The US has lost or is on the verge of losing its ability to develop and manufacture a slew of high-tech products. Amazon’s Kindle 2 couldn’t be made in the US, 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 US 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 US 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.
So the decline of manufacturing in a region sets off a chain reaction. Once manufacturing is outsourced, process-engineering expertise can’t be maintained, since it depends on daily interactions with manufacturing. Without process-engineering capabilities, companies find it increasingly difficult to conduct advanced research on next-generation process technologies. Without the ability to develop such new processes, they find they can no longer develop new products. In the long term, then, an economy that lacks an infrastructure for advanced process engineering and manufacturing will lose its ability to innovate.
The article mentions Apple since they design in the USA but manufacture in Asia (like many) and says…
As Pisano and Shih point out in their classic HBR article, Apple [AAPL], “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.”
It’s interesting to see the concerns and debates shift around from “where things are made”, to “where things are designed” to “how to add more value besides the physical thing”…
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“The article mentions Apple since they design in the USA but manufacture in Asia (like many) and says…”
Apple very clearly states that their products are designed in California.
Yes, I know that California is in the USA, but I think their point is that their products are not designed by teams scattered all over the world, or even the USA. It may also is why they are building a new corporate HQ that is almost the size of the Pentagon.
This is a great article.
These are ‘MBA-type’ decisions made at each step: ‘Outsource this stage and save 20%!’ As a public company, however, it would be hard NOT to follow this strategy.
When HP sold off ‘instruments’ to Agilent, it lost the ability to be creative. Soon, it won’t have ‘consumers’ any more, just corporate partners and clients as it moves to ‘Enterprise’. Almost: consulting about technology, but not creating any technology.
I think that we need to bring manufacturing back to the USA and we can start over again from the basics. Here is a company that is looking for clothespins that are made in the USA.
There are many other basic core items that the American people need and use on a daily basis that we would be happy to buy American. The article says that manufacturing went over seas because we slowly eroded away our manufacturing base. I believe the way to grow it back is to begin manufacturing the little things until our infrastructure and knowledge base has been rebuilt.