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 {complink 5114|Sony Corp.} 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.

12 comments on “Why Manufacturing Matters

  1. elctrnx_lyf
    June 14, 2012

    I believe government of any country is able to understand the power of technology and engineering. I'm really surprised to see these details about how us actually lost its edge by just moving the manufacturing followed by technology later on and there by jobs. I'm not really sure how Japan is going to come over this if they move the tv manufacturing to outside nations again.

  2. bolaji ojo
    June 14, 2012

    I don't believe there's any great mystery here. David Benjamin made a great case but this was all about costs and manufacturing efficiency. The government can focus on long-term issues and national economic growth. That's not the job of a corporate executive. As companies chase profitability they are bound to sacrifice the economic survival of a particular territory.

  3. chipmonk
    June 15, 2012

    All that Benjamin writes about the rise and fall of various manufacturing industries in the US are sad but true. Having worked in both the US Steel and Semiconductor industries in R&D and Management it is clear that the common root cause for this pattern are the current hierarchy of the US society and the resulting economic system.

    This sort of thing does not happen in German speaking ( Germany, Switzerland, Austria ) or Scandinavian countires. They still buy consumer products made mostly by their own people even when it costs more that cheaper imports. They also invest a lot more on a per capita basis in industrial R&D and expand into new areas. Recently Germany has built itself a nice little business in fab tools for photo-voltaic panels.  

    Even the Japanese themselves still prefer consumer electronics built in Nihon. They are xferring to So. Korea ( and ultimately to China ) only what they used to export to the US, all due to the same root cause – having to deal with the US consumer who behave like rats in a cage and the powerful Mafia that put them in that cage using their grip on both Hollywood and Harvard ! The Germans and Japanese do not care much for this Mafia and as history shows would rather not do any business with them. 

    Within the US from Pennsylvania to the upper Mid West were populated mostly by folks from Germany and Scandinavia and they are the ones who made the US the agricultural and manufacturing powerhouse it used to be. But leveraging the sympathy / carte blanche they gained post WW II, the coastal Mafia has ruthlessly emasculated Mid Western industries ( by denying investment to modernize older technology e,g. in steel and auto ), appropriated their cultures ( Beethoven and Mozart were Germans not from Brooklyn ! ), ridiculed and marginalized responsible but staid Germanic cultures and now denigrate the Mid West as “fly over country”, much to the detriment of the US as a whole.

    Only highly manipulative industries like finance, insurance, healthcare, education, entertainment and pornography have any long term prospects in the US so long as the Mafia rules.   

  4. _hm
    June 16, 2012

    @David: Very good story. I also agree with @Chipmonk. But government must get involved to protect interest of their people.

  5. Ariella
    June 18, 2012

    @chipmonk  I have to confess that I don't know much about the history of industry in US other than the fact that at its heyday, the peole who headed the hugely successful companies were known as “robber-barons.” One of those was Henry Clary Frick, for which the Frick Collection is named, as the museum is housed in his New York mansion. He was American born and actually did not start out on his own but by working with Carnegie. Undoubtedly, he was a success, but he was thorougly ruthless about labor demands and strikes. It seems to me that regulations that improved the situation for workers also made the business less lucrative for owners, which likely was a factor in the decline of such industry.

  6. chipmonk
    June 18, 2012

    Yes I too am familiar with the Frick history but you do realize that his onetime boss Carnegie the Scottish immigrant, was so very different. So my central point, that might have escaped you, was that even capitalism ( or what we call Capitalism ) varies greatly from one Western country to another. Compared to the US our neighbors to the North have a far more socialized system because of the large number of Scots that were prominent in setting down its laws and systems. The US in contrast have far too many people from the North of England ( especially in our South ) who since QE I have used Free Market as a cover for crimes against humanity around the world for which others got condemned to death at Nuremberg. What we have in the US now ( i,e. since Reagan ) is a Double Jeopardy due to the fusion between this group and Wall St. / New York shysters who spend ( like the Koch brothers ) to mislead / incite their own victims ( the Tea Party ). Their traditional opponents ( blue collar labor ) have been betrayed by turncoats / emasculated by radical feminism.

  7. Ariella
    June 18, 2012

    @chipmonk it's an interesting theory, but I' do have problems with  it. From what I've seen, the biggest names in industry from the days before income taxes and labor regulations were all American born. Some had Dutch ancestors and some had ancestors from other places. So it does not seem that one nationality with a predefined style of capitalism dominated. If anything, it seems that their styles reflected the America of the time. And Wall Street did not only enter the picture in the late 20th Century. I also really fail to see how you can blame “radical feminism” for what happened to blue collar work. 

  8. chipmonk
    June 18, 2012

    sugestion : go read the history of US railroads ( the major industry in the 19 th and early 20 th century ) and then do a statistical analyses of the ethnic origin of the major players and their modus operandi.

  9. Ariella
    June 18, 2012

    @chipmonk While I do not claim historical expertise, attributing certain personality traits to specific ethnicities smacks of stereotyping, possibly even racism. That captains of industry tended to be ruthless types does not necessarily reflect on where their ancestors came from. I also don't quite get what you are hinting at about “radical feminism” in your previous comment. 

  10. Barbara Jorgensen
    June 18, 2012

    I gotta step in here and second what Ariella says: I don't think ethnicity or gender has any place in a discussion about business. In the words of Rodney King, who just passed away, “Can't we all just get along?”

  11. Himanshugupta
    June 19, 2012

    The major difference, in the way companies do business, between the 20th and 21st century is the way the companies have been able to improve the communications and collaboration between subsidiaries in various part of the world. While having manufacturing in one continent, design team in another continent, R&D in yet another continent and Company's headoffice somewhere else was not possible in last century; this is happening today. Invention has different route today so i do not think that what had not happen in last century cannot happen in this century.



  12. David Benjamin
    June 20, 2012

    Every serious study done about the sort of people who invent things suggests that they are not especially adaptable to altered business practices that cross millenial lines. Inventors, as determined in the Fifties by John Jewkes (The Sources of Invention) and reiterated by Ketteringham & Nayak (Breakthroughs) in the Eighties, are more often than not anti-authoritarian, typically reclusive, unresponsive to the demands and expectations of management, don't give a rat's patoot about budgets and prefer to commune very closely with small trusted teams who work in the same building, not another continent. Human contact, especially when the humans in question are brilliant but eccentric, temperamental and mildly paranoid, is essential to what Arthur Koestler called the act of creation. And close contact between R&D and production is the only way that a mere invention becomes a successful product. Long-distance coordination might succeed for a while, but eventually, inevitably, almost organically, the idea people and the hands-on people will end up in the same physical space, working together — else the whole enterprise goes, in technical terms, kaflooey. (Benjamin)

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