Posts Tagged ‘Toshiba’

Why Commies Couldn’t Do Semiconductors

Sunday, January 15th, 2023

Asianometry has an interesting video up about East Germany expensive, strenuous efforts to catch up to the west in semiconductor manufacturing technology.

Spoiler: They didn’t.

Some takeaways:

  • “In the late 1980s, the German Democratic Republic, or East Germany, went all in on the monumental task of domestic semiconductor production. This semiconductor obsession failed, and the billions of marks spent on it eventually bankrupted the country’s failing economy.” I think he oversells the role the semiconductor push had on bankrupting the economy; everything in late commie East Germany was failing (just like the rest of the Warsaw Pact), they suffered a credit crunch for investment due to tightened western restrictions, couldn’t export Soviet oil as profitably due to the Reagan/Saudi created oil glut, and also were running into hard currency shortages to but the components their manufacturing sector needed to keep exporting.

  • The East German Uprising of 1953 kicked off what would be a persistent, and ultimately existential problem, for the GDR: Emigration. Throughout its history, its best and smartest people consistently sought a way out to the West. To convince its people to stay, the SED [Sozialistische Einheitspartei Deutschlands, AKA Socialist Unity Party of Germany] promised a better future through the use of technology. More than the Soviets, East Germany leaned on information technology as a pathway towards economic vitality and a glorious socialist future. The Party’s elites saw themselves locked in a technology race with the capitalists to see who can build a better society. Leader Walter Ulbricht called for an “industrial transformation” with the ultimate aim of “catching up with and surpassing capitalism in terms of technology.” A thriving computer industry was crucial towards making this ideology work. And in order to produce these superior computers, East Germany needed to learn and master microelectronics technology.

  • “Less than four years after the Americans invented the germanium transistor, East Germany moved quickly to build their own line of first generation semiconductors. In 1952, development work began at the VEB Works for Electrical Components for Communications Technology, or WBN, in the town of Teltow near the city of Berlin. This put them about even with West Germany. The FRG’s first semiconductor factory came about in 1952, built by Siemens.” Indeed, this is very early to get into the semiconductor game. It wasn’t until 1957 that Fairchild Semiconductor, widely considered as Company Zero for America’s semiconductor industry, was founded.
  • “WBN suffered from a lack of cooperation between its industrial and academic sides. The production teams lacked discipline, hands-on experience, and did not appreciate the scale and difficulty of the task they were facing. In one incident, the team dumped hot ashes right outside a factory window where they were producing a pilot run of semiconductors.” Ouch! A very uncleanroom…
  • “The state failed to give their young semiconductor team the resources it should have gotten. Administration – their chief accountant, in particular – seemed to care very little for semiconductors. When the team asked for money to purchase felt slippers to prevent static charge buildup in the clean room, their chief accountant denied the request.”
  • The Soviets didn’t help. “Despite being the GDR’s primary political backer, the Soviets were strangely wary. In 1958, two WBN staff members traveled to the Soviet Union to do technical exchanges. A year later, they came back complaining of limited cooperation. Much of what the Soviets had developed was created for military use. Thusly, the Soviets were concerned that transferring that to the East Germans would leak via scientists defecting to the West.”
  • They tried to get information from the U.S., but Cold War tech transfer policies were already falling into place. They had better luck in the UK. “Through the contacts of Arthur Lewis, a British Labour Party politician, the delegation saw plants owned by British Philips, Siemens-Edison, and British-Thompson-Houston. The latter is a descendant of the Vickers Company that sold oil equipment to the Soviets in the early 1900s. Just thought that was a nice connection. This visit was very successful. The East Germans learned a whole lot about industrial level semiconductor manufacturing. They even managed to purchase equipment for low-frequency transistors, a trailing edge technology.”
  • Despite that, the gap grew wider: “In 1958, WBN produced 100,000 germanium diodes, transistors, and rectifiers. Worse yet, some 98% of what they produced eventually needed to be discarded throughout their entire working lives.” Classic commie quality. “That same year in 1958, the United States alone produced 27.8 million transistors. Two years later in 1960, the US grew that production capacity five times over to 131 million.”
  • “Erich Apel, head of the Economic Commission of the Central Committee Politburo and an economic reformer – wrote in late April 1959: ‘Compared to … the American, Japanese, and West German industry, we lie in a state of backwardness that can scarcely be estimated … this backwardness will not decrease through 1961 at least, but will instead grow. Another inspection in 1960 identified more items of backwardness in semiconductor production. Workers tended to use rules of thumb rather than their instruments to measure. The various factory lines did not cooperate with one another.”
  • “Interestingly, when reporting these results to the Economic Commission of the Central Committee Politburo, that inspector softened his results. In his notes to state authorities, he said the GDR was 5 to 6 years behind. But in his analysis to the more politically charged Economic Commission, he cut it in half, 3 to 4 years.” Commies always institute thermoclines of truth to avoid being purged.
  • The brain drain to the west continued. The solution: The Berlin Wall. “For semiconductors however, the Wall pinched off what little technology the GDR had imported from the West.” The solution was to suck up even more to the Soviets, and to spy harder.

  • In 1963, the aging Walter Ulbricht launched a new initiative – called the New Economy System of Planning – to bring more market elements to the GDR economy. Now industrial groups, not bureaucrats, can actually decide how money can be spent. The reform also elevated the status of technology sectors like semiconductor manufacturing in the economy. R&D spending increased by over a third from 1959 to 1963. In 1965, nearly 40% of the electronics that the GDR produced by value were semiconductors – 82 million marks out of 223 million marks in total. Four years later in 1969, that number grew four-fold. Many of these transistors went into new consumer technical goods like radios, TVs and fridges. In 1971, semiconductor production reached 535 million marks by value. That year, East Germany began producing their first integrated circuits, some 10 years after Texas Instruments did it.

  • “Strange inequalities in policy planning meant that color televisions were widely available, but consumer items like toothbrushes and toilet paper were in short supply.” Communist planning at its finest!

  • One day in 1967, the Minister of Electrical Engineering and Electronics showed up to an East German electronics firm with a suitcase full of integrated circuits from TI. He told them to copy them exactly. The Ministry for State Security – better known as the Stasi – had been engaged in scientific and technology espionage since the 1950s – mostly related to atomic engineering and other sciences. Then in 1969, the Stasi’s Scientific and Technical Sector was reorganized and expanded with the goal of acquiring military technologies. After Honecker came into power in 1971, the Stasi’s job shifted from acquiring scientific knowledge to specific technologies – mostly via informants in the West who found and handed the goods over to East Germany. One such informant was Hans Rehder, a physicist working for the West German firms Telefunken and AEG. He handed over technical secrets for over 28 years and was never caught.

  • “Western companies knew about this copying of course. In one famous example, a GDR chip analyst looking at a stolen chip from the US firm Digital Corporation saw a message n Russian, roughly translating to: ‘When do you want to stop to swipe. Own design is better.'”
  • Stasi intellectual theft kept them from falling further behind, but couldn’t close the gap. “Because the Stasi were spymasters not technical experts, they frequently asked for the wrong item. Their methods of laundering the technology before passing it on made it harder to understand how to use it. Tightening embargoes from the West also interfered with industrial development. Stolen Western products got progressively older and more expensive to acquire. The embargoes gave other countries the chance to scam the Stasi, adding mark-ups frequently in the range of 30% to 80% to even 100%. This drained the East Germans’ already limited R&D budgets.”
  • “The wholesale copying also undercut the country’s ability to export its goods abroad. The Stasi did not want other countries to see what they had managed to acquire. And had they tried anyway, sales would have been blocked on patent infringement grounds. And finally, semiconductors were getting to the point that East German technicians struggled to replicate them. As early as 1976, an IC’s physical form no longer yielded secrets on how to produce them.”
  • “In 1981, with the GDR still about 7-10 years behind the West in microelectronics development, Erich Honecker announced a ten-point program to produce the majority of its semiconductors domestically by 1985. The 1970s were rough years for the GDR. Tighter export bans. The Oil Crises of the 1970s. Heavy borrowing from the West. Declining productivity and worsening competitiveness. It was all weighing heavily – grinding the country’s economy to a halt. Gerhard Schürer, head of the State Planning Commission, convinced Honecker that investing in semiconductors would bring the country out of its economic morass.”
  • They even struck a deal with Toshiba.

    In exchange for 25 million marks, Toshiba – a long running technology  partner with the GDR – would furnish the GDR with designs for their 256 kilobyte memory chips along with instructions on how to produce them. At the time, 256-kilobyte was leading edge stuff. The GDR was still struggling to produce 64 kilobyte memory. This would have been a game-changer. But in 1987, Toshiba got caught selling submarine propeller equipment to the Soviet Union. Huge scandal back then. Afraid of getting caught again, Toshiba offered the Stasi a 95% refund to destroy the evidence. [Spy Gerhardt] Ronneberger agreed. So in July 1988, he got the money back and dissolved the chip designs in a vat of acid in front of Toshiba’s people. But never trust a spy! Those were just copies, produced for exactly that purpose.

  • Finally in September 1988, Zeiss General Director Wolfgang Biermann triumphantly presented Erich Honecker with the first samples of that 1 megabit chip – the U61000. Honecker said that the chips were “convincing proof that the GDR is maintaining its position as a developed industrial country.” This technical “triumph” was the bitterest of them all. In semiconductors, prototypes mean nothing. Production means everything. Dresden produced just 35,000 chips throughout the entirety of 1988 and 1989 with a yield of 20%.

    To say this was “piss poor” would be an understatement. Those are ruinous, “fire everyone” numbers for actual semiconductor manufacturers.

    They planned to scale up to 100,000 1 megabit chips each year. Toshiba alone produced that many in a single day. Two months later in November 1988, the leading edge moved once more. Toshiba began shipping its 4-megabit DRAM in high volume, seeking to produce a million chips a month by March 1989.

  • Then history happened. “By then, the East German economy was in shambles,  scheduled to default on its debts by early 1990. It never even got there. In May 1989, Hungary opened its borders with Austria and East Germans swarmed through there en route to West Germany. Later in November 1989, a year after its one megabit technical triumph, the Berlin Wall fell.”

    • East Germany stole as many designs as they possibly could, but they couldn’t steal the intellectual expertise behind the numerous process tweaks, nor the furious swarm of technological innovation drive by Silicon Valley’s capitalist high risk/high reword startup culture that drove Moore’s Law for decades.

    Top-down communist command economies never had a chance to keep up.

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    Posted in Communism, Economics, video | 4 Comments »

    LinkSwarm for November 12, 2021

    Friday, November 12th, 2021

    Biden takes his Welcome Back Carter cosplay to the next level, fighting the plague of wokeness, and more disasterous Kyle Rittenhouse prosecutor missteps. It’s the Friday LinkSwarm!
    

  • As if high inflation, high unemployment, rising crime, parental unrest over failing schools and a new ABBA album weren’t enough to evoke the late 1970s, now Iranian-backed militias have stormed an American embassy in the Middle East and taken hostages:

    A group of Houthi rebels reportedly stormed the U.S. compound on Wednesday seeking “large quantities of equipment and materials,” according to regional reports translated by the Middle East Media Research Institute. The raid comes just five days after the Houthis kidnapped Yemeni nationals who work for the U.S. embassy. “The alleged raid comes after the Houthis kidnapped three Yemeni nationals affiliated with the U.S. Embassy from one of the employee’s private residences in Sana’a on November 5,” according to MEMRI. At least 22 other Yemenis were kidnapped by the Houthis in recent weeks, “most of whom worked on the security staff guarding the embassy grounds,” according to MEMRI.

    The State Department confirmed to the Free Beacon that the Yemeni staffers are being detained without explanation and that the Iran-backed militants stole property after breaching the American facility in Sana’a, which housed U.S. embassy staff prior to the suspension of operations there in 2015.

    Next up: Pet Rocks and auras.

  • Today’s columnist decrying wokeness among Democrats is…Maureen Dowd in the New York Times?

    For a long time now, people have been watching the spectacle of Democrats grinding away at the sausage and fighting for their piece of the pie (to make a metaphoric meal). And it has not been a pretty picture.

    The question raised by Tuesday’s debacle for Democrats is: Now that President Biden’s high poll ratings and good will are squandered, how do they turn the mishegoss into a winning message?

    There’s some truth in what James Carville told Judy Woodruff: “What went wrong is this stupid wokeness. Don’t just look at Virginia and New Jersey. Look at Long Island, look at Buffalo, look at Minneapolis, even look at Seattle, Wash. I mean, this defund the police lunacy, this take Abraham Lincoln’s name off of schools.”

    There’s also some truth in what Representative Abigail Spanberger, a moderate Virginia Democrat in a tough re-election battle, told The Times’s Jonathan Martin and Alexander Burns about the president: “Nobody elected him to be F.D.R., they elected him to be normal and stop the chaos.”

    Biden has pursued his two bills with Captain Ahab-like zeal; he pines to be F.D.R. and eclipse Barack Obama, who pushed him aside for Hillary.

    It’s Dowd and the Times, so I can’t say read the whole thing. But even Dowd can smell a dead fish rotting…

  • Kurt Schlicter: “Americans Are Waking Up To The Democrat’s Race Hustle.”

    he smart, moral transcriptionists of our glorious ruling class have discovered what they contend is a terrible crime of wickedness – those rural monsters out there whose skin tone is pale voted for Republicans in astounding numbers. Blatant “whiteness” they call it, a malady that people who aren’t white can suffer from too. Just ask Winsome Sears. And so can the other minority voters who ditched the Democrat plantation in record numbers. But they also contend that voting for Democrats because of your race is great. If consistency is the hobgoblin of little minds, these people are totally hobgoblin-free.

    As a normal person, you will observe that this all makes no sense. That’s incorrect, because it makes perfect sense when you understand that all this race hustling is a garbage scam to secure the liberal establishment’s power. It’s morally illiterate, but the moral angle is part of the scam. See, voting for a Democrat or a Republican, to most folks, is just a thing. It’s morally neutral. Now, many vote for a party by habit. Others vote by the individual or by policies. Keeping the former group and coercing the second are the goals of racializing elections in order to cast casting your vote as a moral imperative.

    Republican, bad.

    Democrat, good.

    Dig through the dross of “privilege” and “whiteness” and you get to the crux of the scam. They use race to turn what should be a choice based on rational self-interest into one based on (alleged) virtue. Suddenly, a vote for the Dem is not something Dems need to earn through competence and quality. It is something they are simply entitled to because they are on the side of righteousness. And this is super convenient because the Democrats just suck. They are terrible. Not even a year in and President * has managed to screw up everything his dusty claws have touched.

    This, you should read the whole thing…

  • Another Virginia post-mortem:

    There were two main reasons that Virginia swung: government overreach from a party that claims to be advocating for middle class freedom, and willful ignorance (i.e. government under-reach) about the state of the economy, and inflation, in our country.

    There’s no doubt that a tone of government overreach has grown to a fever pitch since President Biden took office. Whether it is forcing children to wear masks at school, counter-intuitive vaccine mandates which have resulted in the loss of thousands of jobs, or the idea of indoctrinating children too small to even read or write properly with elements of critical race theory, my guess would be that Virginians have simply had enough government in their lives for the time being. And another guess is that the swing state is likely a barometer for a large portion of the rest of the country.

    Nearly everything that the Biden administration has done since he has taken office has likely appeared to centrist voters to be counterintuitive: he turned our country’s exit from Afghanistan into a humanitarian and economic travesty, he has pushed a Soviet-style propaganda campaign for vaccination mandates and most recently introduced the bizarre idea of paying $450,000 to the families of illegal immigrants separated at our border.

    “It is bizarre,” a family member who voted for Biden said to me this weekend, while discussing Biden’s proposed $450,000 payments.

    And therein lies a key axiom: there comes a point where even the most fervent Democrats realize that they have to side with common sense, even if it means disagreeing with the candidate they voted for. I am guessing that this is the principle that helped drive so many anti-Donald Trump voters in Virginia back to the sensibility of conservative government.

  • This is really bad news: “Metallurgist admits faking steel-test results for Navy subs.”

    A metallurgist in Washington state pleaded guilty to fraud Monday after she spent decades faking the results of strength tests on steel that was being used to make U.S. Navy submarines.

    Elaine Marie Thomas, 67, of Auburn, Washington, was the director of metallurgy at a foundry in Tacoma that supplied steel castings used by Navy contractors Electric Boat and Newport News Shipbuilding to make submarine hulls.

    From 1985 through 2017, Thomas falsified the results of strength and toughness tests for at least 240 productions of steel — about half the steel the foundry produced for the Navy, according to her plea agreement, filed Monday in U.S. District Court in Tacoma. The tests were intended to show that the steel would not fail in a collision or in certain “wartime scenarios,” the Justice Department said.

    Snip.

    “Ms. Thomas never intended to compromise the integrity of any material and is gratified that the government’s testing does not suggest that the structural integrity of any submarine was in fact compromised,” Carpenter wrote. “This offense is unique in that it was neither motivated by greed nor any desire for personal enrichment. She regrets that she failed to follow her moral compass – admitting to false statements is hardly how she envisioned living out her retirement years.”

    So, she just harmed national security and endangered the lives of American servicemen because she was lazy as fuck. Oh, that makes it all better…

  • Legal Insurrection continues to keep track of the Kyle Rittenhouse trial.

    Today was the fifth day of the trial by which ADA Thomas Binger’s is seeking to have Kyle Rittenhouse convicted and sentenced to life in prison for having shot three men (two fatally) the night of August 25, 2020 in Kenosha WI, when the city was suffering a tsunami of rioting, looting, and arson following the lawful shooting of a knife-wielding Jacob Blake by Kenosha police officers.

    And it would be hard to fully express what a catastrophe this day was for Prosecutor Binger.

    The prosecution’s demise came into the courtroom in the form of its star witness, Gaige Grosskreutz, famously struck in the right bicep as he closed on the fallen 17-year-old with a Glock pistol in his hand.

    Grosskreutz is the only survivor from among the three men who were struck by Kyle’s desperately fired rounds, and the only one of Kyle’s attackers available to testify for the State in this prosecution (the fourth primary attacker, “jump kick man,” had the unbelievably good fortune to be missed twice by the 17-year-old, and has since disappeared off the face of the Earth).

    Grosskreutz is fortunate that modern American courtrooms don’t do trial by combat, because otherwise he’d have been carried out of the courtroom mortality wounded by his own testimony.

  • One person waking up: Young Turks co-host Ana Kasparian.

    Kasparian said she thought Rittenhouse first chased after Joseph Rosenbaum, sparking the incident that ended with the teen fatally shooting Rosenbaum. However, it was Rosenbaum who chased after Rittenhouse. Moreover, a gun was fired from a third party just seconds before Rittenhouse fatally shot Rosenbaum.

    “I was wrong about that, okay, so I want to correct the record,” Kasparian said on her news show. “Look, these details matter, because if you’re going to make an argument that you acted in self-defense, there needs to be some proof that there was an imminent threat.”

  • Some Rittenhouse trial tweets:

  • “The Italian Higher Institute of Health has drastically reduced the country’s official COVID death toll number by over 97 per cent after changing the definition of a fatality to someone who died from COVID rather than with COVID.”
  • Democrats might do better electorally if they weren’t so rabidly hostile to the Second Amendment.

    Based on the absolute ass-kicking delivered to the Democrats last Tuesday in my home state of Virginia, you’d think they’d get the message that maybe its time to move on from their goals of disarming American citizens. Based on the reaction so far,though the Democrats are in deep denial or simply unwilling to waver on their commitment to denying Americans their Second Amendment rights, and disparaging those who exercise them.

    Witness the reaction to Republican Winsome Sears winning election as Lt. Governor in Virginia. Sears is the first Black woman to win statewide election in Virginia, but Democrats by and large have preferred to focus on the campaign ad with her proudly holding an AR-15. In fact, Saturday Night Live’s Michael Che declared that the picture was actually good news for Democrats, because “nothing will get Republicans to support gun control faster than this picture.”

    Che should come hang out with me in central Virginia sometime. I guarantee that conservative white folks are far more comfortable with Winsome Sears (or himself) owning an AR-15 than his white liberal neighbors in New York City. The “tolerant Left” is never more bigoted than when it comes to conservatives of color, which is evident when it comes to the Left’s collective disdain over Sears’ embrace of the Second Amendment.

    Combine the “everyone who disagrees with me is racist” argument with a “and hell yes we’re coming for your guns” and it’s no wonder that Democrats couldn’t even muster 20% of the vote in more than a dozen rural Virginia counties. Heck, my own county, which went for Barack Obama twice before flipping to Trump in 2016, saw Democrats get less than 40% of the vote, which is a big deal. And I know firsthand how important gun control was for many of these voters, who knew that Terry McAuliffe was going to try to ram through his gun and magazine ban if elected. These folks have as much disdain for most Republicans as they do Democrats, but there was no way they were going to sit out this election.

    While there are some Democrats sounding the alarm bell, none of them are highlighting the need for the party to ghost the gun control lobby.

    Spoiler: Democrats aren’t going to change course because they are radically, institutionally hostile to civilian gun ownership.

  • What. The. Hell. “Police Visited a Person Who Criticized AOC on Twitter.”
  • Problem: Too many minority students fail tests. California solution: Toss aside objective standards and eliminate tests. That’s like this solution:

  • “Black Lives Matter Is the Real Domestic Terrorist Threat.” They’re currently threatening to burn new York City some more. “Democrats at the highest levels have been giving BLM cover since the group was founded. They either excuse BLM’s violence as some part of a protracted mea culpa, or they deny that the violence is happening at all.” (Hat tip: Stephen Green at Instapundit.)
  • MIT caves to wokeness.

    The current MIT administration has caved repeatedly to the demands of “wokeness,” treating its students unfairly, compromising the quality of its staff, and damaging the institution and academic freedom at large.

    We object to MIT’s politically correct measures, including the firing of its Catholic chaplain. In the early days of the George Floyd protests, before the details of Floyd’s death were clear, Father Daniel Moloney sent a letter outlining his thoughts on the event to the university’s Catholic community. It was a sincere examination of conscience from a person whose job it was to examine conscience, yet it prompted his immediate dismissal. MIT’s leadership apparently took umbrage at his statement of these simple facts: that George Floyd “had not lived a virtuous life” (based on his multiple criminal convictions) and that “most people in the country have framed [Floyd’s death] as an act of racism. I don’t think we know that.”

    Moloney did not present these statements as justification for Floyd’s death; to the contrary, his letter begins, “George Floyd was killed by a police officer, and shouldn’t have been.” But MIT found the letter intolerable and fired the chaplain. (We are not Catholic, by the way, but believe fairness transcends religion.)

    We also deplore MIT’s new mandatory diversity training. In the autumn of 2020, MIT sent an email to new and current students informing them that they would be unable to register for spring classes if they failed to undergo wokeness instruction. In the email, MIT outlined two required trainings: one on “Diversity, Equity, and Inclusion,” and the other entitled “Sexual Assault Prevention Ongoing: Healthy Relationships.” Portions of the training materials are available here. The compulsory videos contain deftly worded but fatuous questions implying that straight white males are at the “intersection” of all oppressive behaviors. Everyone else is an oppressed victim, with extra points for being a member of multiple minority groups. Thus, the concept of “intersectionality” is a kind of conspiracy theory of victimization.

  • The war against Critical Race Theory Texas classrooms takes a scalp.

    The Black principal of a majority-white Texas high school who has been embroiled in a controversy over critical race theory was forced to resign after months of accusations that he indoctrinated students.

    The Grapevine-Colleyville Independent School District board of trustees voted Monday to part ways with the principal, James Whitfield, who was suspended this year at Colleyville Heritage High School in the Fort Worth area.

    The school board had voted in September not to renew Whitfield’s contract, NBC Dallas-Forth Worth reported.

    Whitfield is the principles who accused residents of “systemic racism” and demanded students “commit to being an anti-racist.” (Hat tip: Push Junction.)

  • Enes Kanter refuses to sweep Chinese oppression under the rug:

  • General Electric is splitting into three companies, “aviation, healthcare and energy.”
  • Toshiba is also breaking itself into three parts, infrastructure, semiconductors and devices. Toshiba used to be one of the top semicodnuctor companies in the world in the 1980s, but I thought they had spun off semi operations as Kioxia in 2018.
  • YouTube disables dislike button because they don’t approve of you being able to dislike things they don’t want you to dislike.
  • F. W. de Klerk, the South African leader who freed Mandela and ended Apartheid, dead at 85.
  • What happens when you apply pitch correction to Robert Plant? Abomination.
  • Cloudflare lava lamps.
  • Library addition: A new book on the Tiger tank.
    

  • “I shall call him Mini-Me!”

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    Posted in Crime, Democrats, Elections, Foreign Policy, Guns, Jihad, Media Watch, Social Justice Warriors | 1 Comment »

    Remember When Japan Was Going To Take Over the World?

    Monday, February 13th, 2017

    Do you remember those fabulous 80s?

    Reagan was President, cyberpunk was new, and Jennifer Grey had a nose.

    Also, everyone knew that Japan was going to take over the world.

    Giant Japanese electronic companies like Sony, Toshiba and Fujitsu were leaders in their markets, Japan had a big export surplus, and Japanese companies were buying up iconic American assets like Rockafeller Center. Experts assured us that Japan was ascendant and that we needed to follow the “Japan Inc.” model of public/private partnerships, as well as the heavy vertical integration of the Japanese zaibatsu conglomerates, if we wanted to compete in the world market.

    It turns out that almost all that just about every aspect of that prescription was horribly wrong:

    Fast-forward 30 years. When one of Japan, Inc.’s leading corporations makes the news, as often as not it’s the result of an accounting scandal in which corporate profits were grossly overstated for years as a matter of policy–a policy intended to mask the stagnation in the company’s sales, product lines, competitive position and profits.

    What happened to the often-copied, much-vaunted Japan, Inc.? Many observers see Japan’s core problem as demographics: as its birth rate has fallen below replacement levels, the population of Japan is aging rapidly. Since young people start households and spend money, economic growth depends largely on the spending of young people rather than the declining spending of older people.

    While a decline in the youthful demographic certainly impacts growth, this view overlooks the larger problem: Japan, Inc.–its educational system, government, banking and corporate sector–was optimized for the mode of production that existed in the postwar world from the late 1940s to the late 1980s.

    Now that the Digital-Industrial Revolution is remaking the way goods and services are produced and distributed, the system that worked wondrously well in 1960 no longer aligns with the needs of this emerging mode of production.

    In the 1980s, Japan’s optimized-for-industrial-exports system reached its zenith, and many US pundits built careers predicting that Japan would soon eclipse the US in every economic and financial metric.

    But the excesses of Japan’s banking sector and the rise of new technologies that didn’t lend themselves to gradual improvement and vertically integrated corporations disrupted the predictions of Japan’s global dominance.

    Just as Sony ate the lunches of slower, less efficient American companies like RCA, soon the Japanese electronic giants found themselves being beaten by more nimble and disruptive international competitors like Apple and Samsung.

    Toshiba is now so broke they may need to spin-off their semiconductor business, despite it being the most central and profitable business in their company, probably because building a new state-of-the-art 300mm wafer fabrication plant for 10nm process technology can now cost up to $14 billion.

    Many other Japanese companies have been rocked by accounting scandals:

    In the five years since a $1.7bn accounting scandal was uncovered at Olympus, the number of improper accounting cases exposed each year in Japan has nearly doubled. It hit an all-time high of 58 cases in the 2015-16 fiscal year, according to Tokyo Shoko Research, which provides data on corporate failures.

    In many cases, the revelations have shone a light on malpractice and subterfuge dating back years — the legacy of management terrified of failure but left fighting decades of economic stagnation, squeezed costs and a shrinking domestic market.

    And those demographics don’t make anything easier:

    Children accounted for 12.8% of the population, the ministry said. By contrast, the ratio of people aged 65 or older was at a record high, making up 25.6% of the population. Jiji Press said that, of countries with a population of at least 40 million, Japan had the lowest ratio of children to the total population – compared with 19.5% for the United States and 16.4% for China…

    The proportion of people aged 65 or over is forecast to reach nearly 40% in 2060, the government has warned.

    Japan’s government has been running huge budget deficits since 2009, and debt now stands at about twice the size of the economy.

    For a while, the South Korean chaebol looked like they were going to supplant the Japanese zaibatsu as world beaters, but Samsung and LG have started running into some of the same problems.

    The lesson here is not “Merica, fark ye!”, it’s that capitalism works. The creative destruction of capitalism is necessary to keep economic progress moving forward. My biggest fear is that in his efforts to save American jobs, President Trump will prop up the GMs and Boeings of the world at the expense of smaller, nimbler competitors looking to supplant them.

    For the country’s long-term economic well-being, government should get out of the business of picking winners and losers entirely.

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    Posted in Economics, Foreign Policy | No Comments »

    Texas vs. California Update for June 2, 2016

    Thursday, June 2nd, 2016

    Time for another Texas vs. California update:

  • Once again, Texas is ranked as the best state for business by CEO Magazine, while California is ranked the worst. (Hat tip: Rider Rants via Pension Tsunami.)
  • This OC Register piece offers an good restatement of the general problem:

    California has earned quite a reputation for being openly hostile to business, as confirmed by numerous studies and surveys. Its plethora of taxes and regulations are driving away legions of entrepreneurs and workers, but they are doing wonders for one segment of the economy: the moving industry. It is almost as though that industry is secretly lobbying the state Legislature for its anti-business policies.

    Joe Vranich, as president of Spectrum Location Solutions, an Irvine business relocation consulting firm, knows all about what drives businesses’ decisions to give up and leave for greener pastures. According to his research, in just the past seven years, approximately 9,000 businesses have decided to leave California or expand their operations out of state. Companies leaving California typically save between 20 percent and 35 percent of operating costs, he concluded.

    Texas has been the biggest beneficiary of California’s business exodus.

    Snip.

    California’s litigious climate has become a common complaint of business owners. No wonder the American Tort Reform Foundation once again named California the No. 1 “Judicial Hellhole” in the nation last year, based on the state’s excessive laws and regulations and a flood of disability access, asbestos and food advertising and labeling lawsuits, frequently more opportunistic attempts at extortion than legitimate attempts to seek justice for victims who have been truly harmed.

    California has proven to be a particularly harsh climate for manufacturing businesses. “Even if California were to eliminate the state income taxes tomorrow, that still would not be enough,” CellPoint Corp. CEO Ehsan Gharatappeh told the Dallas Business Journal of the Costa Mesa company’s move to Forth Worth.

    General Magnaplate Corp., which has made reinforced parts for the aerospace, transportation, medical, oil and other industries for 36 years, decided to shut down its California facility in Ventura altogether. “This is a very sad day for our employees and for my family, who have a long history of job creation in this area, but the simple fact is that the state of California does not provide a business-friendly environment,” CEO Candida Aversenti said in a press release. “Increases in workers’ compensation costs and government regulations, combined with predatory citizens groups and law firms that make their living entirely by preying on small businesses, have left us with no other choice but to shut down our California facility. This is in stark contrast to our New Jersey and Texas facilities, which are flourishing in small business-friendly environments created by the respective local governments and environmental agencies.”

  • Tech layoffs double in the Bay area:

    Yahoo’s 279 workers let go this year contributed to the 3,135 tech jobs lost in the four-county region of Santa Clara, San Mateo, Alameda and San Francisco counties from January through April, as did the 50 workers axed at Toshiba America in Livermore and the 71 at Autodesk in San Francisco. In the first four months of last year, just 1,515 Bay Area tech workers were laid off, according to mandatory filings under California’s WARN Act. For that period in 2014, the region’s tech layoffs numbered 1,330.

  • How did the California city of Irwindale rack up the largest per household market pension debt in the state, at $134,907 per household?
  • Low and negative interest rates means that CalPERS must make risky investments to even come close to hitting their yield targets:

    The nation’s largest public pension fund, the California Public Employees’ Retirement System, has one-fifth of its assets in bonds and is down 1.3% since July 1, according to public documents. The system, known by its abbreviation Calpers, also has 53.1% of its assets in stocks, 9% in real estate and 9.4% in private equity. In 2015, Calpers posted a return of 2.4%, below its target rate of 7.5%.

    Nor is CalSTARS doing much better:

    The nation’s second-largest public pension plan, the California State Teachers’ Retirement System, has shifted a significant amount of money away from some stocks and bonds to protect against a downturn. It moved assets into U.S. Treasurys and so-called liquid-alternative funds, which mimic hedge-fund strategies. Calstrs, as the pension is called, reported gains of 1.5% during a choppy 2015, with returns on its fixed-income investments up just 0.6%.

    (Note: WSJ link, so you may need to do the Google thing.)

  • News: Former CalPERS chief executive Fred Buenrostro convicted of bribery. California: Buenrostro will continue to receive his CalPERS pension while in prison. (Hat tip: Pension Tsunami.)
  • Overview of the Texas budget.
  • UnitedHealth exits California’s Obamacare exchanges.
  • Despite that, California wants to offer ObamaCare subsidies to illegal aliens.
  • California also wants to spend more money to send illegal aliens to college.
  • And those illegal aliens with California driver’s licenses still aren’t purchasing liability insurance.
  • Hate California traffic? Tough:

    The newest outrage comes from the Governor’s Office of Planning and Research in the form of a proposed “road diet.” This would essentially halt attempts to expand or improve our roads, even when improvements have been approved by voters. This strategy can only make life worse for most Californians, since nearly 85 percent of us use a car to get to work. This in a state that already has among the worst-maintained roads in the country, with two-thirds of them in poor or mediocre condition.

    Snip.

    In essence, the notion animating the “road diet” is to make congestion so terrible that people will be forced out of their cars and onto transit. It’s not planning for how to make the ways people live today more sustainable. It has, in fact, more in common with Soviet-style social engineering, which was based similarly on a particular notion of “science” and progressive values.

    (Hat tip: Instapundit.)

  • Toyota’s Plano headquarters takes shape.
  • The UAW is making a big push to unionize Tesla’s Fremont plant.
  • Speaking of Tesla, they’re approaching the grand opening of their giant battery factory…in Nevada.
  • McDonald’s CEO says a $15 minimum wage will make his restaurants shift to using robots. But what would McDonald’s know about minimum wage workers?
  • In the same vein, it’s no wonder that Whole Foods opened it’s first semi-automated Whole Foods 365 store in Los Angeles. “Promoted as a ‘chain for millennials,’ the new ‘365’ stores use about one-third less square footage than the company’s traditional 41,000-square-foot Whole Foods stores, but they also slash almost two-thirds of workers with robots and computerized kiosks.” (Hat tip: Director Blue.)
  • Schedule for California high speed rail boondoggle pushed back four more years. Latest obstacle: wealthy equestrians. “Hey, this study says horses won’t mind a super-fast, super loud train zipping along right next to them.” “You mean the study from the institute that two bullet train authority members sit on? Get stuffed!”
  • “The State Assembly Subcommittee on Education voted Tuesday to delay funding to the UC system because of concerns with the UC Retirement Plan, proposed by UC President Janet Napolitano in March, which would cause the university to incur significant costs. The delay was announced after an actuarial report was released earlier that day by Pension Trustees Advisors, or PTA, which showed that the retirement plan would cost the university $500 million in savings, or $34 million a year, over the next 15 years.” (Hat tip: Pension Tsunami.)
  • Maywood, California (which had previously outsourced services to the corrupt city of Bell) is on the brink of bankruptcy. (Hat tip: Dwight.)
  • “Two L.A. sheriff’s deputies convicted of beating mentally ill inmate.”
  • San Francisco liberals versus the city’s police union
  • “Another aviation company has decided to move its corporate headquarters to Fort Worth to take advantage of the Lone Star state’s business friendly environment and the city’s longtime history in the aerospace industry. The move is historic for Burbank, California-based C&S Propeller — an FAA and EASA certified repair station for propeller and airplane maintenance — which has been in California for nearly five decades.”
  • This one’s a wash: XCOR lays off employees in both California and Texas.

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