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Defending the IP of the US Semiconductor Industry

Dramatic political and economic shifts are common in the Middle East. In addition to profound impact on those regions, these changes also inform the path forward for the US semiconductor industry. It is very important to understand macrohistory to help analyze the impacts of geo-political events on the operation of businesses.

Today, the US semiconductor industry has a huge vested interest in the Middle East. According to the Census of foreign trade, United States firms exported nearly $24.81 billion worth of goods to the United Arab Emirates (UAE). 

Further, leading semiconductor companies are developing deep ties with the region. For example, well-known full-service semiconductor foundry GlobalFoundries is owned by Advanced Technology Investment Company (ATIC). ATIC, meanwhile, is owned by Mubadala Development Company, a wholly owned investment vehicle of the Government of Abu Dhabi, in the UAE. The ATIC is also planning to set-up a 300 mm fab in Abu Dhabi in near future.

As ties between the UAE and the US semiconductor industry develop, we must remain aware of the potential implications of these shifts.

Applying a framework
An idea from writings on macrohistory by an Indian philosopher and spiritual leader provides a helpful framework for this discussion. The Law of Social Cycle has its source in the concepts of Macrohistory presented in Shrii Prabhat Ranjan Sarkar's philosophical treatise, titled Ananda Sutram , along with original concepts of metaphysics, epistemology, and ethics.

Figure 1: Law of Social Cycle explained in pictorial form. As shown in figure above, control of society keeps moving from intellectuals to acquisitors to laborers to warriors in a clockwise or anti-clockwise direction depending on the domination of intellectuals, acquisitors, warriors, or laborers.

Figure 1: Law of Social Cycle explained in pictorial form. As shown in figure above, control of society keeps moving from intellectuals to acquisitors to laborers to warriors in a clockwise or anti-clockwise direction depending on the domination of intellectuals, acquisitors, warriors, or laborers.

According to Sarkar's writings on macrohistory, in this movement of the social cycle, one class is always dominant. The movement of the social cycle in a clockwise direction in Fig 1 (shown by blue arrows) constitutes an “evolution” if it occurs after a sufficiently long duration. If this clockwise movement occurs within a short duration, this is called “revolution.” The movement of the social cycle counter-clockwise in Fig 1 (shown by orange arrows) constitutes a “counter evolution” if it occurs after a significantly long duration. This counter-evolution is extremely short-lived. However, if this anti-clockwise movement occurs within a short duration, it is called “counter revolution.” Counter-revolution is even more short-lived than counter-evolution.

Professor Ravi Batra from SMU, Dallas, analyzes the successful operation of the Law of Social Cycle in his 1978 book The Downfall of Capitalism and Communism: A New Study of History. Based on this analysis, Professor Batra correctly predicted the collapse of Soviet Communism 15 years before it occurred.

The above concept of Macrohistory could be used to analyze the recent social and political events like the Arab Spring in the Middle East. Based on this law, as shown in Figure 2 below, the rise of fundamentalism would have grave consequences on the US semiconductor industry because the industry relies on its investments coming from the Middle East.

Figure 2: Recent Social events in Egypt complying with Shrii P.R. Sarkar's Law of Social Cycle showing different stages of Evolutions and Counter Revolution.

Figure 2: Recent Social events in Egypt complying with Shrii P.R. Sarkar's Law of Social Cycle showing different stages of Evolutions and Counter Revolution.

We have discussed in the past how the US may be accused of transferring economic dominance to China through its trade and monetary policies. At the same time, it is clear that the UAE is also growing its economic ties with China.

The inability of the US congress to pass a balanced budget has forced UAE to grow its economic and political links with China and China has also signed a currency swap deal with the UAE. The growing ties between China and Abu Dhabi will influence Abu Dhabi's decisions in the best interest of China, which may not be in the best interest of the US.

Abu Dhabi's ownership of GlobalFoundries in New York will act as leverage in the transfer of advanced semiconductor manufacturing technology from its fab in New York to its upcoming fab in Abu Dhabi. Growing ties between the UAE and China could also transfer this technology to China in the future as the UAE is no way financially dependent on US.

Taking into consideration the threat of transfer of technology to China, the US needs to undertake major reforms to have a balanced economy. Additionally, while the US should support growth of education and infrastructure in UAE, it must also strive to ensure that the intellectual property (IP) of its semiconductor industry is protected.

Hence, a top-notch fab like GlobalFoundries should become financially independent of any foreign investments coming from Middle East. As a first step, wafer fabs should develop symbiotic partnerships with the US Government to ensure the sustainability of its capital investments. (Read more here.)

Let us know what you think about the smartest path forward for US semiconductor manufacturers in the comments section below.

22 comments on “Defending the IP of the US Semiconductor Industry

  1. Eldredge
    February 27, 2014

    As a first step, wafer fabs should develop symbiotic partnerships with the US Government to ensure the sustainability of its capital investments.

    In order to succeed, the semiconductor fab industry will have to convince the US government of the strategic importance in maintaining domestic financial and manufacturing control.

  2. apek
    February 27, 2014

    I agree Eldredge. That is whole purpose of my upcoming book “Sustaining Moore's Law: The Macroeconomics of US Microelectronics Industry”. You can read the Synopsis here http://www.electronics.ca/macroeconomics-of-us-microelectronics-industry.html

  3. Eldredge
    February 27, 2014

    Interesting – I'll take a look at the synopsis. I have been in the electronics manufacturing field for a long time, and also have some IP background.

  4. prabhakar_deosthali
    February 28, 2014

    As far as my observation goes, the way the US businesmen think is not the same as what the US govt thinks.

     

    So while US govt is trying to make policies in favor of loacl manufactruing and employment to locals, The US business community sees profit in outsourcing the manufactruing to countries like China and hirng Indian software engineers  for IT related work.

     

    So how the US govt is going to control the IP of the semiconductor industry if the business community does not co-operate?

     

     

  5. Taimoor Zubar
    February 28, 2014

    “So while US govt is trying to make policies in favor of loacl manufactruing and employment to locals, The US business community sees profit in outsourcing the manufactruing to countries like China and hirng Indian software engineers  for IT related work.”

    @prabhakar: I think that conflict between what's good for individual businesses versus what's good for the economy as a whole will always be there. You cannot force the busiinessmen to do something forcefully. The only way to make it work is to incentivize them to move back their operations from abroad. Sacrifice in the short run to gain long-term success.

  6. Taimoor Zubar
    February 28, 2014

    I think a good way to get attention the impact on IP by outsourcing issue would be to pick up a number of cases in the past years where IP violation has taken place just because the parent company chose to move their manufacturing to China. This should also include figures about the financial impact. I think this will really end up catching a lot of attention.

  7. Himanshugupta
    February 28, 2014

    Today's semiconductor FAB are clustered around Asia so i guess that there will be new innovation happening. As far as US is concerned and its semiconductor industry then US govenment is taking some steps to pull back some of the outsourcing in this industry but i donot think they will be able to pull back all of it. 

    Let's take the GF case, the consortium was suppose to open FABs or invest in Middle East and US but they have postpone it. Companies all over the semiconductor domain are reducing their workforce. The new innovations like EUV are not working so what will US do with IPs if the overall industry is not progressing.

  8. apek
    February 28, 2014

    Himanshu,

                         I have provided solutions to bring back manufacturing back into US in chapter “US Economic Boom to Economic Bust”. However, as you read my upcoming book further you will notice that all present options to bring back manufacturing to US is going to not succeed without active co-operation of China. In the last chapter of my book, I have put forth the solution when China does not support US to reshore its manufacturing. 

    I have received advice from economist Professor Batra and World authority of Bio-Medical engineering Professor Ghista in this book. I am sure you would like this read. It is not just engineering and economics but I ahve covered topics of Political affairs, International Affiars, Financial Affairs, Strategic thinking, Socio-economics, Supply Chain, Business Models and many more topics to interest the audience in my book. http://apekmulay.com/macro-economics-in-micro-electronics-industry/

    Cheers,

    Apek

  9. apek
    February 28, 2014

    TaimoorZ,

                          You are correct on that and I have put forth some resilient reforms that would defend IP of US semiconductor industry from counterfeiters in my upcoming book.

     

    With Best regards,

    Apek

  10. apek
    February 28, 2014

    Hi Prabhakar,

                            That is where US semiconductor Industry and worldwide semiconductor Industry needs to understand Macroeconomics. All economics taught in business schools is Microeconomics. Macroeconomics is much more important than Microeconomics. The purpose of my upcoming book is to make semiconductor Industry professionals be aware and uinderstand Macroeconomics of the business.

    With Best regards,

    Apek

  11. Hailey Lynne McKeefry
    February 28, 2014

    @Eldredge and @Apek, and further, once you convince the government, there is still the gargantuan task of forging a path forward that is manageable and reasonable. Any thoughts on how that would happen?

  12. apek
    February 28, 2014

    @Hailey…Good thinking. World wide we are observing many countries investing in Semiconductors. Why? Because it is technology enabler..without hardware there cannot be any software growth. Also, Businesses who only look for their Micro-economic profits ignoring the Macroeconomic Losses are shooting into the their own feet. The whole Business Model of US Semiconductor Industry is failing both IDM and Fabless Model. I have an upcoming article to be published soon on Truthout.org about ” The Transformation of US Semiconductor Industry”. I have explained the unsustainable business model of this Industry from a Macroeconomic perspective. When today we say, US is giving away its economic Dominance to China, remember that we are discussing MACROECONOMICS. We need a Macroeconomic Model for the Industry that is sustainable and leads Industry to next level of Innovation and Financial Success. Also, Government does not have to run any deficits neither does it have to pay for unemployment expenses of laid off workers. I call for MASS CAPITALISM. It is only through Mass Capitalism can we have a true Free Market Enterprise. Such a system will also stop this Political Corruption in US Economy in form of campaign finance which is supressing the voices of ordinary Americans in US Democracy. The path is manageable and reasonable…I put a lot of thought to make sure that our Industry is able to not just sustain Moore's law's relentless progress but to also ensure that the benefits from tis relentless progress are enjoyed by all. There need to be some major reforms and also change in economic thinking of Industry professionals. The topics include managerial reform, trade reform, democratic reform, financial industry reform, monetary policy reform, etc. whcih are too enormous that became a 200 + pages book as I started working on this topic for best interest of our great industry.

  13. Eldredge
    February 28, 2014

    @Himanshugupta – Even if the US does pull back on some of it's outsourcing, I'm sure some IP has already been divulged. But like any other industry, I'm sure semiconductors have segments of the industry that are dong well, even if the total output is down.

  14. apek
    February 28, 2014

    Not only has IP been compromised by sending manufacturing to Asia but now China also owns Trillions of USD in their Foregin Exchange reserves and it has got an indirect control over US Economy. Globalization has been a GREATest American Deception.

  15. t.alex
    March 1, 2014

    In fact, it is not only manufacturing. Opening a support center or a design center will also pose some level of risk as well.

  16. apek
    March 1, 2014

    You are right Alex. Vibrant Domestic economy is key to progress for any country. Shipping jobs and technology overseas to earn short term profits leads to long term losses due to depreciation of market value of any country's currency.

  17. jack90
    March 8, 2014

    The semiconductor commerce is the mass assortment of companies engaged in the intent further fiction of semiconductor machines. It formed circa, earlier the fiction of semiconductors became a possible custom.

    business case study

  18. apek
    March 10, 2014

    @Jack..i did not get that..could be rephrase in simple language?

  19. ahdand
    March 11, 2014

    But isn't the situation improving ? It still has not got recovered fully but comparatively it is improving isn't it ? 

  20. apek
    March 11, 2014

    @Nimantha

    US economy never recovered post 2009 crash. Fed just printed Trillions of USD and most of it was pocketed by manufacturers such that they got 1 million USD to create 1 Job. If you think what I am saying is absurd, please read http://www.truth-out.org/news/item/14887-a-failure-analysis-of-the-us-economy

  21. Eldredge
    March 13, 2014

    @ apek – You also deplete the domestic skill base while simultaneously inventing in foreign skil base.

  22. apek
    March 13, 2014

    Elridge…you are right on that. Domestic job losses cripples domestic economy and it eventualy also affects domestic currency.

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