
I would also argue the big push to apply software was sexy, and took the air right out of hardware efforts. Lack of investment there was not about the lack of returns, and it still is not about that. They are just a different kind and over a longer time.
Ignoring those has bled the region of a lot of capability. It is much harder to make things and here we are trying to understand how the next generation makes it on hair, laundry and food.
Making things is important. And it is not the cheapest way of course. Having a large percentage of people unable to build lives is and will continue to be very expensive. Crime, need for government services and more abound.
Early on, the promise of new tech and automation was a reduced need to work as much and or at the least maintaining respectable standards of living.
Put simply, it was supposed to cost less to live and for the most part these things did not happen.
Something needs to.
> I don't think the government applying such levers to change how the market allocates capital probably won't be a win for economic output or quality of life.
Cuz letting it manage itself works so well
Agreed.
Even the premise that it was always cheaper to manufacture abroad is flawed in many respects as Congress subsidized offshoring over many years as part of an effort to encourage globalization.
Companies often receive massive tax breaks with write-offs to close US plants, tax credits, zero percent import duties, and lower overall tax rates by shifting their profits and losses through offshore banks.
In many respects profitability has most often been determined by the policies we subsidize. and for decades those policies were essentially all in for the benefit of offshoring.
Comparing the actual cost of production by location is far more complicated than just the cost of materials and labor when there are so many subsidies and policies involved.
Not to mention the demonetization of the working class(i.e. the dumb redneck stereotype) and the job class itself with the association of manufacturing jobs as dirty and unneeded with the goal of a service economy as the new future.
https://www.forbes.com/sites/stevedenning/2012/01/31/is-the-...
https://www.forbes.com/sites/stevedenning/2011/08/17/why-ama...
I think the statistics he cited actually make that case
...compared to what? Growth is just one way of representing market health, and it's one that is typically pushed by capital for obvious reasons.
If you're talking about efficiency or productivity, you don't need markets for either of these, you just need any kind of economy to work with. Industrialization only intersects with markets (or capitalism for that matter), they aren't the same thing.
This might be true, but the number of jobs has fallen. It kind of comes from our measurement of GDP. If you have a high-tech factory that employees 10 people to make a $10,000 unit price electronic, that can easily become more GDP per factory than one that sells nails and screws for a penny each with 100 employees.
> One thing that I think that frequently eludes people in this discussion is that US manufacturing has pretty much been constantly growing for the past century; just its share of GDP has fallen as other sectors have grown faster.
> ...I don't think the government applying such levers to change how the market allocates capital probably won't be a win for economic output or quality of life.
I think the problem you're having is you're thinking of manufacturing in terms of dollars, like an aloof economist.
Yeah China has only ever really been a major player for about 3 decades. In a third of a century it has Actually SHRUNK American manufacturing to the point where there was genuine knowledge loss. It was cheaper to manufacture things in China so we used China, and now America doesn't even have the capacity to manufacture anything on the scale of China.
>just its share of GDP has fallen as other sectors have grown faster
I think this is inn-accurate. You're looking at a century of data but China only took 1 decade to overtake the US. We're now three decades in and the overall decline of American manufacturing is pretty evident.
I see empty factories in Shenzhen and Donguan, and massive unemployment in Guandong in September 2024. And I raise you full factories in Vietnam.
True. That shift would be in the last couple of years. Maybe Vietnam is next China. But this is still an emerging event. What China did to the US already happened.
Vietnam doesn't have the population to be the next China. I wish them the best, but their time will not last nearly as long as China. (or more likely it lasts as long but it is shared with a bunch of other countries in Asia, Africa, and/or South America)
Nowadays, with so much automation going around, Vietnam can afford to become the next China even without a comparable population. Not that I think it will, but see the story of the Four Asian Tigers to realize how smaller countries can suddenly have a much bigger importance to the world economy.
Made Americans a lot richer and allowed them to consume more?
Made the Chinese even more richer and technologically superior to the us in many many areas as well.
Yes, it's a win-win situation.
china has been a major player in manufacturing technology for 4000 years, with several minor exceptions of roughly a century or two, one of which ended about 30–40 years ago
What does it mean to be a major player in manufacturing technology 4000 years ago?
painted pottery produced in large, centralized workshops; bronze knives
https://en.wikipedia.org/wiki/Majiayao_culture
pottery wheels; ultra-thin polished black "egg-shell" pottery; silk; indoor plumbing; dagger-axes; elaborately carved jade
https://en.wikipedia.org/wiki/Longshan_culture
lacquerware and tin bronze knives and pots
https://en.wikipedia.org/wiki/Lower_Xiajiadian_culture
Just about all "made in USA" products today are "assembled in the USA from global materials/components." This usually means that the absolute bare minimum of work is done in the USA in order to claim US origin. For example, pillows that are sewn over seas from foreign fabric and the only part that is done here is inserting the filling and closing the final stitch.
The US was once a global leader in textiles and now virtually all of that industry is gone. The same goes for many many other industries.
From the 1930s until the 1990s, Rawlings Sporting Goods produced high quality sporting goods in Missouri. In my home town they made hand-stitched Baseball Gloves, Footballs and starting in the 1980s, Injection Molded baseball helmets. They also made all of the team jerseys for little league and high school sports in another town near by. They employed ~200-300 people in my town and probably 1000 more in a couple of other factories in other towns. In the late 90s all of that was moved to China. The same thing happened with hundreds of companies across almost every industry. Anyone who claims that industry in the USA wasn't totally gutted in the 80s and 90s is using some creative accounting or just flat out lying.
As Henry Hazlitt said
The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups
I think politicians hook onto manufacturing as an ideal of an industry which should pay well and has a low barrier to entry. If manufacturing grew 15% every year but employed 15% fewer people every year due to automation, it would be considered a catastrophe.
The reason most people want more manufacturing in the US is because they want manufacturing jobs. It is only within the last few years since the pandemic that we started to care about domestic manufacturing as a matter of national security
The real benefit of local manufacturing is that it makes related industries dramatically more efficient. For example electronics in the pearl river delta. You can buy everything locally and get prototypes in hours.
> low barrier to entry
> they want manufacturing jobs
Shame most of those jobs in high tech factories are not low barrier to entry...
If the rumors about Elon's robots are true, I see a lot of manufacturing coming back to the US.
However, I do not see this benefiting regular workers.
"just its share of GDP has fallen"
The little "just" does a lot of work here. It means people in the manufacturing industry are being left behind.
It does not mean that, especially given the next sentence, "And the share of the workforce has fallen even faster."
> "I don't think ... probably won't be a win"
Accidental double-negative, right?
that US manufacturing has pretty much been constantly growing for the past century;
Really? Every time I see this claim its based on some citing some statistical mismash that the person citing does not understand and cannot explain.
How much tonnage of merchant shipping does the USA build in 2020s versus the 1960s?
How many TVs and computer monitors does the United States make in 2020s versus 1990s?
How many tons of steel does the USA make in the 2020s versus the 1970s? Of tool steel?
How many nuclear reactors are produced in the USA in 2020s versus the 1970s?
How many railway rails graded for high-speed trains are produced in the USA in 2020s versus 1980s?
How many CNC mills are produced in the USA in the 2020s versus the 1980s?
How many artillery shells are produced in the USA in 2020s versus the 1980s?
How many jet engines are produced in the USA in the 2020s versus the 1980s?
How many car engines blocks are produced in the USA in the 2020s versus the 1980s?
How many computer hard drives are produced in the USA in the 2020s versus the 1990s?
How many motherboards are produced in the USA in the 2020s versus the 1990s?
(Also, adjust all the comparisons above for population growth, we should be comparing manufacturing production per capita)
If you think that these comparisons are misleading because there are 'quality changes' please tell me exactly how you quantify these changes in quality.
Ignoring the thrust of the argument above, and missing the entire subthread where the nuance of how the US has redeployed its economy for comparative advantage is discussed and debated, to type that over and over was a bit of a waste of your time, IMO. Reading it wasn't a good use of mine.
If you read the surrounding argument and want to discuss some further point not covered, I'm here.
I've read the thread and have been very familiar for decades with these debates.
There are two separate questions:
1) Has USA manufacturing increased or declined in its output (measured in things, not $)?
2) If output has declined in terms of things, is this ok because of comparative advantage? Is this ok because the US mains a competitive edge in the highest value most technically advanced products?
As for 1), you say "The net result is that US manufacturing output in real dollars has increased 4x, in the past 70 years." Are you familiar with the term "researcher degrees of freedom"? "manufacturing output in real dollars" is an impossibly complicated statistical construct with infinite researcher degrees of freedom. There are infinite opportunities for "Getting Eulered" https://slatestarcodex.com/2014/08/10/getting-eulered/ That is why I insist on starting with the most straight-forward numbers -- how many cars? How much steel? And then layering on adjustments on top of that. If steel is down but it is compensated by some other high value product being up, OK, but show me the calculation, show me the work. Otherwise your argument boils down to "Trust the US government's impenetrable statistical calculations, we are getting richer comrade"
As for 2), when I first heard that argument from the most prestigious and credentialed economists twenty-five years ago, my toys and clothes said "Made in China" while advanced technical products like my computer motherboard was made in the USA. Now it's OK that the motherboards are all made abroad and because the most technically sophisticated motherboards are made in the USA. Well, it seems to me like the areas where the USA has comparative advantage in making the most technically advanced products is becoming a smaller and smaller every year. Just this year we are made aware of how much Boeing has lost ground to Airbus. Seems to USA is increasingly reliant on low-tech exports like soybeans, or worse, exporting dollar bills. It seems to me like our trade deficit is gaping wide, which means our real export is living off our status as the global reserve currency. Which feels nice until ones military might is no longer able to support that status (see 16th century Spain). Seems to me that the US is losing ground on military relevant manufacturing -- particularly drones but also steel, ships, etc. And without that, it will not be able to maintain its status as reserve currency in the long run.
Whether manufacturing grows, on its own or as % of GDP, has nothing to do with any particular segment of manufacturing has grown or declined, or emerged or disappeared.
As a thought experiment, you can do the same analysis with any number of technologies from the 20th century—typewriters, vacuum tubes, plate-based printing presses, analog telephones—and the point is obvious.
I didn't include typewriters on my list of goods. I only included items like cars and motherboards that were as economically relevant at the beginning measurement point as they are at the endpoint.
If you think that the manufacturing output in some of the things I listed declined or stagnated -- but it is countered by the fact that US manufacturing of other newly invented goods has increased -- then please specify what those goods are. Seems to me like the US manufacturing also lags in newly invented goods -- like drones.
> I think it was a big case of corporate welfare that will result in somewhat increased chip production in the US.
I see two issues with this:
One, this is the same kind of subsidies and meddling with the markets that we accuse China of doing. If we are adopting state-led approach, it can be done in a serious manner without being hypocrites. But that would also require admission of some mistakes.
Two - why is it seen as okay to give tax breaks to an engineering company, why not give tax breaks to engineers themselves instead? Companies are imaginary, people are real, why not give incentives to individuals?
At least that money won’t be squirrelled away in tax heavens.
Just don't hand out tax breaks to politically favoured groups, but clean up the overall tax system to make it simpler and saner..
But that's hard to do politically.
Moreover, share of GDP has been falling because prices of manufacturing goods have been all falling vs inflation, pressured by foreign competition and by productivity improvements, while rest of the economy - services - face none of that: they usually (except corner cases like call centers) can't be outsourced abroad, and output there depends strongly on labor inputs (e.g. waiters) thus making productivity stagnant almost by definition.
So there isn't a problem about manufacturing, never has been. Problem is strictly about manufacturing employment, which is of course, inexorably falling and will continue doing so and every politician promising to reverse it is a blatant liar. It's falling much like farm employment has been falling 40-70 years ago, sure it's traumatic, ruins livelihoods of millions of families many of which will never recover, destroys not just their personal finances but their source of pride and sense of self in many ways. But just like it didn't result in decrease in food output back then (quite the opposite happened), it doesn't result in dearth of manufacturing products now.
You could outsource more services and automate them more. But many service industries are protected by laws and regulations from such competition and improvements.
> I think this is a win for national security. I don't think the government applying such levers to change how the market allocates capital probably won't be a win for economic output or quality of life.
National security and global freedom of navigation are essential preconditions for our current level of economic output and quality of life. In the long run, it’s not an either/or.
Well maybe your quality of life but for the common man in the US? There only seems to be hopelessness on the horizon. It makes you think, who are we really fighting for?
As someone who also feels like the future is trending downward, I hope we can at least get some crumbs from the top.
And you would imagine that quality of life would be better if the U.S. found itself on the losing side of a major war? Your premise that there seems to be hopelessness is more of a media driven phenomenon than reality. There is just no evidence that "the future is trending downward" - at least in the U.S. Every measure you look at shows that for Americans life has improved and continues to - especially in comparison with our global contemporaries.
I'd go as far to say that even a credible threat of war against the USA would have a substantial negative impact on our economy and by extension our quality of life; practically all of us would be impacted. People who don't see that are missing how much the OVERWHELMING majority of Americans have benefitted from USA hegemony over the past several decades.
Think of it another way, the US is only 5% of the global population. That means that 5% is benefiting at the expense of the other 95% due to this hegemon and the other 95% is trying to chip away at this and seems to be failing (as far as we can see but there is so much BS on both sides who really knows)
But wait, of that 5% we can clearly see many negative indicators among at least half (if not more) of the population.
If you are not in tech or part of the asset owning class then your wages have been flat or in decline. With the ever increasing amount of inflation in most goods, your lifestyle has been in decline.
So really only a subset of that 5% has been the beneficiary of the hegemon. Does that look like a thing to be proud of? A small in-group of people have got it going while everyone else is trending negative either now or going in that direction in the future.
It begs asking the same question I mentioned in my original post: Who are we really fighting for? The answer to this question really depends on if you have empathy for others or if you just care about yourself or your "tribe".
>practically all of us would be impacted.
To be fair, I did also point out that I hope that people in this bucket at least receive some crumbs from the top. Thats all we could hope for. But if you continue on that thought process, if the hegemon dies at least there would be some justice if it took out the top with everyone else.
US's security umbrella covers more than 5% of the global population. Even those countries that try to play many sides, such as India.
1. This is going away one way or another.
2. My focus was deliberately very generalized to focus on the way the US benefits itself by pushing others down on a global level. We could drill down on a country by country basis and find ways in which the US can benefit the country and ways in which it benefits at the expense of said country. If you take the entire world population as a whole you can make the argument that it is a net negative and that maybe a stable multi-polar world might have different results. I don't follow Indian geopolitics as closely as others but sure the US Navy's efforts to patrol the oceans to benefit their main trading partners in Europe and Asia also helps to benefit countries such as India and Pakistan by helping secure trade but also secure a stable source of fuel and food (which is starting to slowly break down now) while at the same time, their clear efforts in deposing democratically elected Imran Kahn because he started to shift away from the US is a net negative to Pakistan's future.
The ideal future would be a US that is checked by other rivals that can equal its might.
This would have multiple repercussions: The idea of an evangelical christian fueled "end times" would be over, the propping up of Israel would be much more painful than it is now which would result in severe scrutinization.
The chances of other economies given a chance to emerge might be higher if the cost of the west meddling in its affairs gets more expensive.
Life would be harder for people like me, but there would be more peace when going to bed at night.
Interesting hypothesis; I would encourage you to test your hypothesis by moving to Russia, China, Iran, or North Korea, and help those countries to grow its might equal to US. And also see how hard your life becomes
Yeah this is the standard response the right wingers and the pro-corporate Dems love to give. Just really low effort as usual.
Let me propose an alternative and just try to consider it: How about we let those countries develop and if they can have a sustainable system then great, more competition is good for humanity or if it does not shake out then they will collapse or be forced to pivot and then we will know for sure.
What isn't cool is deliberately trying to cut their legs out because we want to remain unchallenged (Venezuela, Iran, Russia, China) or quietly control their government preventing any chance of democracy (This year Pakistan, a few years back Venezuela etc.)
I'm pretty sure we let Russia develop after their collapse in 1990, right up until they invaded Ukraine again in 2022. And we let China develop after they liberalized in 1979, right up until they turned dictatorship in 2017, snuffed out Hong Kong in 2019, and became close war ally with Russia in 2023. Those are pretty long time I would say.
This history is tarnished by years of propaganda on both sides. We could have a deep discussion on how this is not the case in many aspects as well as how it may be true in some cases. If I haven't made it clear already in my other responses in this thread, in geopolitics nothing is black and white. But since you gave such a typical Republican/Corporate Dem answer before I dont think you are one of those people worth wasting time on so I bid you farewell.
The last time we had a multipolar world with multiple competing rivals, millions of people were slaughtered in a world war. Have fun with that if you want but I prefer the way things have been for the past 79 years.
Nevermind losing; the goal is to deter the war from breaking out in the first place by maintaining a position of strength.
> There only seems to be hopelessness on the horizon. [...] As someone who also feels like the future is trending downward, [...]
What are you talking about? We are living in an age of unprecedented global peace and prosperity. Most people never had as good as today, and things are set to improve further.
There are clear trends even acknowledged among the most pro-American analysts that the coming world will see a reversal of good fortunes by many in the world. We are living in a environment propped up by many things that are going away. There are many risks that can contribute to that. Of course if I knew exactly what would happen down to the day, i'd be betting in the stock market so these are more general trends which is what I was referring to.
Poor leaning trends include:
1. The collapse of governments that were pushed to the end by the US and its partners: Pakistan(deposed leader), Iran(sanctions, deposed leader), Venezuela(sanction, attempted to depose leader in 22), and I guess you can now throw Ukraine and possibly Russia there as well(collapsed economy, massive population casualties + collapse level birth rates)
2. The US has essentially acted as a bully towards many countries in the global south and while many of them have had to just take it, they now have another bully (China) that they can play off of each other.
In the short term it will be painful as the US tries to keep people on their side through backhanded efforts (Pakistan, Bolivia) but in the end the countries know that the China is a unreliable ally that only wants to dump their manufacturing overflow and take resources back while the US is an unreliable ally that bullies everyone into positions that favor itself(4 years loudly and then the next 4 years quietly) so with no other hope, the best move to play is trying to extract as much as they can from both sides (Djibouti for example). Not sure if you can make the argument that "unprecedented global peace and prosperity" is coming to these countries, they are just trying to get by with what they can.
3. Lets not forget climate change: Overwhelming % of historical emissions caused mainly by the west and with the consequences to be dealt mainly to the third world. Where is the justice in that?
Why are you so focused on the US? The world is a big place, and everyone has agency.
> Where is the justice in that?
I did not want to make any statement about 'justice'. That's multiple separate topics.
>Why are you so focused on the US? The world is a big place, and everyone has agency.
The post is about the US, the thread is about the US and the message I originally replied to was about the US....
If you are talking more generally, I am baffled as to why you would ask that. The US's actions are reducing/removing free agency for a significant percentage of people on the planet. I am pro-humanity. Those people are no less deserving of all the possibilities that life has to offer but just as importantly, they deserve every chance to improve their lot. Since we have concrete proof that the US has acted to cause problems in other countries, they will be criticized.
Well, sure. The essential tradeoff is always figuring out how much to economically kneecap yourself in the short term to maintain economic independence in the long term.
And, of course, if you overshoot and the other guys outgrow you as a result, that limits your ability to be secure as well.
Not all economic growth contributes to national security the same way. In particular, outsourcing a large share of your manufacturing to your primary geopolitical adversary is a poor strategy.
You also need millions of destitute people somewhere on Earth, to work on all the goods that Americans buy for cheap.
Huh, why, how?
People in mainland China have gotten massively richer over the last few decades, but America did not have to pay more for imports. If anything, the increase in productivity made Chinese imports relatively cheaper.
It's simple. If one day we run out of people willing to work on goods for us for pittance, the price of goods we consume will rise and our quality of life will drop, because we won't be able to afford as much stuff. Right now, there are still billions in people living in poverty in countries that are friendly to capitalism (so, easy to set up a factory, a sewing sweatshop etc. there), so that risk is far from us.
I’m not convinced… there’s so much room for technology to fill the gap. Companies that fail to properly invest in tech to replace this labor will be beaten by those who do, and quality of life may actually improve as the marginal cost of production marches ever downward.
This might be true, but the rust belt is called that for a reason.
I also wonder what's the share of non-disposable products in US and other Western countries manufacturing.
> This might be true, but the rust belt is called that for a reason.
> > as the actual manufacturing has moved towards higher value items and greater degrees of automation.
US manufacturing has moved away from things like primary metals, which the steel belt had focused on, and towards things further up the value chain.
https://www.nist.gov/sites/default/files/styles/2800_x_2800_...
Manufacturing fell from 25% of GDP in 1947 to 12% in 2015... but real GDP increased by 10x. So, the value of manufacturing output went up by ~4x over that span.
https://www.stlouisfed.org/on-the-economy/2017/april/-/media...
What really went away were the jobs.
Just further evidence of the accelerating returns to capital. It just makes less and less sense for America to be engaged in highly wealth-distributive (i.e. labor intensive) activities, more sense for it to engage in capital-intensive ones which, by definition, accrue further benefit to the owners of that capital. Yikes!
But industry cries out for more immigration to suppress wages because they don't have enough workers (or at least, not enough leverage in the labor market as they would like), so I'm not sure if that tracks.
They will keep crying that, no matter the actual labor market situation. My country has low wages, high unemployment, and yet businesses similarly cry for more immigration, as they always want to find the most desperate worker who accepts the lowest wage possible. That's the reality of modern capitalism.
Have you considered that those foreigners are humans, too?
Or do you believe in out-of-sight-is-out-of-mind?
Of course they are humans like everybody else. But I do not support mass migration as a tool for bringing the wages further down and exploiting workers. I think the rich should be taxed much more, and that money used to reduce poverty & improve education globally. It's not migration itself that is the problem, but the fact many migrants are in a position where they can be exploited more easily than native workers.
In ideal world businesses would have to pay a fair livable wage, no matter where they build factories, or receive migrants from.
Why wouldn’t you want cheaper labor to the extent you need it at all?
Nobody would be investing in labor intensive industry because it doesn't return as well, so there would be a huge oversupply of labor, so prices would already be at their floor.
That doesn't seem to be what's happening though.
Economic systems aren't typically describable with terms like "nobody." There's an equilibrium in investment levels between capital- and labor-intensive sectors, and that equilibrium is moving. If there was a huge oversupply of labor, then it'd make it more compelling to invest in labor-intensive sectors, which would both shift the equilibrium and eliminate the oversupply (which is what has already happened/is happening every hour of every day, thus there's no massive oversupply).
Right, you're replying to my hypothetical which does not describe reality. You contradict the post I first replied to, so it supports my point.
What
Let me echo back what I understand to be your argument: “If there were accelerating returns to capital moving the equilibrium of labor/capital-intensiveness mix, then there would be no demand to further reduce the cost of labor”
My argument is: regardless of where that equilibrium is at any given point in time, it will almost never be 0% labor-intensive, and anyone engaged in labor-intensive production would always have a preference for even lower-cost labor.
So the answer to the question of, “why do businesses want immigration despite a more capital-intensive mix of production” is “because cheaper labor is better regardless of how much labor you need.”
> What
You're replying to basically a strawman I wrote. I didn't say that is what's happening, I said that's what would be happening if investment was all going into capital and not labor intensive industry as OP said.
Good lord you are confused. Nobody anywhere said “all” capital is flowing into capital. You’re trapped in your own straw maze! ;)
Not confused at all, the person with the fallacy that wage intensive activity is insignificant in importance is. Clearly as you say returns are balanced, and the balance that has been arrived at is desperately crying out for more and cheaper labor.
EDIT: Oh, OP is you! No wonder you're getting touchy. Your original comment is wrong.
Can you point me to where I said it’s “insignificant in importance”?
The jobs, and in many cases the expertise held by the people working those jobs.
I think this was the angle epistasis was coming from: not just that chips are physically being formed within the boundaries of the US, but that citizens are involved, being trained and garnering the practical experience that comes with being intimately involved.
So, so much of this sort of experience has been lost over the past few decades, and the fallout is palpable: how many discussions have played out right here surrounding the challenges of manufacturing anything, even trivial bits of plastic, at scale without spending years traveling across the world, dealing with language and cultural mismatches, ensuing mistakes and quality issues?
We're in a weird place now, wrt manufacturing skill - there are still plenty of individual crafters, folks who can make one-off or small runs of high-quality goods... For a pretty high cost per/ea. But scaling is troublesome; to hit that economy of scale requires a lot more people with maybe journeyman-level skill, folks who cut their teeth in a large operation and are looking to specialize - and those large operations aren't here.
> US manufacturing has pretty much been constantly
Middle class manufacturing jobs have fallen off a cliff and completely destroyed huge swaths of our country. Take a tour around Bridgeport, CT sometime as a great example. The northeast is littered with towns like this. These executives and their buddies in Congress mortgaged our middle class for profits by sending all our industry to Asia.
> I don't think the government applying such levers to change how the market allocates capital probably won't be a win for economic output or quality of life.
We've got China cheating with their massively deflated currency, so how the market allocates capital is already screwed.
you probably didn't read news lately. your CNY deflation theory is no longer being cooked by your MSM for a good reason - if the CNY deflation claim is true, then it means the Chinese economy has probably already surpassed the US economy not just in PPP but in real term as well. That would cause huge load of issues for the US which is never prepared to be the No.2.
> transferring knowledge from TSMC to a US workforce.
No, no it's not.
When semiconductor manufacture moved to Asia, this was generally done under a "technology transfer agreement", which was an explicit agreement for US companies to transfer their (usually older) tech to an independent local company who would then be allowed to manufacture it and develop it. This is how TSMC started, by doing a deal with Philips to manufacture for them but also to trained on the tech and to be allowed to use it themselves.
This TSMC US fab (and Samsung's new fab) are not under such an agreement, it is directly run by TSMC with no explicit goal to transfer technology. I think it was a mistake for the US CHIPS act funding to go to such a venture without a clause for technology transfer back to a US company.
The workers can walk away with whatever is in their heads
I’ve seen this attitude in other fields and while it is conceptually true, the more complex the field, the more workers have to „walk away“ with their knowledge to have enough knowledge to be of any use
Arizona has enforceable non-compete contracts, so they may walk away with the knowledge but they might not be allowed to use it.
Yes, and if China invades Taiwan, those noncompetes are going out the window and/ or the plant is getting nationalized
TSMC really screwed thesmelves with that deal honestly.
I would say as a company having an extra foundry in a less earthquake prone part of the world is a good idea to keep the company alive in the case of a major disaster.
well TSMC actually winning on this one because TSMC have another fabs if china invade taiwan
and for taiwan, US has pledged to its security in case of invasion would defend no matter what
> US has pledged to its security in case of invasion would defend no matter what
Maybe with TSMC building chips in the US, that'll be one less reason for the US to defend Taiwan.
nope, US would not give an inch of taiwan in case of invasion
we talking about geo politic here. if china attack taiwan so would be north korea (this is their best chance)
for south korea and japan this is their existensial crisis, having china and north korea close to their home even for a kilometer is basically death sentence
You cant forget also US literally spends billions of dollar to keep balance of power in Europe,Middle-East and Africa
do you think US would ignore Asia where 30+-% world trade and resources happen??? you dnt need expert to figure it out
This. And it's certainly an argument that has not escaped China (nor Taiwan). If there is a "loser", that's Taiwan.
> US has pledged to its security in case of invasion would defend no matter what
by borrowing 155mm shells from South Korea? cute.
Invasion of Taiwan and deterrence of it hangs on non-land-war stuff.
They can’t move to another state?
Long walk back to Taiwan.
These workers didn't create the fab equipment and don't know how to design or create the machinery used there. They also don't have access to the software source code. Most US workers hold maintenance or managerial positions, while those with the deep technical expertise come from Taiwan. There will be no knowledge transfer, aside from how to operate the fab, which is something Intel US employees already know.
Fab equipment is made by other companies. Such as ASML:
https://en.m.wikipedia.org/wiki/ASML_Holding
Walk away to where? And what transferable knowledge?
The US workers are almost certainly limited to people who are low to mid level techs who don't know anything useful. Everyone with actual cutting edge knowledge is from Taiwan and almost certainly under the tightest of NDAs and NCAs.
Even high level people in the plant still aren't that useful. What's useful are the insanely expensive, insanely complicated extreme-ultraviolet lithography equipment from ASML. Nobody in the world makes the stuff they do. At least, that we know of. It wouldn't surprise me if the NSA has funded designing and building an EUV lithography system, or just stole the designs from ASML. We know they do a lot of their own ultra-miniature silicon, so they have a strong interest in this sort of tech.
When the island of Taiwan gets the Alderaan treatment, I'm not sure that will be an issue.
Why would TSMC ever agree to such a deal?
American companies already know how to manufacture older chips. It’s not like TSMC is light years ahead of Intel. They’re ahead, but not by so much that their older generation tech would be transformative.
Semiconductor R&D is very multi-dimensional (despite the media only talking about the one dimensional made up measurement of node size), there are many things Intel could learn from TSMC, and the other way around too.
TSMC and intel are more directly comparable than, say Sony CMOS image sensors.
TSMC is ahead because it adopted ASML's EUV tech earlier than Intel (huge blunder by Intel). The real tech breakthroughs came from ASML, and Intel now has that technology too (and is trying to leapfrog TSMC by being the first to get the new High-NA EUV from ASML, though it won't actually producing sub-3nm chips with it until 2025 or maybe 2026).
> TSMC is ahead because it adopted ASML's EUV
Depends what you mean by "adopted". Pretty sure Intel had EUV prototypes before TSMC (or at least very close), but it was slower to transition its high volume production to it due to execution issues.
> The real tech breakthroughs came from ASML
I know this how the media portrays it now a days but there's so much more to semiconductor manufacturing than lithography, especially since the serious slowdown of lithography scaling with around 193 and 193i litho.
Great example is GlobalFoundry which sent its EUV machine back because it realized it could not compete on the R&D needed to keep up with the other foundries.
> Depends what you mean by "adopted". Pretty sure Intel had EUV prototypes before TSMC (or at least very close), but it was slower to transition its high volume production to it due to execution issues.
EUV by ASML was not possible until there was a technology to create focusing lenses for it. Intel decided not to "wait" and use their existing technology to beat everyone.
Wasn't the limitation more about light sources? And don't EUV machines use mirrors rather than lenses?
> Depends what you mean by "adopted".
by that I mean shipping production chips leveraging EUV
There was recent news of Japan (OIST) developing a new more efficient type of EUV, and also of Canon having a new alternate "nanoimprint" chip manufacturing technology.
https://www.tomshardware.com/tech-industry/japanese-scientis...
https://www.tomshardware.com/tech-industry/new-stamping-chip...
Japan has been working on EUV for a long time but is very far from a working machine, despite developing IP. Notice how that article only mentions simulation tests; very very far from getting all the pieces needed for EUV litho.
On the nanoprint technology: as far as I understand it, this will have economic advantages in trailing nodes but is not currently seen as a way to scale past EUV.
They're working on it, but for some time now ASML has been the only game in town
Aren’t Philips and ASML both effectively under American control anyway? Is the TSMC part of the stack that special in terms of actual IP (versus more squishy organizational know-how)?
> Aren’t Philips and ASML both effectively under American control anyway?
IDK about Philips but ASML follows US export restrictions due to a deal it agreed to when it bought a US company a few decades ago, yes.
> Is the TSMC part of the stack that special in terms of actual IP (versus more squishy organizational know-how)?
I don't want to go into too many details as I work in the Intel Foundry but it's certainly both. We'd be very happy to know how TSMC does some specific things, let me put it that way. At the same time, our execution has been dubious since 10 nm.
IIRC it wasn’t because of an acquisition but part of a joint venture with ASML, Intel, and some other companies to develop EUV with a bunch of Department of Energy funding that started in the late 1990s.
Indeed, I was wrong, thanks for the correction.
From Wikipedia:
> In 1997, ASML began studying a shift to using extreme ultraviolet and in 1999 joined a consortium, including Intel and two other U.S. chipmakers, in order to exploit fundamental research conducted by the US Department of Energy. Because the CRADA it operates under is funded by the US taxpayer, licensing must be approved by Congress.
ASML follows US restrictions because of US power. That purchase is just convinient excuse. If they never bought it, US would force them other way (e. g. access to banking).
Europe has banking, too. Even better: nobody in Europe sends paper checks around anymore, we use instant wire transfers here! European banking is way ahead of US banking in a lot of ways.
So, banking is not exactly something that the US can use to coerce a European company. There are much more effective avenues for coercion, though. But IIRC, in this case, the US gov basically convinced the Dutch gov that making ASML adhere to US restrictions would be in the best interest of both of them, and not much coercion was necessary. After all, both countries are on the same side when it comes to the system conflict with China.
Political capital exists. A more explicit tit for tat makes these grabs more palatable to people.
Isn't it that ASML has to for continued access to the USA IP that they acquired?
Their competitors have access to the same tech. If TSMC’s process wasn’t special, they wouldn’t be years ahead of the competition.
Philips as far as im aware doesnt contribute that much anymore. NXP split off forever ago. Philips may have build TSMC together with the taiwanese government but its hardly relevant nowadays.
Philips spun off both NXP and ASML years ago, so all their relevancy in chip manufacturing disappeared and went to both companies. Same happened with LED manufacturing, going to Signify NV.
Philips has only kept its expertise in medical devices and a large pool of patents for many technologies (MPEG-2, H264, Ambilight, BluRay, OLED, etc.)
I actually think the extreme density and breadth of manufacturing in China is going to continue to outpace US manufacturing. They have multiple enormous manufacturing hubs connected by high speed rail lines over a wide geographic area. The US has no equivalent to the likes of Shenzhen and Guangzhou, where you can finish a PCB design in the morning and have the prototype in hand that evening. You can go to the Huaqiangbei Electronics Market and find exactly the right motor and controller for your specs, pick up specialized sensors, and build your next rev overnight.
I have lived in the Bay Area my entire adult life. We used to have Halted/HSC, we used to have Weird Stuff. We used to have Triangle Machinery Co in Santa Clara. Now everything is gone.
I think it’s great that we built a semiconductor manufacturing plant. That’s important for strategic manufacturing. But we’ve so thoroughly destroyed our manufacturing base, let the factories rot, and financialized property value that the “weird place with random electronics” can no longer even afford to do business. Starbucks makes more money, so in it goes.
US politicians love to shout about manufacturing. “Manufacturing jobs jobs economy growth.” But these people DO NOT understand how things get made. They have no serious industrial policy. They do not know the value of a high speed train connecting manufacturing centers. And even if they did, the entire apparatus of our government is set up to stop it.
Manufacturing workers need education. They need housing, transit, health care, maternity and sick leave. They need secure jobs and extra income that allows them time off to take classes to learn new skills.
I’m glad we passed the inflation reduction act, and the CHIPS act. We need that investment. But it’s going to take much more than that to “bring manufacturing back” and I’ve have seen time and time again that we do not have the vision or capability to move in the ways that would be required.
I hope manufacturing comes back. We desperately need it. But I’m quite frustrated that despite some marginal progress, the serious changes we need are not on the horizon nor seemingly beyond it.
I came here to say something like this. I've worked in product development in the Bay Area for 30+ years and brought numerous products to market, mostly manufactured in China. There's nothing like the density and ability of manufacturing that's in China (and more broadly in other parts of Asia). In the US I've worked with great molders and toolers, PCB fab, machine shops, CMs, etc. but the ability to turn on a dime and get stuff done quickly in southern China is insane. In the Bay Area you see billboards for esoteric SaaS products and credit cards for startups, in parts of China, they are for molding machines and CNC tools. You drive by rows of roll up doors in the base of apartment blocks and each stall/shop is filled with bar stock, plastic pellets, CNC machines, injection molding machines, etc.
You'll also see people doing complex repairs of mobile phones sitting on a stool on the sidewalk. The level of skill and access to tools/spare parts that is endemic there is completely different than the US.
Perfect comment, it's important to celebrate but more important to keep in mind it's a tiny piece of the public infrastructure and government inertia we need to do this correctly. We need exactly what you describe, and I want to bolster the mention of education. China produces 2x the stem phds we do every year. Sure, bigger population, but they also have a growing share of citations. (source for both is suleyman's book "the coming wave")
As they say, the perfect time to plant a tree was 20 years ago.
> and financialized property value
Do you think China has not?
I suspect that the extent to which they have done so, and its impacts, vary significantly from how things have gone in the US.
> They have no serious industrial policy.
Ignoring how we define "serious", they do have an industrial policy. You just may not agree with the wisdom of the outcomes wrought by the regulatory regime. I don't know how you ever compete with the developing world that has a surplus of people and comparatively lax regulatory framework for everything from labor to the environment.
The policy is to move all the dirty work to someone else's back yard. It seems to work as long as the shipping lanes stay open and the other economies have something to gain (room to grow and raise standards of living).
> The policy is to move all the dirty work to someone else's back yard.
Whose policy? Like, which politicians and what exactly is their policy?
Because that sounds more like the kind of thing people say they are trying to do, while hiding the fact that they are doing something different.
Those who tout Free Trade and Globalism as well as those who look at Wall Street numbers and claim that is success.
>Production offshoring, also known as physical restructuring, of established products involves relocation of physical manufacturing processes overseas,[22] usually to a lower-cost destination or one with fewer regulatory restrictions. >Physical restructuring arrived when the North American Free Trade Agreement (NAFTA) made it easier for manufacturers to shift production facilities from the US to Mexico. >This trend later shifted to China, which offered cheap prices through very low wage rates, few workers' rights laws, a fixed currency pegged to the US dollar, (currently fixed to a basket of economies) cheap loans, cheap land, and factories for new companies, few environmental regulations, and huge economies of scale based on cities with populations over a million workers dedicated to producing a single kind of product. However, many companies are reluctant to move high value-added production of leading-edge products to China because of lax enforcement of intellectual property laws.
https://en.wikipedia.org/wiki/Offshoring#Production_offshori...
https://theweek.com/articles/486362/where-americas-jobs-went
https://www.economist.com/media/globalexecutive/outsourcing_...
I've long been of the belief that, much like uranium enrichment, supply chain integrity of semiconductors will become a national security issue. We've seen it already in reverse with export controls being placed on GPU cards, and of course there is a reason the NSA operates its own chip fab. The threat to western economies of (for lack of a better term) "poisoned" chips making their way into phones, laptops, industrial SCADA equipment, etc. is real if nascent.
On-shoring top-tier manufacturers like is absolutely a win not just for the high-tech manufacturing sector but also for the US and allied countries.
>This is great news, and we should celebrate.
Couldn't agree more.
I wonder how Taiwan feels about this. From their perspective jobs are getting offshored from their country because of massive subsidies, and the strategic shield of having most critical semiconductors coming from them is getting getting thinner. At the same time they can't complain because only the US could defend them from China.
I've always thought there's some geopolitical chess at here. The US can't abide being completely dependent on the island of Taiwan. So if TSMC wasn't willing to do this, the US might fund an alternative. This could leave Taiwan no leverage at all.
Now, with some US based production, TSMC is still in charge, and more resilient to disruption. So it may still be a very strong move.
The US is funding alternatives (Intel and Samsung).
I am not sure if Taiwan has any real leverage. If Taiwan is destroyed or otherwise compromised by China, the US would probably seize the American branch of TSMC, force the sale of the American branch to a western company, or force TSMC America become an independent company.
Isn't that like China seizing an iPhone factory and declaring that they are going to make the next iPhone? I doubt that a TSMC US fab can function independently for very long in the case of invasion, the Taiwanese govt presumably did this calculation before signing off on it.
Context matters.
Reactions to active conflict have a different threshold than normal civil operations. The interests of the US are biased towards continued peace. War is inherently value destructive (even if the military industrial complex gets to sell more stuff for a bit) so a majority of the population from a multitude of perspectives would rather remain fat and happy with their circuses (sports-ball).
That balance changes, as it has since the dawn of western history times, when outside forces disrupt the regular machinations of the people. When events like Pearl Harbor, the turn of the century terrorist airplane hijackings that turned them into missiles and America's citizens into hostages to our own national security theater paranoia, or some country turning the place all of our iPhone and computer brains are fabricated in into a war zone.
> fat and happy with their circuses (sports-ball).
You are protecting your ego. The modern circus is the algorithmic feed. And we are consuming it more obsessively then any previous form of entertainment.
> Isn't that like China seizing an iPhone factory and declaring that they are going to make the next iPhone?
In a hot war, they'd absolutely do the first bit.
I don't think they need to do the second bit.
It’s looking really bad for Taiwan to be honest and I don’t think the US has the political will to face off a full on invasion of China against Taiwan. Our military could handle it, but I don’t think the public will is there. I don’t think that China will come away with much other than more land though, the Taiwanese will not hand over their factories and IP to CCP companies, they will blow them up.
Any conflict would leave the small island looking like Gaza, a pyrrhic victory for everyone involved -- if you're trying to seize more than land. It's conceivable that the country making islands in the SCS would see a mere land grab as a win, doubly so if they can weather the global hit to chip production better than their rivals. It's untenable for the US to have so many critical eggs in such a vulnerable basket.
This seems extremely naïve about what it takes to run tsmc and how human capital works.
The US would probably also accept any Taiwanese immigrants fleeing invasion and Chinese occupation
The notion that the US could quickly build up the same capability Taiwan has currently is absurd - as we are currently seeing.
Taiwan has significant leverage in this respect
Not a big problem if 100,000 of TSMC and other companies best engineers and scientists flee to the USA after a full on assault by the CCP army/navy
The strategic shield isn't getting that much thinner: this fab is a generation behind last year's iPhone Pros and MacBook Pros.
Wait does that mean the 16 isn't their "fastest iPhone ever"?
You may be confused by the chip numbering. The A16 chip that they’re manufacturing is not the chip for the iPhone 16 (it uses the A18)
Isn't this better for Taiwan because it strengthens their ally, The USA?
If China would just wipe out Taiwan's ability produce chips, and disables part of the US information tech supply chain, then it would be bad for Taiwan right?
What? All the knowledge can be transferred to the USA in case of an invasion via open refugee status and brain drain from Taiwan to the USA under the circumstances.
Agree that TSMC is good news.
> US manufacturing is about to be reinvigorated
I’d suggest you post a small/medium quantity machining RFP on MFG.com with a medium to high complexity. I’ve been quite discouraged that US vs China price differences are 5-10x. (My part was a custom M0.8 screw in quantity ~500.)
It seems that without a vibrant base of small businesses, it will be very challenging to truly reinvigorate US manufacturing. And that would require reforming the finance sector/allocation of capital that currently is skewing really heavily towards “scale”.
One can only hope that the US learned from its mistake, and doesn't allow chip manufacturing to go offshore to that degree again in future peaceful times.
It wasn't really a mistake. At the time Taiwan and South Korea were advancing into semiconductors, the US was more concerned with Japanese domination of the industry so having 2 small countries as alternatives to compete with Japan in some sectors of the industry was beneficial.
One of those small countries has a belligerent neighbor to the north, and the other is coveted by a much larger superpower that thinks it still owns it.
The NK situation was obviously widely known at the time, but that the US population/government didn't forsee or take seriously enough the rise of China is perplexing to some of its allies.
It's a lot harder to go to war when countries depend on each other economically.
Tell that to Russia, its economy is - military production aside - in shambles due to Western sanctions and especially the brain drain.
The idea of economically enforced peace only works for democratic countries where the government has to show at least a bare minimum of respect towards its citizens, but not in countries that follow the whims of their respective Dear Leader.
Putin is surrounded and supported by people who are probably losing a ton of money right now. When he finally learns his lesson, it's probably going to be a harsh one.
That won't undo any of the damage done by the war, nor bring anyone back. It will pretty much not have any effect at all.
russian MOD people are making bank right now.
Too bad for them they can only spend it in Russia on Chinese stuff. (My father in law lives in Moscow. Muscovites pay more for old Japanese cars than brand new Chinese cars)
[dead]
This was famously the argument made in the book The Great Illusion, 5 years before the outbreak of the First World War.
https://en.wikipedia.org/wiki/The_Great_Illusion
Wars are often irrational.
It wasn't wrong, just too early.
At the time international trade was still fairly minor, so although a war would be deeply unprofitable it'd still be possible. Today's economy looks quite different, with even basic consumer goods coming from overseas. If international trade were to suddenly cease, most major countries would be in serious trouble really quickly.
The most extreme example of this is the European Union. Its economies are so deeply interwoven that they act as a single entity. Separating them to the point that one of its members can independently support a war economy would take decades, so it does indeed make intra-European wars virtually impossible.
It doesn't make war impossible, just economically ruinous.
Make's war more unappealing to those that are rational, which is the best you can hope for because there is no sure fire way of dealing with the irrational.
Although I think wars do often have an irrational element, economic considerations aren’t the only ones that should influence rational decision making.
And yet it may be the best deterrent we have.
We survived the Cold War because the U.S. and the Soviet Union were able to rationally agree on not using nuclear weapons. I sure believe countries today can rationally agree on avoiding war for fear of the economic consequences.
Meanwhile we're offshoring all of our software engineering jobs at a breakneck pace with no regard for the consequences on our future.
The whole same story is going to play out again and in 20 years we'll be panicking because nobody in the US will know how to write software anymore.
But just look at our profit sheets!
> US learned from its mistake, and doesn't allow chip manufacturing to go offshore to that degree again
I don't think USA made any mistake. It was always heavily invested in South Korea and Taiwan. Neither of them would even exist today without USA's investment, interest, and stewardship.
Intel is the one that made the mistake.
On top of that, the US outsourced of a very very ecologically damaging part of industry. The remains of Silicon Valley, literally named after the hotbed of what was manufactured there, are the largest concentration of Superfund sites in the US.
Is it that ecologically damaging? Maybe in the old times when silicon wafers where produced in Silicon Valley and when no-one thought or cared much about the environment. But today, I would assume the damaging effects of semiconductor manufacturing are less profound. But I do not know. Any inputs are welcome.
> But today, I would assume the damaging effects of semiconductor manufacturing are less profound
Manufacturing chips of just TSMC accounts for 5% (!) of Taiwan's entire electricity consumption, Intel's Arizona fab produces thousands of tons of hazardous waste a year [1]. It's far from the old days, but still a massive impact.
[1] https://www.theguardian.com/environment/2021/sep/18/semicond...
So the free market was the enemy all along, what we needed was state planning?
The free market actually works great under the assumption of governments not acting irrationally.
However, since China has expressed interest in war with Taiwan (not a thing advised by the free market), someone needs to address that.
In terms of economics, this is a net loss, but then again, the effects of war in Taiwan would be worse.
The free market is an innocent scapegoat that never existed in any government. As long as the State makes the laws, it is a form of state planning. The only different between Soviet Russia and modern Western countries is how heavy the hand of the state tries to move the needle of the market.
But I agree on the sentiment: everybody seems to have decided the state should control the market even further than it did three decades ago. Free market was never given a chance.
The free market often needs nudges in the right direction. The free market is a rule of thumb and not an actual Scientific Law. When left unchecked it ultimately eats itself
[flagged]
What are you doing with these 70TB of storage? I was meant to ask the other day when you reached the front page, but someone asked me a question during the meeting I was in.
(Your comment made me giggle so I went looking for more banter on a potential blog, sorry for creeping up)
This is a move with swinging geopolitical implications. But the value and urgency of the reinvigoration of the American manufacturing centre cannot be overstated.
China's gonna be a bit salty though.
What I really want them building in America though is low-end AMD chips for development boards.
4-Core/8-Thread CPU, 4-Core GPU, 16 GB ram, sane IO, and however many of Xilinx's FPGAs they can put on it without overdoing it.
People would be able to make some pretty decent things with that.
...transferring knowledge from TSMC to a US workforce. This is a significant win for the US...
I get what you're saying and I agree, but there's some heavy irony in saying that considering that's exactly how TSMC started out but from the opposite side; Transferring knowledge from "the west" (RCA from US and Philips) with ITRI it evolved into a project of Taiwanese state which culminated in TSMC.
It's also terrible/impossible news from a USD perspective if the US produces things nationally in a significant way (importing less, selling less printed USD in exchange for goods).
Printing insane amounts of USD to allow for systemic government over-spending and huge untenable government debt doesn't go hand in hand with not importing most goods. You can't keep your currency strong if you can't force others to buy your currency.
If you have a lot of production in the US, this is going to cause hyperinflation to come sooner.
In the long term it won't matter, the end result is the same, but if production significantly moves back to the US it will be very scary from a currency perspective.
I don't see the argument here. Importing less leads to selling less USD (yes), somehow leading to devaluation of USD? Is the implication that the dollar is strong because the US government "forces others" (foreign manufacturers) to buy it? Isn't that the opposite of the first thought, which implied that "selling less printed USD" was the reason that domestic manufacturing would be inflationary? I don't understand the causality, and it doesn't match my mental model ("a country that can build things domestically at a competitive price point should be deflationary because now there is more supply of stuff and equal supply of money"), so I think this could do with some expanding.
> we in the US are going to be building our own future both for chips and for energy security.
> just the beginning of the amazing industrial policy
Isn't intel one of the biggest companies in the world, makes chips for everyone and everything and based in the US?
If the marker for industrial success is supplying Apple Inc, Intel did until 2022?
It also helps TSMC, i think. More "allegiance" with the US while China is scrambling to catch up
>and we have top tier production here in the US
TSMC's process that they are bringing to the US is 2nd tier. The crown jewels are being kept at home.
If Intel can get their act together, then we will have top tier in the US.
That's not really true, afaict. This press release[1] states that Fab 21 (Arizona) phase 1 is 4nm, which is not the best but clearly is enough to manufacture the A16, phase 2 opening in 2026 will be 3nm, and phase 3 will be 2nm or better. I'm not a semiconductor engineer so maybe there's some process nuance that I don't know, but it certainly seems that this is at or near the top of TSMC's process list.
[1]: https://pr.tsmc.com/english/news/2977
Those are decently advanced nodes, but if 3nm isn't coming until 2026 then this is absolutely a last-gen fab. For reference, Samsung is considered a "last-gen/trailing gen" fab, and they'll be shipping 2nm in 2026 on their roadmap.
Taiwan's TSMC will have a process and sampling edge for the foreseeable future, unless they change the roadmap.
> US manufacturing is about to be reinvigorated, and we in the US are going to be building our own future both for chips and for energy security.
Don't count on it. For every high-end chip you need hundreds of commodity parts to support them, and nobody is investing in US factories to make $0.001 capacitors or $0.10 connectors. You just can't compete with cheap Chinese labor, so the US supply lines will never be able to equal a city like Shenzhen.
Unless the US is willing to get rid of capitalism and switch to a plan economy, most of those expensive high-end chips will just be shipped to Asia for assembly. So much for building your own future.
Or how about instead of 0.001 caps and 0.10 connectors we pay the little bit extra and not sacrifice living wages and environmental regulations?
You don't need a planned economy to legislate that all of you source material must be produced in accordance to local laws.
> most of those expensive high-end chips will just be shipped to Asia for assembly
I get the first part of your comment, but why wouldn't all the missing components be imported for assembly in the US? SMT lines in particular don't need that much cheap labour to operate. Even Brits can assemble PCBs!
"You just can't compete with cheap Chinese labor"
You sure can, we have cheap Mexican labor... and we have a much healthier trade relationship with Mexico.
Those components are not used in military products. Specialized vendors manufacture passives for the military. AVX, CDE and Vishay are just the first three I recall.
Hold your horses — this will only produce a fraction of the chips, and probably at a much higher cost.
It's a step in the right direction for the policy goals, but they've really just entered the woods with this one.
But it also makes us not dependent on a place that China has their literal sights focused on.
I feel like you are running around high fiving everyone for a job well done and the first chips aren't even off the line yet.
This is a huge milestone, but it seems a little premature.
> After all the wailing and rending of clothes, the industrial policy worked out great and we have top tier production here in the US, transferring knowledge from TSMC to a US workforce.
> This is a significant win for the US, and just the beginning of the amazing industrial policy passed over the past few years.
I'm not sure these conclusions are justified. It's the 'seen vs unseen'.
Wave the flag and have colourful fireworks with hand at the heart and tears in the eyes, this is a glorious moment the children will cheer its glory in glorious essays!
This is (only a few years later than the rest of the world's) state-of-the-art manufacturing, built only with the expertise of a Taiwanese company, that relies on the technology of a Dutch company, that in turn purchased (and has since monopolized) its IP from another US company, twenty years ago, and only then because a number of other companies (notably Canon and Nikon, both in Japan) were excluded from using it.
It is not something to be celebrated. What TSMC and ASML are doing is amazing, but we could be so much further ahead.
If you look at it from a geopolitical angle, it's much to be celebrated. It means US can rely on its democratic like minded friends to help protect the supply chain of cutting edge chips, against the now very visible alliance of dictatorships (Russia, China, North Korea, Iran).
And make no doubt about it, there is a democratic alliance vs dictatorships here. Russia is aggressively sourcing artillery shells from North Korea, ballistic missiles from Iran, and financing and weapons from China. China incidentally is the economic caretaker of Iran and North Korea.
US accuses China of giving ‘very substantial’ help to Russia’s war machine https://www.politico.eu/article/united-states-accuse-china-h...
China’s Double Threat to Europe: How Beijing’s Support for Moscow and Quest for EV Dominance Undermine European Security https://www.foreignaffairs.com/china/chinas-double-threat-eu...
> If you look at it from a geopolitical angle, it's much to be celebrated.
I'm not sure. Taiwan is already a democratic ally. They are relying on the chip manufacture to keep them safe politically. Without that they'll quickly get "absorbed" by China.
The US decoupling and isolating technologically/economically from the rest of the world, likely makes war more likely. Not less.
China has already been working hard on decoupling from the West, likely because they are anticipating conflict in the future, so I don't think we'd be doing ourselves a favor by continuing to rely on our supply chains in Asia. In-sourcing doesn't make that conflict more likely, but it does increase our options to react if push comes to shove.
> likely makes war more likely
Maybe, but it also makes the impact of war much less. Because if Taiwan DOES get absorbed, you're not 100% screwed.
Sadly the State Dept.'s moral panic over a non-aligned Military Complex rings somewhat hollow against the backdrop of 'very substantial' support in an on-going genocide.
Coincidentally, it was Chinese intervention that brought an end to the last genocide the State Dept. was facilitating; the delineation of allies likely warrants reflection
Why is democracy relevant here? Seems like a rather random words thrown in to support your point, without any actual relevance. We're talking supply-chain here. And capitalism. Both really dont care what and if people voted.
Friendshoring https://en.wikipedia.org/wiki/Friendshoring is the trend these days, which is why TSMC has setup factories in US and Japan.
> Both really dont care what and if people voted
They kind of do. The reason various Asian companies pulled ahead in their own respective industries is top-down leadership and support. You dump money into them, tell them what to do, and lower the overhead of competition and you can create a world-class company.
We, in the US, can't really do that. We try a little bit, but we don't fully commit so it doesn't work out.
Ah, ok. If we're going to be throwing in personal takes on geopolitics, then here's mine.
Less of the "democracies vs dictatorships". It's more like "western imperialism (essentially US & vassals) vs the rest of the world (who wants out of imperialism, endless sanctions, endless wars, the odd genocide or two)"
I don't think that's true. I see Europe and US and much of the rest of the world giving weapons and financial support to Ukraine. I don't see any other country giving weapons and financial support to Russia besides China, North Korea, Iran, and India who is buying more of Russian oil.
There is more than Weapons though. Brazil is supporting the Chinese peace plan - the plan that China built without talking to Ukraine and looks like give Russia everything they want. A lot of Africa nations are drawing closer to Russia - they don't have much to give now, but may in the future. (just them not developing is a win for Russia)
[dead]
[flagged]
"vassals" is a common phrase/tactic used by netizens in China to try to drive a wedge between US and rest of its allies. Nevermind that they never mention their allies like Russia or Brazil/Italy who seeks economic alignment as vassals.
I think some number of them are probably just legitimately psychopaths living in the West. Though maybe they latch onto the term after hearing it as a PRC talking point. If you genuinely can't imagine mutually beneficial positive relationships based on consent, then it's only natural that seeing the US work together with so many other countries would be scary and look like "US & vassals".
"A billion people" and "thousands year old civilization" are also Chinese talking points I've noticed. Hence why I included it in my comment, to both call out the really degrading "vassals" narrative and also point out these dictatorships aren't as special as they like to pretend.
[flagged]
[flagged]
You can't post like this here. Since I believe you have a long history of abusing HN, and have reverted to doing so again, I've banned the account.
If you don't want to be banned, you're welcome to email hn@ycombinator.com and give us reason to believe that you'll follow the rules in the future. They're here: https://news.ycombinator.com/newsguidelines.html.
[flagged]
You broke the site guidelines extremely badly and repeatedly in this thread. We have to ban accounts that do that, regardless of how other commenters may be behaving.
I'm not going to ban you right now because it doesn't look like we've warned you before, but please make sure to stay on the right side of the guidelines in the future—especially because this isn't the first time you've broken them. (For example, comments like https://news.ycombinator.com/item?id=40734213 and https://news.ycombinator.com/item?id=38963324 are also unacceptable.)
dang, seriously. What is wrong with those posts you linked to. Please take a look at them yourself, and tell me. Genuinely asking.
Whenever I've engaged on this topic (not just this thread), there seems to be an unwritten rule somewhere that absolutely any vile stuff is acceptable, no matter how debunked by journalists, as long as it's on one particular side of this narrative. And any pushback is abused, downvoted, etc.
It seems almost impossible to present an anti-genocide case, on this site.
That can't be right.
[flagged]
> Japan, Germany, are effectively still occupied.
No, they aren't. Having allied forces deployed on your soil by mutual agreement is not occupation.
> Once a US base gets established in your territory, you can never get it out.
There are quite a long list of counterexamples; the US has closed lots of overseas bases (both in countries that remain on good terms with the US and in those where the relationship soured.)
> Just ask the Iraqi's.
"Iraqis", and the US closed large numbers of Iraqi bases in the 2020-2021 drawdown and the US and Iraq are currently (last I checked) in discussions on a complete drawdown of US military presence which would close the remaining bases.
I would encourage you, if you claimed so in this thread that you are a US and UK citizen, to quickly move out of US and renounce your US citizenship. So the torture and rage that you're displaying here and the paradox of your identity doesn't drive you insane. Also you should renounce your UK citizenship, as UK and US are very close allies. Maybe try moving to Russia? I heard they're having another military mobilization, and is paying pretty well.
[flagged]
Just people who can't seem to understand that the world isn't black or white, but shades of gray.
The persecution complex is odd too. Calling themselves a "dissenter", and invoking "exile", because their hypocrisy got called out and their factual claims are easily disproved.
[flagged]
[flagged]
> Once a US base gets established in your territory, you can never get it out.
Lmao:
https://en.wikipedia.org/wiki/United_States_Air_Force_in_Fra...
Phillipines too:
https://www.latimes.com/archives/la-xpm-1991-11-27-mn-209-st...
They are going back currently, as they're invited to. You know, because that's how consent works, when you don't see everyone else as objects in a conspiracy.
Actually, the US just finished leaving Niger this week:
https://www.reuters.com/world/africa/us-military-says-it-com...
Very true, let's look at some of the strategic partners of the US: Saudi Arabia, an absolute monarchy, Israel, a state currently committing genocide.
This also lowers the Taiwan risk, which was increasingly high after the China chip ban.
Notably, this was started in 2020 with a $12B investment - https://www.tsmc.com/static/abouttsmcaz/index.htm
Then in 2022, TSMC invested another $18B and received $6.6B from the CHIPS act.
My bet, is TSMC was given a “you build in the US or we wont give you defense contract work” in 2018-2020 timeframe lol
https://en.m.wikipedia.org/wiki/CHIPS_and_Science_Act#Histor...
Of course Republicans opposed it. :-/
Does it matter? They played pretend opposition like they always do. Democrats can pass this stuff no problem but people elected the opposition party to advance meaningful democratic reforms like better health care, dealing with housing, increasing minimum wage. They haven't done anything. Its blatantly obvious this chips bill was a giant handout to corporations. Sure the plens get a few breadcrumbs but its pointless to point to republicans when both sides are not really enacting fundamental change for the common man.
> My bet, is TSMC was given a “you build in the US or we wont give you defense contract work” in 2018-2020 timeframe lol
My bet is that TSMC recognizes they are a crazy geopolitical pawn. And is frankly playing their part.
Once China develops chip production abilities similar (but not necessarily better) to TSMC, they’re free to destroy Taiwan. Then they’ll be the sole cutting-edge producer, meaning that everyone will continue to do business with them despite their behavior.
TSMC and the US recognize this. If TSMC bring their tech to America, they’ll at least be safe to continue manufacturing (“for the shareholders”). It also is self-serving because it changes the geopolitical game. It increases the risks to China of an invasion, and favors to the US increase the odds of US intervention (good for their patriotism).
Finally, it’s pretty well established that the US defense industry prefers local factories for security purposes. They’re obviously interested in preserving this ability domestically, and most companies recognize that and accommodate.
TMSC has fabs in Taiwan, Japan, the United States, Germany, and China. the most modern ones are in the US and Taiwan. The others are older processes.
[flagged]
Check out Mariupol, Ukraine before and after the Russia invasion https://www.theguardian.com/world/2023/apr/28/mariupol-befor...
Then check out Beijing giving Moscow "very substantial" help to beef up its war machine, and in return Russia is handing over its closely guarded military tech on submarines and missiles, in 2024 https://www.politico.eu/article/united-states-accuse-china-h...
Do you think Dictatorships care about any well being of anyone besides the ruling class?
[flagged]
> My bet, is TSMC was given a “you build in the US or we wont give you defense contract work” in 2018-2020 timeframe lol
TSMC is in an extremely precarious geopolitical situation; China's hardball is a lot scarier than Trump's. Expanding their geographical redundancy through billions in handouts is pretty appealing to investors.
TSMC improves the geopolitical situation of Taiwan by building here, too. China doesn't have the possibility of being "the best logic manufacturer left standing" after an invasion and TSMC being destroyed, if some of TSMC's world-class fabs are also located in North America.
Would it not make the situation worse? The risk/reward of an intervention massively changes when Taiwan is no longer the only source of chips.
So, there's two factors here, that move in opposite directions:
1. China is less likely to secure a semiconductor advantage over the West, if TSMC has a US location. Instead, China is likely to take out the nearby, high quality fab, and whatever they are left with domestically is more likely to be inferior to distant capabilities.
2. Because of #1, China is less likely to secure a massive advantage over the US by invading Taiwan; as a result the US may feel it less likely to support Taiwan.
I'm inclined to think #1 is the more important one. #1 makes the risk of an invasion much higher. #2 makes the reward for an intervention somewhat lower, but I don't think it changes China's calculation of how likely the US is to intervene that much.
How china would secure semico advantage by invading Taiwan? Those fabs would be damaged or destroyed
> Those fabs would be damaged or destroyed
> > China is likely to take out the nearby, high quality fab
Yes.
If China's domestic fabs are second best or close --- and China may manage to crawl into this position --- destroying the best fab increases their relative standing and significantly hurts Western security. Whatever crumbs they get from Taiwan (the proportion of expertise that decides to roll over and help, and whatever capital equipment survives to be reverse engineered) are just a bonus.
If China's domestic fabs are not --- because there's a fab tied for first place in North America-- destroying the neighboring fab that they benefit from clearly doesn't benefit them.
Yep. We should be investing our tax dollars in our economy and our people.
I think it falls back on lots of elites feeling that only “one special group” can do a thing. The pendulum swung too far into the “globalist”agenda and now it’s swinging back. I’m sure it will overshoot and we’ll be back to globalism within a decade, but I for one welcome anchoring more things to the domestic economy; the US is a huge country with lots of resources and lots of untapped potential (despite not being China big) and we could use some of that trickle down economy that the globalists have been hoarding for a while now.
I think you are overly optimistic, this is an older process, which means that next iphones will need to source their CPUs from TSMC fabs in Asia, not from US. There also will be no knowledge transfer, that was not part of the deal. It's more of a national security political message than a real change. I guess it's better than nothing. I wouldn't call it a significant win, but it’s a step in the right direction.
And fabs are not enough:
https://www.bloomberg.com/opinion/articles/2024-09-03/us-nee...
You can't lead in the energy transition or produce chips without the supply chain and critical minerals:
https://www.wsj.com/world/asia/china-harnesses-a-technology-...
https://www.politico.com/news/2024/08/29/biden-minerals-pric...
https://www.politico.com/news/2024/09/13/steelmaker-biden-cl...
There's still a lot more to do to actually make it work before you can celebrate a win.
Not only that, the US now also has some backup when China will invade Taiwan and take over TSMC.
> US manufacturing
America is a continent.
Maybe you should visit the rust belt/midwest before SV starts patting itself on the back for single-handedly re-invigorating the economy.
I get the spirit, but flyover country is not doing great. Unemployment is rising and there is a severe lack of decent paying jobs. Chips are great, but everything else is made in Asia. Increased automation is making a ton of jobs obsolete and there is no solution in sight yet. Chips ain't gonna do it.
Maybe you should look at actual stats for what's going on in the economy before being completely cynical.
The investment in factories is absolutely massive over the past few years. The Inflation Reduction Act is bringing massive amounts of manufacturing into the US, starting with the lowest value add of assembly, and after that additional suppliers lower down the chain will be built up too.
It is not SV reinvigorating the economy, it's not happening in SV, it's happening in small towns all over the country. It's happening due to the bills that Democrats passed over Republican opposition, but because of politics, it's not being trumpeted as a partisan win in the towns where factories are being built.
> The investment in factories is absolutely massive over the past few years.
The fascinating thing is people don't want to believe this. They'll make every excuse before admitting that it's true. They want to be in a declining empire when the reality is the opposite.
That's because reality that is readily observable by these people does not match the reality reported by the media and the reality portrayed in Democrat speeches. In that alternate reality manufacturing-heavy towns are booming and not dying out. US-made automobiles are the most advanced and Detroit is a world-class city. And it's simply not true, much like what Pravda would report back in the day.
> reality that is readily observable by these people does not match the reality reported by the media and the reality portrayed in Democrat speeches.
Democratic* and also, no.
> US-made automobiles are the most advanced
You may be living in a different country then, given how impressive Tesla, Rivian, and Lucid are.
> And it's simply not true
Except it is, you're proving my point
here's a bookmark from a few days ago:
https://www.youtube.com/watch?v=aqhTRQ--x_Q #video on #China/#USA politics trying to keep out electric vehicles with 100% tariffs while US car companies spend their government EV research grants on stock buybacks. High-end electric cars, electric dumptrucks, and even electric mopeds support battery-change recharging; it’s commercially deployed. They’re very impressed with how advanced all the Chinese cars are, and also positively impressed with how accommodating the auto parts manufacturers they met with were, especially by contrast to US and Canadian companies.
a thing i didn't mention in that bookmark is that the prc-company-made equivalent to the (prc-made) tesla model y (still the most popular car in the prc) is one fourth of the price
Somebody took the time to bookmark some political video about the trade war between China and US to post in a comment on hackernews?
my bookmarks file has 14601 entries, including dozens of entries about that trade war.† i find that it's helpful to be able to cite sources when discussing topics with other people, and summarizing them helps me understand them better to start with
the video itself is only incidentally political; it's a 'custom car build show' from canada with 700k subscribers which primarily focuses on things like engine performance, welding machines, impact wrenches, and fixing dilapidated machinery. but a month ago the guys that make the show decided to go to china to see if they could source some car parts for their custom builds, and they were absolutely blown away by how much more advanced chinese cars were than usa-made cars, to the point that they filled a half-hour video mostly marveling at that
to me this seemed relevant to the thread
______
† i'm interested in things that seem likely to result in hundreds of millions of deaths in the next few years, so there are lots of entries about drones and the ukraine war too, for example
A democratic speech would be something about the right of the people to elect a government that represents them (as opposed to being told they are Nazis for wanting to do so). A Democrat speech is any speech delivered by a Democrat.
The USSR also had fanatical members of the Youth Comsomol who'd loudly denounce anyone who questioned the party line as either insane or "anti-Soviet". That's what you and your comrades are doing.
But really, it doesn't matter if Pravda reports a new record in farm production every other week - the people still see the empty shelves in the grocery stores.
US manufacturing growth is manufactured as follows: use tariffs to ban much cheaper (and frequently better) goods and demand that they are produced locally. Or even better: make components for a fleet of ships that costs $4B each and that nobody needs and that gets canceled (see: Zumwalt). Step 2: use the ridiculously inflated costs as proof that manufacturing is growing (hey, you just need a big number).
This is some sort of weird projection, where you have swallowed lots of propaganda, accuse anybody with actual facts as being "insane," and then accuse others of exactly what you are doing.
Meanwhile, back in reality
Bloomberg: US South Accounts for Lion’s Share of Factory Construction Boom https://archive.is/URbMw
Bloomberg Video from a year ago "factory construction has doubled": https://www.bloomberg.com/news/videos/2023-10-06/the-america...
"So one was just like, "Oh yeah, they got those higher starting wages." If you're walking in with no background in manufacturing, no skills that you could point to, the starting wages are in the like $17.50 to $22 an hour range depending on the role" https://www.volts.wtf/p/how-is-new-clean-energy-manufacturin...
This is not from tariffs, it's from carrots in tax incentives, used to build up the entire supply chain, not just a few factories.
If you have empty shelves in grocery stores, where the hell are you living? You expect me to not believe my own eyes, and imagine some empty grocery store shelves? If so, it's your own area's politics that are causing the problem. Wages are waaaaay up, especially on the lower end, much less on the top end.
The economy in the US is blowing away China, Europe, etc. We are so strong right now. If you are not doing well in your own micro area, look internally to see how your area is fucking up so much when there's opportunity everywhere.
Empty grocery shelves are you not being able to read, and taking a comparison literally. However, they could be observed not long ago in much of the country. There were supply chain issues during COVID with most anything. And even after COVID there were disruptions like a sudden unavailability of eggs.
Starting wages increasing by 20% for the first time in a decade doesn't even keep up with inflation.
You are so strong you have to completely change trade policy to a protectionist one. China is the one to watch for the next decade.
> don't want to believe this
I don't think so. Rather, we are being told repeatedly that investment in factories is real bad and we should just continue to do what we did. We, then, respond to that - and that gets interpreted as "oh so you don't believe the situation is getting better?"
It is getting better, but there's still a lot of opposition and the opposition still needs to be addressed and their concerns heard.
Investment in factories != investment in american communities.
Legal immigrants with special protected status, Medicare coverage, and some basic income from the government are given these manufacturing jobs because then the investors don't have to pay for health benefits, can severely under pay, plus they have the bonus of having a desperate, captive workforce.
The investment class thinks workers need to be knocked down a couple pegs. This stuff will not end well.
Cool, factories get invested in, the c levels get paid $500k/year and the workers get $17.50/hr. Come to the Midwest and see it.
Bro I fuckin live in it. I don't care what stats you have, people in the Midwest are struggling to afford groceries and housing. Come visit.
You are completely correct. But the chips have immense strategic value. Not being able to manufacture them would be catastrophic in the event that China cut us off.
Why did it take the United States government having to invest in US labor?
Why wasn’t the “free market” Capitalism allocating resources to the United States if in fact, it is the best place for this to happen?
Or is this just garden variety realpolitik nationalism?
[flagged]
Absolutely astounding to credit the guy on whose watch this literally did not happen for something that's happening now.
Is this like the people that credited current infrastructure improvements to his infrastructure week that didn't happen?
Something like 40% of Republicans believed Obama was 'responsible' for 9/11 in 2015/16
(failed to prevent, not personally perpetrated)
Well, he did fail to prevent it.
Americans also love to praise George Washington, but he too, didn't lift a finger to prevent 9/11.
There is a lag between policy and results, I don't think you can fairly say that because it's happening NOW it's biden's doing (though i'll give credit to Biden for now ending the changes Trump enacted). But Trump should get credit for completely reorienting our trade policy.
Actually you can, the CHIPS act and the IRA lead to a massive boom in factory construction.
It's a horizontal line going supersonic [0]
[0] https://fred.stlouisfed.org/series/TLMFGCONS
I give Trump credit for approving the American departure from Afghanistan. Even with how that was executed, the current state of Americans not being there is a good thing caused by his past decision.
In 2016-2020 the economy was good, jobs were plentiful and there was mostly peace. Then the Democrats mismanaged COVID and the Munich peace conference in 2022, then doubled down and sent Pelosi to stir up the pot in Taiwan.
Now we have cold or hot war everywhere, and a TSMC plant is built for election purposes.
Trump absolutely started the U.S. manufacturing drive, sometimes he does not push things through. Still, the world would be in a much better shape had he been elected in 2020.
[flagged]
Well, one of the three fabs did. The newer two fabs, including the one with the most advanced processes, started in '22 and '24 respectively; that was thanks to the Biden Admin, per TSMC.[0][1]
[0]https://www.tsmc.com/static/abouttsmcaz/index.htm
[1]https://pr.tsmc.com/english/news/3122
Biden, Democrats and the moderate Republicans that came together to support this deserve the credit here. It's game changing stuff, a big chunk of which could be on the chopping block if the extreme takes power again.
The extreme? His policy is literally to bring back as much manufacturing back to America.
Past is prologue - if he couldn’t do it then, how could he do it now? He’s already said he’d repeal the IRA.
All he’s proposing is 10-20% universal tariffs that’ll raise the cost of off-season fruits and in-season coffee by 10-20%.
[flagged]
You’re missing the forest for the trees. The cause to celebrate is not that Apple chips are being made. It’s to celebrate that chips of such high calibre are being made.
It’s only a start, but it’s a huge deal in an economic, technological and geopolitical context.
Yeah, that's great, but it will be a lot better when they're making high-caliber chips for multiple customers, not just one.
It looks like you’re complaining Apple happens to have placed first orders for the new fab.
Maybe next week a run of Qualcomm Snapdragon Elite will begin production, for example. Is that second set of orders what you’re awaiting?
Yes, basically. I don't like seeing what appears to be a whole ecosystem in the US centered on Apple. I really don't want to see a future where so much production is Apple-centered in America, that it's "un-American" to use non-Apple devices (because the Apple devices are mostly American-made, whereas the competitors are foreign-made). So seeing the US fabbing cutting-edge CPUs for a whole range of mobile devices from different vendors would be great.
Same for Samsung, then.
Yeah, it really is a big deal. I wish politics weren’t hitting this topic so hard. This is monumental.
"US manufacturing is about to be reinvigorated"
Oh i'm going to be downvoted into oblivion for this one.... but I think this is a win we can give to Trump. It was a hard focus of his, I think he put the right people in place to do it, and I think time is going to prove he was right to do it.
I didn't vote for him in 2016, but I think it's important to acknowledge it.
This is because of the CHIPS act. Other than Trump's constant whinging about China, he didn't have anything to do with this.
I understand, but I was commenting specifically around the comment "US Manufacturing is reinvigorating" which it is, and which is more general than chips.
I think when the Trump admin renegotiated trade policies (and I'll given Biden credit for keeping them) the economic incentives were rebalanced. I think the result is complex/low volume manufacturing is starting to return to the US, and simple high volume manufacturing is moving to Mexico (which we have a very good relationship with... i'll discredit Trump for being so stupidly aggressive with them in the first few months of his administration though)
>This is a significant win for the US, and just the beginning of the amazing industrial policy passed over the past few years.
I don't consider it a win. I consider it a loss. This is a desperate move by the US. Intel making better chips then TSMC is a win. The government strong arming Taiwan with "protection" from China in order to gain this technology is a display of American incompetence.
But then again maybe is't not about fair play. If the US wins by unfair means, it's still a win? A pathetic win but a win none the less.
There's a common pattern here, it's easier for them to import fresh meat than fix the rotting carcass back home
Whether that's fair or not, who really cares, what can we do about it
As an American I care because it’s shameful and rather pathetic.
And remember stuffing a rotting carcass with imported fresh meat doesn’t actually fix the rotting carcass.
I look at where all the talent is going in the US and it’s all full stack software engineers and gen AI.
where you see talent I just see a bunch of people who aren't in a position to say no
Someone in the thread mentioned "China's gonna be a bit salty though."
I see what salty China looks like now.
I’m an American though. But yes, of course China will be pissed. I suspect China wants this though. Once the US has Taiwan semiconductor technology there’s no need to protect Taiwan and China can move in. Symbolically Taiwan represents more to China than some island that makes great chips.
I still think it’s better if intel was able to pull it off, but i don’t think us Americans have the capability.
You really think it's a success to force Apple to lose money to make US politicians look like they are "doing something" about a world economy that is increasingly leaving the US in the dust?
Meanwhile in China, 1000 engineers (to one in the US) are building all kinds of electronics and embedded systems on shoestring budgets that truly force them to learn engineering. China's industrial policy architects are likely laughing at this big folly on the part of the US.
The worst is the 100% tariff on EVs which keeps the US in an artificial economy of gigafactory, high-end nonsense when the rest of the world will be getting true economies of scale from EVs which are actually simple, reliable and low cost.
It's deeply embarrassing that the US must suffer poltical rule of its economy along with the double embarrassment of seeing other nations do it so much more effectively.
Industrial policy should be measured in terms of person months of career acceleration (experience) per dollar. The US focuses on helping prolong the dominance of internal combustion engines and taxing high profile, high-end companies that do not offer skills that transfer well into the rest of the economy. How many Apples are there? Will forcing manufacture in the US suddenly result in another company doing 2nm process and competing with Apple? It's absurd.
I know of a variety of small and medium sized US tech companies (aerospace and 3d printing / robotics) that were almost sunk by US "industrial policy" becasue they relied on a small number of China-manufactured inputs that suddenly became unavailable, forcing unplanned re-engineering and work the companies could not afford. Sadly, one went under. Meanwhile, the US firms that import finished goods are thriving selling Chinese manufactured gear -- Chinese companies didn't have to pay US tariffs on the same inputs. Utterly absurd.
Politicians should stay out of the economy and focus on moving us closer to nuclear war and promoting the religion of American Exceptionalism.
> Industrial policy should be measured in terms of person months of career acceleration (experience) per dollar
Sounds about right but how would you come close to measuring that?
China probably measures it. In the US it's probably driven by a Fox News opinion poll of rural PA voters.
How could they measure it? It sounds kind of impossible to measure regardless of what data you collect.
>“It's deeply embarrassing that the US must suffer poltical rule of its economy along with the double embarrassment of seeing other nations do it so much more effectively.”
The Chinese Communist Party exerts far, far more control over all sectors of their economy than US politicians do over the US economy.
https://www.cbsnews.com/news/xi-jinping-china-capitalism-60-...
That's what I meant by this:
> other nations do it so much more effectively
China hsa an actual strategy, not just an attempt for politicians to pay lip service and win a few rust belt states.
Also, China had a policy for years of dramatically suppressing its economy, so of course a few small changes result in massive growth (once some of the suppression was removed).
> This is great news, and we should celebrate.
On the other hand, this is a protectionist policy that has been straining US' relations with its allies. That development means the US empire is a little less mutually beneficial, and a little more beneficial to the core.
Its success requires these allies not to reciprocate, and this is a long-term prospect that only time will confirm.
I feel like I've read a few articles on Bloomberg and/or NYT (drawing a blank on the exact source) that a very large portion of the workforce was taken directly from Taiwan and the American workers were having a hard time adopting to the Taiwanese way of doing things (long hours, on call all the time, constantly stepping outside your predefined roll, etc.). Is this currently now, or will it in the future, affect the overall success of the factory? (It also might simply be untrue for all I know.)
Morris Chang, the founder of TSMC was reported [1] by Nikkei Asia in March 2023 as saying this about the work culture:
> "Design is the U.S.'s competitiveness. On the other hand, Taiwan, Japan and South Korea have competitiveness in manufacturing...It's also about the work culture and the people."
> The TSMC founder cited chip production equipment as an example. Because these machines are so expensive, they need to be running 24 hours a day to justify their cost. "If it breaks down at 1 in the morning, in the U.S. it will be fixed in the next morning, but in Taiwan, it will be fixed at 2 a.m."
> "If an engineer [in Taiwan] gets a call when he is asleep, he will wake up and start dressing. His wife will ask: 'What's the matter?' He would say: 'I need to go to the factory.' The wife will go back to sleep without saying another word," Chang said. "This is the work culture."
[1]: https://archive.ph/LqV4M
This isn't all so unusual if its written into the job description. SREs in tech companies are expected to respond within a few minutes if they're paged in the middle of the night. They are usually compensated for their oncall time, however.
Expecting a worker to come to the factory out of fear or good will is not the way. Just write it into the contract/expectations/evaluations.
Out of the major players, Google is the only one I know of that compensates SREs for oncall time (and they do so fairly generously).
All European tech companies I know compensate fairly well for oncall.
There's a rate for simply being on call (you'll get paid extra without even getting any calls), there's a rate that gets summed on top for actually working off hours and this rate increases depending on the time of the day you worked, whether it's the weekend or a holiday.
Yes, in Germany all months when you are expected to in the oncall rotation are basically an addendum to your usual contract that you sign and receive more money even if nothing ever happened during your shifts.
...and do machines really break as often as software in production? :)
[dead]
As a person who runs manufacturing in the US, this is our work culture too. Also the same at the other 3 previous places I have been at. The company culture asks for something, if it is not provided, you find someone who wants to be a part of that type of culture. There is an expectation to pay for it though.
Having to wake at 2 am on call is just bad for cardiovascular health, it's really just paying for one's life at retirement age and there's no real salary that can level that. Young people have an invisibility bias in psychology, they underestimate the physical toll of late nights and workplace stressors, which is cumulative over time.
Having to wake at 2 am on call is just bad for cardiovascular health, it's really just paying for one's life at retirement age and there's no real salary that can level that.
Sounds a lot like corporate slavery.
When the machines need to be running 24/7, why do they not hire qualified workforce that runs in 3 shifts?
Or, hopefully, the engineer who is paid to fix it is paid for their time.
As far as I know, they do. I think the bigger problem of the US manufacturing industry is that the most talented and motivated people have gravitated towards Wall Street and the "ads" companies. They not only pay significantly higher (due to cost/revenue structure) but also have a comfy working environment compared to factories.
The west has the same work culture when the industry and the pay demand it. The difference is that it may well be the woman who tells the man she's on the way to the factory. Or the wife who tells the wife. Thank goodness for liberalism.
Hard to feign sympathy when companies trout the "no one wants to work" line when they always forget the second part of the statement that is always implied: "for how little we pay."
"There is a shortage of qualified Software Engineers (who want to work 60 hour weeks for $40k per year)"
If you believe there has been a decline in American work ethics, this actually seems like a good thing. Optimistically they could reach a good middle ground here.
I am not sure framing it as work ethic is right. It is simply the cost of labor. Some people might argue American's are more or less productive the hours they are working, which means just because someone from Taiwan is willing to be oncall 24/7, doesn't mean you'll have to hire exactly 3 American workers at 8 hours each to match productivity. You might need 5 because Americans truly are that lazy, or you might only need 2 because the on-call isn't that demanding since Americans are more productive.
Not saying any of these specifics are true, but framing it as work-ethic is not accurately capturing why it is more expensive to run factories in one country vs another.
To be clear, you are saying work ethic does exist and it is a factor but it's not the only factor, with productivity being another one?
Yea agree that it exists, but work ethic is one variable in the cost of labor equation.
I was commenting on a story about how americans had problems adapting to taiwanese work culture, and saying how they could benefit from this cultural exchange to optimize their productivity. Like you, I also do not thing this really captures why it's more expensive to run factories here, because I've never even suggested this.
Many of those articles came out before TSMC received CHIPS Act grants. As soon as the CHIPS Act money was committed to TSMC, the factory was suddenly ahead of schedule. Noah Smith called it out here:
> Three months after TSMC announced further delays at its $40 billion Arizona fabs, the chip manufacturer has now said the plant is expected to be operating at full capacity by the end of [2024].
> The announcement comes several weeks after it was first reported that TSMC is set to be awarded more than $5 billion in federal grants under the US CHIPS and Science Act…
https://www.noahpinion.blog/p/at-least-five-interesting-thin...
I've seen those same articles, but also ones saying that was largely a ploy. There were billions of dollars in subsidies that took some time to lock down, and the reported problems with American workers evaporated right after the money was committed to TSMC.
Some of the processors used in the iPhone 14 Pro, 14 Pro Max, 15 and 15 Plus are being made in America by TSMC.
Not even. The only device still in production using the A16 is the iPhone 15 (and plus if you consider that a different model).
It seems likely the new iPhone SE will be released in the next 12 months, and if so, and it follows past patterns, it'll roughly use the iPhone 14 hardware and thus, the A16.
The SE has always used the latest chip.
No chance in hell Apple releases any new phones — even SEs — that can’t do Apple Intelligence.
Now that I'm thinking about buying a new phone, maybe it's worth waiting for the SE to come out
Going by past practices and current rumors, I would expect an iPhone 14 body and display (FaceID, OLED, and no large bezels) with the current flagship model SOC and a single recent gen camera module.
It will be interesting to see how much they bump up the RAM for Apple Intelligence.
New SE models tend to launch in March or April.
Yeah, MacRumors thinks a new iPhone SE is due sometime soon, based mostly on how long it's been since the last model released: https://buyersguide.macrumors.com/#iPhone_SE
You are correct. I am wrong. And good point about Apple Intelligence. I'm disappointed in myself for not seeing that.
The A16 could certainly run the AI with enough RAM
Maybe, perhaps. Idk I don’t work at Apple.
I’m just telling you that if it follows past SE pattern it’ll be an A18. And they won’t skimp on the RAM because Apple Intelligence is clearly going to be rolled out across their entire product line.
2 + 2 = A18 with 8GB of RAM
[flagged]
[flagged]
[flagged]
Apple Intelligence is a bunch of new tech they haven't really released yet. In typical Apple fashion, they start slow, and will improve it year over year.
Apple rarely backports new tech to older devices. It probably could run on the older chips, but it doesn't look like Apple isn't going for the widest possible rollout. They are launching it for the newest chips only, and are not wasting time porting it to old chips, when they don't even know yet how it's going to scale. So right now they are focussing on English speaking markets and newest devices only.
They are skating to where the puck is going to be, and in a few years no-one will care if their tech runs on the A16 or not. Right now they are focussing on getting this thing launched, and backward compatibility would only slow them down.
And its a selling point to get people to buy new iPhones, so it's win/win for Apple.
While I can think of a few examples where they have done back ports given time (but not at launch). I still very much see this the same way as you do for Apple Intelligence. Firstly because they're unlikely to announce it for older phones unless they can get every model working well. Secondly because I notice they've been careful about which of the new AI upgrades are classified as Apple Intelligence, versus those which have been packaged into iOS 18 without fanfare.
I'll give an example:
The iOS 18 photos app, without "Apple Intelligence", still has an improved search function. This is driven of course by a new AI model that tags images with more detail and fidelity than earlier iterations.
However "Apple Intelligence" also features further upgrades to photo searching where a user can request images with highly specific details, expressions or interactions. The example they give is "Katie with stickers on her face", and beta testers have shown examples which demonstrate that other than just tagging individual objects, those items themselves are described and searchable. (E.g. The difference is like between being able to search for photos with a "dress", versus "a red dress", "a wedding dress", <person> "wearing polka dot dress", etc.)
According to Apple, the upcoming “Apple Intelligence” features are exclusive to devices with A17 Pro, A18, or M-series chips.
Maybe for the EU market?
In most industries regulation is an opportunity for incumbents like Apple.
If Apple can profitably provide AI services without breaking privacy laws but their competitors can't Apple wins.
It's unlikely to be able privacy laws, but rather DMA / competition laws.
Apple Intelligence requires deep access to user data, systems apps, etc to make it useful.
Under the DMA, Apple would be required to also offer similar functionality to competitors (e.g. Google).
Ironically the DMA is telling Apple to reduce privacy to make Apple Intelligence work in the EU, it’s just a populist political attempt at regulating a market.
No sane person actually thinks Apple isn’t private enough for EU standards, they’re just not being allowed to compete because they aren’t allowing anyone else access to local user context, which would be a privacy nightmare if done incorrectly.
I think you don't really understand what you're talking about.
Isn't the bulk of Apple Intelligence processing on-device? You want to have powerful chipsets for local, more privacy-friendly processing.
None of the EU ai rules prohibit apple from enabling apple intelligence in the EU, they just don't want to. Gemini, Claude, chatgpt all already exist.
I agree that Apple being stubborn is part of this, but also the point of the DMA / antitrust in general is that large companies that control their own markets can't do some of the same things that less influential companies in the same space can do.
Apple Intelligence is a set of features for a platform (iOS) which the EU has determined to be a Gatekeeper platform which comes with special restrictions and oversight.
There's a regulatory difference between that and just releasing an LLM accessible via the web or an app download.
And the next base model ipad may use it (or the older a15). iPad is currently using a14.
Reportedly, the 2025 iPhone SE will use an A18-family SoC (same as this year’s iPhone 16 models).
Could be used in an Apple TV as well?
You think they'll make another SE? I thought that product line was being abandoned.
Rumors say an update is in the works; my guess is a release early next year. https://www.macrumors.com/roundup/iphone-se/
Yeah why are these chips still produced at all? The iPhone 16 just came out and the 14/15 stockpiles will be sold off for cheaper just to get rid of them. What am I missing?
The iPhone is not the only product Apple makes.
The Apple Watch, TV, iPad, Studio Display, etc. all use variants of older A series SOCs.
AppleTV, HomePod, a new display. Could be anything. There could also be government or corporate contracts requiring the mass production of a slightly older chip for something.
Hats off to TSMC. Spinning up a new factory with processes this complex is very difficult, as anyone with manufacturing experience can confirm.
My understanding is it isn't a new factory. Wasn't the equipment moved from another operational factory so they could get up and running quicker?
To build a factory from scratch you must first invent the universe
AFAIK TSMC does not manufacture the machines they use to create processors so in any case they would be moving the equipment into a facility.
yeah I mean this isn't factorio...
Also, doesn't chip manufacturing require a lot of water? Water is not the first thing that comes to mind when I hear Arizona. I think I'm about to learn a lot with this.
Yes, ~10 million gallons per day (equivalent to 33,000 households). But the plant's water recycling and re-use is very efficient, so it's mostly a one-time hit up front.
From what I read the overriding factor was geological stability. Apparently these factories are very sensitive to vibrations. I guess when you do precision work at nanometer scale these things matter.
Arizona isn't water rich, but it manages to keep the 4 million people around Phoenix hydrated, so there is water.
> From what I read the overriding factor was geological stability.
Guess they are tired of dealing with all of Taiwan's earthquakes.
Arizona actually has a lot of water because of several successful and ambitious irrigation projects in the last century.
So much so, that it has become an agricultural region for growing notoriously water intensive crops like alfalfa and pistachios.
It's notoriously unsustainable. Those water intensive crops would be wildly infeasible if the farmers had to pay anything close to a market price for the obscene amounts of limited water they consume.
I mean, yeah, they have become an agricultural region... but it's not good for the people who live in Arizona right now. [0]
[0]: https://www.cnn.com/2022/11/05/us/arizona-water-foreign-owne...
Elon Musk did it with his Giga Factory somewhere in the range of 11 to 14 months in Texas. It’s 5 times the size of the pentagon and they build more than just top of the line Tesla Chips there.
Some states have less regulations than others. He said if he tried that in California, it would take an unlimited and indefinite time to complete (100 years+) due to so many permits and regulations.
to be honest, this is far better news than I was expected, and sooner, too.
is anyone else besides Intel making ~4nm* node wafers on US soil?
*yes I know I know I know about the misnomer with using nm measurements nowadays
I thought Intel 4nm was outsourced to TSMC. Or it's a rebranding of an earlier node. Am I mistaken? Do they actually produce that?
Here we are:
https://www.guru3d.com/story/intel-to-strategically-use-tsmc....
One of the chiplets of Intel's Meteor Lake laptop processors launched at the end of last year is made on "Intel 4"; the rest of the chiplets are TSMC N5 and N6. It was not a meaningful improvement over Intel's preceding generation that was made on "Intel 7" aka. the iteration of 10nm where the process was finally good enough for their whole product line.
Intel's Lunar Lake low-power laptop processors shipping in a week will be the first all-TSMC x86 processor from Intel. Their desktop/high-power laptop processors (Arrow Lake) will also be all-TSMC, and should be launching this fall. After that, Intel intends to resume using their own fabs for consumer processors with their 18A process. There are some datacenter processors using "Intel 3" and the 20A process was cancelled in favor of the more fully-featured 18A.
(In case of nitpicks: Intel is also manufacturing the silicon interposers that the chiplets are mounted on, but since these dies are completely passive and have no transistors, I'm not giving them credit.)
With Intel 4, Intel has not succeeded to obtain clock frequencies as high as with Intel 7, which is why the older Raptor Lake laptop CPUs still beat the Meteor Lake CPUs in single-threaded benchmarks.
Moreover, the new Intel 4 process had low fabrication yields, so Intel has produced less Meteor Lake CPUs than it could have sold.
Nevertheless, the Intel 4 process has demonstrated a much greater energy efficiency than the previous Intel 7 process, which is why the Meteor Lake CPUs beat easily the older Intel CPUs in multithreaded benchmarks, where the CPU performance is limited by the power consumption.
Intel 4 was the initial internal-only version of that process. The version available to external fab customers is Intel 3, which is in production in Oregon and Ireland. See https://www.trendforce.com/news/2024/06/20/news-intel-claims...
I mean, there are really only three bleeding-edge foundries: TSMC, Samsung, and maybe Intel if they've gotten their yields back on track.
Samsung has a fab near Austin, TX that was slated to make 4nm but it's been postponed to 2026 along with a shift to 2nm: https://www.tomshardware.com/tech-industry/samsungs-yield-is...
But their yields on 2nm are apparently... not great, so even that's in question. https://www.businesskorea.co.kr/news/articleView.html?idxno=...
SMIC is apparently making low-yield 7nm and is supposedly working on even lower-yield 5nm, but absolutely not in the US.
SMIC: "You got anymore if those Secure Foundry grants lying around?"
Would love to see SMIC apply for CHIPS act grants. Would be like the time Russia asked to join NATO.
Yeah I was surprised to hear this is already at a point where they can produce chips. From what I've heard it takes a really serious amount of effort and expertise to calibrate the machines, and get the water filtration and other chemistry working in a new location.
Genuine question: what upside does it have against supply chain attacks?
Is it possible that an adversary to implement a backdoor into a chip design, without Apple noticing it?
I'm not a chip designer so perhaps the answer is obvious to some of you guys, but I'd expect some verification mechanism at Apple's side of the manufactured chips to match their original design to verify that they aren't tampered with?
Very much possible. Talking more generally about microelectronics - You can imagine the DoD is very interested in making sure they're not putting 'bad' chips in their military hardware, whether 'bad' means backdoored or merely counterfeit.
Manufacturing chips in the US means the DoD can investigate the acutal fabs and put cleared personnel on the manufacturing line to make sure nothing untoward is going on. Another strategy is to investigate the chip after it's been manufactured somewhere else and prove that it's the same chip you designed, but that's quite difficult.
If you're interested you can read up on the Trusted & Assured Microelectronics (T&AM) program.
I think the vector people talk about most in this context is denial.
If an adversary wants to deny access to a fab on American soil they'll need to deny access to dependencies or attack the fab itself.
Zero upside, probably a downside.
Apple has a top notch logistics and security processes which had mitigated the issue of supply chain attack in China which his willing and capable of producing such attacks.
Moving some production to the USA might induce some sloppiness in this due a perceived inferior risk.
Also, some security measures requested by Apple to manufacturers in other countries are probably illegal in the USA.
Also, some security measures requested by Apple to manufacturers in other countries are probably illegal in the USA.
That's interesting...do you have any specifics?
The article doesn't mention supply chain attacks. What context are you referring to?
I'll take a guess and agree with TOMDM. It's about China invading or blockading Taiwan (remember the US attack/blockade against Cuba? Exactly that.) and thus denying America physical chip shipments.
Not a specific context in the article. Just wanted to see what (if) aspects it might have as I've seen some other comments around that.
Isn’t Taiwan’s success in creating a TSMC correlated to the pyramid of their workforce which supplied skill at every level commensurate for high tech manufacturing’s demands? They have a high number of post-grads in their population AND also a large number of what we in the US call vocational/technical-educated working class. How are we doing as a country over time by the same measure?
Excellent to see more manufacturers come to the land of the free and home of the brave.
At what cost meme, but literally, what's the cost of a chip made in TSMC US vs TSMC TW.
It's ok their profit margin will go from 50% to 47%, they already have so much money that they don't even know what to do with it anymore
I'm mainly curious if TSMC estimates that US fabs would cost 50% more is confirmed or not.
It's hard to not cost more than employees who think it's literally a patriotic duty to sacrifice yourself for a profitable company. American execs Dream of this kind of non-monetary influence on the work force
Presumably competitive otherwise Apple wouldn't be buying them?
IIRC morris chang indicated US operated fabs would cost ~50% higher, which is not cost competitive, well not something buyers would sign for without something happening behind the scenes (i.e. US gov pushes Nvidia and Apple to use Intel foundries). If A16 is $100 from TSMC TW, it's $150 from TMSC US, presumably $50 to BOM is something Apple can afford, but most others might not. List of companies who are willing to source at 50% limited (unless incentives).
Some of that has to be offset by shipping, importing fees, etc. But I do think the end goal is to get Apple/Nvidia/etc back on US soil manufacturing wise.
>shipping, importing fees
Don't these chips still need to be sent to China for assembly by Foxconn? If anything this will increase costs even more and seems like import fees could potentially be even higher due to the current US-China trade war. Unless there is a plan to assemble everything in the US/Mexico as well. But then the costs would be way higher to assemble outside of China: certainly in US but probably also in Mexico, and I don't think they have any factories there.
well not something buyers would sign for
I bet a lot of people thought the same thing about a phone costing more than $1000 but here we are..
Nah
$100/$150 would be the "shelf price" of the Apple chips if they were in a box for sale like an Intel/AMD one
I believe you that the cost of the delivered (roll of) plastic chips is 50% bigger in the US. Probably less but it might be (also need to include the logistic cost to send it back to assembly on iPhone, etc)
Apple (pre-)pays for stuff and probably doesn't have any orders where Qty is under 7 digits with these big vendors.
This should not be a problem as 100% of Trump supporters will gladly pay the price to further their fight against China. /s
They found a new enemy it seems with their cats and dogs stories.
This is good news for the US and bad news for Taiwan, geopolitically.
The idea that the US only cares about Taiwan because of chips is popular on HN but just dead wrong. Taiwan has been part of the China containment strategy before TSMC was founded.
I think it cares about Taiwan as a democratic country but I think the chip fabs are becoming a geo-political factor as much as oil fields or other resources.
i.e. we don't want [Russia/China/Whoever] to invade Country X as Country X is an ally and a democracy, but as Country X has [Oil fields/Chip Fab/Lithium Mine] we REALLY don't want them to invade.
The difference between an oil field and a chip fab is that the equipment is more easily destroyed in a chip fab, vs a hole for an oil well. Not to mention that expertise in human capital required for chip fab is way higher than that of an oil field.
Even a successful invasion of taiwan guarantees either the people important to the fab will leave, and the equipment evacuated, or destroyed if unable to evacuate.
As Saddam’s Iraq unfortunately proved when invading Kuwait, it is really easy to destroy oil fields, and much harder to clean up the damage. I can’t see much difference between that and destroying chip fabs.
Exactly: https://en.wikipedia.org/wiki/Island_chain_strategy
So the US doesn't care about Taiwan, it cares about China. Taiwan is just a tool.
Well, yeah… The US doesn’t really have allies (the one exception some would say is Israel) - why would Taiwan be any different from the others? Interestingly, TSMC only became a stand-out player in the last 15 years, before then there were basically zero reasons for the US to care about Taiwan except to contain China. Now they have one reason apart from containing China, but it’s still mostly just about China.
The United States has many allies. Obviously the US and UK have a “special relationship.” Then there is AUKUS. Then NATO. DoD calls a number of SEA countries “allies,” including Japan and Korea.
Stating that the US has no allies other than Israel is unequivocally false.
The really before the claim suggests that GP is referring to internal attitudes, I would imagine that they are aware that NATO is technically an alliance.
There is probably no alliance on earth tighter than the U.S. and the U.K.
If that's not an alliance, then you might as well say that alliances don't exist anywhere. (And maybe that is what you mean to say.)
Even the alliance with Israel can't compete with the alliance between the US and UK from World War I to now.
> There is probably no alliance on earth tighter than the U.S. and the U.K.
I'd argue North Korea & China have a closer relationship.
They do not. China sometimes — though not always — endorses and enforces Security Council sanctions against North Korea, and acts as a moderating force in its contacts with North Korean leadership. Substantial differences of opinion between the U.S. and the U.K., not to mention actual policy antagonism, is very rare.
That's less of an alliance and more of a dependance.
Depends. China's obsession with Taiwan is a mix of domestic signaling and posturing internationally and the latter is mostly aimed at the US. China could choose to be more aggressive over Taiwan, as the US should care less. But, since the US care less about Taiwan, perhaps China will turn its saber rattling to other strategic interests of the US, giving the Taiwanese some reprieve.
You're overestimating the importance of that specific chip.
My assumption is if they can do that chip, they can do others and there is less need to defend Taiwan and the massive TSMC fab there.
No, TSMC said that the cutting edge fabs will always be in Taiwan
Good news doesn't have to mean overwhelming good news. Directionally, it is clearly good, not bad, and not nothing.
This isnt Nvidia and this isnt some high end CPU.
This is a mobile phone CPU, and its Apple. You are getting insignificant technology.
Not so. Apple's new mobile processors are routinely the fastest processors in the world (single threaded) when they come out. The A17 pro is currently the 17th fastest CPU, and the M3 (which is in MacBook airs and iPads) is number 2.
Sure these don't have the scope or number of transistors of like an NVIDIA Blackwell or something but in terms of performance/watt these are ultra high-end ICs.
No one is competing on CPU though. Its like having the highest RPM lawnmower, no one cares, its not useful.
To make it worse, they arent even the best. Its getting mid tier, and in 2024, its nearly unreasonable to buy mid-tier when low-tier is good enough for everything.
Not sure about that, the consumer CPU market is probably more competitive right now than it's been in a decade, primarily on efficiency.
Also not sure what that has to do with the original point, which is that the A15 is not an impressive chip to be manufacturing in the US because it's designed by apple and meant for mobile devices, neither of which are reasons to discount the complexity of the chip.
This should go a long way to ensuring our national security does not suffer. We don’t need TSMC level volume production, plenty of non Taiwan entities exist to balance the risk.
We do need latest edge tech to be within our borders and TSMC and Samsung will deliver that in 2-3 years.
Do the chips get shipped to China for assembly?
There's a lot of chip packaging in Taiwan, Malaysia, and maybe Singapore so these A16s are probably racking up frequent flier miles. Probably not China though.
In the future they will probably be packaged in the US: https://www.apple.com/newsroom/2023/11/apple-announces-expan...
Most likely frequent boating miles given their push to use water transport over air when possible for the environmental benefits.
I think they meant for assembly of the iPhones.
No. That was some misinformation. The chips are being fully packaged in the U.S.
I think "for assembly" here means iPhone assembly, ie. the final SoC will be sent to China to assemble the iPhone. I don't think GP is referring to packaging.
[flagged]
Please follow the site guidelines when commenting here: https://news.ycombinator.com/newsguidelines.html.
We've had to ask you this before (https://news.ycombinator.com/item?id=35998957), so if you wouldn't mind reviewing https://news.ycombinator.com/newsguidelines.html and taking the intended spirit of the site more to heart, we'd be grateful.
Two points to counter the snark:
1. The output of a "chip manufacturing" process is a wafer. There is absolutely further assembly (bonding, packaging) done on this output.
2. The chips themselves are not for the end user's consumption. They are assembled into a product, a "consumer electronic".
Assembly of the phone or device using the processor.
The dies themselves are "assembled" - cut from the wafer, bonded to the wires (or solder bumps) that carry signals to the rest of the system, and packaged for physical protection and thermal management.
In recent times, multi-chiplet architecture has added its own layer of complexity to that process.
See also: OSAT.
we're talking about the chip itself. Not the phone
(Some) "in small, but significant, numbers".
About time. It's easier to secure supply chains domestically.
Looking back on some of the comments from this thread^, especially those claiming that TSMC building a factory in the US was infeasible/impossible, was entertaining in light of the current thread.
^https://news.ycombinator.com/item?id=39273830
With fairness to those commentators, Taiwan will still have a process lead on US fabs until 2030 at least. It's entirely feasible that an American TSMC fab will get beaten on both density and price by Intel and Samsung in the immediate future - these fabs won't be manufacturing flagship nodes.
TSMC started sampling N5 in 2019 and full production in 2020. This means the US finally has a 5-6 year old TSMC node in the US.
Hardly a big win.
Any de novo chip plant operation in the US seems like a big win. Machinery can change any day. Operational workforce is significant.
The article says that the A16 processors being produced here are using the N4P process, and are referred to as both 5nm and 4nm, confusingly. But they are used in the iPhone 15 and 15 Plus which are still available.
A little-known fact is that Donna Dubinsky, the CEO of Palm/Handspring in its glory days, is on the staff of the Dept. of Commerce specifically to help with the CHIPS Act.
Or at least was:
https://www.commerce.gov/news/press-releases/2022/09/biden-h...
I don't know what role, if any, she had with TSMC.
This happened significantly faster than I anticipated.
This happening at the same time as germanys intel project freezes makes the fall seem even harder
Wow that was fast, is this a regular timeframe to get a new fab working?
From the conversations about China catching up on smaller chips I got the impression that it takes loads of iterations around how to calibrate the machines but it seems TSMC nailed it not only on Taiwan but also overseas very fast.
Should other countries put tariffs on devices made with chips that profited from the CHIPS for America Fund?
The question is where are these chips packaged? Potentially the wafers are shipped to the east for packaging, assembly and test.
People will be happy as long as it's not Taiwan (e.g. Singapore or Malaysia).
Packaging is much simpler
https://www.ft.com/content/3fa44901-33e4-4ab4-9f7b-efe1575a6... & https://archive.ph/FDmwq
> US and Japan are close to a deal to curb tech exports to China’s chip industry.. export controls are designed to close loopholes in existing rules.. make it harder for China to obtain critical chipmaking tools — restrictions that would have the biggest impact on ASML in the Netherlands and Tokyo Electron in Japan.. to restrict servicing, including software updates, and maintenance of the tools..
I think it's a significant milestone for the U.S. semiconductor industry.
That's great to hear. I hope other countries, like Canada and the EU, also do this. I think it's important for all major nations to have this sort of critical capability in house.
Covid showed this well, despite being allies, countries tended to get vaccines to their own people first, even breaking agreements with allies. That's likely normal, and a bit of mutual distrust is healthy.
Knowing all the efforts that the US government has had to devote in order to push Apple to bring those jobs home, for other countries that do not have as much muscle as in financial and industrial leverage, their industrial future must look quite bleak.
It's really not about the jobs, it's about national security. The US needs the ability to fabricate chips on its own soil where the threat of China invading Taiwan isnt a concern.
Tsmc will never allow the Arizona plant to be a viable replacement. They are extremely incentived to prevent this happening.
That's OK. It's on US soil with US employees and can be nationalized if and when need be. I'm sure ASML will be happy to comply or else risk their US operations being nationalized too. Like their DUV/EUV light sources office https://www.asml.com/en/company/about-asml/locations/san-die...
Yup. Just pass another tiktok bill to force sell factory to US buyer.
Holy shit they have 1,900 employees for that
It doesn't need to be a viable replacement. Even if it only ever makes chips that are 1-2 years behind, it's still a huge strategic benefit for the country.
Does it have to be or does it just have to be enough to be a deterrent to China?
I wonder if the strategy behind the CHIPS act is to have enough “backup” capacity in the US that it isn’t completely vulnerable.
China’s interest in Taiwan is about controlling the sea routes, not about chips.
How so? They also are extremely incentivised to make this happen. A war on your front door is not good for business.
Tsmc is mostly governed by Taiwanese who would like to maintain Taiwanese sovereignty
Taiwan might be a more appealing target if all of TSMC's output is located there.
My thinking is less appealing, because the more USA depends on them the more USA will defend them.
Don’t all the machines in Taiwan have explosives fitted in case of invasion?
TSMC is governed by the Taiwanese ruling class. If the Chinese launches a widespread attack on Taiwanese soil tomorrow, nothing would happen to any of these people. These people are not your random neighbors harboring nationalistic views.
You don't have to be a rabid nationalist to not wish for your country to be invaded and annexed by others. You don't even have to live there. I'm sure a large percentage of Taiwanese living in countries outside of Taiwan would not wish for it to be invaded.
I'm not even Taiwanese, don't know anyone of Taiwanese descent well, and I don't want Taiwan invaded.
The suggestion that there's some kind of weird oligarchy class of TSMC-controlling Taiwanese who couldn't give a toss if Taiwan was invaded is a mustache-twirling level of caricature.
TSMC is governed by the Taiwanese government, which is a puppet government controlled by the US government and military. TSMC answers to the US directly, as without US support, Taiwan falls to China almost instantly. Nobody besides the US can prevent a blockade of Taiwan
A "puppet government".
This claim is based on... Them wanting not to be invaded?
If anything they had the foresight and took advantage of US companies not wanting to fab their chips at higher prices domestically. This has led to cooperation between the two.
I see this argument in some fashion every day, claiming US allies are puppets. When in fact, they just find commonalities and cooperate.
the strength of the US defense commitment is likely proportional to the strategic value of the economic assets they still hold. the taiwanese have every incentive to do just well enough at the AZ plant for the $39 Billion checks to clear and no better
While true, TSMC has a stronger incentive for its own survival than the survival of Taiwan. If it's easier for them to shift operations to the US and continue to make $$$, I suspect they'd do that over retaining operations in Taiwan and hoping it will convince the US to protect the country.
The biggest shareholder of TSMC is the Taiwan government.
This factory is not for economic independence or economic strategy. It is for geopolitical strategy. This factory is meant to build smarter munitions if war breaks out, not the latest cellphone. The US gov does not give a fuck about Apple's stock price and product plans if war breaks out with China, since, you know, there's real adult problems going on.
this is wonderful news. at the same time i hope this doesn't weaken the security posture of Taiwan
The dependency on Taiwan isn't going to go away any time soon, nor is the Taiwan Relations Act (which replaced the Mutual Defense Treaty between the United States and the Republic of China in the late 70s).
I don't see this a positive thing as European. Why not produce the mobile processors in Europe?
Isn't EU basically abusing every tech company for money every month? Why would Apple be inclined in investing anything in EU.
Plus, if US has skill shortage, can't imagine how bad it would be in EU.
Wonder how apple was able to curb the (assumable) higher cogs of producing this domestically.
This news could be bad for Taiwan
Taiwan is still in charge of the fab.
Its a mobile CPU chip, and its Apple. This isn't going to move any markets, its insignificant. Maybe its politically useful for Apple and the US government for PR purposes, but there is no rush for CPU chips, or Apple hardware.
Has either company verified this?
So this is the N4P node... From way back in 2021.
And these are 2 year old chips for a phone that is about to stop being sold...
Seems this news might be more political than strategic... The US still relies on Taiwan for every modern chip.
This may be a very expensive proof of concept… but it's definitely a concrete step toward their goal
Apple isn't the only company in the world that needs CPUs
America isn't the only country with a roadmap to manufacture 3nm silicon by 2026. If history has anything to say in the matter, it's likely that Samsung will have the US fabs beat on yield and price for a long time.
The obvious question is when are they going to build 3nm chips here?
good news like this is so rare. this makes me happy
SOME of them are. A tiny fraction. At 4-5nm. But Taiwan is already making 3nm chips for Apple. Still better than nothing, I guess.
Since US manufactured products are traditionally reputed to be low quality, should we expect to have to look for serial numbers to get iphones with non buggy A16 chips?
"Traditionally reputed" is a vague allusion containing multiple logical fallacies; can you cite some actual sources? Because it's nonsense. Quality is a factor of cost (and cost reduction), not the country of origin.
Are they hiring?
Curious to see when the US will force the TSMC to sell because it presents a national security threat.
Taiwan and TSMC are already USGov assets... why would they need to sell...
The new Apple chips are second generation 3nm. This 5nm stuff is old tech. Why are people celebrating?
Because all of these commentators are ecstatic to use their Made In America M4 processor in 2026!
...wait, M4 will be 3 generations old by then? W-well, a little reliance on Taiwan never hurt anyone...
Unless this is election propaganda, which very well it might be, this is huge news. I know there were a lot of problems for this facility and wasn't aware they were this far advanced in production.
I wonder if the US plant ASML equipment also have a destruct mechanism like the Taiwanese plants have.
This is title seems to be quite the overstatement of the facts.
Hats off to TSMC. They had big culture clash and US has a lot of red tape and high labor costs. They did it!
Also kudos to CHIPS act.
I'd rather have Boeing and Intel wither off, for them to be replaced by new players who bring highly efficient manufacturing to the table.
very happy to see this!
And then sent for packaging to Taiwan and assembly in China?!
How much of this fab's supply chain still comes from Taiwan and/or China? Most especially, where does the fab process equipment itself come from?
> the fab process equipment itself come from?
Isn't there only one for this kind of scale: ASML?
ASML for those who don't know is a Dutch company, and supplies the EUV machines for both TSMC and Intel (It is not clear to me if Samsung uses EUV in its current process nodes). I believe they are the only EUV supplier in the world. There are certainly other suppliers other that ASML, since there is a lot of other equipment other than lithography, but that's a critical one for modern process nodes.
ASML has important ops in US offices fwiw https://www.asml.com/en/company/about-asml/locations/san-die...
Besides lithography there are also several US suppliers for semiconductor manufacturing, Applied Materials, Lam Research, KLA.
Why can't America build a TSMC from scratch?
They did! It's called "Intel".
And GlobalFoundries (ex-AMD, ex-IBM). There's also less cutting edge process stuff at ONSemi, TI, Micron, Analog Devices, Diodes Inc and I'm sure I'm missing a few.
Even Apple has their own fab.
I hadn’t heard about Apple, is the node size public?
They picked up the old Maxim fab in San Jose almost 10 years ago. Not sure what's happening in there now and I assume the people who do aren't likely to spill the beans :) unless its as shuttered I guess.
[1] https://appleinsider.com/articles/15/12/14/apple-buys-former...
The San Jose facility is active. There was some controversy surrounding it recently as some members of the public have been complaining that they’ve been illegally releasing solvents into the environment, which resulted in some EPA investigation/enforcement action [1].
According to some reports they may be developing micro-LED display tech there, not necessarily chips.
[1] https://news.ycombinator.com/item?id=40772224
GF is 14/12 nm. Not really cutting edge anymore
Build a workforce with the world's leading company. Pull those people into senior positions at new companies nearby. An industry is born and competition can grow. All with export limits so the jobs hopefully can't be outsourced.
Its called Intel Foundry
Wrong question. They'd still be buying Zeiss
This was build by TSMC, that's why it was completed in a few years. They have the know-how.
Have you even met Americans? We're terrible at this kind of thing.
Do you know who invented and developed transistors, microchips and their manufacturing processes?
Are the inventors of the wheel still in the driver's seat?
The past is another country.
Find me a modern US exec willing to actually invest in a risky hardware prospect, rather than throwing a billion dollars into real estate or "content" that can be filled with ads.
Tim Cook seems to have done okay with what a bunch of tech pundits said was a risky move compared to sticking with Intel.
Considering how Intel doesn't tend to hold grudge-matches with their customers, I seriously doubt there was any risk in the first place. If TSMC yields were too low to mass-produce Apple Silicon, they could easily ship out another copy-paste Macbook iteration with Magic Keyboard and nobody would care what chip it had inside.
With the benefit of hindsight, it feels more like Intel and Apple were in a race to see who would outsource the Mac chip first. Since Apple already had the supply chain set up for the iPhone, cutting Intel out of the equation was mostly just a matter of designing an SOC. They took the opportunity, and now we're seeing Intel glumly admit that they too can be energy-efficient if they swallow their pride and pay TSMC.
Perhaps a stupid question - what exactly is TSMC contribution to producing Apple designs on ASML equipment?
ASML make fancy printers.
TSMC and other ASML customers build the designs that let those fancy printers create transistors and then logic gates, as well as a basic library of arrangements for those logic gates (PDK). They also provide all of the raw materials and processes and physics that go into said printers.
Apple and other design customers then compile RTL using that PDK to produce a design that can be manufactured using the fab’s process steps.
The printers are A hard part but far from The hard part. If you have an ASML machine it is useless to you unless you have also figured out how to build a 3D transistor in layers. Good luck!
It does seem weird that there is this separation though. I would have assumed that there is a lot of overlap between machine design and operation.
I don't think there's much overlap between things like making a sufficiently-bright EUV light source and designing a transistor.
This is a really sharp summary. I hope it's correct, because it was fun to read.
Apple doesn't design on ASML equipment. Apple (and other fabless companies) designs to a PDK (process design kit, basically rules about how to layout transistors and passives on the die), which is given to them by their foundry (TSMC in this case).
There's a lot of steps between circuit design on the PDK to a working high volume process; and ASML machines are only part of that.
There are a lot of steps involved in making the chips - lithography is only one of them. You have to have the supply chains set up for massive amounts of silicon, you have to have a process for doping the silicon properly, you need quality control, you need to actually build a fab to house the lithography machines, I could go on.
That ASML is not undercutting TSMC and running off on their own should be telling? There's more to a running a fab than lithography.
ASML makes tools for only a small part of the semiconductor production process. It's true that EUV lithography is the big limiting factor right now, and that it is a field dominated by one manufacturer. So it's reasonable to credit ASML "as much as" TSMC for the current dominance of their high end nodes.
Nonetheless if it was as simple as buying ASML boxes there would be more than one fab at the top of the heap, and there isn't. TSMC absolutely "contributes" to their own dominance, arguing otherwise is silly.
A couple trillion dollar valuation?
You can start here: https://www.youtube.com/results?search_query=asianometry+tsm...
USA
Exactly what does “manufacturing in America” mean? It could be as little as final assembly with most of the work still being done in Taiwan. Like Cook said Mac Pros were “being made in America”.
There's not actually that much uncertainty about what a TSMC chip fab does.
Maybe TSMC is sneaking finished wafers into the Phoenix fab at night and taking away blank wafers :)
It takes blank wafers in and produces finished wafers just like all other fabs. I would expect test and packaging are performed elsewhere.
Everyone seems to be celebrating this as a victory for the US, but I can’t help but think of David Ricardo’s Law of Comparative advantage. National security concerns aside for a second, what high tech sectors will the US necessarily be investing in less now that we are putting those valuable resources into chip-making? Are these sectors more or less valuable/profitable than chip-making? I don’t have an answer, but this is the framework that needs to be used to address the question. The US can’t do everything, especially with current immigration restrictions on high tech workers.
Less adtech and crypto? Fewer gamified dating apps?
I can think of a lot of negative/zero sum things that have next to no return or longer term advantage than monopoly seeking or greater foolism. They already got plenty of investment when interest rates were near zero.
If there hadn't already been a significant semiconductor industry, or if there was some similar employment for those employees/grads to go maybe it would be different. If there wasn't large local demand for the product (and I'm including the packaging which is another issue) it would be different. Given what the US has it makes long term sense to put some 4nm and even 2nm Fabs in the US. Creating geopolitical risk by outsourcing ALL supply is sort of silly, quarterly profits be damned. (even $50B is <0.2% of annual GDP).
We could probably find some ways to encourage the Wall Street types to go get real jobs also.
Fun fact: If you read Ricardo you will find the modern form of "Comparative Advantage" isn't really there.
Taiwan doesn't have a "natural climate for chipmaking". In a modern industrial economy, endowments are not natural/fixed by the result of previous rounds of investment.
> what high tech sectors will the US necessarily be investing in less now that we are putting those valuable resources into chip-making?
There is no evidence it is actually zero-sum
> especially with current immigration restrictions on high tech workers.
Yes, more immigration would be greatly appreciated. Probably won't happen until we unfuck housing, however.
> Everyone seems to be celebrating this as a victory for the US, but I can’t help but think of David Ricardo’s Law of Comparative advantage
This theory has always been an overly simplistic model designed to promote the ideology of free trade. The most obvious problem with it is that it only works in a static world where everything stays the same and as such specializing makes sense. But the world isn't like that, and if everybody invests only in the places where they have a comparative advantage, then you have set up a trade network that is very vulnerable to asymmetric shock: if one good becomes irrelevant or too desired, then the system starts failing.
Germans are learning it the hard way now that ICE cars are getting out of fashion.
As always, there's a yield/resilience trade off, and at nation scale, favoring yield is a recipe for disaster.
>Germans are learning it the hard way now that ICE cars are getting out of fashion.
Sadly, "the hard way" is the only way Germany learns lessons. All that national pride on German ICEs is coming home to roost. I remember when I was working for a large German auto company a while back, a division manager laughed at a Chinese auto company in a presentation that "they have tradition since 1995 lol". The arrogance aged like milk.
It's not a nation that values proactive thinking and adapting to change but stubborn pride and conservativism.
[flagged]
[flagged]
I wonder how bad the yields are and how long it'll take to get them up to being commercially viable.
The yields are pretty good - TSMC’s Arizona Trials Put Plant Productivity on Par with Taiwan https://finance.yahoo.com/news/tsmc-arizona-trials-put-plant...
All this because Donald Trump claims (contrary to nearly all economists) that forcing companies to manufacture products on US soil is beneficial in some way that he (Trump) feels confident will make America great again. It is so embarrassing that these outdated ideas are entertained for even a second by HN readers.
Returning manufacturing to the US is a policy of both major parties right now.
only because of the outsized political importance of a few states that happen to specialize in outdated manufacturing technologies and happen to have enough electoral votes that politicians have an incentive to subsidize them.
It's a massive tax on the economy all to provide a tiny bit of welfare to a small number of workers. Better to just pay them a welfare check!
The world is the most unstable it has been in decades. If/when a war kicks off, you have to have your supply chain local because the oceans will be instantly impassable until we can work out how to counter submarines.
This has little to do with welfare and everything to do with national security.
Uh, having entrenched trade relationships across oceans dramatically reduces the chance of war. Trump launched the tariffs to reduce "dependency" on China because it was the "dependency" that held back the typical rhetoric that leads to war.
A lot of the new manufacturing isn't going to the states that specialized in manufacturing previously.
A lot of the boom in EV and battery production is happening in the US southeast (Alabama, Georgia, South Carolina). The TSMC factory is in Arizona.
Exactly, yet the push toward taxpayer-subsidized domestic manufacturing is driven by rust-belt politics.
Why not? Are economists infallible? Even if there’s many of them they may have been taught the same material and risk groupthink.
What position is the US in if all their goods are manufactured abroad? What if the dollar stops being respected?
Yeah, optimizing for economic output isn't the only factor to consider. Having some degree of geopolitical independence and leverage matters when things go off of the happy path for whatever reason.
What does "geopolitical independence" mean? The ability to disregard international law? The ability to make war without worrying about the target being a trading partner?
To me it means some degree of being able to continue with necessary production despite global disruptions due to political disagreement, war, disaster, etc.
For example, a major push to bring more semiconductor production to the US was motivated by supply shortages during the COVID pandemic.
A globally interconnected and inter-tangled trade economy has a lot of benefits, but it can also be disrupted. So some degree of resilience against this kind of disruption may be beneficial.
The pandemic was part of it, but a lot of the shortages were related to the trade war started by Trump and the failure of the US collaborate with public health authorities in China to stop the pandemic sooner.
From the perspective of Trump, those shortages were a good thing because they forced US firms to find other inputs and to resent China and feel suspicious of relationships they had depended on for years.
A friend of mine whose company ultimately failed due to the tariff-induced shortages watched his 90% US-based manufacturing business go under after it couldn't keep up with lower-cost Chinese-manufactured goods -- Chinese manufacturers got all the parts cheaper with no tariffs so their resulting BOM cost was a lot lower. All because he did most of it in the US and relied upon a small number of Chinese manufactured parts.
Lesson learned. Now he isn't even in business anymore so there are fewer voices to complain about the tariffs.
Empirical studies show that governments typically do not introduce policies that result in benefits overall, and the costs of those polices are typically higher than if everyone had just paid a tax that was given as welfare to the small number of workers in the effected industry.
What position is a homeowner in when they decide to hire someone else to mow their lawn? Economic specialization generally a good thing.
US politicians get enamored by industrial policy when they see what happened to the "asian tiger" economies over the past decades. They forget that those nations were so destroyed by war that the "growth" was less due to the policies than to the people's motivation to live in a free and peaceful society.
China is also now the poster child for industrial policy. China had many years of intentional economic suppression in the name of societal harmony (preventing chaos resulting from some regions being poor and isolated and others being rich). In recent years China has managed to use some of the wealth to undertake a social policy (plus industrial policy) of bringing wealth from the coastal manufacturing regions into the agricultural regions, training workers, etc.
Even in spite of all this, China's GDP is still significantly lower than it would be without all the policies, but the societal order is preserved and there is likely greater social stability.
China faces unique challenges in these areas relative to other countries (largely due to geography) which is why it had suppressed its economy so much for so long.
We are getting a glimpse at what a modern approach to Chinese capitalism will look like and it has already left the US in the dust in terms of productivity. It's ironic that the US mis-attributes the success to the industrial policy rather than to the repeal of it.
There is a difference between having manufacturing capabilities and trade tariffs. You can in fact build your own chips AND trade with other countries for the same items at the same time.
Right, tariffs are another word for taxes that penalize importers.
Well actually, Alexander Hamilton is the father of mercantilism. And it's been followed and promulgated by pretty much every country at some point in time.
It's not wrong, it's one strategy given the political goals of a nation. There are other strategies and other goals, like economic liberalism.
Saying a behavior or approach is wrong and/or outdated shows a particular misunderstanding of what policy is for.
What "most" economists believe in the West (and "believe in" is a perfect way to put it, because it's a belief) is economic liberalism. Underlying/embedded in that belief are a number of assumptions, policy goals, and desired outcomes.
For a limited subset of countries on earth that worldview has been incredibly successful. However, for the vast majority of countries on earth economic liberalism has been a failure, and a costly one.
Unfortunately, there aren't many new alternatives out there, and the current system is heavily biased towards economic liberalism.
But it's important to remember that all this is relatively new. The era of modern states is relatively new, and the current postwar order is well, 80 years old or so. The Wealth of Nations was only published in 1776, Report on Manufctures was in 1791, and Das Kapital was in 1867.
These are good points. In my view the idea that "making America great" entails illiberal economic policies which benefit a small fraction at the expense of the rest of the population is a non-starter because in my view "greatness" does not come from propping up outdated industries (coal extraction, steel production) and taxing everyone else to do it.
I don't think economists are ideologically opposed to central planning. There are simply enough empirical studies that show how badly it fails. In fact most of the "economic liberalization" failure stories you refer to are actually centrally planned thefts that benefit specific firms but were sold as liberalization.
China is an example of a state that does very smart central planning. Everything from its central bank to its subsidization of small businesses doing embedded systems (hence all the super cheap gear on Amazon sent via subsidized shipping to customers around the world) is intended to enhance the capability of the workforce and guide the workforce toward a future of technological change and rapid (but not too rapid) advancement.
In other words, China's industrial policy is forward-looking, America's is backward-looking. The very phrase "Make America Great Again" is backward-looking.
China's policy is essentially an education policy disguised as trade policy. Corporate espionage leads to more knowledge, subsidized shipping leads to more low-end consumer devices and engineers who need to learn to build them, etc. There thousands and thousands of low-end consumer electronics, test equipment, etc., manufactured in China that are built upon the many low-end DSP chips and microcontrollers. This is not an Apple-esque 2nm process, it's much lower tech, lower cost but it offers far, far better experience to so many more workers than all but the best educational background can offer. What percentage of first or second year US EE grads could build and ship a $50 spectrum analyzer?
In my view, China has already overtaken the US in key areas of technological innovation and the US is "copying" by deploying industrial policy that has the opposite effect and entrenches and protects top US firms while having minimal educational impact on US workers and minimal impact on educational and early career choices for US workers.
It's funny how (supposedly liberal) opponents of Trump will strategically whine about economic theory when generally otherwise if you were to make appeals on the basis of economics you're labelled heartless, etc.
You know what? I like when jobs are based in America because people need domestic careers that can sustain communities. There are non-monetary costs to outsourcing that are not mere quantities for an economist to decide for us.
Ross Perot was wildly successful running on a platform like this, at least relative to any other third party in American politics, and as soon as he appeared to be a threat to the establishment, strange stuff started happening to him much like the assassination attempts in this election.
Heartless? In my view it is inappropriate for the government to prohibit or tax peaceful, voluntary activity such as trade.
The US grew economically due to the interstate commerce clause prohibiting states from imposing tariffs on each other, and now we are supposed to believe that Trump and Perot are economic geniuses because they want to subsidize coal extraction and tax EVs so that Americans have to pay double?
Most of the big wars started because countries got protectionist and isolated and had no economic reason not to fight each other.
Yes it is heartless, because it's talking about complete dissolution of communities and swaths of the country due to corporate decisions that are all made under certain regulatory regimes and strategic policies of foreign nations (in many cases enemies). Look at H1B, I've never seen a good justification for it based on working in many large corporations, there's absolutely no reason we can't be finding actual citizens that could fill these jobs and build their careers.
> finding actual citizens that could fill these jobs and build their careers.
So then let's let them immigrate and gain citizenship!
The era of people earning more from desks and mental gymnastics is over. The era of weaponization of supply and resources has begun.
All manufacturing will need to become local in some quantity for any country serious about its security.
From what I've seen most economists have extremely short-sighted thinking. Their theories are almost comically naive.
Yes, economically in the short term (< 50 yrs) putting your eggs in your few specialized industries will give you big economic growth. But, in the long term this is economically extremely risky - because you're relying on remaining competitive in those few, high price, more advanced industries. If that happens to change, you're screwed.
And it CAN change due to geopolitical factors (something economists don't understand). A dictatorship of the future can 100% make more efficient supply lines than you. Even somewhere in-between and you can be screwed - just look at the Chinese automobile industry.
For decades, the automobile industry has been the darling child of the US. This has, and will continue, to no longer be the case. The reality is China subsidizing their industry and providing top-down support means they can make better cars cheaper. The only reason this hasn't completely fucked that portion of our economy is because we don't let them in.
We can't keep outsourcing all our manufacturing while we sit on our asses and rely on our darling child industries to grow.
Take a look at what happened during the global communist revolutions. Those communist countries were scary to us because they have the potential to make more shit and make it cheaper. They can out manufacture us.
Luckily we were not completely braindead (and the tech did not exist) to outsource our manufacturing to them. But if we did, it could have been catastrophic for our economy in the long-term.
A few points to consider:
- Electric vehicles are inherently much cheaper and have way fewer moving parts. Just because an entry level internal combustion vehicle costs $25K doesn't mean an EV has to. But with 100% tariffs it can!
- Every day that American workers spend building heavily government subsidized internal combustion powered vehicles is a day we fall farther and farther behind. All those low-end "hoverboards" that everyone bought a few years ago, all the electric scooters. The engineers who design those in China are the ones designing low-cost EVs that utterly out-compete what the US can do. US policy to subsidize mediocrity (Tesla, over-priced, over-hyped, impossible to maintain) HARMS the entire US economy. How many people need to pay an extra $500 to $1000 a month in payments that are effectively a subsidy of outdated tech? Most people with a car payment are doing just that.
Meanwhile we keep getting into wars over petrol which is why we don't keep track of how much we spend on the military because nobody cares, of course it's worth it to keep the oil flowing!
Economics is about information. Price is a function of supply and demand. As much as governments may wish that internal combustion tech was competitive with low-cost EV tech, it's not. As much as everyone wishes healthcare was free, it's not. We have to choose our subsidies wisely. US industrial policy is a disaster and it is fraught with so many misconceptions.
If it's really a national security issue, where is the US stockpile of raw steel, copper, lithium, 555 timers, etc.? Politicians would rather rant and impose tariffs and get photo-ops near coal factories than actually do something simple and strategic that would take away the possibility that a conflict would disrupt crucial supply chain.
Economic specialization is a good thing. Economies are not so simple as importer and exporter. Most companies are both importers and exporters. China's government knows this and adopts sensible policies like subsidizing oceanic shipment of goods so that shipping costs of the $25 electronic device aren't $100. This lets an engineer build and sell something and learn and grow.
China has an economically-aware industrial policy, the US has a backward-looking, short-term, electorally driven one.
A strategic triumph for both the current and previous administrations. Both Trump and Biden handled the situation adroitly. These may not be the absolute bleeding edge tech but it’s a proof of concept that we can wean ourselves from Chinese tech if it becomes necessary.
It comes at the cost of many, many Chinese jobs in the midst of a devastating economic downturn there. They are victims of repeated local and geopolitical malpractice by the current emperor.
EDIT: User lotsofpulp pointed out that we don’t make any strategic chips in China. That is of course true. I meant that the game of economic chess played by the current and previous administrations has been highly effective in reducing China’s options.
>It comes at the cost of many, many Chinese jobs in the midst of a devastating economic downturn there
As far as I know, TSMC does not make chips in China.
They don’t. I was unclear. What I meant to say was that our tightening of sanctions against China has harmed their economy greatly. It is an act of economic war against their acts of economic war.
TSMC Fab 10 is in Shanghai. Probably not cutting-edge stuff coming out of there though.
> Both Trump and Biden handled the situation adroitly.
I don't remember any news like this during the Trump administration. I do remember the Foxconn plant that didn't open though!
That's because a lot of news was dominated by him tweeting about his daily ablutions or something. I'm not convinced how much Trump himself was involved in all that to be honest.
[flagged]
Last time I checked this was a News site
> Both Trump and Biden handled the situation adroitly.
Trump started trade wars by raising tariffs. Biden passed the CHIPS act, the infrastructure bill, and the build back better act.
Biden continued Trump tariffs and raised many of them, appropriately.
https://taxfoundation.org/research/all/federal/trump-tariffs...
That's horrible news, as I was considering grabbing an iPhone... I guess only refurbished, but still, you can trust an American factory even less.
Apple seems to have pretty tight quality control. Thought it is true, they are likely starting with lower scale production of an older chip to work the bugs out of the system.
Once the US doesn't depend on Taiwan anymore, will they give up protecting and China will conquer it?
That the term "electoral college" does not appear once in this entire thread is telling.
Now it does as a result of this comment. Is that also telling?
I can't believe iPhone chips, almost the supreme luxury good, are considered worthy of Federal subsidies.
Surely a better path would have been to slap imported silicon with tarriffs at least equal to their gov't subsidies?
(Unpopular opinion: The people that spent the last 30 years giving away US & EU manufacturing to the Far East - no doubt with plenty of "10% for the big guy" type deals behind the scenes - should all be shot.)
This is troubling news, as we could soon be paying $2,500 for an iPhone within the next three years. The original reason for outsourcing was to keep costs down, and now, with this trade war, it's clear consumers will bear the burden.
While some may see the return of manufacturing to the U.S. as a win for national pride, the reality is more complex. The high cost of U.S. labor, combined with excessive bureaucracy, leads to higher production costs, which ultimately get passed on to consumers. There's nothing inherently beneficial about manufacturing in the U.S. other than symbolic gestures tied to identity politics.
Most consumers want affordable, high-quality products, not overpriced goods that may be touted as "Made in America" but offer no real value beyond that label. Instead of focusing on where products are made, the priority should be on ensuring that they are durable and not part of a system of planned obsolescence. We want iPhones that last longer, not cost more, yet U.S. manufacturing may drive up prices without offering real improvements in quality or longevity.
Unfortunately, the consumer is losing in this scenario—stuck paying for rising costs while receiving little in return. We need to reassess the real benefits of domestic manufacturing and whether they justify the inevitable price hikes. It’s clear that without a shift in strategy, we're moving toward a future where innovation is stifled by political posturing and unnecessary cost inflation.
Chip manufacturing is critical for national security, which is to say world security, if you like the Pax Americana (and you should). This is not some trade war thing. My only actual concern about this is that it may make the US less willing to intervene if the CCP invades Taiwan, and we absolutely should intervene if that happens.
I get the national security part, but not sure about world security part.
Why should I, as an example, who is neither a US citizen nor Taiwanese nor Chinese, should trust a chip being manufactured in the US vs. somewhere else?
I'd say it is neutral in regards to world security, not better.
I suppose it depends on where you are from and your politics, but I think many people outside the US would feel safer with chip production in the US than under Chinese control. I don't think most would really jump at the chance to buy the same chip from a US manufacturing plant vs. a Taiwanese one, but if China were to make a move on Taiwan, I'm not sure the world's computing resources would be particularly safe. (Not to mention, I wouldn't be surprised if the secret back-room plan was to raze Taiwan's chip manufacturing capability to the ground if it looked like China was going to win a takeover of the island.)
Even ignoring the specific players, having critical advanced technology manufactured in more than one place increases world security. What if, say, a catastrophic earthquake were to significantly damage Taiwan's chip manufacturing? Having expertise and working, active manufacturing elsewhere is a good thing.
I see.
Definitely agree with the second part.
I mean that the world is best off if the US continues to maintain the global maritime order, and this means there being no credible way of cutting off the US military from being able to mass produce weapons.
Sure, this costs US taxpayers a lot, but whatever, it's worth it.
Fortunately iPhones are not essential items you need to buy, so there's nothing forcing you to drop a hypothetical $2500 for one.
> and now, with this trade war, it's clear consumers will bear the burden.
"Now"? The trade war has been on since what, 2017?
> There's nothing inherently beneficial about manufacturing in the U.S. other than symbolic gestures tied to identity politics.
While I think that argument can be made in general, if you consider certain sectors and certain products, the calculus changes. Onshoring chip production is a matter of national security. Not necessarily in the "big bad China will take over Taiwan and put backdoors in our chips" sense (though that's certainly a concern), but in the sense of not being dependent upon an adversarial state for fundamental advanced technology.
> Most consumers want affordable, high-quality products
Sure, but that's not sustainable. You end up playing "chase the country with the worst worker protections". This isn't the case of chips (yet?), but there are quite a few things where China used to be the go-to for manufacturing, but production has moved elsewhere because costs went up, and it's cheaper to stop doing it in China. The long-term end result of all this is that everywhere has labor costs that have gone up enough that offshoring doesn't really buy you all that much.
Of course you can say, "okay, maybe that's true, but at least I can get my cheap iPhone now, and moving production to the US hurts that now, rather than decades from now". And I'm somewhat sympathetic to that. But ultimately Apple may just have to change how it prices things if it costs more to make iPhones. They already make solid profit on each unit, and perhaps they'll just have to make do with less of a markup.
> Instead of focusing on where products are made, the priority should be on ensuring that they are durable and not part of a system of planned obsolescence
I feel like Apple is a pretty bad example for you to use here. I had to replace my perfectly-functional, four-year-old Pixel 4 last year because it stopped getting software updates after three and a half years. Meanwhile my wife has a six-year-old iPhone that will update to the latest major version of iOS tonight, and it will likely keep getting updates for a couple more years. My new Pixel 8 will supposedly get major OS updates for seven years. If I break the screen on my phone or the battery gets bad, I can get them replaced fairly affordably. These are improvements!
Apple's repair situation is worse, but that's a choice Apple has made. If they wanted to focus on repairability, next year's iPhone would be the most repairable phone on the market. But they don't want to do that. Moving manufacturing around is orthogonal to all that.