In the fourth quarter of this year, chipmaker Intel’s new wafer-fabrication plant in the city of Dalian in Northeast China, a $2.5 billion capital investment three years in the making, will come online. The factory will produce chipsets to support Intel’s microprocessor business and will boast a workforce of 1,200 people.

Intel received a typically rich package of grants and tax incentives from China in order to build the plant there, according to Stacy Smith, the company’s CFO. “When we are thinking about building a factory, almost every government of a sizable, mature economy reaches out to us and provides financial incentives,” he told CFO.

The one exception? The United States. Indeed, this country continues to lose ground in the battle for high-tech jobs because of its lack of outreach to domestic companies, the finance chief said. Countries such as China and Singapore are ramping up efforts to build high-tech hubs and cooperate with U.S. companies to improve math and science curricula in schools, he noted.

“Other countries have very explicit national agendas to improve their infrastructure,” said Smith. “China is doing an awe-inspiring amount of investment, ranging from improving the electrical grid and broadband [networks] to [building] roads and airports. The gap starts to narrow between some of these places and the U.S.”

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Smith emphasized that Intel is still “bullish” on the U.S. worker. Yet while 50,000 of its 80,000 employees are based here, the company gets 75% of its sales outside the United States. While Intel is not interested in labor-cost arbitrage from offshoring plants, a key differentiator when choosing a site for a plant becomes the financial incentives provided, he said. Direct grants to offset the costs of worker training and capital investment are common, as are tax holidays and tax incentives.

Smith also sees deterioration in the education of the U.S. workforce. Even entry-level positions on Intel’s factory floors require some advanced technical training, and the plants also employ PhDs in material sciences and physics. But math and science curricula in primary-school systems in the United States are comparatively weak, he said, and the population of university students pursuing math, science, and engineering has dropped. “These are some worrisome signs,” said Smith.

While the American Recovery and Reinvestment Act of 2009 was a good step, it was focused on public works rather than technology. “Look at China’s stimulus bill,” said Smith. “It was very targeted to getting broadband and wireless infrastructure in place and closing the digital divide in terms of people with access to a computer. They see it as a national agenda, and that’s crucial to creating a knowledge-worker economy.”

Smith said the problem has been percolating for a long time and cuts across political boundaries. “Over the last several [Presidential] Administrations it’s toggled back and forth,” he said. “I would have said the same thing during every one.”

 

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