How the US lost the Consumer Electronics Business to Asia

The New York Times has a great article documenting the gradual move of Apple’s manufacturing business from the US to Asia over the last decade “How U.S. Lost Out on iPhone Work”. In following the thought process of Apple executives, it clearly shows why these tech-related manufacturing jobs are largely going offshore.

It brings to light a few of key points that are often lost in the debate over outsourcing and globalization of jobs.

• It’s not about the money. Ok, so it is about the money – but not the fact that labor is cheaper in China. Since much of this work is highly automated, labor is a realtively small percentage of the cost. It’s the savings that can be made in other areas due to flexibility of the workforce and local regulations that really make a difference.
• Talent pool. The sheer volume of technical trained / degreed engineers available in China means that highly-qualified staff can be utilized for lower-skill activities, therefore improving creativity, flexibility  and quality at all levels in the factory.
• Product Life Cycle. As consumers, we used to wait a year or more for the next model, and 3 or 4 years for a major product change – hence the excitement around CES and the annual Detroit Motor Show. Now we expect technology companies to launch a ground-breaking product on a regular basis. So design, prototyping and manufacturing have to happen much faster than previously.

The US, with myriad regulations, relatively inflexible labor pool and distance from many major markets, is now at a significant disadvantage in many areas. That’s not to say that it’s a lost cause. I emigrated to the US because of the opportunity for growth and advancement here. I’m a believer in the US, and history has shown that it’s not wise to bet against America. But traditional manufacturing as we know it is not going to come back. Personally, I see that the current shift of some manufacturing from Asia back to Mexico as a positive for US companies. With production closer to home, we see many of the advantages of China, but with an ability to control manufacturing much more closely. As a result, many of the support jobs associated with manufacturing will remain in the US instead of transferring to China.

So let’s learn from the Apple example. The US can be successful with innovation and creativity; by understanding and embracing the global market; and by accepting which areas we can excel at locally, and which ones should be left to others.