manufacturing – Page 2 – The OM Blog by Heizer, Render, & Munson

OM in the News: Manufacturers Head South

Caterpillar’s planned relocation of its global headquarters to Texas from Illinois comes as the equipment maker and other companies expand their manufacturing bases south. Manufacturing employment has been on the rise in many Southern and Southwestern U.S. states in recent years, as companies target the regions for new factories, plant expansions and corporate bases, seeking what some executives have said is a growing available workforce and cheaper real estate.

Florida, Texas and Arizona increased their manufacturing employment the most in the five years through 2021, while New York, Washington and Illinois lost the most manufacturing workers over that same period.

Ford announced its new investments in Kentucky and Tennessee outside the Kentucky State Capitol

Ford Motor said it would spend $11.4 billion along with a South Korean partner to build four factories in Tennessee and Kentucky that would support electric batteries and vehicles. Toyota said that it would invest $1.24 billion in a North Carolina battery and car plant. Leprino Foods is investing $870 million in a new mozzarella plant in Texas, and Novelis intends to build an aluminum rolling plant near Mobile, Ala.

“Companies investing in southern parts of the country have cited benefits including growing workforces, more affordable housing, availability of physical infrastructure and quality educational systems,” writes The Wall Street Journal (June 16, 2022). Southern and Southwestern state lawmakers have worked to make their states friendly to new or established manufacturers, letting companies deduct energy spending from sales-tax bills, for example, or providing exemptions from local property taxes and tax credits that can be resold to other businesses. States in the South and Southwest have typically lower unionization rates than states in historic union strongholds such as Illinois and New York. In 2021, 15% of Illinois workers were represented by a union, compared with 4.7% in Texas.

Such factors, as we discuss in Chapter 8, Location Strategies, can be meaningful in the manufacturing industry, where profit margins often are thin. “A big reason you see this migration is it has a lower cost of business to operate in this area,” said the head of the Texas Business Association.

Classroom discussion questions:

List all the factors that manufacturers consider in making location decisions.
What is meant by a “right-to-work” state?

OM in the News: Robots Pick Up More Work at Busy Factories

“Robots are turning up on more factory floors and assembly lines as companies struggle to hire enough workers to fill rising orders,” writes The Wall Street Journal (June 2, 2022). Orders for workplace robots in the U.S. climbed 22% last year to $1.6 billion.

Rising wages and worker shortages, compounded by increases in Covid-19-related absenteeism, are changing some manufacturers’ attitudes about robotics. “Before, you could throw people at a problem instead of finding a more elegant solution,” said the CEO of Delphon Industries. Delphon lost 40% of its production days during January when the coronavirus spread through its workforce. The disruption accelerated the company’s purchase of 3 additional robots earlier this year.

Athena Manufacturing purchased seven robots in the past 18 months.

Manufacturers in the U.S., where workers typically have been abundant and wages stable, have been slower to embrace robotics than those in some other industrialized countries. The number of robots deployed in the U.S. per 10,000 workers has traditionally trailed countries such as South Korea, Japan and Germany. (The use of industrial robots in North America for years had been concentrated in the automotive industry, where robots took on repetitive tasks such as welding on assembly lines.)

Now, robots are making inroads into other sectors including food production, consumer products and pharmaceuticals. Improved capabilities are allowing robots to be programmed for more-complex tasks requiring a mixture of strength and nimbleness.

At Athena Manufacturing, a fabricating and machining company for metal equipment, customers have been ramping up orders, but Athena has struggled to find enough workers to staff a second weekday shift and a weekend shift. So it recently spent more than $800,000 on robots, including $225,000 alone for the grinding robot shown in the photo. The investments aimed to increase Athena’s capacity to handle orders, more than lowering costs.

“The robots are becoming easier to use,” said the CEO of Fanuc America, a major supplier of industrial robots. “Companies used to think that automation was too hard or too expensive to implement.” But one MIT prof said factories’ increasing reliance on automation will lead to an oversupply of human labor that will drive down wages in the years ahead, unless other U.S. industries can absorb displaced manufacturing workers.

Classroom discussion questions:

Will automation destroy a lot of manufacturing jobs in the U.S?
Why are robots becoming more popular in recent years?

OM in the News: Losing Patience with China

China’s strict anti-Covid-19 policies have left most of Shanghai in lockdown for much of the past two months

Are foreign companies giving up on manufacturing in China? Covid-19 policies and Beijing’s increasingly ideological approach to business are making many companies reassess growth plans, reports The Wall Street Journal (May 26, 2022). A new survey by the European Union, of companies in China, found that 23% of respondents were considering shifting current or planned investments to other markets, the highest total in the past decade.

Apple, whose suppliers in China constitute the country’s largest source of private-sector employment, is pushing its contractors to do more manufacturing elsewhere. Even before the latest Omicron wave hit Shanghai, over a third of American companies told the American Chamber of Commerce this spring that they would reduce investment in the country due to the policy environment there. The stars are aligning for a much more concerted effort, long predicted but slow in arriving, by large manufacturers to diversify away from the country.

China’s export growth has taken a steep dive thanks to a combination of Covid-19 lockdowns, weakening overseas demand and, most likely, tougher competition from other low-cost manufacturers that were closed last year. There will inevitably be more disruptive lockdowns in China given the very low probability of a significant move away from the “zero-Covid” policy until early 2023 at the earliest. And while alternative production locations such as Southeast Asia and India all present their own difficulties, they also have some distinct advantages, including growing, youthful labor forces—and governments that aren’t positioning themselves as ideological and, potentially, military opponents of developed democracies.

Classroom discussion questions:

What are the tradeoffs of leaving or staying in China?
What Southeast Asian countries would most benefit from an exit of western manufacturers from China?

OM in the News: The Challenges of Mass Customization in Manufacturing

Today’s consumers are not content with standard products but are looking for differentiated and personalized goods or services. Thanks to the new information technologies and innovative manufacturing processes, mass customization (see our discussion in Chapter 7) has become widely available. This combination of mass production and customization aims to provide unique products or services on a large scale and at a relatively low cost. It can improve profitability, just as it can help boost customer satisfaction and win brand loyalty.

One in five consumers are willing to pay a 20% premium for customization service, reports New Equipment Digest (Sept. 15, 2021). For instance, in the fashion industry, more people are now looking for personalized clothes, handbags, and shoes.

Although customers might be willing to pay more for a customized product, there might be neither time nor budget for full product inspection. Therefore, manufacturers must work with suppliers who can deliver high-quality materials on time to minimize production costs and shorten lead times.

The supply chain also needs to be adaptable, with every node able to communicate effectively to others so that they are all aware of any changes in demand. Supply chain visibility software can help manufacturers be aware of what’s happening across an extended supply chain so that they can react quickly when unexpected circumstances affect the delivery of goods.

Customer involvement in product configuration is inherent in the process, meaning that sales, marketing, distribution, and manufacturing all need to have great understandings of customer requirements. Customers who visit Dell’s website, for example, can directly talk to the staff about their personal requirements. After choosing suitable products, customers can order them with a simple click. From inventory and manufacturing to marketing and logistics, all the departments can process the transaction at the same time..

Since manufacturers are producing goods based on customers’ unique requirements, a highly flexible manufacturing process is important. Companies that are able to organize their modular product design properly tend to have a more agile manufacturing system. For instance, Boeing classifies a huge number of parts for its planes into 3 types: standardized, configured to a fixed set of options, or customized. This modular product design streamlines the process of ordering, engineering, and manufacturing, leading to a more cost-effective and time-saving customization process.

Classroom discussion questions:

What are the advantages and disadvantages of mass customization?
Provide examples of products/services (beside Dell and shoes) that you have ordered that have been mass customized.

OM in the News: The EV Microfactory

Arrival, a small EV company, wants to replace the assembly lines automakers have used for more than 100 years with something radically different — small factories employing a few hundred workers, reports the Orlando Sentinel (April 27, 2021). The firm is creating highly automated “microfactories” where its delivery vans will be assembled by multitasking robots, breaking from the approach pioneered by Henry Ford and used by most of the world’s automakers.

The plants would produce tens of thousands of vehicles a year. That’s far fewer than traditional auto plants, which require 2,000 or more workers and typically produce hundreds of thousands of vehicles a year. The advantage is that its microfactories will cost about $50 million rather than the $1 billion required to build a traditional factory. Arrival says this method should yield vans that cost a lot less than other electric models and even today’s standard, diesel-powered vehicles.

arrival

Such vehicles are well suited to electrification because they travel a set number of miles a day and can be charged overnight. Arrival has already won over UPS, which has a 4% stake in the company and plans to buy 10,000 Arrival vans

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In Arrival’s factories, a motorized platform will carry unfinished vehicles among 6 different robot clusters, with different components added at each stop. The company is also replacing most steel vehicle parts with components made from
advanced composites. These parts are to be held together by structural adhesives instead of metal welds. The use of composites, which can be produced in any color, would eliminate 3 of the most expensive parts of an auto plant — the paint shop, the giant printing presses that stamp out fenders, and the robots that weld metal parts into larger underbody components. Each typically costs several hundred million dollars.

But automating auto plants is notoriously tricky. Tesla blamed overreliance on robots for the troubled start of its Model 3 production line. Manufacturing robots are usually programmed to do 1-2 tasks. Arrival is counting on its robots to handle a variety of jobs.

Classroom discussion questions:

What are the advantages and disadvantages of microfactories such as Arrival’s?
Why are robots the key here?

OM in the News: Post-Pandemic Supply Chains and Automation

A U.S.-based engineer working from home uses software to examine a manufacturing line in China.

Factories around the world are turning to technology to help them safely open back up after being shut down by the coronavirus pandemic, reports The Wall Street Journal (June 15, 2020). Software, sensors, robotics and A.I. tools that make it easier for workers to keep their distance in factories and let engineers monitor and fix problems remotely have surged in demand. “Covid has really been the catalyst for the adoption of software solutions to automate workflows and make it more efficient when you have less people around doing things,” said one industry expert.

Manufacturers are focusing on using software to dynamically change assembly lines. And they are using A.I. to remotely do quality inspections in real-time. For U.S. electronics manufacturers, mistakes, defects and wasted time add up to 25% of costs and often require engineers from the U.S. to visit factories in China to fix problems. A.I. systems can scan images of every product produced on an assembly line to identify anomalies and defects. Engineers can then analyze and fix them remotely.

One Calif. food manufacturer remained open during the pandemic by using enterprise resource planning (ERP) software to remotely manage its manufacturing, supply chain and finances, letting 30% of its employees work from home. Meanwhile, technology is helping manufacturers deal with disruption to global supply chains stemming from factory shutdowns. Clear Metal, in San Francisco, has proprietary data from sources such as satellite data, shipping ports and trucking companies, along with A.I. that can predict problems in supply chains and help companies change shipping methods or suppliers in real-time.

And of course, supply-chain problems caused by factories closing in China have caused companies to look to move manufacturing closer to home. The only way to do that is automation, with factories closer to customers. Previously, automation was only used by large factories with budgets of millions of dollars with long production cycles. But automated assembly lines are now available for use in smaller spaces than large factories, with one machine doing the work of 3 people at a fraction of the cost.

Classroom discussion questions:

How can technology help improve OM?
Why is automation important in reshoring?

OM in the News: Data Analytics for Factories

A Norsk Hydro aluminium plant in Norway. The company’s CIO, called the availability of data during the pandemic “a clear game-changer.”

Manufacturers will be spending far more on data management and analytics tools in the aftermath of the coronavirus outbreak, and will be using those tools for deeper insight into operations, sales and supply chain disruptions, reports The Wall Street Journal (June 3, 2020).

Data—produced by shop-floor scanners and other hardware tools—can now be used to more accurately measure and improve the performance of production-line machinery. Such benefits are expected to spur annual spending by global manufacturers on data management and analytics to nearly $20 billion by 2026, up from $5 billion this year.

Advanced data tools will give factories a clearer view of operations and equipment performance, allowing them to speed up production, reduce waste, improve their product quality and avoid downtime by more quickly identifying maintenance issues, among other things. Factories will also be able to identify and extract relevant data sets to feed into artificial intelligence software designed to predict production and supply chain problems. “It’s a case of going from reactive analytics, reporting on what happened, to proactively analyzing what might happen and the suggested actions to take,” said one industry expert.

The pandemic has made manufacturers aware of the need for more sophisticated ways to monitor operations, especially when plants are accessible to only a handful of workers. “We’re working with clients on taking unprecedented amounts of data and deriving insights that can shift decision-making,” said the CIO of NTT Data Services, referring to streams coming from shop-floor sensors, machinery, supply-chain fleets and other systems. Manufacturers are using that data to get a better view of equipment performance and maintenance needs, quality control and workplace safety.

Classroom discussion questions:

What is the difference between descriptive, predictive, and prescriptive analytics (see Module G in your Heizer/Render/Munson OM text)?
Which of these methods is discussed in this article? Why?

Guest Post: Coronavirus and the Basic Rules of Lean

Today’s Guest Post comes from Dr. Jeff Heyl, at Lincoln University in Christchurch, NZ. He is currently Associate Academic Dean and Director of the Centre for Lean Education and Research.

As the coronavirus crisis has developed, one key element of the response planning is accurate measurement of any infection. Unreliable measures meant that public health labs could not perform the disease surveillance required to predict and minimize harm before the virus became widely established. The impact has been magnified by the inability to rapidly expand the availability of testing. Yet developing tests for viral infections is a well-understood process. Within one week of the release of the genetic sequence of the virus, tests were successfully being administered in many countries. But the early test released in the US were flawed. What happened?

It seems the problem was a very basic manufacturing error. The CDC was charged with creating the initial test kits. They had considerable experience in this and placed well-qualified people in charge of the project. They also chose to manufacture the kits, and this is where the real problem arose.

The CDC failed to follow common laboratory protocols and procedures, which resulted in contamination of the components in the test kits. The test reported false positives at 24 of the 26 labs that received the early shipments. There should have been no confusion. The CDC had the protocols and procedures with complete documentation, but they were not followed.

The problem, however, started earlier during the design phase. A decision was made to include a 3rd component to the test, and this added complexity while not providing any useful information for the testing labs. It was intended to differentiate COVID-19 from other related viruses, but the genetic sequence of COIVD-19 is unique and the test was unnecessary. The CDC designed a product no customer needed or wanted.

So in a sense, it’s not surprising the test was fatally flawed. Two basic rules of lean were violated – customer focus and follow the rules. The failures may have resulted in higher rates of illnesses and fatalities. Most commercial failures don’t have such visible or tragic consequences, but their implications for firms implementing lean systems can be just as profound.

OM in the News: Eight Drivers for Manufacturing’s Next 50 Years

In the last several decades, we’ve seen major disruptions to the manufacturing environment. We experienced the “China Price,” which prompted offshoring of manufacturing operations, nearly decimating U.S. manufacturing. More recently we’ve seen the trend toward personalized products, resulting in smaller lot sizes, thus straining traditional economies of scale production. And the “Amazon Effect” of rapid turnaround in orders and delivery times of 2 days or less continues to challenge the longer lead times typical in manufacturing.

“What might manufacturing look like in 2030, or 2070?” asks Industry Week (Feb, 10, 2020). In the future we will still have large-volume, low-mix operations that will continue to harvest the advantages of economies of scale production. However, the competitive dynamics of manufacturing will change for a large portion of the traditional manufacturing world. Industry Week sees 8 drivers to the future:

1. Quality will still be Job 1, but how we achieve it will change. With sensors everywhere, critical operational variables will be exposed.

2. Economies of scale will coexist with economies of one production. 3D printing/additive manufacturing technologies will have matured and will be cost competitive.

3. Because of 3D printing, production will be more closely tied to either the location of these raw materials or the location of the customer.

4. Automation will continue to replace repetitive tasks, and the costs of robots and their control systems will decline to a point where even smaller manufacturers can take advantage of them.

5. Products will be made through naturalistic design and their materials will be functionally graded to combine materials in new ways.

6. Humans and digital tools will not only coexist; they will be tightly integrated through AI. Wearables and exoskeleton supports will increase human performance and improve safety.

7. Strategic partners will collaborate to create end-to-end solutions that manufacturers can deploy with limited tweaking.

8. Manufacturing operations will be guided by a unified architecture that links the edge (asset) to the cloud.

Classroom discussion questions:

What changes do you think will take place in manufacturing in the next decade?
Where can 3D printing play a role in change?

OM in the News: 150 Shades of Red Drown Mattel’s Supply Chain

Mattel has gotten to the heart of one of its problems: Too many reds aren’t a good thing. The company’s designers until recently could choose from about 150 types of red when making Barbie dolls, Hot Wheels cars or other toys in its stable. Each variation added storage costs and downtime at factories for cleaning equipment to swap out shades.

“Complexity is really a killer,” said Mattel’s chief supply-chain officer. Mattel has chopped the choices of reds by more than 1/3 and is doing the same for other colors, part of a broad edict to simplify the company’s supply chain. The goal is to improve, modernize and ultimately tame a sprawling supply chain that operates 13 factories, employs 35,000 people and delivers toys to 375,000 retail locations world-wide, reports The Wall Street Journal (Jan. 2, 2020). “Supply chain had become one of our handicaps,” adds the CEO.

Mattel says it plans to keep factories that are “strategically important” or that can make certain products at a better quality and lower cost than a third party could, while consolidating plants that are underused. The company already changed how it sells and fulfills orders to retailers. In Europe, Mattel implemented an automated, online ordering system for wholesale orders, eliminating the need for its sales team to manually process orders. It also increased the minimum order size so that it wasn’t shipping orders valued at just a few hundred dollars into a fragmented retail market.

More broadly, Mattel is using new algorithms to tie its manufacturing output more closely to demand, helping the toy maker to gauge the right number of toys for the holidays. Mattel also will be making fewer products. The company is planning to cut the number of items it sells by 30%, targeting the 45% of the items it sells that only make up 6% of its revenue.

Classroom discussion questions:

Why does Mattel have so many plants? So many colors?
What inventory strategy is Mattel using to cut SKUs (see Ch. 12 of your Heizer/Render/Munson text)?

OM in the News: Do We Need a New National Industrial Policy?

Robots assemble a Ford F-150 truck at the Ford Rouge assembly plant in Dearborn, Mich

In 1987, two economists issued a prophetic warning: “If high-tech is to sustain a scale of activity sufficient to matter to the prosperity of our economy…America must control the production of those high-tech products it invents and designs. Production is where the lion’s share of the value added is realized.”

Even as trade tensions with China have deepened, many U.S. leaders continue to believe that offshoring is not only profitable but also sound national economic strategy. Manufacturing in China is cheaper, quicker and more flexible, they argue. With China’s networks of suppliers, engineers and production experts growing larger and more sophisticated, many believe that locating production there is a better bet in terms of quality and efficiency. Instead of manufacturing domestically, the thinking goes, U.S. firms should focus on higher-value work: “innovate here, manufacture there.”

Today many are rightly questioning this perspective. There is a growing recognition that we can no longer afford the outsourcing paradigm. Once manufacturing departs from a country’s shores, engineering and production know-how leave as well, and innovation ultimately follows, writes The Wall Street Journal (Nov. 16-17, 2019). It’s become increasingly clear that “manufacture there” now also means “innovate there.” A 2015 study found that U.S. companies have been moving R&D to China to be closer to production, suppliers and engineering talent—not just to reap lower costs and more dynamic markets. An estimated 50% of overseas-backed R&D centers in China have been established by U.S. companies.

American manufacturers have learned that the applied research and engineering necessary to introduce new products, enhance existing designs and improve production processes are best done near the factories themselves. As more engineering and design work has shifted to China, many U.S. companies have a diminished capability to perform those tasks here. The solution? It’s time for the U.S. to adopt an industrial policy for the century ahead.

Classroom discussion questions:

What should the new industrial policy encompass?
Which theory do you agree with–“innovate here, manufacture there” or “manufacture there, innovate there”?

OM in the News: Japan’s Manufacturing Crisis

Hiroya Kawasaki, CEO of Kobe Steel, bowed as he left a news conference in Tokyo

Japan’s reputation for flawless manufacturing quality and efficiency transformed the country’s postwar economy, changed business practices world-wide and spawned a library’s worth of management manuals and business advice books. “Now, the model is cracking,” writes The Wall Street Journal (Feb. 5, 2018).

Kobe Steel, Mitsubishi Materials, and Subaru have all just admitted to manipulating quality inspections. Takata declared bankruptcy last year after supplying 50 million defective vehicle air bags in the U.S. Mitsubishi Motors has admitted covering up vehicle faults and falsifying fuel-economy data. Nissan says its Japanese factories let unqualified employees perform final quality inspections. Indeed, Japanese brands have been bested by U.S. car makers in the past 2 years.

The scandals call into question one of the world’s most influential theories of management and manufacturing. Japan’s model, celebrated in publications such as HBR, hinges largely on the concept of kaizen, or “continuous improvement.” Kaizen means eliminating unnecessary activity, reducing excess inventory and using teamwork to fix problems when they arise. It also places enormous responsibility on the line workers (called genba) at the factory-floor level to manage daily operations and generate innovation. The genba have traditionally been guaranteed jobs for life in return for dedication. But many Japanese companies can no longer afford the luxury of lifetime employment for factory craftsmen.

At Kobe Steel, quality-checking staffers became the first targets of layoffs because they didn’t appear as busy as production-line workers. Line workers were told to make quality checks themselves, and some checks were outsourced after the company suspended hiring. Workers involved in data falsification felt they had no choice because they needed to keep production moving.

(Japan, nonetheless, remains a manufacturing powerhouse, ranking 3rd in manufacturing output, behind China and the U.S. and just ahead of Germany).

Classroom discussion questions:

Explain the concept of kaizen.
Why is the Japanese system facing a crisis?

Video Tip: How Baseballs Are Made

Despite its uncomplicated appearance, the baseball is in fact a precision-made object, and one that has often been the subject of heated controversy throughout its history.

An official Major League baseball consists of a round cushioned cork center called a “pill,” wrapped tightly in windings of wool and polyester/cotton yarn, and covered by stitched cowhide. Approximately 600,000 baseballs are used by all Major League teams combined during the course of a season. The average baseball remains in play for only 5-7 pitches in a Major League game. Each ball must weigh between 5 and 5.25 ounces and measure between 9 and 9.25 inches in circumference to conform to Major League standards. Your students will enjoy this 5 minute video showing the manufacturing process.

Such uniformity was nonexistent in the early years of baseball’s history, when balls were either homemade or produced on a custom-order basis as a sideline by cobblers, tanners and other small business owners. In 1872, the modern standard for the baseball’s weight and size was established. The production of balls became more consistent during the remainder of the decade, thanks largely to the demands made on manufacturers by the newly formed National League, the first professional baseball league.

At the turn of the century, the baseball had a round rubber core. This gave way in 1910 to the livelier cork-centered ball, which was itself replaced two decades later by the even more resilient cushioned cork model. The baseball has undergone only one significant change since that time, when a shortage in the supply of horses in 1974 prompted a switch from horsehide to cowhide covers.

OM in the News: And China Outsources to— Ethiopia?

Workers on an assembly line at a Huajian International shoe factory in Dongguan.

With many workers in the Haijian International shoe factory in China complaining about excessive hours and seeking higher pay, that company is sending 1,000s of their jobs to Ethiopia. This as Huajian faces scrutiny from labor activists for how it treats workers. The activists’ focus points to changing labor conditions in China as manufacturers try to get more work out of an increasingly expensive labor pool. But deep economic and demographic shifts mean a lot of low-end work — like making shoes — doesn’t offer huge profit in China.

Today, Chinese workers are less cheap and less willing. More young people are going to college and want office jobs. The blue-collar work force is aging. Long workdays in a factory no longer appeal to those older workers, even with the promise of overtime pay. Such tensions are fueling the drive of Huajian to move work to Ethiopia.

“In many respects, China’s economy is maturing,” writes The Wall Street Journal (June 1, 2017). The number of people who turn 18 each year and do not enroll in college — the group that might consider factory work — had plummeted to 10.5 million by 2015 from 18.5 million in 2000. Wages in Dongguan have increased ninefold since the late 1990s. Huajian peaked at 26,000 employees in China in 2006. Staffing is now down to 7,000-8,000 thanks to automation and the shift to Ethiopia. Citing labor costs and the country’s foreign investment push, Huajian is building a sprawling complex of factories on the southern outskirts of Ethiopia’s capital, Addis Ababa. Huajian’s shoe factories there already have 5,000 employees. When finished in 4 years, the Addis Ababa complex will be ringed by a replica of the Great Wall of China.

Classroom discussion questions:

Why leave China?
Why Ethiopia? Why not the US?

OM in the News: Intel’s $7 Billion Arizona Chip Plant

“New chip plants are tremendously expensive,” writes The New York Times (Feb. 9, 2017), “requiring large tracts of land, reliable electricity and water, and a skilled work force that includes people with doctorates in chemistry and technicians who can repair a malfunctioning robot.” Sophisticated equipment is necessary to deposit and etch microscopic layers of material on silicon wafers, which are then cut and packaged into the microprocessors that run PCs, servers, smartphones and, increasingly, other electronic devices.

Countries compete to land such plants, especially modern factories that produce the most valuable chips and bring high-paying R&D jobs. Government subsidies are common, with China vowing to spend tens of billions of dollars to expand its domestic chip industry. While most technology manufacturing, such as computers and smartphones, has moved overseas, American factories still account for 1/7 of global chip production and produce many of the most valuable computer chips, including Intel’s flagship processors. Seventy-six chip plants are scattered across the U.S., from Maine to California.

Intel’s new $7 billion, 3,000 employee, chip plant in Arizona plant will build ultradense chips that Intel refers to as 7 nanometer, with transistors packed more closely together than in the chips the company now builds. The tighter spacing allows for faster, more energy-efficient chips. “This factory will produce the most powerful computer chips on the planet,” says Intel’s CEO, who adds: “the company had decided to proceed because of the tax and regulatory policies we see the (Trump) administration pushing forward.” Intel also has factories in China, Ireland and Israel.

Classroom discussion questions:

Why are chip factories important to the U.S?
Why is chip manufacturing a tough business to enter and succeed in?