The Future of Electronics in Colorado · The Future of Electronics in Colorado ... understand why,...

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September 15, 2005 Joint SMTA / IMAPS Meeting 1

The Future of Electronics in Colorado

• “It’s all about you.”• Macro-Economics are

Unsustainable• Colorado is a State of

Unfulfilled Potential• “Can we talk?” …

meaning Collaborate

ØWho is in the audience?

ØOwners? Operators?

Ø“C” level people? Managers? Engineers?

ØContract Mfg People – From BIG CM’s?

ØASK About Sanmina – Celestica - FLEX

ØWho else? … is there a contrast with other SMTA meetings in DCApast?

ØTell’em What?

ØThe Macro Picture is ugly … NYT story about New Orleans > get specific reference

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“There are few surprises in life, only surprised people.” John T. Dunlop

July 18, 2005

America's Truth DeficitBy WILLIAM GREIDER

DURING the cold war, as the Soviet economic system slowly unraveled, internal reform was impossible because highly placed officials who recognized the systemic disorders could not talk about them honestly. The United States is now in an equivalent predicament. Its weakening position in the global trading systemis obvious and ominous, yet leaders in politics, business, finance and the news media are not willing to discuss candidly what is happening and why. Instead, they recycle the usual bromides about the benefits of free trade and assurances that everything will work out for the best.

Much like Soviet leaders, the American establishment is enthralled by utopian convictions - the market orthodoxy of free trade globalization.

September 2, 2005

They Saw It ComingBy MARK FISCHETTI

THE deaths caused by Hurricane Katrina are heart-rending. The suffering of survivors is wrenching. Property destruction is shocking. But perhaps the most agonizing part is that much of what happened in New Orleans this week might have been avoided.

Watching the TV images of the storm approaching the Mississippi Delta on Sunday, I was sick to my stomach. Not only because I knew the hell it could unleash but because I knew that a large-scale engineering plan called Coast 2050 - developed in 1998 by scientists, Army engineers, metropolitan planners and Louisiana officials - might have helped save the city, but had gone unrealized.

In true American fashion, we ignored an inevitable problem untildisaster focused our attention. Fortunately, as we rebuild New Orleans, we can protect it - by engineering solutions that work with nature, not against it.

Macro Economic Forces are Irresistible

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The U.S. Economy is “Living on Borrowed Time”

July 4, 2005

Who Owns the Dollar?by Paul Craig Roberts

China is the leading scapegoat for America's economic ills. What explains the U.S. dependence on a poor country for First World products? The answer, and the key to China's rapid development, is that corporations in First World countries-American businesses chief among them-use China as an offshore location where they produce for their home markets. More than half of U.S. imports from China, and as much as 70 percent from some of China's coastal regions, represent offshore production by American firms for U.S. markets.

When we speak of the Chinese economy, we are speaking in large part of the relocation of American manufacturing to China. Those millions of lost domestic manufacturing jobs were not lost. They were moved. The jobs still exist, only they are not filled by Americans.

October, 2003

Squanderville versus Thriftville By Warren E. Buffett

I'm about to deliver a warning regarding the U.S. trade deficit and also suggest a remedy for the problem… I started way back in 1987 to publicly worry about our mounting trade deficits -- and this time backing it with Berkshire Hathaway's money..: To hold other currencies is to believe that the dollar will decline.

My reason for finally putting my money where my mouth has been so long is that our trade deficit has greatly worsened, to the point that our country's "net worth," so to speak, is now being transferred abroad at an alarming rate.

A perpetuation of this transfer will lead to major trouble. To understand why, take a wildly fanciful trip with me to two isolated, side-by-side islands of equal size, Squandervilleand Thriftville…

The American Conservative

RobertsIn a world where capital and technology are highly mobile internationally, these critical factors of production flow to countries with the lowest cost of labor. China has attracted manufacturing, and India has attracted professional services. This has left the American work force with job growth only in lower-paid domestic services, which provide no export earnings.

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The U.S. Trade Deficit is Unsustainable

Bob Powell / Continuous Improvement Associateshttp://www.exponentialimprovement.com/cms/fallacy.shtml

Issues•Scale of the U.S. Economy•Dollar as the Reserve Currency

•Federal Deficits•$43 Trillion Future Liabilities

•Social Security•Medicare / Medicaid•Pensions

•Zero U.S. Savings Rate

•Global Capital Deployers Divide From Domestic Operators

Reserve currency in respite due to rejection of Euro

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Connecting DotsAugust 29, 2005

Greenspan and the BubbleBy PAUL KRUGMAN

At the (Jackson Hole) conference, Mr. Greenspan didn't say in plain English that house prices are way out of line. What he did say, after emphasizing the recent economic importance of rising house prices, was that "this vast increase in the market value of asset claims is in part the indirect result of investors accepting lower compensation for risk. Such an increase in market value is too often viewed by market participants as structural and permanent." And he warned that "history has not dealt kindly with the aftermath of protracted periods of low-risk premiums." I believe that translates as "Beware the bursting bubble.“

There are signs that the housing market either has peaked already or soon will. And it will be up to Mr. Greenspan's successor to manage the bubble's aftermath. How bad will that aftermath be? The U.S. economy is currently suffering from twin imbalances. On one side, domestic spending is swollen by the housing bubble, which has led both to a huge surge in construction and to high consumer spending, as people extract equity from their homes. On the other side, we have a huge trade deficit, which we cover by selling bonds to foreigners. As I like to say, these days Americans make a living by selling each other houses, paid for with money borrowed from China.

One way or another, the economy will eventually eliminate both imbalances. But if the process doesn't go smoothly - if, in particular, the housing bubble bursts before the trade deficit shrinks - we're going to have an economic slowdown, and possibly a recession. In fact, a growing number of economists are using the "R" word for 2006. In his closing remarks he suggested that "an end to the housing boom could induce a significant rise in the personal saving rate, a decline in imports and a corresponding improvement in the current account deficit." Translation, I think: the end of the housing bubble will automatically cure the trade deficit, too.

Sorry, but no. A housing slowdown will lead to the loss of many jobs in construction and service industries but won't have much direct effect on the trade deficit. So those jobs won't be replaced by new jobs elsewhere until and unless something else, like a plunge in the value of the dollar, makes U.S. goods more competitive on world markets, leading to higher exports and lower imports. So there's a rough ride ahead for the U.S. economy.

“Those people have to get other jobs…”

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Grove’s Law: “Technology will always win.”

July 30, 2005From Intel to Healthcare

and BeyondBy JOSEPH NOCERA

At the (INTEL) annual meeting last May, (Andy Grove) laughingly described the line "Technology will always win" as "Grove's Law.“

Then he moved to the subject of his latest obsession: globalization. Will it surprise you to know that this refugee from Hungary, whose company derives 70 percent of its revenue from places other than the United States, is a bear on the potential consequences of globalization on this country? He is.

"I don't think there is a good outcome," he said. "I looked up a quote for you. 'If you don't believe that [globalization] changes the average wages in America, you believe in the tooth fairy.' Do you know who said that? Paul Samuelson, age 90.“

Although mainstream economic thought holds that America's history of creativity and entrepreneurialism will allow it to adapt to the rise of such emerging economies as India and China, Mr. Grove thinks that is so much wishful thinking. In his view, globalization will not only finish off what's left of American manufacturing, but will turn so-called knowledge workers, which was supposed to be America's competitive advantage, into just another global commodity.

“Those people have to get other jobs…”

Robotics for surgery, conducted by physicians in India & attended (ONLY) by service staff in the OR

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“Welcome to a Has-Been country.”

June 3, 2005

The US Labor Force: One Foot in the Third World

By PAUL CRAIG ROBERTS

American businesses' short-run profit maximization plays directly into the hands of thoughtful Asian governments with long-run strategies. Short-run goals are reducing US corporations to brand names with sales forces marketing foreign made goods and services.

By substituting foreign for American workers, US corporations are destroying their American markets. As American jobs in the higher paying manufacturing and professional services are given to Asians, and as American schoolteachers and nurses lose their occupations to foreigners imported under work visa programs, American purchasing power dries up, especially once all the home equity is spent, credit cards are maxed out and the dollar loses value to the Asian currencies. The dollar is receiving a short-term respite as a result of the rejection of the European Union by France and Holland. However, nothing is in the works to halt America's decline and to put the economy on a path of true prosperity.

Considering the vast excess supplies of labor in India and China, Asian wages are unlikely to rapidly approach existing US levels. Therefore, the substitution of Asian for US labor in tradable goods and services is likely to continue. As US students seek employments immune from outsourcing, engineering enrollments are declining.The exit of so much manufacturing is destroying the supply chains that make manufacturing possible.The Asians will not give us back our economy once we have lost it. They will not play the "free trade" game and let their labor force be displaced by cheap American labor. Offshore outsourcing is dismantling the ladders of America's fabled upward mobility. The US labor force already has one foot in the third world.

Henry Ford & the $5 daily wage – to enable employees to purchase the products that they produce…

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What is the difference between recession and depression?

The difference is whether or not you have a job.

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In Colorado, what do jails, beer, tourism, hospitals and government

have in common?

The these are economic sectors where jobs have been created in the last

five years.

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Colorado Employment

Bob Powell / Continuous Improvement Associateshttp://www.exponentialimprovement.com/cms/uploads/ColoradoEmployment7.pdf

Datapoints•25,000 short of 2001 peak

•2001 to 2003 job drop of 4.4% vs 2.2% for the U.S.


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Colorado Employment

Bob Powell / Continuous Improvement Associateshttp://www.exponentialimprovement.com/cms/uploads/ColoradoEmployment7.pdf

Issues

•140,000 to 228,000 backlog

•Likely underemployment approaching 20%, many with knowledge-based skills

Business Week article per Jim Leonard on college graduate pay

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Attractiveness of Colorado for Business Development

State Weaknesses•Tabor, Gallagher and 23 …

•Infrastructure Backlog•Present approaches as Band-Aid

•Balkanized Tax Authority

•“Only 5 million people”•“…did somebody say Water?”

•Low Education Spending, Results

•Don’t expect a lot of help

State Strengths•Low Tax Burden

•No Budget Deficit•Avoided Incentives for Economic Development

•Diverse Economic Base•Attractive Environment

•Highly Educated Professionals

•Don’t expect a lot of help

#5 (+/-) in Venture Capital … between $400M and $500M this year

ØMA, CA, TX consistently higher … note vastly larger population base

SBA Nexus Study > 6 of top 22 communities for innovation & entrepreneurship are in Colorado

Hand-full of “Headquarters” Companies

Track record of businesses ‘leaving’ at revenue levels between $5M and $7M

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The Future of Electronics in Colorado?

($B) 2002 2003 2004 YTD 05 YTD 05-04

Total CO Exports $5.5 $6.1 $6.6 $3.8 0.5%

ADP Equipmt 0.8 0.9 1.0 0.5 -0.8%ADP Parts 0.5 0.5 0.6 0.4 10.6%Integrated Circuits 0.6 1.0 1.1 0.4 -51.2%Analyzers 0.1 0.1 0.1 0.5 -39.6%

Electronics $2.0 $2.5 $2.8 $1.8Electronics % 36% 41% 42% 47%

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The Future of Electronics in Colorado?

•Crocs, not necessarily nano•Sod staples, not necessarily biotech

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Process Knowledge + Market Perspective = Innovation

Linkages•Manufacturing a Root of New Intellectual Property

•Early Life Cycle Value-add as Base for Wealth Creation,Middle Class Wages & Benefits

•Tradable Goods as Import Offset

•Sine Qua Non – The Slippery Slope

•Personal Passion, Commitment, Observation, Opportunities in the Global MarketIs the Glass Half Full or Half Empty?

4th in tax friendliness

4th in grants for research

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The Combination of Innovation & Entrepreneurship

Issues•CU database

•SBA Nexus study

•Magellan Center Colorado Catalyst2 Research Portfolio

•Bottle What?


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Economic Development Initiatives: Collaborate to Compete

Linkages

•Colorado Institute of Technology•Colorado Institute for Technology Transfer and Implementation

•Colorado Association for Manufacturing & Technology•Knowledge Distribution•Area Marketing•Manufacturing Excellence•Innovation Support

•Legislative Agenda•Education and INVOLVEMENT


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Collaborate to Compete: Bottle What?What we know•Macro-economic crisis - Katrina•State-level problems

•Fiscal & educational•Not likely to succeed acting alone

•Too many weakened voices•Schism

•Will and willingness•Get on the Mayflower … whatever•Understand that the mission not unlike that following Pearl Harbor

•To dedicate ourselves in the same waythat global competitors are dedicated to their own betterment

What decide individually•Culture – Florida, Kotkin, Marlboro•Short-Term Thinking

•Invest or Not?•Relationships

•With Universities•With Each Other

•Observation of Opportunities•Exploration with marginal resource•Process engineer, •Spare office & capacity•Partnering with market thinkeror process technology owner forincremental cost development


The Future of Electronics in Colorado · The Future of Electronics in Colorado ... understand why,...

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