Kirk Ladendorf and Dan Zehr, Austin American-Statesman, Obama pitches high-tech manufacturing vision
May 10, 2013
President Barack Obama capped off his trip through Austin on Thursday with a visit to Applied Materials, where he told more than 1,000 employees and visitors that the government can play an important role in expanded high-tech manufacturing in the country.
“We’ve got to do everything we can to help the kind of high-tech manufacturing that you’re doing right here at Applied,” the president said. “And we want to make sure it takes root here in Austin and all across the country. And that means, first of all, creating more centers of high-tech manufacturing.”
Earlier in the day, the White House announced it would push to get funding for three new “manufacturing innovation institutes,” opening up a nationwide competition for centers focused on digital manufacturing and design, lightweight and modern metals, and next-generation power electronics.
“We want the next revolution in manufacturing to be ‘Made in America,’” Obama said.
The frigid clean room where he spoke provided a fitting backdrop for his efforts to encourage innovation, education and meaningful job creation. California-based Applied Materials produces the extremely precise equipment used to manufacture semiconductors.
But the setting also underscored the increasingly difficult task of rebuilding a manufacturing base that once supported a robust American middle class. At the height of the 1990s tech boom, Applied Materials employed about 4,500 workers in Austin. That’s down to about 2,500 workers today.
Automation and global labor competition have chipped away at the traditional notion of American’s manufacturing middle class. The work on the factory floor has drifted toward higher- and lower-skilled jobs, with a hollowing out of the middle tier.
Offshoring has accelerated that bifurcation, and the more recent trend to re-establish production activity in the U.S. isn’t expected to offset the shift, experts said. While returning factories will help boost the country’s output, more-automated facilities will require fewer workers.
With the manufacturing innovation institutes, part of a job-creation program Obama initially laid out in his State of the Union speech in February, the White House hopes to faster advanced-manufacturing operations throughout the country.
To some extent, the initiative resembles Sematech, the semiconductor-industry consortium that helped spawn a chip industry in Austin and put Central Texas on the country’s high-tech radar. Sematech produced an array of advanced chip-manufacturing techniques and spawned thousands of jobs at local fabs, including a strong core of middle-class positions.
Yet Sematech’s long-term impact on middle-class job creation — the stated goal of Obama’s manufacturing initiatives — has deteriorated in recent years, decimated by the same combination of task automation and cheaper foreign labor that whipsawed American manufacturing as a whole.
The semiconductor-manufacturing industry in Austin shed more than 8,000 jobs from 2001 to 2012, a 45.6 percent drop, according to EMSI, an economic consulting firm. With production largely entrenched in Asia, facilities like the Applied Materials, Samsung and Freescale outposts in Austin are true outliers.
“There will not be enormous numbers of jobs created in manufacturing,” said Harry Holzer, a public policy professor at Georgetown University and former chief economist at the U.S. Department of Labor.
Of the jobs that do spring up, Holzer said, most will fall into two categories — unskilled jobs that pay low wages; and high-skilled jobs, such as machining, that often require a degree or certification beyond high school.
“But we have to be clear,” Holzer said. “We’re not talking about the good, durable manufacturing jobs that provided employment for less-educated men a generation ago.”
Despite the potential limitations on middle-class job creation over the long term, Obama’s advanced manufacturing initiatives could spur significant advances in terms of output and innovation. While U.S. manufacturing payrolls are sharply down, overall production is rising. In Austin, for example, manufacturers have cut 38 percent of their payrolls since 2001, a net loss of more than 30,000 jobs, according to data from the Texas Workforce Commission.
Over the same period, however, output has skyrocketed. Manufacturing now accounts for 20 percent of the local economy, up from 9 percent in 2001 and now the largest single sector in the area, according to a study by Civic Analytics, a local economic consulting firm.
Furthermore, these new manufacturing centers could push existing industries down new and fruitful paths — perhaps establishing hubs of innovation around the country like Sematech did in Central Texas.
“A lot of stuff got pushed down into the system that changed the place,” said Pike Powers, one of the key forces in bringing Sematech to Austin. “We didn’t intend it to be a permanent institution. We intended it to be an institution that disrupts.”