Who's the biggest computer manufacturer in the world? Try General Motors.
Every day at a plant outside Milwaukee, GM produces nearly 17,500 tiny computers. GM officials, not bashful by nature, think that's more than any one else. Maybe it is and maybe it isn't: a symbol of what has been called variously "the second industrial revolution," the "golden age of electronics" and the "micro revolution."
Progressive miniaturization of electronic components has created vast new applications that within a decade may touch virtually every major industry. The General Electric Co. recently prophesied that electronics would affect two-thirds of its sales within five years. Like GM, other major auto manufacturers are installing computers in new cars. And new products -- such as mobile telephones the size of cigarette packs -- could become commonplace.
The spread of this technology promises to be one of the great economic dramas of the next decade. Make some allowance, of course, for initial exaggeration: Microelectronics does not stand on a historic par with the invention of the steam engine or the discovery of electricity. Some uses will be frivolous: electronic toys? But the evolution of microelectronics will affect pervasively lifestyles, patterns of industry and the balance of international economic power.
It won't all be fun. New technologies inevitably disrupt, and a recent study by Washington's Worldwatch Institute cites case after case of job loss. By shifting to computer, one large New York bank reduced the number of people preparing letters of credit from 14 to one. But Worldwatch researcher Colin Norman also correctly concludes that resisting the technology is self-defeating: Countries that don't adopt it will suffer most. t
Like all superior technologies, this one will rewrite the rules of competition, and those who can't play by the new rules may not play at all. Norman recalls that the Swiss watch industry failed to anticipate and accept digital watches; in the 1970s, industry employment dropped 46,000.
Some assembly line robots built from microcomponents may out-perform people at less than $5 an hour -- about a third of an auto worker's rate. Firms ignoring such savings will have overpriced products or lower profits.
Little wonder that microelectronics seems both mystifying and dangerous. Most of these gadgets usually involve computers, and computers confuse and antagonize all but the specialists. Details are indeed perplexing, but the basic idea isn't. A computer simply stores information and instructions of how the information should be acted upon.
Understanding that should dispel some of the sense of threat. Microelectronics may eliminate some employment, but it should also create markets -- and jobs -- that simply don't exist today. The marvel of the past 15 years is the steady shrinkage in both the size and price of componetry. A standard silicon "chip" today contains up to 100,000 circuits, costs $10 or less and can rival the calculating power of early room-size computers. Consequently, computers can now go where cost or bulk once barred the way.
Consider the small automobile computer. Equipped with sensors that monitor the exhaust, the computer constantly regulates the engine's air-fuel mix to minimize pollution and maximize fuel economy. That was virtually impossible before. Or take the automatic teller machines, also based largely on microcomponentry. To be sure, the machines, eliminate some tellers' jobs. But they also create a new service by making deposits and withdrawals possible all day.
So there will be new markets to be exploited, and the worrisome possibility is that Americans won't be doing the exploiting. At first blush, this seems improbable. U.S. firms pioneered computers, and the United States still produces 60 percent of the world's chips.
But, in an open global economy, complacency is surely misplaced. By now, only the thickest dunderhead has not recognized the difficulty (perhaps impossibility) of preserving a national monopoly over any technology. Japan has created an impressive manufacturing capacity for chips, and Europe is following suit. If the United States is to maintain its dominance, it can do so only by improving its chip technology and -- more importantly -- by finding new applications.
There's no shortage of possibilities. General Electric has developed a light bulb with a chip and a light sensor that adjusts the bulb's brightness according to the surrounding natural light. This saves energy and increases the bulb's life. Electric motors can be fitted with devices that automatically regulate the power flow according to the load, also at a considerable energy saving.
Someone is bound to ask: What can government do to encourage the realization of the most promising possibilities? The answer is everything and nothing. Ten years ago, virtually no one foresaw today's microelectronics explosion. Today, no one can accurately predict the most productive uses of microelectronics a decade hence.
GE's bulb now is too expensive to support a mass consumer market. Who knows whether costs can be brought down sufficiently to change that? Government can't judge the choices effectively. It can foster basic technologies through defense and space programs, but requirements for government contracts and private markets differ significantly.
Government typically wants small volumes of sophisticated goods; high costs are often accepted as the necessary price for high performance and reliability. aOnly rarely do large private markets develop for such customized products. Commercial success requires low costs and high reliability.
Paraphrasing Chairman Mao, we ought to adopt the motto, let a hundred flowers bloom. We need hordes of firms searching for new applications and ways to lower costs and increase reliability.
Through its tax laws, government can help create a climate for risk-taking. It ought to prey on the greed in human nature and the industriousness in the American character. Otherwise, stand aside.