If China's dicey, why not
09/01/2004
It seems like all the semiconductor industry can think about these days is China. Executives dream of a monstrous growth market where things can be made with cheap labor once they get past a few impediments like shaky infrastructure, stolen IP, WTO violations and ever-changing rules, rampant corruption, human rights violations, a growing military menace with frequent threats to attack Taiwan if some politician there gets too uppity, attempts to manipulate standards and protocols to favor Chinese electronics firms, and so on. Some companies pride themselves on struggling through it all to build working operations in China, even though they have trouble making a profit and then repatriating the money.
That dangling carrot seems so close, but always just a little out of reach. Some speakers at a session on doing business in China at Semicon West suggested that despite the constant posturing of Chinese officials, too many government policies and actions are pushing things toward copycat products and stolen IP rather than a collaborative industry adding value to the world economy.
Maybe our industry should be paying more attention to a neglected area of the world that was characterized as the "new Europe" in the infamous cat fight at the UN between the US and "old Europe" over the Iraq war. Leaving aside the Iraq issue, where there may have been reasonable differences, it turned out that there were a few struggling countries trying very hard to become friends with the US, like Poland, Romania, Bulgaria, Hungary, and the Czech Republic. So what has the US done to reward them for their support? Not much.
A panel of European business leaders at Semicon Europa in Munich discussed how Eastern Europe has large cadres of well educated, technically knowledgeable workers, but that it would take "an awful lot of money" to build up their economies. West Germany has been struggling to do just that for the East Germans, and the growing success of the Dresden area, not only with some very advanced wafer fabs but also with expanding infrastructure businesses, is helping to bring that region into the 21st century. While Infineon has been the major player, some US firms such as AMD and Motorola (now Freescale) have also joined in. It may turn out that judicious investments can bring healthy paybacks to investors at the same time that the region gains the strength to become a valuable, contributing member of the world economic community.
Couldn't a similar collaboration be worked out between US companies and some of the struggling "new Europe" countries? Bede, a metrology company in England, has a research group working in Czechoslovakia that made important contributions to its x-ray instruments based on work the researchers had done earlier on Russian space-probe projects. ON Semiconductor, the discrete components spin-off from Motorola, set up manufacturing in a couple of Eastern European countries, but tough economic times drove it to move a major part of its operations to China, seeking even lower production costs. Perhaps a targeted program by the US could encourage new worthwhile links between our companies and enterprises in Eastern Europe. These could be much wider than just technology — for example, US Steel recently bought a steel works there that can be upgraded with modern technology.
Delegations from major US universities might tour some of the research-oriented institutes and universities in Eastern Europe and help develop collaborative programs with them and with US industry. Such a program would not have to be costly; it could be aimed at facilitating valid business links involving private rather than public capital. Any government role would be as a facilitator, and perhaps some partial loan guarantees could be made so that risk would be shared with private investors. In places like Dresden and Berlin, investment money was put into new plants such as Infineon's wafer fab, and it appears these investments are paying off.
Leadership from the US, in concert with leaders within the new Europe, might spawn a program that could gain traction in growth markets. Facilitating business links that make real sense (rather than setting up enterprises with ownership by relatives of politicians) might involve eminent US venture capital specialists reviewing investment plans. The result could be a thriving, new economic sector making strong contributions to the world economy.
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Robert Haavind
Editorial Director