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Written by Mike Buetow   
Saturday, 31 May 2008 19:00
Caveat Lector The recent events in Myanmar and China are unspeakable. At last count, the massive earthquake that rocked central China on May 12 cost at least 50,000 lives and left more than five million homeless. The infrastructure of Sichuan Province – roads, schools, buildings – is no more.

Just 10 days earlier, Myanmar was engulfed in a horrendous cyclone that killed at least 100,000 persons – due to the nation’s secretive military ruling junta, the exact count may never be known – and left up to 2.5 million people destitute.

In China, major electronics manufacturers appear to have escaped damage from the quake. Among the major companies issuing statements, it appears the worst of the damage amounted to a few fallen ceiling tiles. In Chengdu, 55 miles south of the quake’s epicenter, staff and inventories at Intel’s chip test and assembly plant in Chengdu were unhurt, although the company shut down operations temporarily to assess possible damage. In Suzhou, about 600 miles east of the epicenter, home to a host of the world’s top electronics manufacturers and suppliers, some companies are reporting plant closures for inspections, but no injuries or damage have been reported.

Fortunately, the Three Gorges Dam, a nearly 600 ft. high, 1.2-mile long structure that pools the Yangtze River into a lake some 410 miles long, was unscathed. This is critical, as there are a reported 30-plus million people who live adjacent to the dam and whose lives would be at least disrupted, and at worst lost, should it fail.

As I’ve noted before, the Three Gorges Dam is highly controversial because, among other things, it resides atop the Jiuwanxi and Zigui-Badong faults, two of the largest fault lines in Asia. Each time engineers raise the water level in the reservoir, the earth surrounding the dam moves, at times with deadly consequences. In the seven months after engineers increased the reservoir level to 512 ft., in fall 2006, the Chinese Academy of Engineering reported 822 tremors. Next year, plans call for hiking the dam’s water level to its full 575-ft. capacity. When that happens, even more seismic activity is sure to follow, geologists and seismologists are convinced.

China and Myanmar are worlds apart in size and global importance, but their rulers share distinct and not-so-positive similarities: a lack of openness, an unwillingness to follow best practices, a lack of institutional oversight, a desperate need to hold onto power at all costs. China has for years followed an aggressive economic expansion strategy, but building-at-any-cost tactics eventually take a toll. And the Chinese government would never cave to international pressure: Doing so would be considered a sign of weakness, an absolute no-no in a nation where “face” trumps all.

In the rush to offer Wall Street a “China solution,” many companies suppressed consideration of the longer-term issues, such as what, exactly, do we do if an earthquake or flood or other catastrophe strikes our main facility (which has happened), or if the government decides to move our plants (ditto) or if, God forbid, China and the US face off in some arena other than sports or world trade?

With China getting more expensive by the day, we are seeing a steady stream of migration to India, Vietnam and other places along the Pacific Rim.

Companies like Intel have long known the wisdom of spreading their eggs among many baskets. The world’s leading microprocessor company has six wafer fabs across three time zones in the US, plus three more in Ireland and Israel. Its assembly and test sites are China, Costa Rica, Malaysia, the Philippines and the US. If tragedy or Mother Nature strikes, Intel is prepared. (And unlike much of Sichuan Province, Intel plants are built to earthquake standards.)

North America may be expensive, occasionally corrupt (Mexico’s specialty), bellicose and politically onerous (that would be the US). It’s also a place where your assets will be protected, where governments are stable, where building codes are demanding and followed, and where risk is, generally speaking, the lowest.

A 7.1 magnitude quake rocks San Francisco in 1989, a scant 50 miles from the heart of Silicon Valley, and just a handful of people die and businesses are up and running in days, if they shut down at all. Hurricane Andrew devastates southern Florida and the panhandle region, but only 15 lives are lost. The two largest buildings in New York City are blown up, and we absorb the hit and go back to business, sadder and wiser, but more unified than ever. I hope China learns its lessons from the Sichuan earthquake. But we would be wise to spread our eggs around, just in case they don’t.

Ed.: Clarification
As a few readers pointed out, the epicenter of the 1989 Loma Prieta earthquake that hit northern California was not San Francisco, but 56 miles away, near Santa Cruz. We regret any confusion.


Last Updated on Monday, 23 June 2008 05:13
 

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