The turkey and ham many are eating this holiday season don't just appear magically on the table. Most are the end product of an increasingly global, industrialized system that is resulting in costly environmental degradation. Better understanding of the true costs of this resource-intensive system will be critical to reducing its negative effects on the environment, says an interdisciplinary team of researchers led by Stanford University's Rosamond Lee Naylor, Walter Falcon, and Harold Mooney.

"Losing the Links Between Livestock and Land" appears in the Policy Forum in the Dec. 9 issue of Science. It represents a synthesis of research by professors at Stanford University, the University of Virginia, the University of California at Davis, the universities of Manitoba and British Columbia in Canada, and the United Nations LEAD (Livestock Development and Environment) program within the Food and Agricultural Organization of UN.

"Sixty years ago, the link between the livestock production and consumption was much more clear and direct, with most consumers getting their meat and dairy products from small, family-owned farms," says lead author Naylor, an economist. Co-author Falcon agrees. "When I was growing up in Iowa, almost all farmers kept both chickens and pigs."

Today, meat consumption has sky-rocketed, and large-scale intensive livestock operations provide most of those products, both in the U.S. and around the world.

Particularly striking is the growth in demand for meat among developing countries, Naylor notes. "China's meat consumption is increasing rapidly with income growth and urbanization, and it has more than doubled in the past generation," she says. As a result, land once used to provide grains for humans now provides feed for hogs and poultry.

Numerous factors have contributed to the global growth of livestock systems, Naylor notes, including declining feed-grain prices; relatively inexpensive transportation costs; and trade liberalization. "But many of the true costs remain largely unaccounted for," she says. Those costs include destruction of forests and grasslands to provide farmland for corn, soybeans and other feed crops destined not directly for humans but for livestock; use of large quantities of freshwater; and nitrogen losses from croplands and animal manure.

Nitrogen losses are especially problematic, says James Galloway of the University of Virginia. "Once nitrogen is lost to the atmosphere or to water, it can have a large number of sequential environmental effects. For example, ammonia emitted into the atmosphere can in sequence affect atmospheric visibility, forest productivity, lake acidity and eventually impact the nutrient status of coastal waters."

Naylor cited Brazil as a specific example of the large impact on ecosystems and the environment. "Grasslands and rainforests are being destroyed to make room for soybean cultivation," she said. The areas are supplying feed to the growing livestock industry in Brazil, China, India and other parts of the world, leading to "serious consequences on biodiversity, climate, soil and water quality."

Naylor and her research team are seeking better ways to track all costs of livestock production, especially the hidden ones related to ecosystem degradation and destruction. "What is needed is a re-coupling of crop and livestock systems," Naylor said. "If not physically, then through pricing and other policy mechanisms that reflect social costs of resource use and ecological abuse."

Such policies "should not significantly compromise the improving diets of developing countries, nor should they prohibit trade," Naylor added. Instead, they should "focus on regulatory and incentive-based tools to encourage livestock and feed producers to internalize pollution costs, minimize nutrient run-off, and pay the true price of water."

She cited efforts in the Netherlands to track nitrogen inputs and outputs for hog farms as one approach. In the U.S., the 2002 Farm Bill provided funds for livestock producers to redesign manure pits and treat wastes, but she notes that much greater public and private efforts are needed to reduce the direct and indirect pollution caused by livestock.

In the end, though, it may be up to consumers to demand more environmentally sustainable approaches to livestock production. "In a global economy with no global society, it may well be up to consumers to set a sustainable course," she added.

Seed funding for the research was provided by the Woods Institute for the Environment, which supports interdisciplinary approaches to complex environmental issues. Naylor, Falcon and Mooney are affiliated with the institute and with the Center for Environmental Sciences and Policy in Stanford's Freeman Spogli Institute for International Studies.

In addition to Naylor, Mooney and Falcon of Stanford and Galloway of Virginia, co-authors are Henning Steinfeld of the United Nations Food and Agriculture Organization; Galloway; Vaclav Smil, University of Manitoba; Eric Bradford, University of California at Davis; and Jacqueline Alder, University of British Columbia.

A delegation from the China Semiconductor Industry Association (CSIA) headed by its president, Mr. Zhongyu Yu, visited Stanford University on November 5, 2005. As part of its visit on campus, the delegation was invited to speak at SPRIE's seminar series on the rise of China's innovation competence. Mr. Yu and his colleagues shared with the audience the latest developments in China's integrated circuit (IC) industry as well as their understanding of the underlying driving forces, the level of competency, the role of the government and China's integration into the global innovation system.

Phenomenal growth of China's IC industry

Mr. Yu first shared with the audience some striking data that clearly illustrated the growth of China's IC industry since 2000. In 2000-2004, the industry grew with a CAGR of 31% from $2.2 billion to $6.7 billion. In 2004, there were 670 IC companies employing a workforce of 130,000, of which 40,000 were engineers. The growth is pronounced throughout the value chain from IC design to IC manufacturing and IC packaging and assembly. In 2004, there were 476 IC design companies and their revenue reached $1 billion, an 81.5% increase from 2003. Domestic companies have made impressive inroads into the development and commercialization of a few specific IC products such as second generation ID cards, audio decode chips, third generation cell phone base band chips and MP3 chips. In IC manufacturing, there were a total of 39 fabrication plants by the end of 2004: one 12-inch plant, nine 8-inch plants and 29 4-inch to 6-inch plants. These plants generated a revenue of $2.24 billion in 2004, a 90% increase from 2003. Meanwhile, three more 12-inch plants are under consideration by SMIC, HHNEC and Hynix. IC packaging and assembly reached $3.49 billion in revenue in 2004.

Multiple forces drive the growth

What has been behind such phenomenal growth? Mr. Yu identified three major driving forces. First is the continuing growth of the domestic market that has provided new demand for outputs from the industry. China has become the largest manufacturing base for most consumer electronics products such as televisions, DVDs, personal computers and mobile phones. For example, in the year of 2004, China manufactured 74 million television sets and 230 million mobile phones. These consumer electronics products are fueling the growth of the China's domestic IC market. In 2004, the market reached $40 billion, making China the second largest IC market in the world with a global share of 22%. The second driving force has resulted from the reform of the financial system, which has substantially improved the investment environment--especially for foreign investment. Foreign investment now accounts for 80% of total investment in the IC industry, even when domestic bank loans are taken into account. Venture capital has become a considerable source of capital. $424 million was invested in 2004. The third driving force is the global recession of the IC industry after 2000. The recession exerted tremendous economic pressure for multinational corporations to relocate their manufacturing and R&D activities to China to take advantage of China's cost advantage.

China still weak in innovation in IC

While the growth of China's IC industry has been impressive, Mr. Yu also pointed out some noticeable weaknesses of the industry. The industry is dominated by low value-added IC packaging and assembly, which accounts for half of the industry's revenue. High value-added IC design work only generated 15% of the total revenue in 2004. Most of the 476 IC design companies are very small. In 2004, only 17 companies had revenues over 100 million RMB (which was about 12 million USD). Among them, only two had revenues over 500 million RMB (about 60 million USD). The technical competence of IC design companies is still very weak. Except for the few aforementioned emerging niches, IC design is very much lagging behind the cutting edge. Most domestic demand for IC is still met by import. As Mr. Yu pointed out, "all the micro components and memory [of domestically manufactured consumer electronics products] are imported."

Government policy

The government is well aware of these shortfalls and policies have been put in place to support the next-phase growth of the industry. Factor inputs need to be boosted. In terms of capital, Mr. Yu estimated that a total of $30 billion investment will be needed in the coming five years to fuel the growth of the industry. Yet, the government will cede its role as a director investor in any IC programs while promoting investments from other sources, being it bank loans, domestic private investment, foreign direct investment or venture capital investment. Human resource is another prime area for improvement since there is a serious shortage of experienced IC engineers. The government has put in plans to "cultivate 40,000 IC designers and 10,000 IC processing technologists" over the coming 6-8 years. More importantly, however, indigenous competence needs to be built. "Independent innovation" has been identified as a priority for public policy in China's 11th five-year development plan. Mr. Yu declared, "our goal is not to copy others' chips but instead to have our own."

China's integration into the global innovation system

Looking into the future, as China's IC industry and market continue to grow, Mr. Yu articulated for the audience the importance of China being integrated into the global innovation system. In the coming five years, there will be plenty of opportunities for Chinese companies and universities to collaborate with innovators from abroad, whether it is to shape next-generation technologies and technical standards, for multinational corporations to set up research and development centers in China, or for universities to collaborate on cutting-edge research. As Mr. Yu declared, "China welcomes mutually beneficial cooperation with American industry and academia in the area of [IC] manufacturing and the innovative work of R&D."

Biography of Zhongyu Yu

Mr. Yu Zhongyu has been engaged in semiconductor research and management for many years and is one of the leaders of China's integrated circuit industry. He has engaged in research and design of IC products and was honored with the National Science and Technology Award. Having joined the government in 1988, he was responsible for organizing and leading the IC project during "7th five-year plan" and "8th five-year plan"; he acted as a member of the leading group for the National "908" project and headed the construction leading group of the Huahong factory in the "909" project. These projects made important contributions to China's IC industry development. Mr. Yu has been the President of the China Semiconductor Industry Association since 2001.

On November 1, 2005, SPRIE invited Jimmy Lee, Vice President and General Manager, Timing Solutions, Integrated Device Technology (IDT) to speak at SPRIE's seminar series on the rise of China in innovation. Lee shared his experience in running a full-blown integrated circuit (IC) product development center in China together with an informative account of China's rise in the IC industry.

The globalization of the IC industry and the rise of China

The commoditization of semiconductor technology is marked by the encapsulation of previously proprietary technologies into commercially available equipment and software design tools. This has substantially lowered the entry barrier for IC design. It has enabled the emergence of a new generation of companies in the Far East in backend assembly and testing as well as IC design. The process is further helped by advances in communication technology that eases access to and sharing of information across geographies. Meanwhile, the IC industry is shifting from being technology-driven to application/market driven. The integration of product development and market has become an important differentiator in global competition. These industry changes are coupled with changes in the worldwide market, mostly noticeably the rise of Asia as a significant market.

China is rising quickly as a significant player in IC. It has a huge pool of talent and many "returnees" - those who grew up in China, were educated in the West and have returned to China to work; they are essential in transferring competence from the West to China. China also enjoys substantial cost advantage while having fairly decent productivity. Starting from the 1990s, the government has invested heavily, and issued extensive regulatory incentives, to promote the semiconductor industry. As a result, according to Lee, in 2004, there were 102 IC test and assembly companies, 50 foundries and 457 IC design companies operating in China. They generated a total revenue of $4.4 billion.

IDT's product development venture in China

IDT is a major IC design company. Its workforce of 3,700 (1,500 in U.S.) has designed 1,300 IC products in 15,000 configurations. In fiscal year 2005, the company garnered a revenue of $645 million, 25% of which went into R&D. In the late-1990s, frustrated by the high turnover and the shortage of talent in Silicon Valley, it opened up an operation in

China. China's abundant and low-cost talent pool provided an opportunity. The company was also attracted to its budding telecommunication market, an area IDT had wanted to get into.

Luckily for IDT, "it just so happened that Newave Technology Corporation was available." Newave was the first IC design start-up in China. Founded by several Chinese returnees in 1996, the company had 100 some engineers developing telecommunication IC for the China market. In 2001, IDT acquired Newave for $85 million. At the time of acquisition, Newave was working on two products but its revenue was very small. Since then, Lee built it into a successful product development center.

Challenges for setting up a product development center in China

Setting up and operating a product development center in China is full of challenges. Lee grouped them into two areas.

The first is organizational challenges, from defining the mission of the organization to every aspect of human resource management: recruiting, training, retention, etc. From the beginning, the mission was to be a self-sufficient, whole product development center. "They basically have the responsibility to develop the entire product from the specification to the manufacturing transfer and they also have the entire infrastructure such as HR, finance and legal to be self-sufficient to support the local needs." Such positioning is crucial in China because the competition for talent is extremely intense and this generation of young engineers is very ambitious, many wanting to start their own business sometime in their life. They are often impatient with long-term strategy. Therefore, "if you want to have top-notch talent working for you, you have to challenge them constantly in technical areas." Picking the right leader is also a key. IDT decided that this person had to be born in China, grew up in China, be western trained and have worked in western companies. Such a combination is ideal because there are a lot of subtleties that are culture specific and one has to be born and grow up in China to get it. In the technical area, IDT hired a few long-term expatriates from headquarters. They are the real masters in their respective fields in IC design. This is where the leverage comes from: "You use one super high power master technical guy to leverage the intellectual labors of the local engineers," said Lee.

The second challenge stems from social-cultural differences. A few examples: communications is a big issue, not so much because of language barriers but because of differences in culture and the level of professionalism. As Lee stated, "...it's more of the mindset. It's very difficult at the beginning to teach them how to communicate, when to communicate and what to communicate." Secondly, social-culture norms shape a different level of standard in decision-making and judgment call. Lee needs to put a lot of effort into teaching the local engineers how to think from the customer's perspective. Thirdly, employees are loyal to individuals rather than the corporation. These social-cultural differences are an area where there is no shortcut. They have to be overcome with training. Training means taking every opportunity to educate the local workforce: formal training programs, informal one-on-one coaching, ongoing training-by-doing, training over hundreds of conference calls over the past 4-5 years, you name it. "To some extent, this is sort of the brainwashing process," commented Lee. "There is no shortcut. You just have to put in a lot of TLC - tender, loving care. This is very challenging."

IDT's positive experience in China

While IDT "did run into many, many of those challenges," its overall effort in China has been extremely positive. The local team now manages a dozen of products, which involves some original work. The headquarter team is using some of the intellectual property generated by the folks in China. The local team even presented a paper in this year's IEEE ISSC Conference. It is the first paper coming out of China presented at such a prestigious conference. Productivity and cost advantage are also evident. Lee estimated that "for the team here in the United States to develop the same number of products will probably take them twice as long in time and probably cost 4-5 times more. This is really a good deal for the company."

Future outlook

Looking ahead, Lee highlighted a few issues that will shape China's IC industry. Overall, it will be a fertile ground for IC product development because of the talent pool. The job market will remain red hot with rapid increase of wages and high turnover rates. There will be hundreds of start-ups because of the low entry barrier. However, many will lack management experience and business acumen. Duplication of investment and engineering effort for the same market will result in the industry consolidating into dozens of medium size companies. In ten years time, these survivors will become significant suppliers to domestic IC demand in emerging applications such as wireless communication and digital TV. All in all, as Lee pointed out, "one needs to marry the best of the East and the West to create a world-class company."

Despite its attempt to soften criticism of the war, there is no evidence the Bush administration is capable of self-correction.

That came home to me the other day while listening to a senior administration official deliver an off-the-record tour d'horizon of American foreign policy. He is among the best minds in this administration, counted among the ranks of the realists, rather than the neoconservatives.

The United States stands alone as the most powerful nation in the world, the official began. In no previous moment of human history has a single state enjoyed such a dominant position.

When it comes to managing its relations with other would-be powers -- Europe, China, Japan and India -- the United States has done "extraordinarily well,'' he said.

The tensions generated by the war in Iraq have eased, the senior foreign policy official confidently asserted. The Europeans are content to gaze intently inward, he observed, while America strides the globe.

Japan is embracing the United States in a very close relationship that shows no sign of unraveling. Meanwhile the Bush administration has forged a growing partnership with India.

When it comes to China, the administration has chosen the path of accommodation and integration rather than containment of the rising power. He expressed confidence that American power and the prospect of democracy in China will secure the peace.

The only remaining challenge for the United States is to combat the threat of a radical Islamist movement that seeks to acquire weapons of mass destruction. For that, there is the promotion of democracy and American values around the world. After all, the official said with not even a nod to humility, "the U.S. is the most successful country that has ever existed.''

A year or two ago, the American people embraced this vision of a confident colossus, a Gulliver among the Lilliputians. That was before they watched the giant tied down in its attempt to export those American values by force of arms in Iraq.

The arrogance of this administration would be barely tolerable if it were not paired with a stunning incompetence, on display from Kabul to Katrina. That deadly combination has weakened American strength in the world. It has emboldened far more serious challengers in Iran and North Korea, who see the United States as too bogged down in Iraq to credibly threaten them with the use of force.

The war rated barely a mention in the sweeping view offered by the senior administration official, except indirectly. He offered a realist defense of the administration's democracy crusade.

World War II was fought with democratic goals, the official pointed out. And the Cold War -- the model for the current struggle against Islamic extremism -- was not just about balancing the power of the Soviet Union. The wars in Korea and Vietnam were really about determining which system those countries chose, he argued.

Those are curious examples to cite as a defense of the decision to go to war in Iraq. The United States shored up authoritarian regimes in Korea and Vietnam to counter the communist threat. Vietnam was a strategic mistake that took decades to overcome. And democracy came to Korea more than 35 years later, after a long period of economic development.

President Bush cited the democratic transformation of Korea -- along with Taiwan and Japan -- in a recent speech during his trip to Asia. But these are examples of the "conventional story in which you become rich and then you become democrats,'' as the senior official put it so well.

The administration proposes however to skip this long, but necessary, path to democratic capitalism when it comes to the Middle East. The policies of security and stability have failed there and a quicker route to democratic change is called for. But there is no historical evidence to suggest that this is any more than another manifestation of a blind belief in American power.

Democratic values have always been essential to American foreign policy. In practice, however, American administrations have often made painful choices between stability and the promotion of democracy. We saw that too often during the Cold War -- in Budapest in 1956, Prague in 1968 or Tibet in 1959.

The administration might do well to recall the words of candidate Bush, uttered Oct. 11, 2000.

"It really depends on how our nation conducts itself in foreign policy. If we're an arrogant nation they'll resent us,'' Bush said. "But if we are a humble nation, they'll respect us.''