One of the most encouraging recent developments in American public policy lately is the virtual disappearance of the idea that manufacturing boasts no special importance to the American economy. I guess that’ll happen when a pandemic reveals dangerous shortages of key medical equipment (and the long supply chains needed to supply equally key parts, components, materials and the production equipment to make all of these items).
Ditto for the loss by a U.S.-based company (Intel) of the global lead in the knowhow to produce the world’s most powerful semiconductors – which run not only the world’s exploding numbers of electronics devices and networks, but soaring percentages of production machinery, as well as lying at the heart of nearly all present and future defense-related goods.
But I’m far from taking this triumph for granted – no doubt because this victory has been so recent, and because I’ve spent so much of my career making the case for government promotion of manufacturing against a free market-worshipping opposition that not only represented an entrenched conventional wisdom, but that could vastly out-spend and therefore practically drown out us “industrial policy” supporters.
And that’s why I was so pleased to see an article just out from the Japanese publication Nikkei Asia that dramatically illustrated how a robust national manufacturing base can supercharge an entire national economy and its workforce’s well-being.
Nikkei Asia described the effect on Taiwan of the new expansion programs being carried out by its world-class semiconductor manufacturing company TSMC (the firm that, along with South Korea’s Samsung, has taken the global microchip manufacturing technology lead from Intel). TSMC’s planned growth is dramatic, largely because the CCP Virus and its effects have created such surging demand for and consequent shortages of microchips. Blame (or credit) the booming popularity of semiconductor-powered electronic devices critical for increasingly popular stay-at-home work and leisure, and the on-and-off jolts generated by the pandemic for giant semiconductor-using industries like the automotive sector.
Compounding the impact, according to authors Cheng Ting-Fang and Laury Li, is the trend of “other Taiwanese companies…bringing production home from China amid Beijing-US trade tensions.”
And the results? “Business has never been brisker for construction companies in Taiwan….” Consequently, wages are way up for construction workers with both ordinary skill sets and specialized knowledge. But even though labor shortages are evident, Taiwan’s government shows no signs of killing this living standards bonanza by trying to open immigration flood gates.
As explained by a manager in the construction industry itself, “Foreign workers are not the ultimate solution as the government sets limits on their entry and many positions, such as electroplating specialists, require professional knowledge.”
Bottlenecks are already appearing and more are sure to come. But it also seems that Taiwan’s businesses will be solving the problem in the way that brings the greatest, most broadly shared national benefits – with technological and managerial innovation (i.e., by improving productivity) rather than by suppressing wages via artificially pumping up Taiwan’s labor supply.
At the same time, it’s not just workers that are in great demand on Taiwan. As the Nikkei Asia article specifies, “Cranes, trucks, excavators and all manner of heavy vehicles stream in and out of the vast construction site for” TSMC’s new advanced semiconductor factory in the city of Tainan. So the need for these machines is pressing, too – and thus for the workers and machinery needed to turn them out.
Is there a downside? Absolutely. Higher wages (and they’ve advanced throughout the economy) have driven major real estate and housing price increases (though the wage hikes indicate that affordability remains pretty much the same, and therefore bubble fears are unwarranted so far). And Taiwan’s water supplies and other infrastructure systems are under strain.
Overall, though, I’d bet on Taiwan to cope successfully with these and other actual and potential problems – which most other countries would actually love to have. And that’s precisely because, to a practically unrivalled extent, the country knows how much manufacturing matters.
Full disclosure: I own some TSMC stock.