CHAPTER 11

Mass Capitalism and Fourth Industrial Revolution with More-than-Moore and Beyond CMOS

Introduction

The upcoming fourth industrial revolution in the form of “Internet of things” (IoT) is likely to offer a huge market that would allow low-cost chips and sensors to be attached to everyday consumer electronics such as refrigerators, washing machines, television, etc. It would also make it possible for refrigerator to order food or washing machines to ask clothes for laundering instructions, etc. It would be possible for local government to monitor traffic, pollution, and to offer a host of diverse services to their citizens. In this chapter, we will look into how the progress of More-than-Moore and Beyond CMOS along with the drivers proposed by the ITRS shall establish a new golden age of high prosperity and growth in the global semiconductor industry. The benefits of this growth would also radiate far and wide to other sectors of the economy.

A Few Interesting Perspectives About the ICs to be Used for IoT

In March 2016, in the technology quarterly issue of the magazine The Economist, Dr. Greg Yeric, a chip designer with ARM Inc., had the following things to share about the Integrated circuits (ICs) that would be used to usher in the upcoming IoT revolution. According to Dr. Yeric,

• The processors needed to make the IoT happen will need to be as cheap as possible.
• They will have to be highly energy efficient, and ideally able to dispense with batteries, harvesting energy from their surroundings, perhaps in the form of vibrations or ambient electromagnetic waves.
• They will need to be able to communicate, both with each other and with the Internet at large, using tiny amounts of power and in an extremely crowded radio spectrum.
• The chips that power the IoT will be built on much older, cheaper production lines.
• At the same time, though, the vast amount of data thrown off by the IoT will boost demand for the sort of cutting-edge chips.

These specifications highlight that IoT revolution would not only make use of analog sensors from older technology nodes but also drive a continuous growth in the economic demand for the latest and greatest transistor technology nodes driven by More-than-Moore and Beyond CMOS. In one way, the IoT revolution would involve a holistic approach ­toward the progress of Moore’s law. In his own words, Dr Yeric says,

If we really do get sensors everywhere, you could see a single ­engineering company—say Rolls Royce [a British manufacturer of turbines and jet engines]—having to deal with more data than the whole of YouTube does today.

In order to handle the Big Data traffic from so many sensors, the industry is also progressing to “Cloud.” Cloud is the network of data centers that delivers services over the Internet. When computers were stand-alone devices, whether mainframes or desktop personal computers (PCs), their performance depended above all on the speed of their processor chips. Today computers have become more powerful without changes to their hardware. They can draw upon the vast (and flexible) number-crunching resources of the cloud when doing things like searching through e-mails or calculating the best route for a road trip. And interconnectedness adds to their capabilities: Smartphone features such as satellite positioning, motion sensors, and wireless-payment support now matter as much as the processor speed. For the IoT ecosystem, chips are now being designed specifically for cloud computing, neural-network processing, computer vision, and other tasks. Such specialized hardware will be embedded in the cloud, to be called upon when needed. Thus, the raw performance of end-user devices matters less than it did, because the heavy lifting is done elsewhere.

Designing a Holistic Ecosystem for the Fourth Industrial Revolution With More-than-Moore and Beyond CMOS

The advent of successful original equipment manufacturers (OEMs) like Apple Inc. has provided a rapid growth of System on Chip (SoC) devices. Such SoCs tend to devote around 65 percent of their real estate to memory, with the rest for everything else—including all the processor’s logic gates, the necessary input/output circuitry, and numerous analog functions needed to run a phone, tablet, laptop, etc. While it is possible to shrink the size of the logic devices on SoC, the memory components do not scale anything like this and the analog circuitry barely scales at all. This means progress of Moore’s law affects only a small portion of SoC. As such devices are never going to gain significant cost or performance benefits from shrinking further, and there is a good reason to stick with mature processes like 28nm (unless next technology node has proven to show a better yield), with their minimal cost when ushering in the IoT revolution. However, the IoT revolution has to ensure an overall growth of digital, analog, and mixed signal ICs leading to a broader technological and economic growth.

However, as explained in the preceding section, “Big Data” and “Cloud” would automatically drive the progress of More-than-Moore and Beyond CMOS drivers with an exponential growth in the volume of data from various sensors. In addition, according to the specifications put forth by Dr. Yeric, in order for the chips to be able to dispense with batteries and operate on tiny amounts of power, the IoT ecosystem should be able to interface with local “Cloud” as well as be able to transfer data over larger distances. Hence, while Internet would be able to connect the entire world and transform the data anywhere, the eco-system has to support a robust growth of local economy. In that regard, I propose a complete redesigning of the entire semiconductor ecosystem in order to adopt the ideas of mass capitalism, which will usher in an economic democracy with an economic decentralization. It would promote fair trade over free trade as well as focus on the economic growth by means of growing consumer purchasing power in the local economy.

Figure 11.1 The entire semiconductor ecosystem for envisioning the Internet of things considering the new drivers for More Moore, Morethan-Moore, and Beyond CMOS.(This figure has been repeated from Chapter 9 for convenience of the reader.)

When all of the above are taken into consideration and the newly ­designed ecosystem involves the drivers proposed by ITRS, the entire semiconductor and IoT ecosystem for ushering in the IoT revolution would look as shown in Figure 11.1.

Fundamental Factors of Mass Capitalism while Ushering in the Fourth Industrial Revolution of IoT

There exist five fundamental factors for success of mass capitalism. Let us elaborate these five fundamental factors as follows and verify whether the above-designed ecosystem complies with those five fundamental factors. Let us also understand the importance of having this type of ecosystem design in ushering in the fourth industrial revolution while implementing the drivers for More-than-Moore and Beyond CMOS.

1. For the semiconductor industry, the economic and monetary policy should ensure there is no valueless hoarding of wealth by a few individuals, and this valueless hoarding should get converted into valuable investments for sustaining the progress of Moore’s law to include More-than-Moore and Beyond CMOS.
2. There should be maximum utilization and rational distribution of all available resources, and nothing should remain unutilized for sustaining the progress of More-than-Moore and Beyond CMOS.
3. The business of operation for the semiconductor industry should be implemented in such a way that all potentialities of employees in semiconductor industry are properly utilized toward the success of their profession for driving More-than-Moore and Beyond CMOS.
4. The corporate human resources policies should be designed to encourage optimum utilization of all potentialities of employees for driving More-than-Moore and Beyond CMOS. However, there needs to be proper adjustments in utilizing these potentialities.
5. The process of utilizing employees’ potentialities should not be the same for all employees of the semiconductor industry. Better methods of utilization should be continually developed, but the process of utilization should be progressive in nature. Time and space are changing, and the semiconductor industry will have to adjust with those changes. The principles of mass capitalism will not change; rather the application of these principles will have to adjust with the changing circumstances. The semiconductor industry will have to move forward by recognizing and adjusting with changes in time and space when driving progress of More-than-Moore and Beyond CMOS.

As shown in Figure 11.1, the proposed three-tier business model on the left-hand side for IoT and for the semiconductor industry on the right-hand side would ensure that there is a balanced economic growth. The supply and demand would rise and fall in proportion. Hence, during an economic downturn, there can be more R&D. The industry and academia conglomerates will prepare the future workforce for addressing the technological challenges. Although there can be both public as well as private “Cloud” services providers, in developing economies that lack sufficient capital, the local government has an important role to play in ushering in the IoT ecosystem. Besides, the presence of public Cloud servers will ensure that continuous capital investments that are needed with the progress of More-than-Moore and Beyond CMOS are sustainable in the long run.

The public and private broadband ISPs (Internet services providers) will offer competitive broadband Internet services and have decentralized supply chains to ensure better collaboration between the service providers. The small businesses at the lower industrial tier will include local area networks (LANs), broad area networks (BANs) as well as personal area networks (PANs) which will offer two-way communication between the end user and the rest of the IoT ecosystem through the middle industrial tier. In this way, this three-tier business model for IoT ecosystem will cater to the local customer and network him or her with rest of the semiconductor ecosystem.

The three-tier business model for semiconductor industry will incorporate all the specifications of the ITRS when it comes to More-than-Moore and Beyond CMOS. The OEMs at the middle industrial tier would have an exchange relationship in the form of a decentralized supply chain. They would get the System in Package (SiP) inputs directly from the end customer in order to offer customized electronic gadgets as per the needs of the customers. These functionalities would include all the various drivers for More-than-Moore and Beyond CMOS as shown in Figure 11.1. The OEMs will receive the inputs from the end customer and provide manufactured gadgets to them. In addition, the role of the middle industrial tier for the semiconductor industry would be to interface with the IoT ecosystem through the middle industrial tier and provide the necessary supply of semiconductor ICs to the IoT ecosystem based on the requirements of the end users.

The lower industrial tier of the semiconductor industry will harness the innovations of small businesses, which will include the design houses, contract third-party laboratories, test engineering facilities, etc. that offer innovative solutions to the middle industrial tier of the semiconductor industry. As antitrust laws would be strictly enforced, it would prevent the formation of any industrial monopolies and preserve competitive capitalism at lower industrial tier. The middle industrial tier will usher in collaboration between the different businesses and the entire semiconductor ecosystem. The SoC inputs to the semiconductor foundry will be provided by the middle industrial tier based on the inputs received from the end customer.

The local engineering colleges and universities would provide a hands-on experience to create a workforce ready for the rapidly advancing semiconductor industry. The industry and academia conglomerates would also train the existing workforce to keep pace with the rapid technological progress in the semiconductor industry. As the semiconductor foundry would receive a financial backing from the local government, the operation of the semiconductor foundry would be sustainable. A compliance of the entire Industry 4.0 ecosystem with five fundamental factors of mass capitalism would ensure a minimum government intervention into the economy and offer a rational distribution of profits. The local colleges and universities would offer courses in analog design, mixed signal design, digital design, semiconductor processing, device physics, advanced package manufacturing, econometrics, data analytics, etc. These courses would be industry oriented and the faculty would be selected such that there are adjunct faculty members in the universities who have ties with the local IoT based companies and local semiconductor companies. This would help offer internship opportunities to graduate level students as well as offer a challenging thesis to PhD students that would not only offer them a doctoral degree but also help solve the problems of semiconductor industry in a cost-effective manner.

The engineering and management schools would inculcate the importance of collaboration in their courses and make it a prerequisite to have such courses for graduating students. This would usher in collaborative business models and collaborative corporate structures, collaborative R&D ventures, collaborative utilization of infrastructure and resources, collaboration between companies, academia, and government as well as collaboration between consumers and producers. In this way, the business model of industry would take into consideration the changes in the semiconductor industry and develop better methods of improving productivity and efficiency of workforce. Mass capitalism would ensure a rational distribution of wealth and lead to a broader economic growth by enabling a much larger number of people to participate in the resulting prosperity.

As the technology matures and new technology replaces the old, the proposed business model will prepare the overall industry for the changes happening at the macroeconomic level. In this way, the semiconductor industry would be able to adjust with the changes in time and space. It would help usher in the fourth industrial revolution of IoT by learning from the mistakes made with the third industrial revolution, which has resulted in an economic stagnation. As the designed holistic Industry 4.0 ecosystem will inculcate all the proposed drivers for More-than-Moore and Beyond CMOS, any new industrial revolution after the upcoming fourth industrial revolution would also become successful. In this way a New Golden Age would begin on Earth, bringing long-term prosperity to the human society. Although both the business models for the semiconductor industry on the right and for the IoT on the left are neo-fabless, by achieving collaboration across all sectors in the economy it would also become a virtual IDM business model for ushering in the fourth industrial revolution in the global economy.

Central Bank Monetary Policies under Mass Capitalism

The origins of negative interest rate of central banks like European Central Bank, Japanese Central Bank, etc. lie in the neutral rate identified by Knut Wicksell almost a century ago. Negative interest rates meant that the rate of interest required to bring an economy back to full employment with a stable inflation could be even negative. The real job creators in any free market economy are not only producers but also consumers. Hence, both producers and consumers have to prosper for a robust economic growth.

On macroeconomic level, there is a huge income inequality in global economy because of the reluctance of the central banks to follow a monetary policy that would usher in a true free market economy. The U.S. Federal Reserve (Fed) has also printed several trillion dollars in its ambitious Quantitative Easing (QE) program after the 2008 stock market crash that resulted in a global financial crisis. As a result, the economy stabilized in 2009 and began to grow in 2010.

However, the real wages of Americans fell, while the corporate profits skyrocketed. How did that happen? Because the entire increase in government spending from rising budget deficit went into the coffers of already wealthy producers. This is how Goldman Sachs alone could give bonuses of over $20 billion to its executives in 2009, while millions of ordinary Americans were still being laid off from their jobs. While the consumer debt actually fell, government spending and hence its debt actually rose so much that executives received hefty extra compensation.

Due to the absence of a free market economy where wages keep pace with productivity, the central banks have to print fiat currencies just to sustain deficits in respective economies. The trade deficits of the United States are a result of offshoring manufacturing jobs to Low Labor Cost (LLCs) Asian countries to increase the corporate profits of U.S.-based MNCs. With a lost domestic manufacturing in developed economies to countries in Asia, the citizens in developed countries are relegated to low-paying service sector jobs. Hence, the real wages of majority of citizens in the United States have actually decreased with rising trade deficits. These trade deficits, however, have benefited the external shareholders of corporations who have reaped huge profits from the rising share prices resulting from a practice of offshoring.

The growing economic disparity has also reduced the ability of low-wage-earning citizens to pay their fair share of income taxes. In addition, the tax cuts that are offered to corporations have added further to national budget deficits. Now, the growing trade and budget deficits can be sustained only by means of printing more currency. With their monetary policies, central banks like Fed or European Central Bank (ECB) print more money to bring down the rate of interest, and lower interest rates induce people to increase their borrowing or it increases consumer debt. As the wages fall with rising productivity, resulting from technological progress, the wage–productivity gap keeps rising so fast that even the government has to raise its own spending and debt constantly to sustain an economic demand from the growing gap between wages and productivity. In this way, even the national debt keeps rising because of increased government spending.

Hence, central banks keep printing more and more money and all the printed money keeps entering into the pockets of already wealthy individuals and corporations but such policies do not help boost domestic consumer purchasing power in economy. Hence, the real economic demand keeps stagnating and even falling in some cases. Since, wages contribute to economic demand and productivity contributes to an economic supply, wage–productivity gap contributes to demand–supply gap.

The Fed’s benchmark interest rates are already close to 0 percent and just to keep the value of the dollar high in order to be able to export more goods to the United States, the ECB entered into a negative interest territory in June 2014. This unprecedented step of imposing a negative interest rate on banks for their deposits is in effect charging lenders to park money with the banks. In addition, the monetary policies of central banks let wages trail productivity resulting in a lack of economic demand. This causes all the money that is not put into the bank accounts to not get invested into the economy due to a poor economic demand. In fact, negative interest rates are causing money to get stashed underneath mattresses, thereby steadily shrinking the consumer credit in the economy.

When Fed hiked its benchmark interest rate by only 0.25 percent in early 2016, there was a net inflow of funds from developing economies into the United States. This move has strengthened U.S. dollar as compared to its other trading partners. The Asian trading partners like Japan are also following an unconventional monetary policy and Japanese central bank is moving into a negative interest rate territory just to maintain a net trade surplus with the United States. Hence, any reluctance by the Fed to hike its benchmark interest rate is undone by a decision of U.S. trading partners entering into a negative interest rate territory.

A rising value of U.S. dollar from all these policies is not good for the U.S. economy as the United States is unable to export its goods to other countries due to high value of U.S. dollar. Hence, U.S. trade deficits are steadily rising and could rise further if the Fed hikes its interest rates ­further in 2016. Rising value of the U.S. dollar combined with falling U.S. exports are crashing the profits of U.S.-based MNCs. All of this causes an inability of the United States to balance its budget in order to retain its AAA rating. The corporate bonds can no longer retain an excellent credit rating when corporate profits keep crashing because of falling consumer demand in the economy.

A net inflow of capital from developing economies into the United States has also triggered a panic in the developing economies as they are dependent on the capital arriving from developed economies for economic growth. The U.S.-based MNCs have neglected consumer demand in the U.S. economy, in search of a better return on investment (RoI) from Asian economies, and this is crashing multinational corporations (MNCs) profits in developing as well as developed economies. Everything depends on the ability of the United States to service its sovereign debt, which would no longer retain its AAA rating as corporate profits start crashing. The end result of all this would be exactly like what happened with the housing market crash of 2008, but this time the crisis will be much more severe than the housing market meltdown. Once the United States defaults on its debt, the global economy would collapse like a “Fire Cracker.” The solution to this crisis is to reform monetary policies of central banks so that wages keep pace with productivity.

In his new book, End Unemployment Now: How to Eliminate ­Joblessness, Debt and Poverty Despite Congress, one of America’s top economists, Professor Ravi Batra, argues that the trade deficit actually results from two forces: while the United States follows free trade, China and Japan do not. These nations constantly intervene in the market for foreign exchange and manipulate their exchange rates in order to cheapen their currencies relative to the dollar. A cheap currency means cheaper prices for its goods abroad. In his recent volume End Unemployment Now, Batra cites Mass Capitalism as A Wave of the Future, where I present solutions to the systemic problems caused at the macroeconomic level for the U.S. semiconductor industry as a result of America’s free trade policies.

As explained by Professor Batra in this simple equation,

U.S. imports from China = China’s imports from the United States + China’s purchase of U.S. government bonds

If U.S. imports from China are $100 and China’s imports from the United States are $30 but China spends $70 to buy U.S. government bonds, then of course China’s ownership of U.S. debt will increase. The growing ownership of U.S. debt by China has caused a lot of geopolitical tensions. The growing wage–productivity gap in the United States, caused by its free trade policies—has resulted in a waning manufacturing sector in the U.S. economy. China also has a high wage–productivity gap, but they have avoided any overproduction of goods by having an exchange rate with the United States that creates an artificial demand for dollars. This way China has not followed true free trade and hence has prevented a depreciation of dollar in spite of rising U.S. trade deficits, but in this process China has become an increasingly larger withholder of U.S. national debt.

For the United States to eliminate its trade deficits and for manufacturing to make a comeback, it needs to follow the footsteps of China. It needs to manage its foreign exchange rate with the help of the Fed so that the Fed offers an incentive to Chinese importers to buy more American goods. Professor Batra explains in his latest book that this can be made possible by offering a better exchange rate like 4 Yuan for U.S. $1 or perhaps even 3 Yuan for U.S. $1. Let us take an example of an iPhone 6 manufactured in the United States. Let us suppose that the cost of an iPhone 6 is approximately $500. With the current exchange rate of 6 Yuan for U.S. $1, the cost of iPhone 6 to Chinese importer will be 3000 Yuan. Now, suppose the Fed offers an exchange rate for China as 4 Yuan for U.S. $1 instead of 6 Yuan for U.S. $1, then the cost of iPhone 6 to a Chinese importer would fall to 2000 Yuan from 3000 Yuan, which is a staggering 33 percent drop in price for the importer. If this does not work, the Fed can offer an exchange rate of 3 Yuan for U.S. $1 to increase U.S. exports to China.

The Chinese importers would also be delighted and there would be a rush to take advantage of Fed’s offer. China will buy more consumer electronics from the United States. The United States will no longer run trade deficits but gradually also increase its exports to China. Eventually, American exports to China would soar to match its imports from China. This is how more manufacturing jobs can be created within the United States and trade deficits can be eliminated with existing free trade policies. The free trade policies do not let trade barriers to be imposed but allow exchange rate manipulation. Professor Batra argues that when China and Japan have pursued such policies, why can’t the United States pursue similar policies to reduce its domestic poverty, debt, and joblessness?

These trade policies would rekindle America’s waning semiconductor manufacturing base and create millions of high-paying semiconductor manufacturing jobs within the United States. The trade deficits would be eliminated without any major geopolitical tensions. There would be no import duty placed on Chinese and Japanese electronics entering the United States. However, with the growing consumer purchasing power in the United States, the quality of Chinese goods entering the United States would have to automatically increase. The problem of counterfeit electronics would be eliminated when domestic consumers would have sufficient buying power to demand good-quality electronics rather than cheap electronics. China’s government should not resist this policy either, because Chinese exports to the United States would not be hurt, as a U.S. importer would still buy 6 Yuan for U.S. $1 from the People’s Bank of China, and obtain Chinese goods at the same cost as before.

As long as all countries play by the rules, the process of offshoring manufacturing jobs just because of low costs in the third-world countries will also come to an end. These policies could be adopted by developing countries like India, which run a trade deficit with China and hence have a huge problem of domestic unemployment. Besides, China has also decided to compete with India’s “Make in India” initiative to ensure that China retains its dominance as a global manufacturing hub. The Fed action would then create a free market outcome, even though in reality there still would be no actual free trade, which would make it mandatory for countries like China and Japan to abstain from intervention in markets. Once a balanced trade has been created between nations of the world, the economies can transition to mass capitalism-based free market economic reforms to further boost domestic purchasing power and hence increase domestic prosperity.

Conclusion

The upcoming fourth industrial revolution is very promising but it can become successful only after learning from the mistakes of the third ­industrial revolution and by means of establishing a holistic ecosystem that ensures long-term sustainability and profitability. The proposed business model also takes into consideration the contributions from More-than-Moore and Beyond CMOS in driving the economic growth and envisions these drivers as per the specifications provided by the ITRS. Such a neo-fabless three-tier business model or a virtual IDM business model would take the global semiconductor industry to its next level of innovation and financial ­success as it ushers in the fourth industrial revolution in the form of IoT.

Suggested Readings

[1] Mulay, Apek, Mass Capitalism: A Blueprint for Economic Revival, Book Publishers Network, Bothell, WA, 2014.

[2] Mulay, Apek, Sustaining Moore’s Law: Uncertainty Leading to a Certainty of IoT Revolution, Morgan & Claypool Publishers, San Rafael, CA, 2015.

[3] The Economist, “After Moore’s Law: Double, Double, Toil and Trouble”, The Economist. March 12, 2016.

[4] The Economist, “After Moore’s Law: The Future of Computing. The Era of Predictable Improvement in Computer Hardware Is Ending. What Comes Next?”, The Economist. March 12, 2016.

[5] Mulay, Apek, “Ballooning Deficit: Central Banks’ Low Interest Rates Increase Liquidity but They Do Not Boost Growth”, DNA. April 29, 2016. http://www.dnaindia.com/analysis/column-ballooning-deficit-2207137