Intel to build 2.5-billion-dollar China chip plant

[imported_Tango]

Originally posted by: rchiu
I don't get it, maybe those ppl with experience in chip manufacturing can educate me here. But how labor intensive can chip manufacturing be? It's not like you can hire ppl to put transistor on those cpus by hand. Isn't chip manufacturing mostly machine based? How much can Intel save by going with cheap labor? If it's the cost of land, I bet out there in Nebraska or Montana isn't too expensive too, and with railroad/highway system, it's cheap to ship to major city or seaports. Maybe I am wrong here, but if American government want, there must be something they can do to keep some of the manufacturing here. At least you won't be letting Chinese learn all those advance manufacturing capability to once day bite u in the butt.

We are looking at the beginning of a major macro shift. Intel is not going to China looking for cheap unskilled labor. Intel is opening a plant in China because it has long term strategic vision. It's access to human capital that Intel is looking for.

Right now they can get cheaper skilled labor, and comparatively cheaper fixed costs due to the currency regime; but what's more important they will have access to a virtually infinite pool of talents coming out from the quant-intensive Chinese tech schools.

Sure, China has still a lot of underdeveloped land and poor population, but you don't need to have high per capita GDP when your population exceeds 1 billion. GDP-per-capita in the Shanghai and Beijing urban areas is exploding, as well as average education level of people under 35.

Also remember that the Chinese currency is effectively in a currency band regime, some kind of flexible peg. When you compute the GDP at purchasing power parity you really get the idea of how fast the country has been growing in the last 15 years. Goldman Sachs' chief economist for emerging markets considers the Chinese yuan to be likely to appreciate 289% as the country loosen its currency band.

Here's a nice reading if you want to know more about China and other emerging markets in the next few decades:

http://www2.goldmansachs.com/insight/research/reports/99.pdf

 

[her209]

Since corporations from the U.S. can setup shops to take advantage of cheap labor in developing countries, are corporations from said developing country allowed to setup shops in the U.S. to take advantage of highly-skilled individuals, e.g. engineers?

 

[Mxylplyx]

Even though I am a conservative, and that doesnt mean a Republican, I'm really hoping the dems move past their rhetoric on China and actually do something to counter their currency manipulation. We need a floating tariff on every good that comes out of that country in order to offset that manipulation.

 

[rchiu]

Originally posted by: Tango


We are looking at the beginning of a major macro shift. Intel is not going to China looking for cheap unskilled labor. Intel is opening a plant in China because it has long term strategic vision. It's access to human capital that Intel is looking for.

Right now they can get cheaper skilled labor, and comparatively cheaper fixed costs due to the currency regime; but what's more important they will have access to a virtually infinite pool of talents coming out from the quant-intensive Chinese tech schools.

Sure, China has still a lot of underdeveloped land and poor population, but you don't need to have high per capita GDP when your population exceeds 1 billion. GDP-per-capita in the Shanghai and Beijing urban areas is exploding, as well as average education level of people under 35.

Also remember that the Chinese currency is effectively in a currency band regime, some kind of flexible peg. When you compute the GDP at purchasing power parity you really get the idea of how fast the country has been growing in the last 15 years. Goldman Sachs' chief economist for emerging markets considers the Chinese yuan to be likely to appreciate 289% as the country loosen its currency band.

Here's a nice reading if you want to know more about China and other emerging markets in the next few decades:

http://www2.goldmansachs.com/insight/research/reports/99.pdf

Heh, you don't have to educate me on China, I am a Chinese from Taiwan so I am plenty familiar with China.

I know Chinese controls their currency to increase export and attract investment. That's the whole point of my argument, Chinese has a plan to attract investment and technology from foreigners, where is American's plan? American company is gonna go where the return on investment is the most. So why isn't federal, state government offer companies with strategic technologies incentive to stay in the US? You may think Intel CPU is low tech, but the manufacturing capability of putting hundreds of millions of transistors on a 65nm or smaller chip is not.

Anyway, I don't buy your talent pool argument. Yeah, Chinese have lots of engineers. But if you ask them if they rather attend one of their top school, or Stanford/MIT, I am sure 99.999% would choose Stanford/MIT. US is still producing the very top engineering talent, the only thing US lack is the quantity. Most advanced research are being done in the US, not in China because of the intellectual property issues.

And why would Intel need to build their plant in China to take advantage of their market? All they need is a sales/marketing office and good distribution channels.

In the end, I believe if American government value some of their civilian business technologies, they should have plan to keep them in house. If they can waste billions in a war that means nothing, they can afford a few billions to attract strategic assets to stay in the US.

 

[Trianon]

I guess we won't hear anymore about Chinese scientists and students stealing secrets, they will be at the source

 

[Trianon]

Originally posted by: rchiu
I don't get it, maybe those ppl with experience in chip manufacturing can educate me here. But how labor intensive can chip manufacturing be? It's not like you can hire ppl to put transistor on those cpus by hand. Isn't chip manufacturing mostly machine based? How much can Intel save by going with cheap labor? If it's the cost of land, I bet out there in Nebraska or Montana isn't too expensive too, and with railroad/highway system, it's cheap to ship to major city or seaports. Maybe I am wrong here, but if American government want, there must be something they can do to keep some of the manufacturing here. At least you won't be letting Chinese learn all those advance manufacturing capability to once day bite u in the butt.

I can tell you this, most of the todays sub-micron fabs are almost completely automated, they don't let people in once cleanroom facilities are certified and running, maintnance only has access from service corridors and has to wear spacesuit kind garments to keep contamination out. I seriously doubt cheap labor is an ussue here, it's something else, some kind of business agreement.

 

[imported_Tango]

Originally posted by: rchiu

Originally posted by: Tango


We are looking at the beginning of a major macro shift. Intel is not going to China looking for cheap unskilled labor. Intel is opening a plant in China because it has long term strategic vision. It's access to human capital that Intel is looking for.

Right now they can get cheaper skilled labor, and comparatively cheaper fixed costs due to the currency regime; but what's more important they will have access to a virtually infinite pool of talents coming out from the quant-intensive Chinese tech schools.

Sure, China has still a lot of underdeveloped land and poor population, but you don't need to have high per capita GDP when your population exceeds 1 billion. GDP-per-capita in the Shanghai and Beijing urban areas is exploding, as well as average education level of people under 35.

Also remember that the Chinese currency is effectively in a currency band regime, some kind of flexible peg. When you compute the GDP at purchasing power parity you really get the idea of how fast the country has been growing in the last 15 years. Goldman Sachs' chief economist for emerging markets considers the Chinese yuan to be likely to appreciate 289% as the country loosen its currency band.

Here's a nice reading if you want to know more about China and other emerging markets in the next few decades:

http://www2.goldmansachs.com/insight/research/reports/99.pdf

Heh, you don't have to educate me on China, I am a Chinese from Taiwan so I am plenty familiar with China.

I know Chinese controls their currency to increase export and attract investment. That's the whole point of my argument, Chinese has a plan to attract investment and technology from foreigners, where is American's plan? American company is gonna go where the return on investment is the most. So why isn't federal, state government offer companies with strategic technologies incentive to stay in the US? You may think Intel CPU is low tech, but the manufacturing capability of putting hundreds of millions of transistors on a 65nm or smaller chip is not.

Anyway, I don't buy your talent pool argument. Yeah, Chinese have lots of engineers. But if you ask them if they rather attend one of their top school, or Stanford/MIT, I am sure 99.999% would choose Stanford/MIT. US is still producing the very top engineering talent, the only thing US lack is the quantity. Most advanced research are being done in the US, not in China because of the intellectual property issues.

And why would Intel need to build their plant in China to take advantage of their market? All they need is a sales/marketing office and good distribution channels.

In the end, I believe if American government value some of their civilian business technologies, they should have plan to keep them in house. If they can waste billions in a war that means nothing, they can afford a few billions to attract strategic assets to stay in the US.

I don't want to educate anybody on anything. If I gave you the idea I wanted to lecture you I apologize.

But the talent pool argument is correct. I have access to quite a lot of consultants and research departments of investments banks, and many people I trust in the business are starting to see this trend. I know Intel operations are not low tech. This is actually the interesting part of the story. Firms strategically looking into China for comparatively cheaper SKILLED labor, as opposed to just cheap unskilled labor to produce ultra-cheap goods.

You are correct about the Stanford/MIT thing. However, as I said, it's a vision, not a contingent reality. Big multinationals need to plan 20 years in advance. There's obviously a lot of human capital in china, at a comparatively low cost of labor, and this will improve even more as the Chinese economy continues to emerge.

A very interesting thing, for example, is the fact that while a few years ago virtually every Chinese student graduating from an American university was trying to stay here in the US, in the last few years the majority chose to go back as they felt more opportunities could be sought in China than the US. This is true especially for the technology and financial services industries, less so for medical personnel and people in academia.

I think Intel recognized it was time to capture the momentum of a major macroeconomic shift that will likely shape this century. The shift from a Atlantic world to a Pacific world, as Asia slowly becomes the epicenter of business transactions. Intel probably knows that just by raw numbers is very likely that many critical researches will emerge from China in the next decades. If you can be in a privileged position for tapping into an almost limitedness pool of talented engineers and programmers, while saving some fixed costs at the same time, I don't really see how this can be a bad strategy.

In my opinion it's pretty obvious that China will be the next hegemon. That's the story of the world. Powers rise and fall all the time. There is nothing a government can do to prevent this. What the government can do is provide an as-soft-as-it's-possible landing.

 

[fmj7six2]

Originally posted by: jpeyton
You prefer Costa Rica and Malaysia? I don't really see the difference.

They aren't nuclear powers that have threaten to kill us!