Stratechery A Chance to Build
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Nov 18, 2024 This discussion highlights the pivotal role semiconductors play in Silicon Valley's growth and how venture capital shaped tech startups. It examines the geopolitical landscape of semiconductor manufacturing, particularly the rise of Asian companies and U.S. trade policies. The conversation dives into the Biden administration's tariffs on Chinese electric vehicles and the engineer shortage affecting American industries. Additionally, it explores how complementary product pricing impacts market dynamics and the evolving global trade environment.
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Venture Capital and Silicon Valley
- Silicon Valley's venture capital model thrived due to high upfront investment and low marginal costs of chips.
- This model was further amplified by software's perfect replicability, driving immense returns at scale.
Early Offshoring in Chip Production
- Fairchild Semiconductor, founded by the "Traitorous Eight", opened facilities in Hong Kong, Taiwan, and Singapore.
- These locations offered significantly lower labor costs for chip assembly and testing compared to US wages.
US Government's Role in Chip Offshoring
- The US government aided chip offshoring with the Tariff Classification Act of 1962.
- Tariff Item 807.00 minimized tariffs on assembled chips, making Asian labor even more cost-effective.