Just as there is no “Mo” left in Motown, the silicon computer-chip manufacturing industry in the South Bay of San Francisco no longer exists. This manufacturing zone, that once ran up the peninsula from San Jose to San Mateo, has all but disappeared.
In the ‘70s and '80s, the valley was dotted with many computer-related manufacturing facilities. IBM had a large plant in south San Jose where their Disk and Data Cell manufacturing took place.
Advanced Micro Devices (AMD), Intel, and National Semiconductor - the true “Silicon” companies - are not only headquartered in the valley, but they had their primary manufacturing facilities located there as well. Fairchild Semiconductor, headquartered in Maine, also had a large manufacturing presence in the South Bay.
Major mainframe and server computer companies like IBM, Amdahl, Tandem Computers, Sun Microsystems, and Hewlett Packard had extensive “board stuffing” facilities in the area along with their “final assembly and test” production lines. Network router hardware was being manufactured locally by Atalla, Ungermann Bass, and Cisco Systems. In addition, the main manufacturing facilities of key players in the personal computing and game-console industry (Apple, Atari et al) began operating in the valley in the early '80s.
During the ‘70s, and into the mid ‘80s, all of these manufacturing facilities were working three shifts, every day, to keep up with the demand for “American Made” computer products.
Not anymore.
There is very little, if any, computer-related manufacturing done in Silicon Valley today. The large IBM manufacturing facility in San Jose shut down years ago. Atalla, Ungermann Bass, Tandem Computers, Atari, and Sun Microsystems no longer build electronic components in the valley and have all been bought-out by other companies. Moreover, the chip-makers no longer mass-produce their products in the South Bay. The only remaining chip production facilities are there for prototype development work only.
Although it is true that much of the computer hardware manufacturing has been replaced by computer software development run by companies like Oracle, Google, Yahoo, and eBay, these companies have a much smaller local employee base and are much more specialized.
What happened to the tens of thousands of skilled production, laboratory, quality-control, test and support people who were previously working in the Silicon Valley hardware manufacturing plants?
Most of them have either re-trained to do software development work, left the area, or have sought lower-paying work in the real estate, sales or services industries. Even though most of the remaining big-name companies are gradually turning around (or steadily improving) their profit margins, they are still laying off large numbers of employees. Two Silicon Valley companies recently made the list of the top 25 Layoff Kings since the beginning of the recession – HP (47,540 people) and Sun Microsystems (14,000 people).
This shifting of manufacturing facilities to overseas locations, of course, is not unique to Silicon Valley industries. Practically all US manufacturing companies are trying to improve profits by utilizing cheap foreign labor, forcing more and more of the American workforce to become salespeople, brokers or service personnel. The problem with this scenario is that our consumer-based economy cannot be sustained by salespeople and deal-makers alone. As Harold Meyerson wrote yesterday in The Washington Post, “Throughout his term, Obama has spoken eloquently -- but only sporadically -- about the need to shift from an economy that makes deals to an economy that makes things.”
Manufacturing workers helped pull this country out of the Great Depression and create the possibility of achieving the middle class American Dream. However, by shifting manufacturing overseas, the business profiteers have managed to generate ever-increasing executive pay and corporate profits, while the hard working people in our factories have been losing the value of their paychecks, or losing their paychecks completely.
We have created an economic environment where most American businesses are making money by taking a slice of each sale of a foreign-made product sold to an American customer. Eventually, as our consumer base shrinks because we will have fewer and lower-paid workers, we will find that we will also have fewer and less-wealthy consumers to sell to.
Consumer demand drives the American economy, and this demand can only remain strong if American workers have decent jobs with decent pay to allow them to buy many products and services.
We need to return to the economic environment where we buy, sell, and “make” our own products, and where we use our well-trained workforce to build and improve our own infrastructure.
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But you make a good point that the US can't continue on the path of being only a design, marketing and service economy - in many indudustries, not just tech.
Happy Blogging,
Heather
Sun Microsystems started in 1982. I clarified the dates to show both the '70s and '80s timeframe. Thanks for bringing this to my attention.
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There is nothing you make that cannot be outsourced. The vast majority of white men (those with HS diplomas) have seen their real wages cut for the last forty years.
And don't expect to keep your oh-so-special service work, either. The GATS treaty (General Agreement on Trade in Services) will permit more efficient workers, such as Indians and Chinese, to set up and import entire service businesses.
These businesses will house and feed Indian and Chinese workers and pay them at Indian and Chinese wages, right here in America.
You may not like to be a nurse at Indian nurse wages, but ultimately you will take the job or starve, just like 100 years ago, the last time America threw open its doors to cheap workers from everywhere.
But you don't get it, do you? What makes you Americans think you are better than some $200/year Haitian worker? Or a $1000/year Indian worker? The fact that you are white?
You are sheep and will be replaced -- in your own country. Get used to it. And learn to work three times as hard as you do now for one tenth the money. You are weak. You are lazy. You will be replaced by people who would kill for minimum wage ... or even less.
And don't expect us to take care of your old grandmother or grandfather, or you, either, for that matter, with generous Social Security benefits. We take care of our own. You whities had best learn to do the same.
It must be tough walking around with a hundred pound chip on your shoulder.
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Welcomes aside, your comment that American workers pulled us out of the Great Depression is incorrect. World War II pulled us out of the Great Depression, followed by the post war building boom, followed, in turn, by Korea, then the Cold War, then Vietnam, and finally the Gulf Wars, with each event, in turn, artificially increasing employment....all of which are consequences of the acceleration of the urban manufacturing environment that commenced with the American Civil War and culminated with the proliferation of war industries stimulated by World War I.
The workers didn't pull us out of anything; they merely filled the jobs created by these events.
Lullu is 100% wrong in her assertion that the exportation of American jobs has anything to do with a shortage of qualified labor in the United States. The vast majority of the skilled foreign workers who are taking American jobs were trained here in the United States and those who weren't were trained by people who were. If the jobs were kept here, we could certainly provide the workers to fill the positions.
The exportation of jobs from the United States is a direct consequence of differences in standards of living. Because it costs less to live in China or India, China and India can pay its workers less for equivalent performance. Because China is an oligarchic dictatorship, the worker's paradise has no labor unions. Because of its historic caste system, India doesn't have a strong trade union movement.
These factors create an impossible situation for the United States in terms of competitive disadvantages.
Stephen Block is correct when he points out that changes in our trade policy are at the root of these problems. When we lowered trade barriers, including tariffs on foreign manufactures, we created a situation where cheap foreign good could crowd American made manufactures out of the market place, but he's wrong when he claims that our trade policies are responsible for China outstripping Japan as the world's second largest economy.
China has replaced Japan as the number two economy simply because there are more Chinese consumers than there are Japanese consumers. The sheer size of China's domestic market creates efficiencies of scale that Japan cannot compete against.
Trade unionists have been pointing out this problem for a generation, without acknowledging that wage and benefit demands were contributing to America's competitive disadvantage. Bob Dylan made the issue crystal clear in his 1983 song, "Union Sundown."
It is important to understand that, unless we are able to reduce our manufacturing costs, we cannot compete against China. This means less income for Americans because we either design factories that need fewer workers, or we pay more workers less per hour. There is no alternative.
It's also downright silly to suggest that private sector jobs will fuel a recovery when the government is employing millions of Americans in the military and, if those jobs were to go away, the problem would become catastrophic.
You hit the nail on the head. And when we talk about manufacturing, nothing dispels rust-belt imagery like Silicon Valley. Only now, the clean rooms are gone, too. Yet, we refuse to come to terms with what this means because a few thousand CEOs have found a way to higher paychecks through offshoring.
Time for pitchforks and torches?? So you send our jobs overseas and just by coincidence your mansion burns down and your yacht sinks. Also, lobbying should be over one way or another.
Want another recession or maybe a depression? Vote Republican and give them another chance to destroy the economy.
I love this. I live in CA, not AZ, so I should know.
Blittie
I don't have a problem with that being offshored, but there has to be something done so that those people who do not have college degrees can live a decent middle class life. Manufacturing used to be a way for someone who just graduated from high school to make a decent living. It's no longer that way.
I don't have a problem with the country shifting away from manufacturing and more towards services. I like this for two reasons. First, as Bill Gates said, 90 percent of Microsoft's assets walk out the door every night. When you're one of those people, you have a hell of lot more power than a factory worker, and the company will do what it can to keep you happy.
Second, the service industry is a lot cleaner, less energy intensive, and less polluting than the manufacturing industry.
The problem is that we've got to have service sector jobs that pay enough for someone who DOESN'T have the education and skills for one of those jobs at Microsoft to make a living.
And right now, we don't have too many of them.
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Miniaturization of electronics did as much to wipe out manufacturing jobs in the tech sector as offshoring. I worked with the NCR SVP of strategic planning in the mid 1980s and the big concern was trying to figure out what to do with that manufacturing capacity as they went from refrigerator sized mainframe components to blade servers providing multiples of the compute power.
I sat with an individual who held the first title of DP manager for a large insurance company as he fiddled with a hand held calculator in the mid 1990s. An algorithm within that hand held calculator had been the basis of his Master's Thesis in the 1970s that had the insurance company promote him to the aforementioned title of DP manager. It took all the "behind the glass" compute power to do what the hand held calculator could now perform.
Miniaturization, reduced barriers to entry, more nimble business intelligence reducing middle management functions, global wages, knowledge work all play a role in the economic transformations and the work force disruptions.