Why Manufacturing Matters

When EE Times' Junko Yoshida recently reported that Japanese consumer electronics companies will be scaling back their production of TV sets, shipping most or all of the manufacturing work offshore, I found myself waxing nostalgic. I harkened back to my college days in Beloit, Wis. To stay in school, I was working three part-time jobs. My wife chipped in by working shifts at the Admiral TV plant in Harvard, Ill.

By that time (the early 1970s), CRT television was a so-called commodity, a low-price product in a saturated market and a weak profit center for many corporations that were still building the damn things. My wife -- whose co-workers were mostly women and minorities -- made barely more than the minimum wage. This was not considered a fit job for a white man, and there was no glamour or future in CRTs.

So goes Japan today, which pretty much took over the TV market when the United States got completely, totally, absolutely, and irrevocably out of the business of making TV sets. The Admiral plant closed in 1973. A decade later, I happened to be writing a book about inventions, which took me to Japan. I visited companies like Sony Corp. (NYSE: SNE) and JVC, which were making incredible technological advances and tons of money -- doing what? Making TVs!

I remember touring a vast, luxurious research facility at JVC and getting glimpses of stuff that was still years from commercial introduction, including wide screens, high-definition TV, digital video, LCD flat panels, and plasma displays. This wonderful technology followed hot on the heels of the great TV breakthrough of the 1980s: VHS video recording. JVC and Sony had engaged in a tooth-and-nail struggle to win a recording race that had started with an American company called Ampex. Of course, Ampex was out of the race by then, because it had no partner in the TV industry (in America). There was no TV industry. Besides transferring the low-profit commodity business of building TV sets to Japan, the US consumer electronics industry (Zenith, Admiral, RCA) had willingly transferred to Japanese TV engineers all the technology and all future R&D breakthroughs -- in television.

Since the 1980s, Japan has been the great originator of flat-panel technology and the breathtaking array of uses that derive from it. But now, Japanese companies apparently believe they can transfer the production of all those dull, low-profit TV panels (today's version of Admiral's CRT) to Korea and China and still control the technology. They seem to think that, with production and production technology thousands of miles away, they can innovate as smoothly and vibrantly as always.

But that didn't work for America. Not only did America's consumer electronics companies abandon TV making (along with the subsequent technology advances in TV, all the money that came from those advances, and all the jobs that ended up being Japanese, Korean, and Chinese jobs), but the United States also did nothing to prevent the death of this vital economic sector.

Government intervention to save an industry? No, that would be wrong. It would be a sin against capitalism.

I had another flash of nostalgia. In 1969, I was working at a little steel fabrication plant in Orlando, Fla. All the steel we prepared for McDonald's, Burger King, and Disney World was recycled material shipped to Florida from Japan. By 1969, Japanese steel, even with transportation costs, was cheaper than steel from Pennsylvania. In those days, the steel industry was in a technological decline that would eventually shift almost all production overseas. As production moved, so did know-how, technology, research experience, and sheer brainpower. The Japanese, Chinese -- even Europeans! -- got better at doing things with steel than Americans.

Since then, American steel has modernized and recovered to some extent. But the US steel industry is a cautionary tale for any country that has a vital industrial technology and casually surrenders that economic engine to other nations.

Your object lesson for today is the Bay Bridge between San Francisco and Oakland. Not only was the steel to rebuild the earthquake-weakened bridge smelted and forged in China, but it also stayed in China for the actual construction of the bridge. Americans no longer know how to make a steel structure as big, as important, and as magnificent as the Bay Bridge. Instead, with staggering difficulty and at enormous expense, this immense bridge -- made in China -- is being floated in pieces across the Pacific Ocean on pontoons that had to be invented by Chinese guys.

The pictures of this operation are awesome. But for an old American steelworker like me, they're also sad.