President Obama highlighted the connections among manufacturing, job creation, and innovation in his State of the Union address. Blogger George Leopold notes that the president wants to bring lost manufacturing jobs back to the US, but argues that both he and Congress have been timid on the issue and that it's time to play hardball in global markets. Read his piece and then tell us what you think in the comments section below.
The titans of Silicon Valley have made it perfectly clear that all those manufacturing jobs shipped to Asia aren’t coming back. That’s precisely what Apple’s Steve Jobs told President Obama during a dinner in California last year before his death, according to a sobering account published by The New York Times, "How the U.S. Lost Out on iPhone Work."
President Obama called for regulatory and tax-relief support for innovation and research in his Jan. 24 State of the Union Address. (Official White House photo by Pete Souza.)
The reason those jobs manufacturing consumer devices are gone for good, the NYT reports, is that the US manufacturing base has failed to evolve; the Asian supply chain for electronics is superior to ours; and American workers are unwilling to pull 12-hour shifts and live in company dorms.
That, of course, is a reference to China’s manufacturing behemoth, Foxconn, assembler of the iPhone and many other consumer electronic products. Foxconn is Exhibit A in the debate about the decline of US manufacturing. As the NYT reports, nothing like it exists in the US. (That’s a good thing, Apple’s critics say, since many regard the 230,000 Chinese workers at “Foxconn City” as nothing less than slave laborers working for less than $17 a day.)
“The scale [of Foxconn City] is unimaginable,” one Apple executive told the paper.
Apple and other consumer electronics companies argue that they simply have no choice but to outsource manufacturing of their products to companies like Foxconn. While the article buys Apple’s line that making the iPhone in China is not about the cheap labor, it is a fact that Foxconn can build a new plant (with the help of the Chinese state) and hire thousands of workers at the drop of a hat.
Hence, Apple’s central arguments for assembling the iPhone in China: Asian factories can scale up and down faster while the Asian supply chain -- for funneling all the components that go into an iPhone, like the fancy glass display -- has left the US distribution network in the dust. If Apple needs a glass-cutting factory for iPhone displays, Foxconn will build it. Thousands of rubber gaskets? The factory is next door. A million screws? That factory is a block away.
I listened to the President SOTU and was heartened by the focus on calls for revitalizing the manufacturing industry and supply chain, including possible tax reform that would encourage corporate investment in reshoring American jobs. That bubble gets burst rather quickly when you consider the very real and difficult challenges that lie ahead before any of that transition can happen and your piece does a stellar job of spotlighting those challenges.
The question is what kind of infrastructure can Americans possibly create that could rival the economic advantages that a FoxConn city or government subsidiaries bring to the table making it such a fiscal no-brainer for companies like Apple to outsource overseas? There are no easy answers. With all the political jockeying, two of the most effective tools--corporate tax reform and our own government programs--don't stand a chance when up against an increasingly devisive Washington.
The structural steel modules (not just the raw steel, but finished bridge assemblies) for the new Bay Bridge in San Fransisco are being fabricated in China. California decided not to use federal funds so they could save $400 million dollars.
The cost impact is MUCH greater, and will get worse. It was a short-sighted, short-term savings by state government.
The ridiculous battle over the Air Force tanker program is another instance where the government decision to build domestically vs. internationally should never have gone as far as it did.
We have ONE large body aircraft manufacturer left in the country. To not use it for such a program, and keep tens of thousands of jobs (directly and indirectly involved with actual construction) is dereliction of our elected official's duties.
Steve Jobs famously told President Obama that "those jobs aren't coming back," in reference to jobs lost to China. The economy is still in the midst of structural change, and hasn't settled yet, which makes long-term strategic planning difficult. Even more than that, the political reality is that many people are opposed to government setting and spending money on an industrial policy. At the same time, you have people like former Intel chairman Craig Barrett sounding the alarm about STEM, or lack thereof. I.e., the US needs to educate children so that they have a math and science basis from which they can progress to technical careers. I wish I knew what the solution was. The one bright spot is that all the US manufacturing executives I know wish they could spend money on upgrading plant infrastructure. So there's pent up demand and desire to move forward and become more competitive.
I completely agree with you. I would go a step further. In many cases the action of our elected officials could be looked as anti American. We also kill our manufacturing with unreal regulations.
We must be careful of price level, but that should not be the only criteria.
I also "enjoyed" the SOTU speach. It made me feel even worth from how I felt before the speach. Clearly the weather in Washington is too cloudy. The culture of "spend-spend and spend" on wrong things will not stop unless there is a cultural change. The division between parties is huge and i do not see a way for easy and fast fix.
I'm afraid I agree with Jobs. Many manufacturing jobs -- especially the low-level ones -- aren't coming back. We can't compete with FoxConn City. But outsourcing of R&D? No way. With our university system, we should be leading the world in product innovation and in the creation of technical talent. And we should do whatever we have to in order to keep those jobs here. Our R&D, our engineering, and our ability to innovate should stay right here.
I completely with you, Chuck, and applaud your definite and passionate response to the idea of outsourcing R&D overseas. I think both Washington policy and corporate agendas have to do whatever it takes to foster R&D jobs and a culture of innovation right here on our own shores. Educational institutions have to step up promoting STEM curriculum and we have to make it a priority to introduce our next generation to the skills and training they will need to lead American innovation.
Unfortunately, we can't expect the engine of prosperity and growth to move along its track when it must stop every few miles to get bureaucrats and regulations out of the way. If I were to start a business today, I'd set it up in Australia, Hong Kong, Singapore or New Zealand; not here (USA). US businesses get burdened with ill-conceived regulations that help drive them overseas. I doubt many manufacturing jobs will return to the US, but by getting government out of the way we have a better chance to ensure R&D activities stay here and that corporations don't move off shore. Eliminating the tax on overseas profits would let companies bring profits back to the US and invest them. And repealing the stupid Sarbanes-Oxley Act would eliminate another noxious burden for companies. OK, you get the idea...
Regarding STEM, there's been a lot of executive support for improvements in both funding and process for K-through-12 science and math education. However, it doesn't seem to have had much effect, as of yet. I did an interview two years ago with former Intel chairman Craig Barrett, who is a major STEM advocate. You can read it here. I would add that the slow progress is partly the result of the fact that it's a multi-tentacled effort comprising government, academia, and titans of the tech industry. At the same time, the slow forward movement is, at this point, also indicative of a lack of collective well to break the logjam and just get it done.
I would agree with Jon that there are serious domestic regulatory impediments, which put U.S. companies at a disadvantage. However, I find it illogical (in a Spock-like way, I guess) that a desired to dismantle onerous regulations has become joined at the hip (or, in our world, soldered) with the view that government can never invest in, nor support, any research, technology, or company. (Support for education is often, though not always, included in this bundle.) That linkage, I submit, is illogical. Firstly, the two issues are discrete and so one should have nothing to do with the other. Secondly, a cogent argument can be made the government financial support for, say, tech R&D in batteries, would help LEVEL the playing field with the likes of China.
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