Wednesday, June 20, 2012

"Why Amazon Can't Make A Kindle In the USA"

That's the title of an article at Forbes by Steve Denning, the first in a series examining the state of the US manufacturing economy.  It was published last year, but I've only just come across it.  Here's an excerpt.

Amazon’s Kindle 2 couldn’t be made in the U.S., even if Amazon wanted to:

  • The flex circuit connectors are made in China because the US supplier base migrated to Asia.
  • The electrophoretic display is made in Taiwan because the expertise developed from producting flat-panel LCDs migrated to Asia with semiconductor manufacturing.
  • The highly polished injection-molded case is made in China because the U.S. supplier base eroded as the manufacture of toys, consumer electronics and computers migrated to China.
  • The wireless card is made in South Korea because that country became a center for making mobile phone components and handsets.
  • The controller board is made in China because U.S. companies long ago transferred manufacture of printed circuit boards to Asia.
  • The Lithium polymer battery is made in China because battery development and manufacturing migrated to China along with the development and manufacture of consumer electronics and notebook computers.

An exception is Apple, which “has been able to preserve a first-rate design capability in the States so far by remaining deeply involved in the selection of components, in industrial design, in software development, and in the articulation of the concept of its products and how they address users’ needs.”

. . .

The lithium battery for GM’s Chevy Volt is being manufactured in South Korea. Making it in the U.S. wasn’t feasible: rechargeable battery manufacturing left the US long ago.

Some efforts are being made to resurrect rechargeable battery manufacture in the U.S., such as the GE-backed A123Systems, but it’s difficult to go it alone when much of the expertise is now in Asia.

In the same way that cost accounting and short-term corporate profits don’t reflect the true health of corporations, the economists’ reckoning of the impact of outsourcing production overseas misses the point. Americans are left with shipping the goods, selling the goods, marketing the goods. But the country is no longer to compete in the key task of actually making the goods.

Pisano and Shih have a frighteningly long list of industries of industries that are “already lost” to the USA:

  • “Fabless chips”;
  • compact fluorescent lighting; LCDs for monitors, TVs and handheld devices like mobile phones;
  • electrophoretic displays;
  • lithium ion, lithium polymer and NiMH batteries;
  • advanced rechargeable batteries for hybrid vehicles;
  • crystalline and polycrystalline silicon solar cells, inverters and power semiconductors for solar panels;
  • desktop, notebook and netbook PCs;
  • low-end servers;
  • hard-disk drives;
  • consumer networking gear such as routers, access points, and home set-top boxes;
  • advanced composite used in sporting goods and other consumer gear;
  • advanced ceramics and integrated circuit packaging.

There's more at the link, including links to the rest of the articles in the series (scroll down at the linked article to find them).  Highly recommended reading.



Unknown said...

Manufacturing and assembly of finished goods has actually increased in the US over the past decade, but it has been heavily automated manufacturing. This means fewer jobs, especially for the unskilled folks our schools are dropping out and churning out.

Old NFO said...

We are no longer manufacturers, we are ONLY consumers... sigh

Joe in PNG said...

I wonder what kind of .gov crap a business would have to go through to set up a plant to manufacture modern tech in the USA?

Shrimp said...

@Joe in PNG

That, in a nutshell, is exactly the problem. It's not just the cost of the labor involved (although that is certainly significant) it is all of the EPA regulations for manufacturing and red tape that must be gone through just to set up the business. It is more cost effective for the companies to send the work overseas, and ship the products back. People want to blame the company for choosing profits over keeping the jobs here, but that is the bottom line of any company--to make sure it is profitable.

Bob in VA said...

Didn't I see, just a day or two ago, where A123 was filing for bankruptcy????

Anonymous said...

I would say to Mr. Denning "Bull Crap!". I'm at lunch in a modern industrial electronics factory right now, and have worked in the US electronics manufacturing sector for almost 37 years. There is nothing in that list that keeps us from manufacturing here. All of those products are shipped to the US on a daily basis.

As Joe and Shrimp point out, our products have higher costs because of excessive regulations and financial incentives to export jobs. The .gov is negotiating a "Trans-Pacific Partnership Treaty" that favors overseas corporations to the point of allowing them to not comply with regulations US companies must comply with and sue the US in foreign tribunals that can order the payment of taxpayer dollars.

Nothing a much smaller book of regulations couldn't fix.

SiliconGraybeard @ work

Fly To Your Dreams said...

I'm not sure how "desktop, notebook, and netbook PCs" made the list of lost industries either. If we're talking about components, then sure, most of the internal hardware is manufactured overseas, although I think Intel still has at least one US based plant.

In terms of actual PCs, Dell would disagree about not manufacturing computers in the US. A number of boutique PC manufacturers would as well.

Anonymous said...

I design printed circuit boards every few months which I have fabricated in Arizona and assembled in Colorado. I am currently working on an advanced custom ceramic semiconductor package with groups in California, NY, Colorado, Virginia, and Arizona. It only makes sense to go offshore when your volumes reach very high levels.

North said...

I have blank PCBs made in either Asia, Canada, or the US. Assembly is done here. Parts for assembly are all made outside of the US.