Silicon Valley’s biggest disadvantage as its high cost of capital. The Japanese “pay 6 percent, maybe 7 percent, for capital. I pay 18 percent on a good day,” he complained. Building advanced manufacturing facilities was brutally expensive, so the cost of credit was hugely important. A next-generation chip emerged roughly once every two years, requiring new facilities and new machinery. In the 1980s, U.S. interest rates reached 21.5 percent as the Federal Reserve sought to fight inflation.
