Impact of semiconductor industry on macroeconomic cycles
Among the various sectors that comprise that U.S. economy, the semiconductor industry for one plays a potentially crucial role in mitigating the effects of the natural macroeconomic cycles.
As such, a business model for the semiconductor industry is deemed necessary that takes into consideration the macroeconomic cycles, and also to avoid a huge unemployment during economic downturns.
As explained in my previous blog, these macroeconomic cycles, which last seven years to 14 years, are beyond the control of any human being, corporation or nation. Of course, high unemployment created during an economic downturn translates into substantial costs for the government in providing unemployment benefits.
Unemployment and economics
As the government works minimising spending during an economic downturn, we must also work to minimise the problem of unemployment. Hence, the semiconductor industry business model should be able to establish a free market economy where wages of employees automatically catches up with employee productivity in spite of economic downturns. Only when the wages catch up with productivity can supply and demand grow or fall in proportion. When this kind of a balanced economic growth is achieved, there would be a minimal overproduction of electronics in an economic downturn.
By reducing the overproduction of electronics, layoffs could be avoided. As I explained in my article “A Failure Analysis of U.S. Economy,” layoffs occur when real wage fails to catch up with productivity and poor consumption overproduction of goods. On my recent trip to India, a local TV station interviewed me about the state of India’s economy and India’s Budget 2015. I was also asked about how India’s “Make in India” policies and solutions sustainably create jobs. In this interview, I made a forecast about the coming global macroeconomic crisis, which I predict will happen by end of 2015 and which will be far severe than 2008 global financial crisis.
Semiconductor’s take on the U.S. economy
In “Mass Capitalism: A Blueprint for Economic Revival,” I proposed blueprint for revival of U.S. economy and particularly its semiconductor industry. In this book, I analysed the existing economic models in U.S. semiconductor industry from a macroeconomic perspective. Based on this analysis, I was able to put forth a free market business model that would ensure broader prosperity and growth of entire industry and change the thought process of the semiconductor industry professionals that it will be physics and not economics that will eventually lead to the demise of Moore’s law. In this proposed business model, the existing defects in present fabless-foundry business model that result in trade and budget deficits have been rectified. It also ensures a robust free market balanced economy that would boost the consumer purchasing power of economy.