Katie Deighton: Welcome to Tech News Briefing. It's Tuesday, February 24th. I'm Katie Deighton for The Wall Street Journal. The age of growing headcount is over, at least in the world of AI startups. Small companies are doing all they can to remain that way whilst growing revenue as part of a bid to showcase efficiency to investors. We take a look at how the trend is reshaping the tech industry. Then we're going on a tour of America's newest tech factories. After years of political promises and encouragement from the government, more chipmakers and other manufacturing companies are breaking ground on US plants and gearing up to hire American workers. But can these facilities really compete with their counterparts in Asia? Stay with us to find out.
But first, once upon a time a growing headcount at a new company was seen as a positive sign. Now in an age of AI outsourcing, not so much. Some Silicon Valley startups are running leaner than ever, using the latest AI tools to keep staff numbers as low as possible. My colleague Belle Lin is here to talk about this new flex. Belle, generally speaking, where are these companies finding that AI works best within the workforce? Are there particular jobs or even functions that you've heard these AI companies cutting out and replacing with technology?
Belle Lin: In most cases, it's the software engineering function, so these software developers that use tools like Anthropic's Claude Code or OpenAI's Codex, which are really supercharging the way in which they write code and many times replacing the active writing code at all. So what they're doing is just reviewing the code or looking at the code that's being written by the AI. That's the kind of pattern that's seen across many companies, not just startups in Silicon Valley.
Katie Deighton: How lean is lean? What kind of headcount versus revenue range are we talking about here?
Belle Lin: You can look at the definition as a startup that has maybe less than a hundred employees and is tracking revenue per employee. So they're looking at efficiency as one of the most important metrics very early on. That's more important to them in some cases than growth. Because the old way of looking at things in Silicon Valley was that you had these companies that were just trying to grow as quickly as possible, these startups that considered it a badge of honor to have a lot of employees, and that was something you touted in a press release. But nowadays, it’s really about staying small and lean and very mean.
Katie Deighton: How low can they go? Your story mentions the idea of the one-person company. Is that a feasible thing that we're going to be seeing in the future?
Belle Lin: According to some folks in Silicon Valley, it is very possible. You have folks like Sam Altman who has touted this idea. With the rise of AI agents, like OpenClaw that was very viral a few weeks ago, this personal AI agent that can do a lot of things on your behalf, it’s very likely that you have millions of these agents working on behalf of one person, and then you start generating revenue, like a billion dollars. So it’s very possible, but there’s a lot of technical infrastructure that needs to be built before we get there.
Katie Deighton: For companies that have more than one person right now, when they’re talking about getting lean, are they talking about keeping their headcounts low from the beginning, or are they talking about firing people?
Belle Lin: That is also a possibility. I spoke with a startup called Forethought that realized it needed to pivot, and so it went through a round of layoffs and is now tracking revenue per headcount. So you don’t need to necessarily be lean from the get-go from what I’ve heard from these startups. You can also take on the lean persona.
Katie Deighton: Keeping revenue per person high obviously sounds great to investors, but what are some of the drawbacks to keeping your employee base this small?
Belle Lin: One investor that I spoke to said that it can really hamper growth from the start. Investors do also like seeing growth. Efficiency is important, but growth is also essential. So in areas like sales, enterprise sales specifically so selling to large companies, that’s a place where you still need people to cater to the whims and demands of large enterprise clients. So that isn’t changing anytime soon. Then another startup I talked to said that they realized their people were under-resourced. They were at capacity, and so they needed to hire more. So that’s certainly a downside is your people are working the 996 hustle culture, and maybe they’re not too happy because of it.
Katie Deighton: That was WSJ reporter Belle Lin. Is AI making your workplace more efficient? Coming up, why a patch of land north of Phoenix has become one of the hottest places for American tech.
For years, the Trump and Biden administrations vowed to beef up America's tech manufacturing capabilities, particularly when it comes to making chips used to power most modern devices. The argument is that doing so would help the US compete with and insulate itself from the Asian countries that have cornered the market of production. Now it's finally happening. Tech factories are being erected throughout the US, and Apple is showing up at the doors as a customer. WSJ reporter Rolfe Winkler recently hit the road to get inside these new plants.
Rolfe Winkler: Oh, it's huge. It was just one of the facilities that I toured. We started at a wafer facility in Sherman, Texas. We went to TSMC in Arizona. We saw an Apple/Foxconn facility in Houston. It was really quite the trip. But I will say TSMC is the highlight there. It's so big; it's so epic what they're building there in Arizona.
Katie Deighton: How big are we talking? Can you put it into context for us?
Rolfe Winkler: Right now, one chip fab is built and operating. Another one is almost completed. A third is a steel beam skeleton. These are massive, massive buildings. They’re building in one spot, but they’ve acquired a total of 2,000 acres in that area. If everything is completed, if all six chip fabs, if the advanced packaging facilities they do the R&D center, everything is built, we’re talking 2,000 acres—which is more than twice the size of Central Park.
Katie Deighton: Why is the world's largest chipmaker, Taiwan Semiconductor Manufacturing, building a base in the American Southwest? How did we get to this point?
Rolfe Winkler: Yeah, I should back up. The reason we were there is Apple took us on an exclusive tour of some of these facilities. Apple is the world's largest buyer of chips, and so they have a lot of leverage to say, "We want some of that manufacturing to be in the United States," because today it's almost exclusively in Asia—a lot of it in Taiwan. Pressure from the US government plus they want to diversify their supply chain says, "All right, let's at least move some of this to the United States."
Katie Deighton: This site, like you said, it's absolutely humongous. I wonder how it compares with those in Taiwan that TSMC and other companies operate out there.
Rolfe Winkler: Much smaller. As big as it is—and $165 billion would be one of the largest construction projects in the United States if they ultimately spend all that and build everything there—it’s going to be maybe a decade before this one facility reaches the volumes that TSMC has multiple facilities in Taiwan operating at. Moreover, there’s the level of sophistication of the chip that they make in Arizona doesn’t match Taiwan. What’s made in Arizona is five years behind and will continue to be five years behind because there’s no way Taiwan is going to allow the best technology off the island to defend against a Chinese invasion. It’s called the Silicon Shield. Does China want to invade the island that actually makes the world’s most advanced chips, like all of them? That would be ruinous to the world economy. So it’s a very good deterrent.
Katie Deighton: For the better part of a decade, we've had two presidents pushing for more tech manufacturing in the US. What are the main challenges involved with doing so, and what factors are tech companies and other stakeholders pointing to as obstacles in this push?
Rolfe Winkler: Cost and capability. China has a couple great things going for it—China and India and Vietnam—which are places that Apple has expanded to. They have first off very cheap labor; it’s gotten more expensive though—labor in China is no longer as cheap—Vietnam and India are more competitive in that regard. But they also have very skilled labor—people machining metal and all of the talented engineering it takes to make the parts—smartphones are intricate devices—and there’s a lot of expertise that China has built up over years that puts them ahead; we just don’t have that in America anymore! So you combine lots and lots workers coming from rural areas who’re happy working inside assembly plants by hundreds thousands millions—with skilled labor existing there—that’s an advantage place like China has US can’t match! If you’re going try do it US wouldn’t have workers cost more! It’s just not plausible unless wanted pay $10k whatever your iPhone!
Katie Deighton: With all that in mind, what do you think the story of this plant and the others that you've been touring says about where American companies are at with bringing manufacturing here?
Rolfe Winkler: It shows there’s a start. There’s actually stuff being built. It’s the beginning. We have a long way to go—and we will probably never catch Asia without generational investment focus on this as America—but it’s not nothing.
That was WSJ reporter Rolfe Winkler.