The manager of a microchip (chip for short) manufacturing firm can choose from various production technologies and must determine whether to (a) move part of their production to a foreign plant, and (b) use the same technology in their foreign plant as they do in their domestic plant.

Chip manufacturers can produce using either sophisticated equipment and relatively few workers (prevalent choice in the US) or many workers and less complex equipment (prevalent choice abroad).U.S. chip firms have been moving much of their production abroad for many years. Worldwide sales of chips made in the U.S. dropped from 66% in 1976 to 34% in 1998, and to 17% in 2011, then rose slightly to 21% in early 2015. U.S. chip firms moved their production abroad because of lower taxes, lower labor costs, and capital grants provided by foreign governments. These grants reduce the cost of operating a foreign facility by as much as 25%, compared to the costs of running a U.S. plant. However, in 2012, China, Thailand, and other Asian countries substantially raised their minimum wages, which reduces the incentive of U.S. firms to move production to those locations.

Draft a one to one and a half-page memo to your CEO, in bullet format, advising her of the different cost and productivity issues the firm must consider in the decision of (a) moving part of the production abroad, and (b) choosing (or not choosing) the same technology abroad as they do in the U.S. Use all class production/productivity and cost concepts that are relevant to consider in making this decision.