The Globalization of Semiconductor Manufacturing and Labor

Key Insight

The exponential growth predicted by Moore's Law, which forecast plummeting computing costs, necessitated a drastic increase in both the volume and affordability of chip production. This required a larger and cheaper labor supply for assembly, driving semiconductor firms to look beyond Silicon Valley. Charlie Sporck, a production manager at Fairchild Semiconductor, was instrumental in this push for efficiency and cost reduction. He adopted an anti-union stance, having faced labor union resistance in a previous job at GE, and was determined to keep unions out of the burgeoning semiconductor industry in California. While Fairchild offered stock options to employees, Sporck rigorously demanded maximum productivity in return.

Early chip startups in Silicon Valley predominantly staffed their assembly lines with women. This was partly due to the belief that women's 'smaller hands' made them better suited for the intricate tasks of microchip assembly—such as positioning silicon chips, bonding them with heat and pressure, attaching thin gold wires, and manually testing devices under microscopes. However, the primary drivers were lower wages and reduced likelihood of unionization compared to male workers. The easing of immigration rules in 1965 further expanded the labor pool in the Santa Clara Valley with foreign-born women, who had historically worked in local industries like fruit canneries and aerospace.

As demand for chips skyrocketed, the need for even cheaper labor pushed companies to offshore assembly operations. Bob Noyce's investment in a radio assembly factory in Hong Kong, where wages were approximately 25 cents an hour—a tenth of American wages—demonstrated the massive cost savings. Fairchild, under Sporck's leadership, became the first semiconductor firm to open an offshore assembly facility in Hong Kong in 1963, assembling 120 million devices in its first year with excellent quality, partly due to the affordability of hiring trained engineers for assembly management. Other U.S. chipmakers like Texas Instruments and Motorola quickly followed, establishing facilities in Taiwan (19 cents/hour), Malaysia (15 cents/hour), Singapore (11 cents/hour), and South Korea (10 cents/hour) by the mid-1960s. These locations offered significantly lower wages and, in some cases like Singapore under Lee Kuan Yew, an environment with effectively 'outlawed' unions, laying the groundwork for today's Asia-centric semiconductor supply chains.