History suggests that design and engineering ultimately co-locate with manufacturing because they are coevolutionary. Advances in one spurs innovations in the others. The problem is that despite the cratering of the US economy and the great hankering for job creation, the US is probably still too expensive a locale for this sort of work.
Outsourcing has provided strategic partners and business allies with access to the intellectual capital that provides insights into how products are designed. Perhaps more importantly, it has offered insights into the process improvements that underpin the scalability crucial to spurring and sustaining competitive advantage.
Though the evidence leads to the inevitable conclusion that the US is toast, it is based on a significant assumption: that the future of the US economy is dependent on technological innovation.
But one might argue that it is precisely because all eyes are focused so resolutely - one might say, desperately - on the offerings of Silicon Valley and its offshoots that the 'next big thing,' if such a savior is to emerge, may well come in another field. Technology may well fuel the growth of whatever new impetus emerges, as it did to decidedly mixed effect in finance, but we should be careful not to assume that we can predict the future. That is one field of endeavor in which we can definitively state that our record does not support our hopes. JL
Jordan Weissman comments in The Atlantic:
The next great consumer gadget will not be built in the United States. That's a fact, not a forecast. Tomorrow's iPhone, iPad, or Kindle Fire -- pick your favorite -- will be assembled at a low-cost, high-volume factory in Asia, because that's where the locus of electronics manufacturing has been for decades.
But what if the fact that Americans won't build the next big gadget also means we won't invent it?
That's the vexing question raised in a Washington Post column this week from Harold Meyerson. Like roughly two-thirds of all business journalism these days, the piece is pegged to Steve Jobs. Meyerson believes the U.S. has developed a bit of a fetish for innovators. And in our collective rush to praise great visionaries like Apple's founder, he writes, we risk forgetting the role played by the people who actually built his products. Those would be the 700,000 Chinese workers employed by Taiwanese manufacturing giant Foxconn.
Meyerson, for his part, would like to bring some of those jobs home. Read carefully:
Apple's Silicon Valley innovators are doubtless highly paid, but there are too few of them to have any significant effect on the U.S. economy. Only by moving production back here could Apple really improve U.S. economic prospects. Given the huge productivity advantages this country has over China, there would be many fewer than 700,000 production jobs, but the advantage to the U.S. economy would still be substantial.
What's more, as manufacturing is offshored to Asia, innovation generally follows close behind. As professors Gary Pisano and Willy Shih explained in a 2009 Harvard Business Review article, "process-engineering expertise can't be maintained" when manufacturing is sent abroad. The ability to devise new manufacturing processes is lost, and with it, the ability to devise new products. Apple, thanks to Jobs, was an exception to this rule, but it was an exception to a lot of rules.
If you know a little about manufacturing, that first paragraph doesn't make a whole lot of sense. But the second paragraph does. And that's a bit frightening.
Meyerson's fantasy about bringing iProduction back to the U.S. is just that--a fantasy. Even with recent wage hikes in China, American workers are still vastly more expensive than their Asian counterparts. And assembling consumer electronics is not the sort of labor where American productivity can help. Why? Because productivity is about having a technological edge. Calling U.S. factories productive is a fancy way of saying machines do a lot of the work. We've retained manufacturing in industries, such as transportation and chemicals, where those cost-efficient robots can replace a large portion of the pricey human labor that would otherwise be necessary.
Assembling an iPad isn't that kind of work. It's a fingers-intensive job best performed by long lines of low-wage employees. If it weren't done in China, it would be done in another country where workers are reliable and cheap--maybe Thailand, but certainly not the United States. As Derek Thompson wrote a while back, having that task performed by Americans would add hundreds of dollars to the cost of each Apple product. That, in turn, would undermine one of Jobs' biggest triumphs: making fabulous technologies available at a mass-market price.
But what about the effect on innovation? Does the "if you don't use it, you lose it" rule apply to the art of building things? Maybe. Pisano and Shih's article is worth reading in full. But in short, they argue that the world's workshops have a habit of becoming its design shops, too. That's because high-value jobs in product engineering tend to move in tandem with manufacturing. Industries like cell phones and laptops are dominated by companies from Korea and Japan because those countries took over the low-margin, unglamorous task assembly work. Eventually, that knowledge helped them move up the value chain, producing larger and larger portions of products, until, suddenly, there wasn't much left for companies stateside. Today, there are many goods that simply can't be built domestically in the U.S. The know-how is gone.
Even if companies like Apple are sending innovation abroad along with their manufacturing, neither Meyerson nor Pisano and Shih know quite what to do about this. Of course it would be nice to have more world class research centers, corporate R&D labs, and green energy projects in the U.S., but none of this has anything to do with reclaiming iPad manufacturing by building a plant in, say, Oakland. Still, if Pisano and Shih are right, we're a decade away from Foxconn beating Apple products, and not just building Apple products.
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