Once one of the most strategic parts of the U.S. manufacturing base, electronic manufacturing has continued its overall decline over the past decade despite recent attempts to stem the tide. With most of the product development firms content to farm their work out to manufacturers in China, the Obama administration and organizations like the Reshoring Initiative have sought new ways to bring manufacturing operations back to U.S. shores.
Their constant highlighting of their programs has helped to cause a couple of large manufacturers, Apple and Google, to reconsider their manufacturing plans and open a couple of manufacturing plants in the United States. Of course, the Apple plant is largely designed to assemble their computers. The actual manufacturing of components takes places overseas.
Questions And Investments
The question for many that have seen the emphasis on moving more electronic manufacturing back to the United States has been ‘Is it sustainable?’. Unlike many other industries, the equipment purchases necessary to create an American electronics component factory often require large cash outlays, making it a risky venture if the market turns–especially if your workforce is in the crosshairs and you are selling into the same market.
Cell Phones And CPU Chips
Evidence Nokia, the market leader in cell phones seven years ago. They created a smartphone in San Diego before Apple or Google had finished developing their own. When they couldn’t sell it, they were forced to lay many people off, making it more difficult for them to start over in the same market.
On the other hand, when Intel creates a fabrication plant for its CPU chips, the planning stretches out several years in advance and the expected life of the equipment in the plant is measured in the same terms. Yet for years, despite the risks, Intel, with its large U.S. manufacturing base was one of the most profitable companies on the planet.
Rewards For Good Timing Rather Than Location?
So it does appear that there are rewards for the manufacturers that time the market right, regardless of where they are manufacturing. Though from the point of view of some electronics manufacturers, having a solid manufacturing base with a talented workforce that is cost-efficient is more important than the geographic location of the factory.
A caveat to that would be that because most electronics manufacturers sell into global markets, a clamor for more manufacturing in the United States doesn’t mean that they won’t do just as well by putting their factory in Japan or Korea or China where consumers are paying the same price for their products.
Constant And Changing Competition
One of the largest challenges that faces electronic manufacturers in the United States from a market perspective is manufacturing costs including labor. The solar panel industry for example, saw around 35 venture-capital funded manufacturers go out of business over the past few years. One of the biggest complaints from these manufacturers was that Chinese competitors were undercutting them on price. True or not true, the U.S. government agreed last year, adding tariffs to Chinese-manufactured solar panels.
Defense Manufacturing Is Domestic Manufacturing
One sector of the electronics manufacturing industry that remains committed to American manufacturing is the defense industry. As the armed forces continue to upgrade their equipment, so that they are using the latest in high-tech gear, American electronics manufacturers have been busy creating products and filling orders for equipment that meets their standards.
One part of the industry, the suppliers of drone makers, has been doing especially well due to the popularity of drones being used in every branch of the service. By way of example, a recent order from the Pentagon went to a Florida manufacturer that created a new type of drone that weighs only 1.5 pounds and looks like a bird from afar.
Article Sources:
http://www.wired.com
http://www.greentechmedia.com
http://www.theverge.com
Apple and Google may be considering adding manufacturing plants in the U.S., but this could be simply a small scale move to look patriotic and to appease the Obama administration, especially on the part of Apple, since that company has a large scale plant in China. At least they are giving some jobs back to the U.S.. As far as Google is concerned, I am not privy to any sort of manufacturing that they may be doing outside of the country.
I can comprehend why electronic manufacturing declined in America. When I think of all the world leaders of cellular manufacturers, most of them have their plants outside the U.S.. Samsung we know is a Japanese company. However, Apple does most of their manufacturing in China, although they recently announced that they will allocate a portion of their manufacturing to a new U.S. based facility which they will be opening soon. I hope this tide changes in the coming years.