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Friday, May 13, 2022

Idiot Government, Corporate Welfare and Crony Journalism

In today's politically charged climate it is amazing to see how far crony journalism  can go, in support of both Government officials statements and corporate lobbyists PR points, all without scrutinizing the facts.

The largest problems that the U.S. is facing are derived from too much concentration and lack of true competition in almost every sector of our economy. Whether Democrats or Republicans are in charge of government, large corporations seem to continue sucking taxpayer's dollars through government subsidies and financial bailouts.

While we expect professional journalists to scrutinize official statements coming from either Government or corporate PR through rigorous fact checking, what we too often witness, is that journalists prefer a cozy relationship with the powers at be, acting as a bullhorn or an echo chamber to "sell the line of the power player" to the grand public. 

On May 11, 2022 the Washington Post published an article, written by Jeanne Whalen entitled Sanctions forcing Russia to use appliance parts in military gear, U.S. says. The article begins with the following paragraph:
U.S.-led sanctions are forcing Russia to use computer chips from dishwashers and refrigerators in some military equipment, Commerce Secretary Gina Raimondo said Wednesday.

From there on, the article continues to explain that the U.S. Government position that the "technology exports" sanctions on Russia are working well and that the Russian military industrial complex is resorting to using "semiconductors" taken out of common home appliances to make up for parts shortages in its weapons systems.

Whalen goes further to explain:
Computer chips, also known as semiconductors, are the brains that operate most modern electronics, from appliances to fighter jets. Russia manufactures few of its own chips, historically relying on imports from Asian and Western companies.

After spending 45 years in the electronics industry, including decades in the semiconductor development and manufacturing sector I cannot but despair at the way professional journalists keep selling "fake goods" to the public.  In the above paragraph, Whalen is quoting (and provides links to) two of her own articles, previously published in "The Post", that supposedly give cover to her explanations. No wonder that Whalen chooses to quote herself, in order to portray legitimacy to her bizarre coverage of anything "semiconductor". I wonder where her expertise on the subject comes from? We will get back to this point, later on.

Empty Baby Formula Store Shelves

Another headline showed up in today's news outlets reads: 

Biden works to fix US formula crisis as parents scramble to keep babies fed

This article was published by The Guardian, where the writers explain:
The problem is the result of supply chain disruptions and a safety recall, and has had a cascade of effects: retailers are limiting what customers can buy, and doctors and health workers are urging parents to contact food banks or physicians’ offices, in addition to warning against watering down formula to stretch supplies or using online do-it-yourself recipes.

It is not clear why is is the job of the President of the U.S. to furnish baby formula to consumers. However, as is so common nowadays to ignore root causes, instead of pointing out that less than a handful of major manufacturers own 98% of that product market and when one of them (Abbot) failed quality control of its products, the floor caved from under the supply chain. Instead of figuring out that this event is an indicator of fundamental vulnerabilities in American industrial economics, which is a direct result of too high concentration in the nation's manufacturing sector, everything turns into political fire fight. I wonder what our President or Secretary Raimondo can do to actually solve this problem, when Corporate America keeps vigorously fighting any hint of government controls and continues to promote mergers, business take overs and industrial concentration, which mostly benefit the Executive Class, while reducing consumers choices and eventually lead to price gouging, even without supply chain problems.

The reflexive political survival choice immediately leads our government officials to come up with stupid statements like the one mentioned in Whalen's article, about how the Russians cannot get (what Raimondo refers to as) "semiconductors" for their war machines. It is not clear if the secretary of Commerce even knows what "semiconductors" mean, because public education about the subject was mostly formed by journalists who did not bother to educate themselves on the subject before parroting what industry lobbyists kept feeding them.

In reality, Semiconductors are a family of materials. Semiconductors are NOT computer chips, though computer chips are made out of semiconductor materials, as well as many more, other, NON-semiconductor materials. Semiconductors are NOT even remotely associated with brains, unless a brainless journalist repeats conducting and propagating false information to the public!

While the average car contains approximately, 800 electronic components, most of these components are not semiconductor-based. These components are known as capacitors, resistors, conductors (wires), connectors and circuit boards. Most Automotive Semiconductor Components, are NOT so-called computer chips, they include diodes, signal transistors, power transistors, electro-optical components and a variety of analog and digital chips. Only the minority of automotive semiconductor components are dedicated to control and computing functions and these are considered a special class of computing devices, known as "embedded controller" or "micro-controller".

The reality is that most common electronic components are either manufactured inside, or shipped into China, where the largest industrial base of electronic manufacturing has been established over the last 20 years. In spite of crying wolf over the last two years, companies like Intel Corp. and others have invested tens of billions of dollars on establishing manufacturing base in China. In spite of poisonous rhetoric, this is not going to change much. The lure of well educated cheap labor, particularly in the high-tech sector, and the fact that the Chinese armed forces (PLA) donating their recruits to work at Western companies in China, while being paid peanuts for their work

The savings on labor costs that companies like Intel Corp., Dell, HP and others are gaining on each year of operations in China amounts to billions of dollars over a decade. The picture below was taken at the cafeteria of Intel Corp. facilities in Changdu (PRC). All of the people in uniform that you see in that picture, are officers of the Chinese armed forces, yet they are also regular employees of Intel Corp. No doubt the savings on payroll are substantial to Intel Corp. and most valuable to the Chinese government in other ways...



The anecdotal story (without evidence) of the Russian army using "semiconductors" out of household appliances in their weapons systems, as a indication of the trade sanctions working, is a complete farce. Because, as mentioned earlier, most common electronic components are either manufactured in, or shipped into China, Chinese electronic component distributors are the largest in the world and readily ship electronic components at a very good price, to any destination in the world, including Russia. Global merchant companies like Alibaba, Aliexpress, Banggood, etc. ship millions of electronic parts, including microprocessors, memory parts and micro-controllers every day. I am buying electronic parts from these venues, almost every week! For the Chinese companies there is no reason to stop shipping electronic components through the mail, to anyone who is paying willingly. Can the U.S. Government monitor Chinese postal or other shipping services going to the Russian market as small packages? Seriously?

It is nice to see more competition in the Graphics Processor market, with Intel declaring their "Johnny come lately" entry into that market that has been dominated for decades by Nvidia and AMD. Intel Corp. own statement regarding the new ARC line of graphics processors, confirms my statements about China remaining at the center of "all things electronic", with very little chance of the global electronic manufacturing bases, relocating out of China, for at least a decade to come.

 According to Intel "ARC" Visual Compute Group web site:

We will release our entry-level Intel Arc A-series products for desktops (A3) first in China through system builders and OEMs in Q2. Etail and retail component sales will follow shortly in China as well. Proximity to board components and strong demand for entry-level discrete products makes this a natural place to start. (see: 

https://community.intel.com/t5/Blogs/Products-and-Solutions/Gaming/Engineering-Arc-5-9-2022/post/1383055

Any attempts of shifting public views through "metaverse", built upon a series of blitz PR campaigns, cannot transform deep economic factors, established over decades of globalization, into real-life facts. The only people who are seem to believe in such imaginary economic transformation are our clueless politicians who seem to be towed by their nose by industry financed lobbying firms.

A case in point:
In spite of a blitz effort by the Intel Corp. corporate PR machine to capitalize on the so-called "semiconductor shortages" bandwagon, Intel sales to the automotive industry, world-wide have been less than one percent (1%) of the company's total sales, according to the company's own annual reports. However, by way of major PR manipulation, Intel, Qualcomm AMD and other major Semiconductor industry players, somehow managed to convince the U.S. Senate to donate
52 billion dollars of your hard earned money, to enrich the executives of their industry, under the catch-all excuse of "national security". It is not clear at all why these companies, which made money hand over fist in the last decade, are crying about and why taxpayer's money is needed to add to their profits. Is baby formula less important than semiconductor manufacturing? Any concentration of industrial capabilities will lead to non competitive monopolistic behavior and single-sourcing, thereby creating massive disastrous consequences, when these sources fail to deliver for any reason. However, apparently, there are no boundaries of rational thinking in the world of Idiot Government, where big money keeps calling the shots at taxpayers expense.

Regardless of other issues concerning how to best spend US taxpayer's dollars in the best interest of the people of the US, the semiconductor industry in the world is part of a Global Value Chain (GVC), in which the US is still at the top of the value pyramid. The GVC depends on extensive collaborations among all actors in the chain. Crying wolf while coming to the US Congress with a tin cup in hand and insisting on industrial isolation can only harm the US position across wide geographical areas of economics, particularly in Asian countries that are currently not aligned with China. Such countries may potentially fall into China's hands, once the current structure of the GVC is disrupted due to the polarization in US politics. "May you get what you wish for" is an ancient gypsy curse...

I would like to see the US public to invest more time into learning about the GVC works to better understand what to convey to our politicians as our people wants. Responsible journalists (and they are there) should take the lead on informing and educating the public about the significant shifts in world economics and how the US can do best through smart collaboration with our world economic allies over the upcoming decades. 

  
 

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