I had a chance last week to listen to Paul Otellini, the chief executive of Intel, the microchip maker and one of America’s crown jewel companies. Otellini was in Washington to talk about competitiveness at Brookings and the Aspen Institute. At a time when so much of our public policy discussion is dominated by health care and bailouts, my public service for the week is to share Mr. Otellini’s views on start-ups.
While America still has the quality work force, political stability and natural resources a company like Intel needs, said Otellini, the U.S. is badly lagging in developing the next generation of scientific talent and incentives to induce big multinationals to create lots more jobs here.
“The things that are not conducive to investments here are [corporate] taxes and capital equipment credits,” he said. “A new semiconductor factory at world scale built from scratch is about $4.5 billion — in the United States. If I build that factory in almost any other country in the world, where they have significant incentive programs, I could save $1 billion,” because of all the tax breaks these governments throw in. Not surprisingly, the last factory Intel built from scratch was in China. “That comes online in October,” he said. “And it wasn’t because the labor costs are lower. Yeah, the construction costs were a little bit lower, but the cost of operating when you look at it after tax was substantially lower and you have local market access.”
These local incentives matter because smart, skilled labor is everywhere now. Intel can thrive today — not just survive, but thrive — and never hire another American. Asked if his company was being held back by weak science and math education in America’s K-12 schools, Otellini explained:
“As a citizen, I hate it. As a global employer, I have the luxury of hiring the best engineers anywhere on earth. If I can’t get them out of M.I.T., I’ll get them out of Tsing Hua” — Beijing’s M.I.T.
Does the Obama team get it? Otellini compared the Obama administration to a “diode” — an electronic device that conducts electric current in only one direction. They are very good at listening to Silicon Valley, he said, but not so good at responding.
“I’d like to see competitiveness and education take a higher role than they are today,” he said. “Right now, they’re going to try to push this health care thing over the line, and, after that, deal with the next thing. God, I’d just like this [our competitiveness] to be the next thing. Something has to pay for” everything government is doing today.