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**MulaMan** · February 05, 2010, 04:20 PM

Re: High Tech Thread

"Globalization" + "Free Trade" + "Offshoring" = full steam ahead.

"President Barack Obama is spending $2.1 million to help Suntech Power Holdings Co. build a solar- panel plant in Arizona. It will hire 70 Americans to assemble components made by Suntech�s 11,000 Chinese workers"

"Asia makes more than half the world�s wind and solar energy equipment, and is gaining ground as U.S. factories lose out to cheaper labor and higher demand for clean energy. China for the first time topped the U.S. in wind-turbine manufacturing and installations last year"

http://www.businessweek.com/news/201...itiatives.html

**don** · February 08, 2010, 03:43 PM

Re: High Tech Thread

Martin Hart-Landsberg takes alook at the technology 'with Chinese Characteristics' question.

The U.S. economy is in bad shape and people are understandably seeking solutions. Many, encouraged by mainstream media and politicians, believe that China�s trade policies bear primary responsibility for the structural decay of our economy and that recovery will require, above all, pressuring the Chinese government to implement �market-freeing� policy changes that will bring the U.S.-China trade relationship into balance.

Despite its popularity, this nation-state approach to understanding the dynamics of the U.S.-China relationship is seriously flawed. It encourages people to see U.S. industrial problems, falsely, as the outcome of a contest between China and the United States, in which the Chinese government has boosted the well-being of its citizens at U.S. expense, through �unfair� practices. As a consequence, it leads to counterproductive policy recommendations.

In this paper, I offer an alternative approach to understanding the U.S.-China trade relationship; one that relies on a class-based analysis of (global) capitalist dynamics. It leads, not surprisingly, to very different economic insights and political challenges. For example, it reveals that the threat to U.S.-based manufacturing activity comes not from China, but from the operation of a transnational, corporate-shaped, regional production system, in which China serves as the region�s final assembly platform.

The �Nation-State� Argument

Those who argue that U.S. problems owe much to China�s growth strategy tend to reason as follows: Chinese state policies have transformed China into an export powerhouse, with the U.S. market its main target. Initially, Chinese exports were predominately labor intensive, low-technology products, such as textiles and shoes. However, beginning in the mid-1990s, China also became a major exporter of higher valued added, high-technology products, such as computers, cell phones, and other consumer electronics. As BusinessWeek points out, this is far from a �normal� development:

America has survived import waves before, from Japan, South Korea, and Mexico. And it has lived with China for two decades. But something very different is happening. The assumption has long been that the US and other industrialized nations will keep leading in knowledge-intensive industries while developing nations focus on lower-skill sectors. That's now open to debate. �What is stunning about China is that for the first time we have a huge, poor country that can compete both with very low wages and in high tech,� says Harvard University economist Richard B. Freeman. �Combine the two, and America has a problem.�1

This one-two punch is said to have devastated the U.S. manufacturing sector, driving firms out of business and undermining both manufacturing employment and wages. Families were forced into greater and greater debt to sustain consumption. And, as a growing share of consumer spending went to the purchase of goods produced in China (and other countries), government efforts to boost employment and production became increasingly ineffective.

Financing the resulting trade deficit also required ever greater foreign borrowing, especially from China, which helped accelerate the financialization of the economy and put additional limits on U.S. fiscal and monetary policy. Taken together, these trends contributed to a weaker, more unbalanced and unstable growth process, laying the groundwork for the current crisis.

Logically, then, reversal of these trends is key to the revitalization of the U.S. economy, an outcome best achieved through a restructuring of the U.S.-China economic relationship. More specifically, China must be pressed to revalue its currency, open its markets wider to U.S. goods, and play by the accepted rules of �market-based� capitalist competition. These steps can be expected to boost U.S. exports to China, reduce U.S. imports from China, and, as a consequence, renew U.S. manufacturing, boost �family-wage� job creation, reduce domestic and foreign debt, and restore national policy effectiveness.

This argument promotes the view, intentionally or not, that our task is to strengthen capitalist market forces in China.

China�s Adoption of an Export-Driven Growth Strategy

China has indeed become an export powerhouse. Between 1990 and 2008, China�s share of total world exports rose from 1.8 percent to 9.1 percent.2 China is on pace to become the world�s biggest exporter in 2009, overtaking Germany.

This export orientation represents a major change from past Chinese growth dynamics. China under Mao Zedong (1949-1976) had a highly centralized planned economy, in which production was organized by state-owned firms and directed at meeting domestic needs. Exports were few and undertaken primarily to pay for necessary imports.

During this period, China achieved both rapid growth and industrialization. As Maurice Meisner explains, �Starting with an industrial base smaller than that of Belgium�s in the early 1950s�China emerged at the end of the Mao period as one of the six largest industrial producers in the world.�3 Moreover, because it was isolated from international trade and investment for most of the Mao era, China was forced to (and did) develop its own technological capabilities. Looking at the computer sector, for example, Andrew Ross notes that:

In the 1950s, the new communist state established a science and technology R&D network, modeled after the Soviet system, and its electronics arm went on to produce several generations of computers, in many cases with little or no gap behind the capitalist powers. China�s first computer was developed in 1958, only one year after Japan�s and its first integrated circuit was produced in 1964, only five years behind the first US patent. A microcomputer was developed by 1977 (even before IBM unveiled its PC), a microprocessor by 1980, and a supercomputer, along with an IBM-compatible PC, by 1983.4

Shortly after Mao died, the Communist Party (led by Deng Xiaoping) decided to radically increase the economy�s reliance on market forces. It claimed that such a step was necessary to overcome the country�s growing economic problems, which were alleged to have been caused by Mao�s overly centralized system of state planning and production. However, although political and economic changes were definitely desired by the majority of Chinese, Deng and his followers greatly overstated the severity of existing problems and, more importantly, ignored popular calls for an exploration of other, non-market reform responses.5

Regardless of intentions, the Party�s post-1978 reform program ended up dramatically transforming the Chinese economy into a capitalist one (although with �Chinese characteristics�). In contrast to the pre-reform period, almost all economic activity is now market determined. And, while the state continues to dominate in many strategic sectors, such as finance, energy, and transportation, the great majority of value added in the all-important manufacturing sector is now produced by profit-seeking, private firms.6

Most importantly, foreign capital now plays a leading role in the Chinese economy, especially in manufacturing.7 Its activity has transformed China into an export-driven economy: the ratio of exports to GDP climbed from 16 percent in 1990 to over 40 percent in 2006, with the share of foreign produced exports growing from 2 percent in 1985 to 58 percent in 2005 (and 88 percent for high-tech exports).8 Equally noteworthy, the share of total exports being produced by 100 percent foreign-owned firms has also soared.9

This restructuring cannot be understood simply through a nation-state lens. Rather, as China�s reforms proceeded over the 1990s, Chinese accumulation dynamics became increasingly dependent on transnational corporate investment and export activity. As a consequence, the Chinese economy became more and more enmeshed in a broader process of East Asian restructuring�one that was driven by the establishment and intensification of transnational, corporate controlled, cross-border production networks, which linked and collectively reshaped all the economies involved. In other words, the Chinese experience, and in particular, its export drive, can only be understood in the context of broader capitalist dynamics.

China and the Dynamics of Transnational Restructuring

The expansion of cross-border networks was largely driven by the desire of transnational corporations to cheapen the production cost of goods classified as �machinery and transportation equipment,� most importantly information and communication technology (ICT) products (such as computers and office machines, and telecom, audio, and video equipment) and electrical goods.10 These two product lines together �accounted for nearly three fourths of total exports from the [East Asian] region in 2006-2007.�11

In accord with the logic of these networks, a growing percentage of the region�s ever greater trade activity became limited to the intraregional exporting/importing of the parts and components used to produce these products. As the Asian Development Bank points out, �Disaggregating manufacturing trade into final products on the one hand and parts and components on the other shows�[that] intraregional trade in Asia is mainly concentrated in parts and components. The intraregional share of developing Asia�s parts and component trade rose by almost 20 percentage points over the past decade, reaching 62% in 2005-2006, as compared to an 8 percentage point increase in total trade in manufacturing over the same period.�12

China was not only pulled into this process of regional restructuring, it has become central to its functioning. In the words of the Asian Development Bank, �the increasing importance of intra-regional trade is attributed mainly to the parts and components trade, with the PRC [People�s Republic of China] functioning as an assembly hub for final products in Asian production networks.�13 The share of parts and components in China�s imports of manufactures from East Asia rose from 18 percent in 1994-1995 to over 44 percent in 2006-2007. The import share of parts and components in the machinery and transportation equipment category soared over that same period from 46.1 percent to 73.3 percent.14

China�s unique position as the region�s production platform for final goods is highlighted by the fact that it is the only country that runs a deficit in regional parts and components trade, and whose exports are overwhelmingly final products. It is this unique position that has enabled China to increase its share of world exports of ICT products from 3 percent in 1992 to 24 percent 2006, and its share of electrical goods from 4 percent to 21 percent over the same period.15

The U.S.-China Bilateral Trade Relationship

The transnational production dynamics highlighted above led East Asian countries (other than China) to shift their overall export activity away from the United States and the European Union and towards East Asia, in particular, China. At the same time, they led China to expand and redirect its export activity away from East Asia and toward the United States and the European Union. Between 1992-1993 and 2004-2005, the East Asian share of China�s exports of final goods fell from 49.5 percent to 26.5 percent, while the OECD share (excluding Japan and South Korea) increased from 29.3 percent to 50.1 percent.16

Not surprisingly, then, the value of U.S. imports from China has soared, from $16 billion in 1990 to $340 billion in 2007. In 2003, China became the second largest exporter to the United States, trailing only Canada. The position of these two countries has fluctuated since, with China becoming the largest exporter in 2007 and then again in 2009. U.S. exports to China have also grown, but far more slowly: from $5 billion in 1990 to $65 billion in 2007. As a consequence, the U.S. trade deficit with China has grown dramatically: from $11 billion in 1990 to $274 billion in 2007. This is the largest deficit that the United States holds with any country.17

While the overwhelming majority of U.S. imports from China have long been manufactures (approximately 96 percent), their composition (as previously noted) has changed over time. The share of �miscellaneous� manufactures, such as toys, clothes, and footwear, fell from 58.5 percent in 1995-1996 to 37.7 percent in 2005-2006.18 Over the same period, the import share of machinery and transportation equipment products rose from 26.3 percent to 44.1 percent. Within this broad category, ICT products dominate. In 2005-2006, ICT products made up 37.6 percent of all U.S. manufactured imports from China.19

Not only are Chinese imports to the United States becoming increasingly sophisticated, China is also increasingly the main foreign supplier of such products. For example, in 1995-1996, China accounted for only 6.5 percent of total U.S. ICT imports. In 2005-6, China accounted for 33 percent of the total.20

These trends highlight the reason that Chinese exports have received so much attention in the United States. They also reveal, in concert with the previous analysis of East Asia�s transnational accumulation dynamics, that these �sophisticated� Chinese exports are really Chinese only in the sense that they were assembled in China. This point is reinforced by the fact that China�s increased share of the U.S. deficit was matched by a decline in the share accounted for by the rest of East Asia.

From 1999 to 2007, China�s share of the total U.S. trade deficit rose from 20.4 percent to 32.1 percent. Over the same period, Japan�s share fell from 21.1 percent to 10.2 percent. And the combined share of the rest of East Asia also fell, from 16 percent to 7.9 percent.21 In short, the threat to U.S.-based manufacturing activity comes not from China, but from the profit maximizing strategy of transnational capital.

While East Asian corporations have played the leading role in shaping and expanding the region�s transnational production networks, U.S. companies have also benefited from, and helped to expand, their operation. Some of the biggest beneficiaries are those U.S. firms that import and then market the products exported from China; Wal-Mart and Dell are among the biggest in terms of the dollar value of imports.

U.S.-based manufacturing firms that produce machinery and transport equipment also participate in these networks. For example, the share of parts and components in U.S. machinery and transportation equipment exports to China grew from 36.1 percent in 1995-1996 to 50.8 percent in 2005-2006. Over the same period, the share of parts and components in machinery and transportation equipment imports from China actually fell slightly, from 25 percent to 24.2 percent.

The same trend exists for ICT products. Parts and components, as a share of U.S. exports of ICT products to China, rose from 51.2 percent to 72.8 percent. Parts and components, as a share of imports in this category, fell slightly, from 23.5 percent to 20.7 percent.22

Thus, rather than producing final goods in the United States, U.S.-based manufacturers are increasingly dedicated to supplying the parts and components that China-based producers need to produce those final goods. Prema-chandra Athukorala and Nobuaki Yamashita describe the nuances of this strategy as follows: �[T]he share of parts and components in U.S. [ICT] exports to other East Asian economies, in particular, ASEAN countries, is much higher compared with that of exports to China. This pattern is consistent with case study-based findings that U.S. firms located in East Asian countries and regions undertake further processing and assembly of parts and components originally designed and produced in the USA as part of their engagement in China-centered regional production networks.�23

National Technological Capacities

As noted above, China had a strong national research and development infrastructure in place before the start of the reform period. However, given the country�s system of highly centralized planning, most of the gains supported prioritized military and heavy/chemical industry sectors. Few, if any, applications were shared with or designed to benefit consumer industries, and enterprises within these industries had no incentive (or resources) to develop their own innovations. This was one of the limitations of China�s economic system that needed to be addressed in the wake of Mao�s death.

Early decentralizing reforms did encourage new technological dynamism and improve the standard of living of working people. However, the gains were not sustained. As the reform program progressed, the resulting foreign domination of industrial activity began steadily eroding the country�s development capacities.38 This outcome is illustrated by the post-reform evolution of China�s high-tech industries, especially its computer industry.

In the early 1980s, the Chinese government started reducing the direct funding of its various state research institutes with the goal of forcing them to become self-financing. In response, and with government encouragement, these institutes created new, profit-making enterprises. To enhance their chances of success, these new enterprises were granted managerial independence and, more importantly, free access to the personal and (pre-reform) research findings of their parent institutions. Four computer companies were among the most successful of these new enterprises: Legend (now Lenovo), Founder, Great Wall Computer, and Stone. Lenovo, for example, was started by the Chinese Academy of Sciences.39

These firms were able to expand rapidly and dominate the domestic computer market for two interrelated reasons. They were able to combine innovations related to Chinese language word processing developed by their parent institutions with foreign-purchased hardware and technology, to produce affordable computers, capable of processing Chinese characters.40
And they were able to obtain the needed hardware and technology from foreign firms on relatively favorable terms, thanks to state policies that restricted the direct access of these firms to the Chinese market.41

By the middle of the 1990s, conditions had changed. The Chinese economy had become dependent on foreign capital and enmeshed in its regional networks. Unwilling to change its growth strategy, the Chinese state had little choice but to abandon its restrictions on foreign access to the domestic market. The resulting competition has taken its toll on leading Chinese firms, including those in the computer industry.

Lenovo (which acquired IBM�s PC unit in 2005) remains the largest PC seller in China, but is facing a profit squeeze and losing ground to HP and Dell (both of which are rapidly expanding their own distribution networks). Lenovo�s market share fell from 36 percent in 2006 to 29 percent in 2007.42 China�s other computer makers (labeled �also-ran computer makers� by BusinessWeek) are in real trouble, including Founder, which used to hold second place in the Chinese market.43

While leading Chinese firms continue to battle for survival in the domestic market, they are largely missing in action as far as high-technology exports are concerned. For example, China is now the world�s leading computer exporter, assembling approximately 80 percent of the world�s notebook and desktop computers. However, China�s main contribution to this activity is limited to providing cheap labor and land.

China�s export dominance is due to the fact that Taiwanese original design manufacturers (ODMs)�who dominate worldwide computer manufacturing�have shifted their production to the mainland. In 2001, Taiwanese computer makers manufactured only 4 percent of their computers in China. Five years later, it was 100 percent. Reflecting this shift, eight of China�s top ten exporters are now Taiwanese ODMs that supply �branded PC sellers such as Dell with unbranded computers and components�.There are no Chinese ODMs and there are no significant Chinese suppliers to the Taiwanese ODMs, or to their suppliers."44

Lenovo�s operations underscore this situation. By purchasing IBM�s PC unit, Lenovo instantly became a major player in the global PC industry. Yet this purchase has done little to advance Chinese technological capacities. Lenovo continues to use the same (mainland-based) Taiwanese ODM�s previously used by IBM, and has even moved its headquarters to the United States, where it employs U.S. engineers for product development.45

Surveying China�s situation five years after the country�s 2001 accession to the WTO, the Chinese economist Han Deqiang recalls that he had �argued the greatest damage [of membership] would be to China�s capacity to control its industrial and technological development autonomously. I think it�s safe to say these last five years have more than proven that true. In China, any industry that wants to develop its own technology or markets has encountered increasingly great barriers.�46

BusinessWeek proves supportive evidence for this point, noting: �delve beneath the muscular statistics and hype about advances in strategic industries, and China doesn�t seem so prepared to catapult into a role of global economic leadership. Experts familiar with highly touted Chinese achievements such as commercial jets and high-speed trains say the technologies that underpin them were largely developed elsewhere.� China exported $416 billion worth of high-tech goods in 2008, �but subtract the mainland operations of Taiwanese contract manufacturers and the likes of Nokia, Samsung, and Hewlett-Packard, and China is an electronics lightweight�.Most mainland companies mine existing technologies and compete on high volume and low cost in commodity goods.�47

Some Chinese firms, like Lenovo, have (thanks to mergers and acquisitions) already established themselves as major international competitors. No doubt there will be others. But such accomplishments are not an adequate indicator of whether a country is successfully strengthening its own national development capacities. And, on this measure, China does not appear to be succeeding. Rather, in line with its ever deepening integration into transnational capital�s regional production networks, the Chinese economy is slowly but steadily increasing its dependence on foreign technology, production, and markets.

**don** · February 14, 2010, 02:33 PM

Re: High Tech Thread

Joint Venture Silicon Valley Network annual report and outlook.

Why Silicon Valley faces fresh threats

Silicon Valley has rebounded from prior downturns, but this time a shakeout in venture capital, a foreign brain drain and a crisis in California education pose new threats to the innovation ecosystem, says a report being released today. "I'm not telling you the sky is falling, but I have a duty to report that some of the indicators are not good," said Russell Hancock, chief executive of Joint Venture Silicon Valley Network, which has indexed the region's business climate each year since 1995.

A prominent theme in this year's report is that Silicon Valley needs to acknowledge how federal investments in space and defense fertilized the region in the 1960s and 1970s, creating the environment for civilian entrepreneurship in computing and networking to flower in the 1980s and 1990s.

Now, given the vital federal role in growth sectors like biotechnology and clean technology, private sector leaders must realize that future innovation will increasingly depend on government support, said Emmett Carson, chief executive of the Silicon Valley Community Foundation, which helped develop the new report.

"We have started to forget how we got to be who we are," Carson said.
"We got here because we went after and got huge federal investments."

The 76-page report offers a detailed look at the demographic, economic, societal and governmental characteristics of Silicon Valley, defined as all of Santa Clara and San Mateo counties, with the additions of Fremont, Newark and Union City in Alameda County and Scotts Valley in Santa Cruz County.

The report will be discussed at a "State of the Valley" town hall meeting Friday at the McEnery San Jose Convention Center. Joint Venture and community foundation officials recently discussed its highlights.

Silicon Valley's secret sauce has been a blend of risk-friendly capital, a deep pool of engineering, scientific and marketing talent, and a steady stream of research and inventions from universities and laboratories.
All three aspects of this innovation edge are being eroded during this recession partly because the secret is out - other locales in the United States and abroad are actively cultivating their own Silicon Valleys - while structural factors are make it difficult for the original to maintain its position.

Less venture capital

The most traceable of these shifts is the downturn in venture capital investment from the unrealistic levels of the dot-com era.

"The fabled returns of (the venture capital center on) Sand Hill Road have not been there over the last decade," Hancock said, as Wall Street has lost its appetite for initial public offerings, minting fewer big deals that enrich investors and draw more risk capital to venture funds.

As a result the total venture capital investment in Silicon Valley has declined from $32.3 billion in 2000 to just under $7 billion in 2009, according to the PricewaterhouseCoopers Money Tree and the National Venture Capital Association.

"The industry is clearly going through a shakeout," said association research director John Taylor. Venture investing has receded to its 1998 levels and could slide lower before it rebounds, he said.

In this contraction Silicon Valley has so far managed to increase its share of overall U.S. venture investment from 32 percent in 2000 to 40 percent in 2009, as the region remains a center for innovation in sectors like biotechnology, medical devices and clean technology that are currently hot, Taylor said.

But having a larger slice of a smaller pie still makes the startup environment tougher, said William Miller, an emeritus professor at Stanford University who helped found the Mayfield Fund in the late 1960s, one of the original Silicon Valley venture firms.

"There will be less money available for a while," Miller said.
While the venture shakeout makes it harder for startups to get cash, a reverse brain drain threatens to diminish the region's talent pool, according to the report, which details Silicon Valley's dependence on foreign-born scientists and engineers and suggests that more of these skilled workers are staying home or deciding to return there.

Relying on immigrants

Nationwide about 21 percent of the scientific and engineering workforce is foreign-born, compared with about 60 percent in Silicon Valley. Many of these skilled foreigners came to the region to study at world-class institutions like Stanford, UC Berkeley or UCSF, and stayed afterward to create or staff startups.

But many factors now diminish the region's appeal as an education destination, said Hancock at Joint Venture. These include better educational opportunities at home, stricter rules on travel to the states in the wake of the Sept. 11, 2001, attacks and U.S. immigration rules unfavorable to the retention of skilled foreigners.

At the same time, India and China, which together contribute roughly 40 percent of Silicon Valley's foreign-born science and engineering talent, are prospering through this recession relative to the United States and Europe, becoming increasingly attractive as destinations for entrepreneurs, Hancock said. China has been particularly aggressive in luring back so-called "sea turtles" - Chinese nationals educated abroad - to participate in the country's planned economic expansion.

"The trends of immigration are reversing," Hancock said.

Cuts in education

California's cuts to its own educational system due to the state budget crisis will make it even tougher to keep up the pace of invention and education to sustain the knowledge-based innovation economy.

"If we're not growing our own and we're not sustaining the inflow of foreign talent, where does that leave us," said Carson with the foundation.

To rebound from these challenges the region must make a coordinated effort to seek government help, whether this means increased funding for education or specific backing for clean technology projects that require incentives or regulations to reach the market, the report says.

"Silicon Valley has been flat on its back and it's not entirely clear we'll be able to pick up again and reclaim our rightful place as the world center of innovation," Hancock said.

http://www.sfgate.com/cgi-bin/articl...BUMD1BV6A1.DTL

Report says Silicon Valley economy sputtering

Silicon Valley's economy took a big hit during the global meltdown and could have trouble climbing out, according to a report released Wednesday.

The 2010 Index of Silicon Valley said the region is entering a "new phase of uncertainty" where job losses, a shrinking foreign talent pool, a drop in investments and state legislative gridlock could put its standing as the center of technology at risk.

The report, released annually by local nonprofit groups the Silicon Valley Community Foundation and Joint Venture, examines trends in employment, housing, education and other issues to provide a snapshot of the region's well-being.

"It's a report with a lot of bad news in it. Most years, Silicon Valley has all this good news. But this year, it's not entirely clear when the recession ends if we're going to be able to very easily get back. That's not a given," said Russell Hancock, president and chief executive of Joint Venture, an alliance of business and community institutions.

The report noted that the region lost 90,000 jobs from November 2008 to November 2009, and unemployment is higher than national levels. It's also the worst in the region since 2005.

And there are other signs of weakness.

The number of patents dipped slightly in 2008, and venture capital financing, which provides money to start-ups, plunged. Office vacancy rates also were up 33 percent from 2008 to 2009, and incomes dropped 5 percent between 2007 and 2009, to $62,003.

The authors also worried that as other areas seek to compete with Silicon Valley, including India and China, the region will have a hard time attracting top talent, particularly for science and engineering positions. The report noted high high-school dropout rates, fewer students meeting basic state college entrance requirements and persistent racial disparities in education.
Silicon Valley's woes aren't totally unique � the recession has hit industries and geographic regions worldwide � but many people thought the high tech sector that drove the region was immune, and for a while, it was, said Stephen Levy, senior economist at the Center for the Continuing Study of the California Economy.

"What changed is that this became a worldwide recession and financial panic set in and exports were falling. There may have been an individual product that thrived, like the iPhone, but overall we couldn't sustain it," said Levy, who is also an adviser on the study.

The authors suggest Silicon Valley revisit its roots as one way to emerge from the recession thriving.

The region started as an area invested in the defense industry, space and creation of the Internet, and the federal government heavily funded those ventures, said Emmett Carson, chief executive and president of the Silicon Valley Community Foundation.

"When the government made those investments, there were spinoffs that happened in people's garages. People were drawn here because this was the place that certain work was going on and people were making it happen," Carson said.

He said now the government is making massive investments in biotechnology and clean technology, and local business and government leaders need to compete for that money. The report suggested green jobs were key to the region's turnaround.

"We stand with a set of industries that is the future � green technology, medical records technology, innovations to make buildings and homes more efficient," Levy said. "But we have to be a place that's inviting to families and companies."

http://www.sfgate.com/cgi-bin/articl...a160449S69.DTL

**don** · February 16, 2010, 07:43 PM

Re: High Tech Thread

Is that a rocket in your pocket or are you just happy to see me? (Mae West)

Adding Rocket Man to His R�sum�

By KENNETH CHANG

HAWTHORNE, Calif. � The coming debate over the future of the American space program will, in no small part, revolve around this question: Should the United States hire Elon Musk, at a cost of a few billion dollars, to run a taxi service for American astronauts?

President Obama�s budget request for 2011 calls for dismantling the Constellation program � the system of spacecraft that the National Aeronautics and Space Administration has been developing for returning astronauts to the Moon � and turning to private enterprise to provide transportation to and from the International Space Station. The budget asks for $6 billion over five years, which would most likely be split among two or three competitors .

That is the chance that Mr. Musk, 38, and his eight-year-old company, SpaceX, have been waiting for.

Smart, brash and prickly, with the accent of his native South Africa, Mr. Musk promises that SpaceX will be able to provide space trips aboard its Falcon 9 rockets at $20 million a seat � a small fraction of the cost of a ride on the space shuttles or the Russian Soyuz rocket. And Mr. Musk, says he could do it in two or three years once he signs a contract with NASA.

�Really, the whole purpose of SpaceX from the beginning has been human spaceflight,� Mr. Musk said last June to a blue-ribbon panel reviewing NASA�s human spaceflight program. When he started SpaceX in 2002, Mr. Musk was an Internet entrepreneur who had made his fortune with PayPal.

SpaceX now has nearly 900 employees. It successfully launched a small Falcon 1 rocket into orbit in 2008, and successfully deployed a satellite last year. It has a $1.6 billion contract with NASA to bring supplies to the International Space Station in its larger Falcon 9 rocket. �I absolutely believe he can do everything he says he can,� said Peter H. Diamandis, founder and chairman of the X Prize Foundation, which seeks to encourage space development through technology contests. �I�m a fan of the approach that SpaceX has taken.�

Aerospace giants like Boeing and Lockheed Martin will almost certainly also submit bids for the new NASA contracts, but SpaceX has drawn much of the attention, both positive and negative. Senator Richard Shelby, Republican of Alabama, the home of NASA�s Marshall Space Flight Center, which has led development of the Constellation rockets, has strongly defended the current program and discounted potential commercial competitors like SpaceX.

In a statement responding to the administration�s proposal, Mr. Shelby said the new plan amounted to a �death march� for the astronaut side of NASA and lambasted the claims of commercial companies as �cure-all hype.�

To the blue-ribbon panel last June, Mr. Musk said he expected that all of the pieces of the first Falcon 9 would arrive at SpaceX�s launching pad in Florida by the end of the summer and that the maiden flight would take off by the end of the year.

Mr. Musk told the panel that this year SpaceX would be �doing our flights that actually go to the space station, carrying cargo and bringing it back.�
The first Falcon 9 flight has still not taken off. The second stage arrived at Cape Canaveral last month, about half a year later than Mr. Musk stated to the panel. The first launching is now scheduled for no sooner than March 22.

The target for first delivery of cargo to the space station is now sometime in the first half of 2011. That would still be an impressive achievement.
�As a payload launcher, I think they�re doing very well,� said Joseph R. Fragola, a safety consultant who works on NASA�s Constellation program and who has also had technical conversations with Mr. Musk to offer advice on the SpaceX rockets.

But he doubts that the Falcon 9 can get off the ground with astronauts as quickly and easily as Mr. Musk expects. �Theoretically, it is possible,� Dr. Fragola said, �but the history of development of crewed launch vehicles says it�s extremely unlikely.�

A New Rocket Factory

The headquarters of Space Exploration Technologies Corporation � SpaceX�s official name � certainly look like the future. Located near Los Angeles International Airport, the building�s lobby has the sleekness of a boutique hotel. The front half is mostly open space filled with designer cubicles for the engineers. Even Mr. Musk�s work area is a cubicle, although his is large enough to hold a sofa and an executive-size desk.

Down a hallway and through a door, the office area opens into a voluminous factory where the fuselages of 747s were once built. Now it is the manufacturing area for giant 12-foot-wide cylinders for rocket stages, rocket engines and the Dragon capsule that is to be used first for cargo and later for astronauts.

In the lunch area the worlds of Mr. Musk intersect. Like an Internet company, SpaceX offers employees free drinks and frozen yogurt treats. And he has reminders of his Hollywood connections as well. A statue of the comic book character Iron Man, with an employee I.D. badge around his neck, stands nearby. Mr. Musk served as a real-life role model for Tony Stark, the industrialist-turned-superhero in the �Iron Man� movie. The SpaceX factory appears in the sequel, and Mr. Musk has a bit part.

Mr. Musk has also faced the hazards of celebrity. His personal life � his divorce from Justine Musk, a fantasy writer, and his engagement to Talulah Riley, a British actress � has provided fodder for technology gossip blogs, as have the corporate machinations at SpaceX and Tesla, the electric car maker that Mr. Musk also runs.

Mr. Musk said he did not set out to be a rocket manufacturer. Rather, with some of the millions of dollars he reaped from the sale of PayPal to eBay, he wanted to send a small greenhouse to Mars � a private science experiment to see if Earth plants could grow in Martian soil. Beyond the science, he said he thought the sight of a green plant on Mars would capture people�s imagination and reinvigorate interest in space.

�I could get all that down to several million dollars,� he said. But a rocket to get Mars Oasis off the ground was expensive. At the time, in 2001, a Delta II rocket would have cost $65 million, Mr. Musk said. He made three trips to Moscow to look at a refurbished Russian intercontinental ballistic missile. But even that would have required the development of a third stage to get into space.

He wondered whether it would make more sense to build his own rockets, and he started talking to people in the rocket business, including Dr. Diamandis. �I was actually trying to talk him out of it,� Dr. Diamandis recalled, �because I said, �You know, it�s going to take two or three times as long as you think it is, and it�s going to cost you two or three times as much.� The reality is it has taken him longer, and it has cost him more than he expected, but I�m extraordinarily thankful he didn�t take my advice.�
A Bumpy Road

By most accounts, SpaceX has assembled a talented team and successfully streamlined costs while aiming for high reliability. Instead of turning to subcontractors, SpaceX builds almost everything � about 80 percent, by value � at its California factory. �They essentially have created their own low-cost avionics and rocket companies,� said Douglas O. Stanley, an aerospace research engineer at the Georgia Institute of Technology who has made several visits to the SpaceX factory.

Dr. Stanley estimates that SpaceX was able to develop its Merlin engine, which provides propulsion for the first stages of the Falcon 1 and Falcon 9 rockets, at one-fourth to one-third the cost that a traditional engine manufacturer would have required. Mr. Musk points out that SpaceX already manufactures more rocket engines than all other companies in the United States combined, and SpaceX may surpass Russia�s output this year.

While SpaceX has cut costs, it has not avoided the failures that afflict rocket development. The first three flights of the Falcon 1 failed. Mr. Musk said he had invested about $100 million of his own money in SpaceX, nearly twice what he originally planned. He maintains that the company could survive four Falcon 9 failures.

But Mr. Musk also expressed confidence that the development of Falcon 9, despite its greater size and complexity, would go more smoothly than that of Falcon 1. Lessons learned from the earlier failures have been applied to the Falcon 9, which shares many Falcon 1 components, like the Merlin engines. And once the Falcon 9 proves ready for cargo, it is straightforward to add seats, a carbon dioxide scrubber and other systems to make the capsule suitable for astronauts, Mr. Musk said. �The escape system and then flight testing the escape system are the only things of note,� he said.

He has harsh words for those who disagree. �Joe Dyer ought to be ashamed of himself,� he said of Adm. Joseph W. Dyer, chairman of NASA�s Aerospace Safety Advisory Panel, after the panel issued a report that called for continuation of the Constellation�s Ares I rocket and stated that none of the commercial alternatives had yet met NASA�s safety standards for humans. Mr. Musk said the safety panel had spent only a few hours touring SpaceX and had no knowledge about what SpaceX had or had not done, and that SpaceX engineers had designed the Dragon capsule and the Falcon 9 rocket to meet published NASA requirements.

The panel, Mr. Musk said, �just seems to be speaking out of complete ignorance.�

Dr. Fragola said SpaceX has indeed kept reliability among its top priorities, but he also said numbers like structural margins were only the first step in evaluating safety for passengers. NASA has not yet set out a process for certifying commercial rockets.

SpaceX doesn�t �fully understand the dramatic difference between a crew launcher and a payload launcher,� Dr. Fragola said. For example, the capsule designers have to carefully study the conditions following an accident, including the blast heat, fragments of the disintegrating booster and the pressure wave of an explosion. While they do not matter for cargo, �the crew cares tremendously about what the conditions are, because it relates to their survivability,� Dr. Fragola said.

Waiting to Launch

Launch Complex 40 at the Cape Canaveral Air Force Station bears little resemblance to SpaceX�s sleek headquarters. The Air Force used the site most recently for the launching of Titan rockets, now obsolete. SpaceX has leased the site for two years, knocking down the launch tower. In its place it has built a hangar, 225 feet long, 75 feet wide, where the two stages of the Falcon 9 rocket, laid out horizontally, can be mated together along with a Dragon capsule on top.

Much of the launching pad seems like it was assembled during a scavenger hunt. A 125,000-gallon liquid oxygen tank from the Apollo era was bought for $86,000 � the price of scrap metal � and refurbished. SpaceX bought some rusty railroad cars that NASA had used to transport helium and refurbished those, too.

The assembled rocket, still horizontal, will be rolled out along the same railroad tracks that used to move the Titan rockets, and swung into a vertical position. In the next couple of weeks, the first Falcon 9 will be rolled out and rotated up for a brief test firing of its engines.

Then it will return to the hangar for final preparation, including the installation of the explosive charges to destroy it if it goes awry.
In a news release last week, SpaceX announced the launching would occur in one to three months.

http://www.nytimes.com/2010/02/16/sc...ml?ref=science

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