Are Runaway Jobs the Bitter Fruit of Silicon Valley?
by David Bacon
SANTA CLARA, California (7/25/94) - The Plaza de Manila restaurant used to be filled with hungry workers at lunchtime, with lines stretching from its buffet table into the parking lot. Immigrant Filipino production workers from the semiconductor plants thronged into the Sunnyvale lunchspot for food which reminded them of home - fragrant adobo, musky-flavored dinaguan and crunchy-skinned lechon.
The food is as great as ever, but the workers have disappeared. Most of the tables are empty now at lunchtime, even though Mercy Sagun, the Plaza's owner, has cut the prices in half. "We've lost hundreds of customers," she says. "For the last two years, many old friends have come in and told me they wanted to eat one last meal here because today was their last day of work."
Over half the production workers in the semiconductor plants are Asian. And of the various Asian nationalities, Filipinos outnumber all the others combined.
"What this really means," according to Romie Manan, who was a production technician at National Semiconductor until he was laid off earlier this year, "is that Filipino workers have lost their jobs by the thousands, more than any other national group."
Manan is a deceptively quiet man, who lives with his brother and his sister's family in Milpitas. A shock of black hair frames an open, brown face, and intense black eyes. As he talks, he rubs the thumb of his right hand. Half the flesh is missing. He explains that years ago hydroflouric acid infiltrated a glove he was wearing as he cleaned the quartz tubes used in the ovens which bake the semiconductor wafers. Hydroflouric acid passes through flesh, and attacks the bone underneath. The doctors who treated Manan long ago had little expertise in dealing with this type of injury, and cut his contaminated flesh away from the bone in his hand.
Of all the things Manan takes with him as he leaves his job of fifteen years, his memories of the accident that night in National's Building A, and the missing part of his thumb, will last him the longest.
That accident, thirteen years ago, forced him to look critically at his job, he says, and at the working conditions of the other people around him. It gave him a reason for trying to organize a union in the factory, and when that attempt was unsuccessful, made him the most vocal and critical semiconductor worker in Silicon Valley. Manan was a trade unionist in the Philippines before immigrating to the U.S., and that experience gave him higher expectations for workplace rights than many of his coworkers, he believes.
Most other semiconductor workers have not been as outspoken. So long as the plants offered steady work, most Filipino workers in particular, Manan says, felt that criticism could cost them their jobs. But with the waves of layoff over the last few years, quiet acceptance has changed to growing anger.
Like many production workers in the semiconductor factories, Vicente and Anita Angel lost their jobs after working for the same company for over a decade. "In our fab," Anita Angel remembers, "we were a happy group. We were all friends, we had potlucks, we worked together like a team. Now we're very worried about losing our home, since we don't have enough money to pay next month's house payment. We're willing to accept any kind of job, but it's hard because we're older workers."
Vicente is 61 years old. Anita is 57. After immigrating to the U.S. from the Philippines, they both got jobs in 1979 at the National Semiconductor plant on Kifer Road in Santa Clara. They started working at $3.25/hour, and by the time they were laid off, they were making over $11.00/hour as production operators. They both worked on the wafer fabrication lines, using complex and potentially-dangerous processes to produce the tiny integrated circuits which are the brains of all electronicequipment.
Like most workers for the big manufacturing giants of Silicon Valley, the Angels felt that their jobs were very secure. They bought a modest, attractive home in Milpitas where they raised two children. Anita's two sisters also went to work for National, and bought homes as well. For the moment, the sisters are working, but the feeling of security is gone, they say, and they don't expect their jobs to last.
Vicente Angel recalls that "when our 18-year-old daughter heard that we lost our jobs, she joined the Army so that she could get health insurance to cover us. She knew we had no money for her to go to school anymore."
After months of layoff, and exhausting their unemployment benefits, Vicente found a job as a security guard at San Jose's airport. It pays close to the minimum wage, but, he says, it's better than losing your home. Other family members moved into the Angel house to help with the house payment, and got guard jobs at the airport too.
"When we were in the Philippines, we thought about life in America as a kind of paradise," Anita remembers. "But losing your job is more like a kind of hell."
National Semiconductor isn't the only company where Filipino semiconductor workers have been hit by massive job losses. Maria Villanueva, a worker on the fab line at Advanced Micro Devices, remembers that when she went to work at AMD's Sunnyvale plant four years ago, the plant had as many as 15 fab lines. "The workers on swing and grave shift were almost all Filipino," she recalls.
Like National Semiconductor, Intel and other Silicon Valley chipmakers, AMD built one new fab line for research and development, and moved the other lines to a plant in Texas. Swing and grave shifts in many plants like AMD or National, were known as Filipino shifts. When those fab lines closed, Filipino workers lost their jobs by the hundreds.
Villanueva's mother worked at National for 18 years, in many departments and areas. She has a teaching degree from a university in the Philippines. "The company didn't value the skills she acquired in her years in the plant, and they don't honor her education here," Villanueva says, "so it's been difficult for her to get a job. My sister will also be losing her job soon at National, and she just bought a house."
Many of the workers who have lost their jobs are parishioners at Holy Spirit Church in Fremont. Father Jeff Acebo, the parish priest, believes that the layoffs have a corrosive effect on the Filipino community. "Our community is based on double income households," he explains, "so the loss of income can be very se-rious, even leading to losing a home. We identify strongly with our jobs. Winding up out of work after years in the factory often robs us of our feelings of self-worth and identity. Within our families, we have a lot of stress. But fortunately our families also provide a strong support system. Family pride is a spiritual value which often holds us together."
What's happened to the semiconductor plants? Where have the jobs gone? These questions challenge the common vision of Silicon Valley as a community of growing affluence and stability, as a massive engine of economic growth. This is the view which has been adopted with a vengeance at the top levels of the administration in Washington. But does it meet the test of reality, especially for the people at the bottom?
Silicon Valley was built on the transistor. For three decades, the manufacture of integrated circuits, or semiconductors, has fueled the valley's industrial growth. The assembly of computers, the building of lasers and medical instruments, the launching of aerospace electronics - all owe their origin to the development of solid state electronics, and to the plants where the basic industrial process of wafer fabrication was born.
But today the companies which pioneered the manufacture of integrated circuits are abandoning the tens of thousands of workers who grew up with this industry, and who transformed Santa Clara Valley forever from the sleepy agricultural center of half a century ago. While the sales and profits of these large semiconductor manufacturers are higher than ever in their history, their wafer fab lines are closing one after another. The work which was the heart of the industry's economic engine is moving out.
Left behind are working-class towns like Milpitas, Union City and areas like east and north San Jose. Lost jobs here are like a stone thrown into a pool of water - ripples of economic devastation expand outwards affecting whole communities, like those of immigrant Filipino production workers. In the place of secure, relatively well-paying jobs in semiconductor production, job growth in Silicon Valley depends increasingly on the proliferation of a temporary and contract workforce. Jobs like those of security guards at the airport, or contract circuit board assemblers, are growing. But they pay much less, they have no benefits, and they disappear overnight.
This picture of the loss of stable, well-paying jobs, and the expansion of insecure, contract employment, is not the image projected by the Clinton administration. Presidents Reagan and Bush believed in letting the market decide which industries should live or die, and said that it made no difference if the U.S. economy produced electronic chips or potato chips. But since 1992, the Department of Labor, the Council of Economic Advisors, and the president and vice-president themselves have advocated an industrial policy of government intervention to strengthen industries which they believe have a future.
High tech electronics production has been number one on their list - the showpiece industry advertising the success of business and government working in partnership. But the contradiction between the image and the reality is so sharp that it suggests that there are more mundane political motives in the growing interconnection between the country's most glamorous industry and the insiders of the Washington beltway.
This past spring the administration announced that it would make available over $1 billion in subsidies to the industry to underwrite the production of flat-panel displays, used in portable computers. This was just the latest move in two years of mutual courtship between Silicon Valley and Washington. In January the Departments of Labor and Commerce organized a special hearing of the Dunlop Commission, set up to recommend changes in labor law, to hear the industry's perspective. High-tech industry is anxious to preserve worker-management cooperation programs, which are in danger of being declared illegal under present labor law. Silicon Valley's Dunlop hearing gave the industry a platform to recommend labor law provisions which would help it to maintain its long-held goal of remaining "union-free."
Both the flat-panel subsidies and the Dunlop hearing are part of a growing set of connections which began before the 1992 elections. President Clinton made Silicon Valley visits a highlight of his campaign. Valley executives like John Sculley, then-CEO at Apple, stood at his side, showing that a Democratic presidential candidate could enjoy high-powered corporate support. Clinton and Gore held a famous roundtable before the bright lights and television cameras at Silicon Graphics, where the information superhighway became a household word. The message was that the industry's health was vital to the country's future. Faced with an economic recession that just won't go away, the administration has needed a success story, a model for a new industrial and economic policy. Silicon Valley industry has been happy to oblige.
One of Clinton's key advisors, Laura D'Andrea Tyson, appointed to head the Council of Economic Advisors, is a strong advocate of industrial policy. For many years, as a professor at U.C. Berkeley and founder of the Berkeley's Roundtable on the International Economy (BRIE), Tyson has advocated government assistance to the high-tech industries of Silicon Valley. Michael Boris, BRIE's co-director, declares that "our overall experience is that helping new industries leads to job growth," although he carefully qualifies this declaration by noting that "not every group of workers benefits equally."
For workers on the valley's wafer fabrication lines, the benefit is hard to see. Sophisticated products and graphics, together with healthy economic bottom lines for most of the valley's giant manufacturers, create the image of an affluent and healthy industry. But the image doesn't fit the reality of the statistics collected by California's Employment Development Department. Jeff Koller, an EDD analyst specializing in Silicon Valley employment, has documented the loss of 30,000 jobs in the semiconductor industry over the past 10 years. Where the plants employed 102,200 workers in 1983, they employ only 73,700 workers today.
A large percentage of electronics production workers are immigrants. Women constitute over three-quarters of the production workforce. According to the Equal Employment Opportunity Commission, about one-third of technicians, and over one-half of production operators, are of different Asian nationalities. These are the workers whose jobs have disappeared.
Employment of engineers and managers, whose lifestyles fit the valley's affluent image, has actually risen slightly. Job losses have fallen much more heavily on operators and technicians, who work directly on the production line, at lower wages. This seemingly contradictory phenomenon is a product of the semiconductor industry's basic plan for its future (or lack of one) in Silicon Valley. Since the early 1980's, most big semiconductor companies began building factories for the mass production of integrated circuits outside of the valley. Gradually, production facilities in the valley were allowed to age into obsolescence, leaving only a limited production capacity for designing and testing new circuits. The real mass production work was transferred to the new plants.
In communities like Detroit, or Youngstown, Ohio, massive layoffs and job loss have been accompanied by the actual closure of factories and steel mills. But the Silicon Valley facilities of giant semiconductor companies are not boarded up. There are no dramatic pictures comparable to the wrenching images of the huge open hearth ovens in midwest steel mills being blown up or torn down.
Although the ultimate effect on people of job loss in Silicon Valley is the same, the process is different. The steel mills which closed in the 1980s were built decades ago. The lifespan of an auto assembly plant can be measured in dozens of years. But semiconductor production lines become obsolete much more quickly.
When technology evolves as rapidly as it does in the semiconductor industry, companies must build new plants and new fabs constantly. For workers whose jobs are dependent on the production line, the location of these new plants and lines is a life-and-death question. When the companies decide to build them outside the valley, the decision spells economic havoc for workers whose jobs depend on the Silicon Valley plants.
Rapidly-evolving technology has a big effect on the lifespan of electronics plants, especially on semiconductor plants. These factories use sophisticated and expensive machinery, and highly toxic chemicals, to build integrated circuits, or chips. Many chips at a time are gang-processed on silicon wafers, by the workers who labor on the wafer fabrication lines.
A "wafer fab line" has a useful life of about 10 years, before it can no longer compete with newer, more automated lines which produce more efficiently. The state of the art on a fab line is measured in the width of the tiny transistors which it can implant on a wafer's surface. When Intel closed its Livermore plant last year, which opened in 1974, its fab lines produced wafers with transistors which measured 1.2 microns across. Intel's newest microprocessor chip, the Pentium, is based on .8 micron technology.
In essence, if you work on a fab line, and your line is producing transistors larger than that, you can expect eventually to lose your job.
A year ago Intel Corp. announced that it will build a new factory in Rio Rancho, New Mexico, instead of California. This huge wafer fabrication plant will manufacture the new Pentium chip, and will produce .4 micron wafers. Billed as the largest semiconductor plant in the world, it will employ more than 2,400 workers on its fab lines, and account for 60% of Intel's semiconductor manufacturing capacity.
Howard High, a public relations spokesperson at Intel, says the reason for Intel's decision to locate its new plant outside Silicon Valley is that the state of New Mexico offered the company an industrial revenue bond to help finance the plant's construction. According to the South West Organizing Project in Albuquerque, which has opposed the plant, Intel was also given a 30-year waiver on property taxes, which they estimate is worth $100 million over 5 years. In addition, the company was given a $50 million investment tax credit. California put in a bid as well, to try to keep Intel's production in California, but couldn't match thesubsidies offered by New Mexico.
Semiconductor plants use a lot of water. The Intel Rio Rancho plant was given the right to pump water out of the water table below it. Local activists charge that the pumping is depleting water available to the community itself.
Intel won reknown as the inventor of the microprocessor. These pathbreaking chips combine in one solid-state integrated circuit thousands of transistors which form the processing unit which lies at the heart of personal computers and computer workstations. The invention of the microprocessor was a crowning glory of Silicon Valley's semiconductor industry, and made Intel one of the world's largest and most profitable semiconductor manufacturers. Last year the company had $8.8 billion in sales, and made a profit of $584 million. Andrew Grove, the company's CEO, was paid $2.4 million in compensation, not counting stock options, and five Intel executives rank among the twenty highest-paid corporate officers in Silicon Valley.
But Intel's future as a local manufacturer is not as bright. High recalls that in the heyday of semiconductor production in Silicon Valley in the late 1970s, the company had almost 2,000 operators on its wafer fab lines. Today less than 600 are left. "I really don't think we'll see more manufacturing in Silicon Valley in thefuture," he said.
The cost of huge semiconductor plants is steadily rising, as the size of the transistors on each chip shrinks. A new, state-of-the-art .4 micron manufacturing process includes over 500 steps, and costs 80% more to build than the generation of factories which came before it. LSI Logic, which started in Silicon Valley, is spending $500 million to build a new semiconductor plant with Kawasaki Steel in Japan. Texas Instruments will pay $1 billion to build one in Dallas. Six new plants are under construction in Taiwan, also costing $1 billion each.
For the companies large enough to play this game, the payoff is huge. Despite increased costs for construction, economy of scale means that the cost to manufacture each transistor is dropping. And when the cost per transistor drops, companies can cut prices, increase sales, and make large profits. National Semiconductor last year earned $190 million on $2.2 billion in sales. Advanced Micro Devices made $229 million on sales of $1.6 billion.
Compensation for the executives of companies which are relocating jobs out of the valley looks very different from the economic outlook for Manan, the Angels, and Villanueva. Gil Amelio, National Semiconductor's CEO, took home $1.9 million. W.J. Saunders, CEO of Advanced Micro Devices, was Silicon Valley's highest paid executive, earning a $3.3 million salary. Salary figures do not include stock options or other executive perquesites.
BRIEUs Michael Boris says that the location of semiconductor plants "depends on the deals that the companies get. Personally," he said, "I thinkcompetition between states to offer tax-based subsidies isn't good."
Romie Manan and other semiconductor workers believe that lower wages are also a big factor which attracts plant construction. "The truth of the matter is the company can hire workers in New Mexico much more cheaply because wages there are much lower," he says. "New workers earn a starting wage around $6-7/hour, unlike those of us with many years in the plants here, who earn more as a consequence. That's also why National and other companies won't allow workers to transfer to the other plants."
NSC Corporate Communications Manager Mary Ann McKay admitted that "some workers were told they couldn't transfer" to National's plant in Arlington,Texas, when the work on their Silicon Valley fab lines was moved there. None of the workers interviewed for this article could think of any of their coworkers who were allowed to transfer to the Arlington plant.
McKay said the main motivation for the company in moving production there from Santa Clara was the availability of empty space in the Arlington factory. This facility was also given a tax abatement by Texas when it was first built, but McKay said she had no idea whether the company had made any commitment in return for maintaining any particular level of production employment.
Employment at National's plants in Arlington, in Portland, Maine, and in Greenock, Scotland is growing. At its Jordan, Utah plant the number of jobs has remained about the same. In Santa Clara the fabs are almost all gone. National's last remaining mass production fab was closed this spring. A small fab line remains in the valley, called the Fairchild Research Center, but is used only for new product research and development, not for the mass production of chips.
Manan criticizes semiconductor companies not only for eliminating jobs, but for laying off large numbers of older workers in the process. Anita Angel says that she and her coworkers trained the new workers hired for National's plant in Arlington, Texas, many of whom were brought to Silicon Valley to learn their jobs. "After we trained them, National made us take a skills assessment test to qualify for working in the new research and development fab line here," she charges. Although workers like her knew how to do the work, had done it for years, and were training new hires, they suddenly found their job qualifications under question.
"The company said we had to have college degrees to work there," she remembers. "But the company kept the young people. Some of them showered the supervisors with gifts, who flirted with the young women. When they told my husband he would be laid off, I pleaded with the supervisor to keep his job, but the supervisor said that it was impossible, that the company was downsizing." NSC's McKay would not comment on those charges.
Villanueva felt the assessment process at AMD was fairer. After passing a skills assessment test, she was sent for training at Mission College for seven months, full time. "With so many people out of work, I feel fortunate to have a job," she says.
Secretary of Labor Robert Reich emphasizes that workers in the country's new competitive industries must be ready to upgrade knowledge and skills, and change jobs often during their lifetimes. Those who are the best educated and trained will survive better. "Unlike the boats of routine producers and in-person servers" he says in his book The Work of Nations, "the vessel containing America's symbolic analysts is rising." Symbolic analysts include the engineers, software designers, scientists, managers and highly skilled technicians whose numbers in Silicon Valley are still growing.
But despite this emphasis on retraining in the administration's new laborpolicies, very little federal money is available for retraining laid off workers in Silicon Valley, according to the Private Industry Councils in San Jose and Sunnyvale. And with growing unemployment in the miracle valley, the obviousquestion is: retraining for what?
Lenny Siegel, director of the Pacific Studies Center in Mountain View, notes that the main source of new production jobs in Silicon Valley is the growth in contract assembly plants, which insert chips and electronic components into circuit boards. These jobs, however, are much less skilled than those in the semiconductor plants.
Workers losing jobs on wafer fabrication lines in the semiconductor plants make as much as $11-14/hour for operators, and more for technicians. Companies provide medical insurance, sick leave, vacations and other benefits. By contrast, contract assemblers are often paid close to minimum wage, have no medical insurance, and often no benefits at all.
The same conditions prevail for workers providing janitorial, cafeteria or landscape gardening services to the industry. Esther Thompson, a janitor who cleans Apple's buildings, declares that "I need two jobs because neither pays enough to pay my rent, feed my children and pay my bills."
Contract employment is much less secure than jobs working for electronics manufacturers directly. Although the work and the money come from the big companies, they come indirectly. Contractors compete against each other by offering their services at a lower cost. When one contractor edges out another, one group of workers loses their jobs as another group goes to work. According to Mike Garcia, president of the valley's janitors' union, Service Employees Local 1877, "high technology manufacturing, instead of creating the high-wage, high-skill jobs that will bring prosperity to our country, patterns itself after the service sector. The inevitable result," he said, "is that contractors in manufacturing compete over who can drives wages and benefits the lowest."
The relocation of semiconductor production out of Silicon Valley is contributing to the development of a two-tier workforce - the expansion of high-paying jobs at the top and low-paying contract jobs at the bottom. The middle level, the production jobs in the big factories themselves, is the layer being eliminated.
Siegel declares that "I have seen the future and it does not work for hundreds of thousands of low income workers in Silicon Valley."
"Investment creates a logic of its own," according to Michael Boris at BRIE. "All things being equal, companies will put their plants in the place where they can minimize production cost. Capital is mobile - it depends on who owns it."
Unfortunately for the Angels and the thousands of other semiconductor workers like them who have lost their jobs in Silicon Valley, their jobs have fallen victim to these market forces. These are the same forces which Reagan and Bush thought should be left unfettered. But the new Clinton industrial policy doesn't seem to fetter them much either. While calling for assistance to new industries like semiconductors and electronics, it has little to say about demanding a commitment to maintain jobs in return for that assistance.
The general idea behind Clinton's industrial policy is that helping high-tech industry will produce jobs in and of itself, "although we recognize that there will be losers," Boris says. While saying he could imagine a federal preemption preventing states from engaging in bidding wars in order to attract plants and production jobs, he thinks that "without a big, powerful labor movement we're not likely to get it. And to ask the administration to lead where there's not an organized constituency, well it isn't going to happen."
Electronics companies, and especially semiconductor companies, have been notorious for all-out opposition to the organization of unions among their workers. There is no organized constituency among workers in the semiconductor plants, either to advocate limits on the ability of companies to move jobs at will, or even to help people like the Angels over the personal and financial crisis of losing their jobs. When asked if there shouldn't be some exchange, for instance, like dropping the companies' hostility to unions in return for federal attention and assistance, Boris felt unsure that organizing unions and protecting the jobs of particular groups of workers was the best quid pro quo. "It might be better," he felt, "to require some level of sustainable investment."
Finally Boris admitted that there was much more attention being paid by the administration to those who win than those who lose. "But there will be losers," he said, "and the important question is whether Clinton's high tech policy will focus enough on their problems."
"In the meantime," says Villanueva, "maybe we should get into another field. Electronics is certainly not a secure job anymore."
Top of Page
PEACE & JUSTICE
WORKPLACE | STRIKES | PORTRAITS | FARMWORKERS | UNIONS | STUDENTS
Special Project: TRANSNATIONAL WORKING COMMUNITIES
HOME | NEWS | STORIES | PHOTOGRAPHS | LINKS