Six months ago, I wrote a post about why high-tech brands can't manufacture in the US. One of my key arguments in that post concerned a lack of government support: “The US doesn’t have a job-centered economy anymore. It is consumer-centered. The way to fuel the economy is trying to restore consumer confidence and provide cheap credit to encourage spending.”
I still believe that is true, but recently I came across a few hopeful stories of a small change in mentality, both in the business and political environments, which can lead to a significant revival of high-tech equipment manufacturing on US soil.
One example is the semiconductor foundry being built by GlobalFoundries in Malta, N.Y. “The new plant, which is about the size of six football fields, has hired 1,100 workers in the past two years and plans on adding another 300 this year,” Ron Scherer reported this month in the Christian Science Monitor.
One key factor in the plant's location was the nearby Hudson Valley Community College. Its engineering school offers a two-year program on semiconductor manufacturing technology.
Another factor was the support of the State of New York. The region has the infrastructure and plenty of educational institutions to supply skilled personnel, but not many jobs. So the state and local administrations invested in communications and services to attract manufacturing to the area. GlobalFoundries, one of the largest wafer manufacturers, made the decision in 2009 to build the plant, its first in the US, with an initial investment of $4 billion. By the time it is completed, the plant will cost $7 billion and employ nearly 1,500 people. (GlobalFoundries also has plants in Germany and Singapore.)
The new plant will “stand as the most advanced semiconductor manufacturing facility in the world,” Scherer wrote. “It will also be the largest leading-edge foundry in the United States.”
It will cost GlobalFoundries nearly $1 billion more to build the plant in New York than in Asia, but it can make the money back in the form of tax breaks and refunds. Also, many of its customers, including IBM, are happy to get their products manufactured in the West, where intellectual property laws are strongly enforced.
According to the Bureau of Labor Statistics, the US lost 5.7 million manufacturing jobs in the last decade, including 2.3 million during the recession. Some experts say more than half are lost forever. The US added 330,000 manufacturing jobs last year, but the BLS projects that these jobs will not increase this decade.
But some voices are starting to express optimism. Scherer quoted Gene Sperling, director of the National Economic Council, who told reporters last month, “We are the most competitive in manufacturing that we have been for the past two or three decades.”
US officials are changing policies and probably going in the right direction to bring manufacturing jobs back. Two main proposed changes are starting to convince some businesses to consider building infrastructure here.
- Eliminating the tax deduction for moving expenses when companies send jobs to foreign countries.
- Doubling the tax deduction for advanced manufacturing technologies from 9% to 18%.
And there is the multiplying effect. For every job directly created by a manufacturing facility, there are four or five other jobs created to support it by everything from service firms that provide cleaning, security, and communications to restaurants, housing, retail, etc.
I hope the GlobalFoundries initiative is just the beginning of an effort to bring high-tech manufacturing to the US and Europe, and I hope it brings hope to trained technicians in the West about employment opportunities.