That production chief was named Charlie Sporck, and at Fairchild, and subsequently at the spin-off National Semiconductor, he played an important role in directing the future of Silicon Valley and the American economy at large. In the early 1960s, only around five years after the company started, Fairchild opened its first overseas assembly plant, in Hong Kong. The move—suggested by Bob Noyce—surprised the rest of the industry, but with the low start-up costs for assembly lines, it was a textbook case of labor arbitrage. According to Wilf Corrigan, who was promoted to oversee Fairchild’s overseas manufacturing in the mid-1960s, the going rate for “semiskilled” assembly work was $2.50 an hour in the Bay Area (more than $20 in 2022 money) but only 10 cents in Hong Kong, a 96 percent reduction.50 Fairchild was the innovator in what Corrigan called “jet-age automation” and what we have come to call offshoring.51 At around $1 a day, Fairchild found a way to match the nominal cost of Chinese railroad workers a full century after they built the Central Pacific. Paying so little sounds dangerous, especially so close to Red China, but America’s military bases provided sufficient security. The country’s global anticommunist mandate (self-awarded) ensured capitalist governance, and that made offshoring a more promising investment than automation. Sporck replayed the same layoffs-first strategy at National Semi, and the rest of the industry followed suit.

Offshoring is an inexact term, considering that firms were perfectly willing to seek deals on work in North America, too, by building plants in Mexico. In 1965, Fairchild opened a factory on the Navajo reservation in Shiprock, New Mexico, taking advantage of high unemployment with a low-wage “trainee” program and $700,000 in loans from the Navajo Nation.52 Scholar Cedric Robinson calls sites like Shiprock “production enclaves,” places where corporations “could be guaranteed special privileges and higher rates of exploitation.”53 Whatever you call it, Silicon Valley reoriented around this labor arbitrage strategy, bifurcating high-cost engineering and design from low-cost assembly work—the Shiprock site quickly became New Mexico’s largest industrial employer.54 As we’ll see, the strategy culminated in “fabless” (as in, without fabrication lines) manufacturing in the following period, divorcing design and production at the firm level. The First World’s Cold War arsenal created the production enclaves where capital could count on low wages, freeing semiconductor firms and ultimately U.S. industry in general from domestic wage-price inflation. Besides, putting production in East and Southeast Asia kept electronics firms near their biggest customer: the U.S. military.