Dave, The half dozen machine tools in my shop are all Chinese. They did not require rework but admitedly are less precision than those made by Bridgeport. The thing is, I could not have afforded to buy those American tools and start my business. 15 years later those Chinese and Taiwan tools are still doing the job.
I am turning the tables on Asia though. The American products I make are lower in cost than what is available anywhere else. I still think the US vs Them picture is the wrong way to look at it.
We made a serious mistake when we did not allow Hong Kong citizens to immigrate to the US. China gained loads of experience and tech knowledge in an instant which allowed them to build and man plants right away. Now we have an unusual situation and we just can't get out of it. Cheap technology is the only thing keeping inflation from getting out of hand. A false economy indeed but what can you do? If we had not exported all of our technology to China inflation would have gone up , interest rates would have gone up. Is that so bad? Cheap money would not have driven the prices of homes out of the roof perhaps. But the worst of it is that we are supporting a communist country which has nukes and wants to take back Taiwan. Now the Chineese can bring our and other countries to a stand still by stopping their exports any time they think it is necessary to get what they want. Seems like the tail wagging the dog. A solution could be to gradually move some operations to the US and Mexico as contracts run out. The jobs in Mexico, we used to produce lots of integrated circuits there and other stuff, would help our immigration problems perhaps and keep some of the prices down somewhat as well as providing employment of US managers and engineers in those plants. Help our neighbors and ourselves.
I'd add to the list of negatives a long lead time. Which translates into non-flexibility. A quality improvement or cost savings can't be put into affect as soon because of the weeks or months worth of inventory.
@Tcrook: I don't have any expertise about electronic components, but when it comes to mechanical components sourced from China, I'd say that poor quality and manual rework are serious problems.
As far as obstacles to starting small businesses, here is what Business Week has to say about starting a small business in China: "Registering a company is typically a 25- to 30-step process, the nation's legal system is unreliable, and government regulations are vague and often subject to bureaucratic whims. [...] For most multinationals, all of this is simply part of the cost of doing business in China. Big companies can afford to pour a continual stream of capital and manpower into their China operations until they finally achieve profitability. But the little guys have no such luxury."
Your mention of bribery actually reinforces my point. If you need to violate criminal laws and face potentially severe penalties (including death) in order to do business, I'd hardly say the business environment is good.
As far as small business in the U.S. is concerned, it's true that the rate of small business employment is significantly lower here than in other industrialized countries. Even though over half (51.2%) of all manufacturing jobs in the U.S. are in companies with fewer than 500 employees, this is low compared to Sweden (56.7%), Denmark (65%), or Norway (72.2%). These countries have higher effective tax rates and more regulation than the U.S.
The report which I've linked to attributes the relatively low rate of small business employment to the lack of government-subsidized health care in the U.S., but I don't necessarily agree with this. Some of the countries with the highest rates of small business employment (Greece, Portugal, Spain, and Italy) are hardly economic role models. Although it's undoubtedly true that small businesses are important, too large a proportion of small businesses may be a sign of trouble: if the economy is working well, more small businesses should be growing into mid-sized businesses.
My point is not that the U.S. is perfect -- far from it -- simply that it's a better environment for business than China or many other countries, and therefore that the reasons why companies go to China have nothing to do with the business environment.
Dave Palmer you would be pleased at the last 10 years record, implementation, and use of Grant money at several of our Community Colleges. Some Universities as stated in your last paragraph are very heavy on foreign BORN students. There is hope, however!
In TX at Collin County Community College Distric under direction of (origionally) Dean Ann Beheler a new type of engineering school was started. It advocated Convergence Technology which has today populated an entire new campus, has a student entrance backlog and post graduate EMPLOYED engineer applications for career direction retraing. So successful is the program it has expanded coast to coast and Ann B. now is offically an employee of Orange County CA.
The organization of the School was unique. A team of 15 educators and 5 large/5 medium/5 small assorted advisory technical corporations met over the period of several months to design the program. Today, ten years latter, is has most of the same advisory board members and highly reconized support of the engineering community.
Some key people involved at CCCCD also have applied lessons learned to benefit larger institutions via ACE at UT Dallas to add a Systems Engineering BS up course of studies to the well established Eric Johnson School of Engineering and Computer Sciences. These programs have been so successful that a verysenior chinese born multi-degreed and talented, was induced to return to China to build one their universities as its' president.
These foreign buy-in actions of US trained educational professionals coupled with our governments unnessary enforcement of entrance application acceptance based on "diversity" over weighting, especially as it applys to grad stundents, needs to be limited and favor native americans in my opinion. Conversly this could be useful overseas for America corporations.
SMTbuilder, Thanks for sharing your story. It sounds almost identical to my own and supports my suspicion that there is enormous potential in small cottage industries if only the legal and regulatory environment was more suitable.
Because of the factors you pointed out, I have no desire to expand beyond the 5 employees (all family members) that I have now. I make less than I did at one of the largest defense industry contractors but the job satisfaction and other benefits means I've never looked back.
I have to confess that I am as guilty as the big corporations - my wife and I buy from China and Taiwan. We utilize machine shops and PC board houses in China and now have our own buyer in Nanjing. For now this is the least expensive way for us to start a cottage-based business. My background is electrical engineering and I have always had a drive to manufacture our own products. The reason is that I can invest my time in the design of products and receive a return on my invested time several fold compared to a fixed hourly billable rate.
Last year my wife and I invested half of our life savings in SMT assembly equipment (pick & place, automatic & manual stencil printers, IR reflow oven and air drier) in spite of news that large companies would never consider using us as a US-based manufacturer. The SMT line was made in China and I am not thrilled about that but it allowed us to get started without borrowing hundreds of thousands for better supported and more reliable equipment. The SMT line is located in our basement because the lease is very affordable: $0. One of the first visitors to our home facility said "I hope OSHA does not find out about this". I quickly invited our guest to go away. I was looking for a comment like wow, this looks great and not watch out for the government.
My wife and I have done away with niceties years ago to prepare for the creation of our business. We do not have cable, I drive a 16 year old car with 195k miles and my mower should have stopped working long ago. Our primary overhead is our mortgage and utilities. We don't owe money for cars or credit cards.
We do struggle with our small manufacturing business. We use licensed electricians, trucking companies to deliver equipment, etc. and not to leave out our accountant who provides legal advice on what is acceptable this year to keep us in a low-risk tax audit category. It has been and still is very frustrating. My specialty is design and NOT taxes, business management or law. But I do need to be somewhat of an expert in all of these areas to minimize lawsuits, audits and visits from OSHA/EPA to invite themselves into our basement business. Despite believing that I can do anything, I cringe at the thought of hiring employees for all of HR red tape and legal administration it comes with. All of this is needed to support me, a part-time start up designer and fledgling manufacturer, a single person. I know this is in our future so we still forge on. We are looking to invest in better SMT equipment and a precision PC board manufacturing line with the intent of being competitive in today's world market.
So what is my message? Do the best you can to be world competitive and not reliant on foreign labor and goods. Enacting more legislation to disrupt or tax international trade is not the solution.
Dave, do you really think those Chinese factories are manually reworking a lot of defective iPhones & iPads from poor workmanship? I'm not even sure that's possible, let alone practical. Poor build quality from China is not something I hear a lot of complaints about. (But I did hear a lot of squaking about the US designed iPhone antenna : )
If you have ever tried to start up a small company (actually tiny in my case) that was too small to attract help or incentives from government, you would never think that regulation here is not a problem. It would have been much easier to bribe a government worker in China to grant the permits needed than to go through what I did here. This in addition to the liability situation. One lawsuit (even if unfounded and unsuccessful) would be fatal to companies the size I am talking about. Mega companies will never get us out of the situation we are in anyway.
One thing that could begin to turn this situation around overnight is a substantial tariff on imported goods. There, I said it: the "T" word.
Adherents to free-market religion are no doubt clutching their pearls at this moment. But the U.S. blatantly and unapologetically used tariffs to jump-start our industrial economy in the 19th century (and it worked brilliantly). As Oxford economist Ha-Joon Chang has pointed out, this was before we hypocritically began lecturing other developing countries about the evils of protectionism.
Let's call the U.S. a "redeveloping" country instead of a "developing" one, and get busy.
Fifty-six-year-old Pasquale Russo has been doing metalwork for more than 30 years in a tiny southern Italy village. Many craftsmen like him brought with them fabrication skills when they came from the Old World to America.
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