Margaret Atwood’s most recent novels ― “Oryx and Crake” and “Year of the Flood” ― describe an incredibly bleak political landscape dominated top to bottom by a collusion of government agencies and private enterprises called “CorpSeCorps.” The kingpin of a totalitarian society, CorpSeCorps has its fingers into everything commercial from oil cartels, to internet content, to fast food chains, to seedy strip joints and brothels. As in Atwood’s most famous novel, “A Handmaiden’s Tale,” women are sexually exploited. But in this world, there is a cash register attached to everything they do. Everything CorpSeCorps touches is milked for a profit.
I don’t quite share Atwood’s vision, though it makes for entertaining and thought-provoking reading. I could see CorpSeCorps as corrupt and lawless in their pursuit of power and profits, but not down to the level of sleaze. To my mind, there would have to be a buffer layer between corporate entities and local strip clubs (let’s call it “The Mafia”). With so many women in C-Level jobs these days, I just can’t see the society-wide treatment of women being dictated from the corporate boardroom… but… who knows? Unplug “CorpSeCorps” from Atwood’s narrative, and plug in “Wall Street,” and what do you get? What should we think when the US government hands out hundreds of billions of dollars in subsidies to Wall Street firms (on the supposition that they’re “too big to fail”), and encourages them to grow their profits ― not to hire unemployed workers, or to loan money to people in trouble ― just to grow their profits. What should we think when the government looks the other way as these Wall Street entities, after wringing their hands to congress, give multi-million dollar bonuses to their managers? Is there not something “sleazy” in that? Think about it: Atwood’s vision of Wall Street dictating to McDonalds the ingredients of a hamburger patty that would ensure 50% margins is not all that far-fetched.
It should shock no one, then, to think that Wall Street owns and runs the semiconductor industry. Wall Street dictates gross margins for semiconductor makers as surely as Atwood’s CorpSeCorps dictates the proportion of dead rats in a SecretBurger. They’ll encourage you to outsource, tell you when your investments in the next technology node have gone overboard, applaud when you fire people, and extract blood on your corporate debt. There are investors, to be sure, who understand the technology, who see the industry from a long-term perspective, and have deep respect for its people. But a muckraker, a yellow journalist like Michael Moore, looking at the connections between Wall Street and semiconductor industry, could have a field day.
I’m old enough to remember a time before Wall Street discovered the semiconductor industry: There was so much exuberance then, as well as foolishness. (Some of the most idiotic things would get venture funding.) There was something called the Friday Afternoon Beer Blast, a celebration of the week that went well. I remember going to lunch on a sunny Friday afternoon, and how, under the influence of California wine, conversation and fresh fish, one hour would turn into two, two hours would turn into three, and then it wouldn’t make sense to go back to your desk. But nobody would seem to mind. I worked for a semiconductor company then which boasted $278 million in revenues, and nearly 10,000 employees. These days, 30 years later, you eat lunch at your desk, and you’re lucky if your workload allows you time to run to a vending machine. Yes: There’s a big gap between free Fridays and a vending machine lunch, but it may be eye-opening to remember how and when we exchanged one for the other.
Bye, Bye three hour lunches…
Advanced Micro Devices (AMD), Intel’s most difficult parasite, if you can remember back to the early 1980s, had an analog division. At a time when data converter accuracy depended on 12-bit-accurate resistor ladders, AMD’s analog division was the first to show one that didn’t depend of laser trimming. The part ― celebrated with a cover story in Electronic Design magazine, as well as an International Solid State Circuits Conference (ISSCC) paper ― could maintain 12-bit accuracy (one part in 4096) with diffused resistors, a fact which would make it an order of magnitude cheaper than other 12-bit converters. It would be an exaggeration to say that the AMD part was a “hoax” (one, as an editor at Electronic Design, that I bought into), but the reality was that AMD could not manufacture this part reliably in high volume, and that the publicity was intended more to impress AMD’s CEO and chairman, Jerry Sanders, rather than any AMD customer base. Sanders didn’t bite: he pulled the plug on the company’s analog division, and plowed resources into AMD's second-sourcing deal with Intel on the x86.
What is significant is what occurred in the days following: Sanders went into an AMD stock holders meeting, beads of sweat visible on his forehead. The Shame! ― The Absolute Shame! ― he must have felt. His was among the first Silicon Valley companies to institute profit sharing, and he had done his best to avoid layoffs with recessionary downturns. But His company could not become the broadline supplier he had hoped it would be, and he had to let people go. He faced Wall Street as if he were a
I don’t know whether this was the first time the semiconductor industry had a massive layoff, but its positive impact on stock prices marked a turning point in how the industry would feel about its employees. The same thing occurred almost 10 years later when Ken Olsen, Digital Equipment Corp.’s CEO (remember “DEC”?) announced a large-scale layoff. His company’s stock price WENT UP. The message was absolutely clear at that point: It was no longer fashionable to hold onto employees because you felt some sort of obligation to them. Rather, they represented “fixed costs,” you just as well could do without. If you dumped them, Wall Street would approve.
While we may miss the Friday afternoon beer blast, or the three-hour martini lunch, it would be foolish to lobby for their return. Still, we might ask who benefits from 10-hour work days, and schedules so harried and compressed that we’re afraid to leave our desks to pee. A nominal productivity score for the semiconductor industry these days ― annual revenue per employee ― is about $300,000. Let me ask: Do you make $300K? (Let’s forget for a moment the issue of medical insurance; in these troubled times, some people would accept minimum wage ― become a bagger at Trader Joe’s ― just to have that.) How much do you think it costs your semiconductor industry employer to support your work? To pay your salary? To support a year’s worth of travel? To give you a cubby, a desk, a telephone, computer and software tools? To keep the lights and air conditioning on? Does this add up to $300K per employee? If not, if your costs to your employer add up to $200K (and this would amount to something like a 30% operating margin), where do you think the other $100,000 is going? Do you own stock in the company which keeps you employed? If not, why are you busting your hump? Somebody more politically inclined than me might see something operating here as dark and as sinister as Margaret Atwood’s CorpSeCorps: Armies of workers (hundreds of thousands of them) putting in 10-hour days, eating vending machine lunches, neglecting their home life, just to support profit-taking by a small minority of stock holders. And that minority, with its obsession with revenues, margins and earnings-per-share, effectively calls the shots for the rest of us.
Stock price dictates everything
Is not hard to see executive compensation, in this light, is an extension of Wall Street: Corporation presidents and CFOs are paid see the world through the eyes of their share holders. Their jobs are to keep the company’s stock price up. They do this, not by wrapping a paternal arm around a growing number of employees, but by keeping margins up, and fixed costs down. Certainly, it will be up to corporate managers to “strike deals” with investors: To retain enough revenue to support technology and manufacturing investments, product research and development, and, where necessary, to build or maintain a head count. But, with Wall Street beating the drum, we should expect expansion resources to be tight, and the focus on margins to be intense.
During the
Still, we can't help wondering about the side effects. A few years ago, KRON-TV reported a horror story, bound to rip the heart out of any young parent. A young office worker took turns with his wife bringing their infant son to a child care center on their way to work. The worker, thinking about the tasks he needed to finish one day, followed his habits and drove straight to the office ― totally forgetting the child strapped into a car seat in the back. In the heat of the
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