DARPA's Economic Fix: Run All Industries Like the Semiconductor Industry

By Clay Dillow Posted 01.21.2010 at 12:31 pm 10 Comments

U.S. Industry United we fall. Divided we flourish. Uwe Hermann

Ask a GM employee, any barstool economist, or your dad, and they'll all likely tell you the same thing: American manufacturing ain't what she used to be. But who will think us out of this economic box we've trapped ourselves in? DARPA, of course. DARPA's director told the President's Council of Advisors on Science and Technology (PCAST) that by replicating the successful model that the semiconductor industry is built upon, other manufacturing sectors can experience similar booms as well.

DARPA -- better known for seeking flying cars and weather control devices -- is currently integrating more than 20 programs that have implications in the manufacturing sector, synthesizing ideas that collectively have $200 million federal dollars backing them up. The key tenet of DARPA's plan: decouple the manufacturing and design processes.

The problem, DARPA director Regina Dugan told PCAST, is this: vertical integration has become inefficient, dragging creative companies down with costs associated with maintaining manufacturing facilities. "The seams between each stage of development; between design and prototyping, early production runs, limited, and large scale manufacturing ... create extensive rework and are the source of production delays, surprises, and cost overruns," Dugan said in her statements to PCAST.

The semiconductor industry, on the other hand, designs products and relies on semiconductor foundries to manufacture -- even to prototype at the prototype stage -- their products. These fabrication-less firms focus on innovating and leave the core manufacturing to the foundries, which distribute their costs across the products of many companies. The result is greater efficiency on both ends; designers focus on innovating and manufacturers are never idle waiting on the next big idea from upstairs.

In proper DARPA fashion, details concerning this great economic panacea are scarce. That's probably because, while this sounds good from a macro perspective, a closer look at America's manufacturing sector reveals diverse industries across which the semiconductor paradigm might not necessarily fit.

For instance, it's difficult to imagine a pharmaceutical company that spends tens (or hundreds) of millions on research, trials, and FDA approval just handing over its investment to a third party that likely also does business with its rivals. Nor does it seem particularly efficient for the manufacturer; stamping out a few-hundred thousand semiconductors is one thing, but the nuances of tweaking chemical compounds until they're just right seem more suited to trusted in-house experts.

Then there's the thorny issue of outsourcing; if we separate our creative process from the manufacturers who create the products, what's to stop U.S. companies from seeking less costly labor on foreign soil? Implementation also seems difficult. How would America, as a policy, force businesses to divorce their manufacturing operations from their product development arms?

But criticisms aside, this wouldn't be the first time DARPA stunned us with a game-changing idea that the skeptics didn't quite comprehend until later -- remember the time they invented the Internet? We'll remain cautiously optimistic for now.

[Physics Today]

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10 Comments

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Battleshield

01/21/10 at 1:46 pm

Surprisiingly little self-review by the author of this article:

"...it's difficult to imagine a pharmaceutical company that spends tens (or hundreds) of millions on research, trials, and FDA approval just handing over its investment to a third party that likely also does business with its rivals...."

Um, what do you think Chip Foundries do?

"...what's to stop U.S. companies from seeking less costly labor on foreign soil?.."

Further reading on the (foreseen) evolution of First world ountries would show that many analysts predict the next phase of American work-life to be one founded on Services and Information. Sure, some few of the 'old' style jobs will always remain, but for the most part we are moving to a non-manufacturing business model....

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Azorus

01/21/10 at 1:47 pm

Ya that will work, how about we just shoot all of Americas manufactures in the leg. Same effect. God forbid that we come up with a real model for each industry.

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deegeezee

01/21/10 at 2:55 pm

is there a sector of American manufacturing that hasn't already been outsourced? even the auto industry mainly assembles parts made overseas. textiles, electronics, housewares... none of it is made here.

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DerivePi

01/21/10 at 6:00 pm

Maybe industries are smarter about their own business than DARPA? All for new thinking, but forcing this as a gov't policy sounds like DARPA's in the wrong country (or they were a year ago).

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SVB

01/21/10 at 9:53 pm

Listen the only way us Americans are going to save our economy is if we start buying American made products. Did you know that in Japan its impossible to get an American made product that is less expensive than a japanese product? The japanese government purposely makes it cheaper to buy products made in Japan. THATS WHAT OUR GOVERNMENT NEEDS TO DO TOO!!! Our own government needs to encourage Americans to buy American made products and our government needs to give out incentives for doing it, like I dont know, maybe tax breaks or something like that.

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ford2go

01/22/10 at 2:32 am

Good model. I just reviewed a wiki on the subject and the US has ONE foundry in the top 18 -- it's number 13.

The rest are mainly in the Pacific Rim with the exception of one in Germany and one in Israel.

On the other hand many foreign auto manufacturers have built plants in the US. Despite the current downturn, they seem to like the concept.

Maybe DARPA should stick to technology -- especially as it applies to the military.

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USA020

01/25/10 at 1:11 pm

I agree with SVB above.
So much manufacturing has moved overseas that its ridculous.
The politicians and really big money are in bed with China so they will keep financing the US debt. Therefore, no action will ever be made to recapture it.
Can't compete with people who are being paid a tenth of what US employees make, oh, by the way the US dollar is dropping.
Hmmmmmm, maybe this is the plan after all.
Double dip.....

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soylent

01/26/10 at 3:06 pm

"The japanese government purposely makes it cheaper to buy products made in Japan. THATS WHAT OUR GOVERNMENT NEEDS TO DO TOO!!!"

You're aware that Japan has been in an ECONOMIC DEPRESSION for the last two decades right?

You want to know why? Because they haven't been able to keep their government from dicking about with the economy.

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riff_raff

01/30/10 at 11:29 pm

Apparently the irony of their statement is lost on DARPA. The semiconductor industry made most of their real productivity and cost improvements without any involvement from federal bureaucrats like DARPA.

We don't need to decouple the design and manufacturing functions as DARPA suggests. We simply need to decouple American industry from the tax and regulatory burdens imposed by DARPA's federal overlords.

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