For the past score or so, the issue of manufacturing in America has been a prevalent one. Millions upon millions of manufacturing jobs in America have been lost in the realms of textiles and furniture. But recently, the political scope that typically dodges the world of consumer electronics has found its sights set squarely on a field that we as gadget journalists cover. Some might say that Apple's recent dealings with Foxconn helped to bring the issue to light, but honestly, those jobs were being shipped elsewhere long before the iPod came to fruition. Based on statistics gathered by the US Department of Labor: Bureau of Labor Statistics, employment in the country's wide-ranging manufacturing sector fell below 12 million in 2009. It was the first instance that the figure had dipped below 12 million since 1946, and it capped off a 24-month slide of manufacturing jobs that began at the tail end of 2007. Think about it this way: from December 2007 to December 2009, the US economy lost around 89,000 manufacturing jobs every month. If you didn't understand why folks were concerned, perhaps you do now.
Back in 1979, manufacturing kept nearly 20 million Americans employed. Today, according to the National Association of Manufacturers, that figure is closer to 12 million.
In February 2011, the manufacturing conversation truly hit home for me in terms of my work coverage. As he'd done in prior years, Barack Obama attended a dinner in which a number of Silicon Valley's wealthiest gathered around for grub and confabulation. Each luminary was tasked with asking the president a single question. As fate would have it, Obama actually interrupted the late Steve Jobs in order to pose an inquiry of his own: "What would it take to make the iPhone here in America? Why can't that work come home?" According to a fellow guest quoted by The New York Times, Jobs was crisp and direct in his response: "Those jobs aren't coming back." Baizhu Chen, a professor of clinical finance and business economics at USC Marshall School of Business, further substantiates the dire claim. In a February 2012 piece for Forbes, Chen offered this:
"America does not produce iPhones here because we, the average middle-class American family, demand that Apple outsource its production to China. The 10 largest shareholders of Apple are all either mutual funds or institutions. The largest shareholder is Fidelity, and the second Vanguard. If Apple is not able to generate good returns for the average American, we will punish these mutual funds by moving our retirement money to somewhere else. So who decides to locate the manufacturing bases of Apple, Dell, and Nike to China or other countries? Average Americans, who seek high returns on their investments."
The Nexus Q, unveiled at Google I/O 2012, is one of only a few high-profile consumer electronics devices made in America.
That's tough to argue with. He also points out that while manufacturing has sunk in America, it's not like our nation has become a textbook example of lost hope. In 1900, 60 percent of Americans lived in areas classified as "rural." Today, that figure has slid to 16 percent. Cultural expectations have changed. Demand has changed. Nations like Cambodia, Thailand, India, Sri Lanka, China and Bangladesh (just to name a few) have risen up and provided real supply to meet real demand for lower-cost manufacturing. Chen continues: "The average manufacturing wage in 2010 is about $2 in China and $34.75 in America. By locating the same iPhone factory in America, Apple would add more than $25 billion in labor costs a year, which would completely wipe out Apple's 2010 profit of $14 billion. Had we made the iPhone here in America, we would have deprived Apple of the resources to employ highly paid engineers to design, professionals to market, and young associates of Apple Stores to sell the cool products. Apple might have been bankrupted a long time ago."
Can't it afford to suck it up and employ Americans to build iPhones?
The issue came up once more just a few weeks back at D10. There I sat, just feet from Apple CEO Tim Cook, as hosts Walt Mossberg and Kara Swisher asked Cook if any of Apple's products could, in fact, be made in America once more. Clearly, many companies outsource production to lower-cost nations due to America's own postulation. The majority of consumers outright refuse to pay more than a few dollars for a smartphone case, as an example. Given America's minimum wage of $7.25 in 2012, one can see how impractical it'd be to have an American make such a commodity. But Apple ... Apple is being viewed in a different light. The company has around $100 billion in cash. Can't it afford to suck it up and employ Americans to build iPhones? Perhaps. But that's asking an unfair question. Apple is a for-profit company, with shareholders that task it with maximizing profit via any and every legal means possible. Choosing to add labor costs that aren't clearly necessary to raise quality would be a strike against the company's leadership -- in the eyes of investors, at least. All that said, Cook still asserted that he "wanted" there to be Apple products manufactured in America. As it stands, many pundits are focusing on two lines found on the backs of several of Apple's products: "Designed by Apple in California. Assembled in China."
Cook did shed a bit of light into the supply chain, though. Turns out, the CPUs for the iPad and iPhone are built in Austin, Texas, while the glass used on the latter is constructed in Kentucky. He added: "We will do as many of these things as we can do [in America], and you can bet that we'll use our influence to do it." That's a starkly different tone than the one exerted by Jobs just a year (and change) earlier, and while he may very well be pacifying the mobs, there's arguably a fighting chance for manufacturing to rise once more in the nation I call home.
In the midst of all the negativity, one statistic you rarely hear is this: "The United States is the world's largest manufacturing economy, producing 21 percent of global manufactured products." That comes directly from the National Association of Manufacturers, which also points out that China is second at 15 percent and Japan is third at 12 percent. Taken alone, US manufacturing would be the ninth largest economy in the world. Yes, these figures are coming from an entity that strives to portray our manufacturing in the best possible light, but still -- that's fairly impressive. The "worry" that I so often hear is that China and Japan will eventually topple America in this race. But frankly, American innovation is doing a fine job of killing its own manufacturing jobs. My parents grew up in Lexington, North Carolina. That's a stone's throw from High Point, which remains home to Furnitureland South, as well as 45 other furniture outlets. That's a lot of stores in a small place, but it used to be much more significant. Locals in the area often reminisce about the times when job security was a given and entire families would raise four generations in the furniture business. It was central NC's gold rush. Eventually, however, machines far from the rolling hills of Guilford, Randolph and Davidson counties agreed to produce high-quality living accessories for a great deal less money. Or, were programmed to do so.
It's easy to fall prey to the nightmare scenario belief -- that manufacturing in America can only get weaker from here. But I'm a man of hope. A realist, yes, but also a man that has lived long enough to know that slides on a macro scale rarely continue in the same direction, at the same speed, forever. The Boston Consulting Group is on a similar wavelength in a research report [PDF] entitled "Made in America, Again: Why Manufacturing Will Return to the US." In it, the paper's three authors -- Harold L. Sirkin, Michael Zinser and Douglas Hohner -- proclaim that "China's overwhelming manufacturing cost advantage over the US is shrinking fast, (and) within five years ... rising Chinese wages, higher US productivity, (and) a weaker dollar ... will virtually close the cost gap between the US and China for many goods consumed in North America."
It would take a catastrophic upending of our existing culture.
What's difficult to slice out of studies like these are data specific to the universe of consumer electronics. The pragmatist in me sees more components designed and built here in America, but fewer full assemblies in the years ahead. It's difficult for me to wrap my mind around the ability of Foxconn to build a factory anywhere in the United States where upwards of 300,000 of my countrymen would flock to work 16+ hours per day, six days per week, for the bare minimum wage and a scaled-back (or practically nonexistent) benefits package. Some manufacturers have had success in outlying territories -- places like Puerto Rico, Guam and Saipan -- but even the smattering of garment factories on the latter island weren't able to compete on cost, and were largely shuttered in the past five years.
For any significant change to occur, and for electronics manufacturing to return to the US in any meaningful way, it would take a catastrophic upending of our existing culture. American consumers, en masse, would have to universally agree that paying many times more for an iPhone built within US borders was worth the premium. Apple shareholders, en masse, would have to universally agree that paying orders of magnitude more for American manufacturing was a wise use of funds. Or, of course, the government would have to step in and force the hands of those in power, given that the existing economic variables would likely never produce a situation where American manufacturing of electronics would make pecuniary sense. Something tells me this nation isn't truly ready for any of those scenarios to occur, but a lot can change between now and the future.
This article was originally published in Distro Issue #47.