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Since the late 1990s, nearly all high tech devices have been manufactured in Asia, initially in Japan, Korea, and Taiwan, later in mainland China, Malaysia, and Vietnam.
Why has this happened, and is it likely that some electronics manufacturing might come back to the West? What obstacles might be preventing this?
I have my own theories, based on general knowledge of current events, but I'm not in the hardware business (well, actually I do work for a company that manufactures various types of devices with factories worldwide, but I'm not on the hardware side).
It seems to me that Westerners have a pretty good grip on research and invention, but when it comes to the nitty gritty of steadily engineering, assembling, and improving fundamental components, we lack long term focus.
The Asians, however, seem to have the patience to do repetitious, detailed work like soldering chips and other parts into tiny circuit boards. Also, they now have almost a total monopoly on chip foundries and other fundamentals of electronic products like LED displays.
This last part puzzles me the most. Why can't someone set up a plant to make LED displays in, say, Florida or Arizona, that is equally competitive, given that the components don't require tremendous hand work? Literally, it could be a machine etching or extruding some kind of material with an almost completely automated process.
Because the big money isn’t in manufacturing. That’s largely viewed as a commodity that needs to be done cheaper within reason for price and quality.
The markup is in design, marketing, after market support, ect. I’d rather have the rest of the value chain and the jobs from it.
Because the big money isn’t in manufacturing. That’s largely viewed as a commodity that needs to be done cheaper within reason for price and quality.
The markup is in design, marketing, after market support, ect. I’d rather have the rest of the value chain and the jobs from it.
This. Your question reminds me of one of my favorite movie lines..."American components, Russian components, all made in Taiwan!"
A lot of it had to do with maximizing profits in the short term, which also means in the short term minimize production costs. It also means sacrifice the future for the present or short term.
In the long run it is always best to do R&D, design, manufacturing, or any other aspect in US. In short terms it can make things look real good to do the opposite or do it all somewhere else (except the sales).
Motorola was once the largest semiconductor manufacturing company, largest cell phone maker, police radios and much more. It sure looked good to start putting cell phone plants in Brazil and Malaysia where hiring people cost nothing. It sure looked good to spin out that semiconductor division into Taiwan. Doing both of those things made cash look like king and things looked great in short term. But meanwhile Apple and others came out with cell phones while Motorola was worried about setting up cheap production costs in Brazil and Malaysia. It looked good in spin out the semiconductors but without that division it is a fraction the company it once was and it opened things up to a flood of foreign competition since none of it is in US now. Now Motorola still makes police radios, yes and the stock is a good stock, but they are 1/10 the company it could be if it had focused on the long run and not just the short run. I leave lots out here but you can read stories for more details.
In the short run so many things are done to make things look good temporarily, but in long run you lose out. People got bonus for making Motorola 1/10 the company it could be today, they made the stock rise and more valuable. Of course again I leave lots out here but you can read stories for more details and beyond this short summary. It is short term thinking that is the problem.
Rather than investing in improved manufacturing processes, these companies have offshored assembly to places with lower hourly labor costs. Basically they just throw direct labor at it. (This is why the statement "the jobs are lost to automation" is incorrect; if you look at those Asian factories, they're swimming in direct labor, they're not highly automated.)
Furthermore, by outsourcing much of their work to contract manufacturers, the companies whose names go on the products also reduce their capital investment and the costs of maintaining a manufacturing process and workforce.
Rather than investing in improved manufacturing processes, these companies have off-shored...
Not just these electronic companies...
virtually every business that was dirty or dangerous or the owner was opposed to union rules.
Quote:
(This is why the statement "the jobs are lost to automation" is incorrect...
a) Not so much. b) Semantics.
Had those companies rebuilt in the US you can be certain the new (cleaner & safer) machinery and processes they would install
would require a whole lot FEWER man hours per ton of product output than had been the case before. The problem is that no one
really made this clear to the former workers who continued to produce replacement workers for jobs that would no longer exist.
That excess supply of the no/low skilled has been allowed, even encouraged, to reach epidemic proportion.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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I had a sign business for 26 years, and at the time I closed up in the recession (2008) was paying my last employee $14/hour. About a year before I had a visit from a woman who was offering a service where I would send the artwork (data files) to her people in China who would produce my signs for about 1/3 of what it cost me to make them, and that included shipping. I passed because the turn-around time was too long, but also because I wasn't about to contribute to the loss of jobs here. With electronics, and most every other consumer items, it's hard to compete with other countries that don't have the same labor laws.
A lot of it had to do with maximizing profits in the short term, which also means in the short term minimize production costs. It also means sacrifice the future for the present or short term.
In the long run it is always best to do R&D, design, manufacturing, or any other aspect in US. In short terms it can make things look real good to do the opposite or do it all somewhere else (except the sales).
Motorola was once the largest semiconductor manufacturing company, largest cell phone maker, police radios and much more. It sure looked good to start putting cell phone plants in Brazil and Malaysia where hiring people cost nothing. It sure looked good to spin out that semiconductor division into Taiwan. Doing both of those things made cash look like king and things looked great in short term. But meanwhile Apple and others came out with cell phones while Motorola was worried about setting up cheap production costs in Brazil and Malaysia. It looked good in spin out the semiconductors but without that division it is a fraction the company it once was and it opened things up to a flood of foreign competition since none of it is in US now. Now Motorola still makes police radios, yes and the stock is a good stock, but they are 1/10 the company it could be if it had focused on the long run and not just the short run. I leave lots out here but you can read stories for more details.
In the short run so many things are done to make things look good temporarily, but in long run you lose out. People got bonus for making Motorola 1/10 the company it could be today, they made the stock rise and more valuable. Of course again I leave lots out here but you can read stories for more details and beyond this short summary. It is short term thinking that is the problem.
I disagree that it’s always better in the long term. If you are in a competitive industry, how can you maintain long term viability if your cost basis is higher? Production costs are table stakes.
I disagree that it’s always better in the long term. If you are in a competitive industry, how can you maintain long term viability if your cost basis is higher? Production costs are table stakes.
So for example, Motorola which had prototype cell phone like Apple released in the iphone, but instead chose to focus like you are thinking on the short term and production costs lets see what happened. Well, if I recall it was not Motorola who won that battle. If you see a Motorola phone today it is a Lenovo product, not connected to the US Motorola corporation, not made by Motorola, no profits today go to the remains of Motorola. By doing R&D, design and manufacturing here in the US, yes at great cost, you are on top of the field or at least were at one time, though you still can be. You can be first to market, you can lead, and one needs to lead in more than just making labels/stickers to put on a product. The way it is with a US label on a overseas product, yes it is cheap, but it is a downhill battle that is sure to be lost to an overseas product while people hate the cheap quality and poor performance. In some ways Apple putting some design here and manufacturing overseas mixes the model, but Apple isn't making new products mostly either. If you want to lead, do it in the US to win the long term. Always. But do it overseas if you like being cheap. Yes, you will be cheap and it looks good in short term only. You will lose though long run, maybe you make stickers to go on products I guess.
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