[blue_k]

Are there any BB devices that are made in China? I've never seen one.

[CrackedBarry]

Oh, and btw: It's not even just the cost of labor that's the problem. Cost of labor in making an iPhone, for example, is a tiny part of the total cost.

(Though arguably, a big reason why there's still so much manual labor involved in producing an iPhone is low labor costs. If labor costs rise from (for example) a dollar an hour to 5 or 6 dollars an hour, many of those manual jobs would be eliminated or replaced by robots)

The average wage of the workers involved could easily rise or double, without the price of an iPhone rising notably.

But the problem is, as other posters have mentioned, that the rest of the industry is located and concentrated right there. And we simply don't have qualified workers in numbers big enough in the west.

Sure, we could probably find 50 or 60 thousand people who are qualified to work in an iPhone factory, wiping screens 8 hours a day for minimum wage. (Though quality would undoubtedly suffer. You don't exactly get the cream of the crop of the labor market, paying minimum wage these days...) But what about all the electrical engineers and CNC workers you need IN ADDITION to the minimum wage workers? We don't produce enough of those, and the ones we do have, certainly aren't going to work for 12$ an hour. And even if they would, they'd all have to relocate from where they live around the US to our little iPhone factory in (for example) Oregon, which again isn't very likely.

But despite of all this, lets assume we can magically wave our wand and have tens of thousands of qualified workers appear who are willing to do very menial work for minimum wage. Lets also assume that we wave our wand around A LOT more, so we don't run into problems with quality control, absenteeism, etc. etc.

Lets also assume that we got a BIG *SS magical wand and waved that around when the environmental inspectors came and wanted to take a look at our factory, so we passed with flying colors.

It's now twelve months later, and unfortunately iPhone sales are falling. It's to be expected, since there are rumors of a new model coming in the next six months. But because of that, the factory isn't profitable anymore and we have too many workers, so we need to fire a third of them. (though they'll of course get rehired again in four months when our iPhone 6 plant is up and running.)

Oh, and we also need to retool part of our factory for making the iPhone 6, so we need to let another third of our workers go for 3 or 4 months. No problem, right? Well good luck finding a magical wand big enough to deal with the clustertruck of problems that will get you with unions, politicians, lawsuits, etc. etc. etc.

Face it. We live in a post industrial economy In the US that just isn't equipped to mass produce electronics, or is as capable of it, as a developing economy like China's is. We COULD make the necessary changes In the US, but I'm not sure you'd like it. It would mean a goodbye to 3-500 dollar laptops, tablets and cellphones, since prices would double or triple. It would also mean a substantial slowing down of the whole tech sector. You wouldn't get new models once or twice a year, you'd get a new model cellphone or laptop in the showroom every two or three years.

Some people might say its worth it, if it would mean that electronics are made in the US, but I wouldn't agree, neither would most people, I suspect...

[CrackedBarry]

Are there any BB devices that are made in China? I've never seen one.

All the parts are made there. They're just assembled elsewhere...

[ichat]

If they manufacture like apple does. I will not even use a blackberry again. I don't think they do it that way though. The phone that benefits all, even if the people are at the factory. Lol.

Sent from my BlackBerry 9860 on 7.1.0.714 with Tapatalk and my fingers

[Nine54]

Simply because an economy is a services based one does not necessarily mean it is a thriving one. Greece is a good example. Nor does it mean that a manufacturing or commodities based economy are necessarily doing bad. Countries like Kuwait, Canada, China, and Australia are examples. In general, as economies develop, they move towards services, and move basic manufacturing to countries with lower labor costs.

Right, but extrapolate that out into the future and the current manufacturing economies eventually move up and out into services economies. As a type of litmus test on services economies, let's think in terms of absolutes: could the world function if the only economies were services economies? No. In fact, most services still rely on manufactured goods as inputs into their services "products." But could the world exist with all manufacturing economies? Isn't that how it used to be? Countries would trade raw materials or finished goods for the products they can't, or don't want to, naturally manufacture themselves.

This notion of service economies is a relatively new phenomenon, at least as it is now defined. We don't have the benefit of history to see how sustainable services economies are in the long-term, and there are compelling reasons to think that large nations (that can't survive on, say, tourism) cannot thrive--and possibly cannot survive--with just a services economy. What percent of exports are services vs. goods? And what percent of imports are services vs. goods? Goods account for the majority of exports, but also imports, which is what keeps us in a trade deficit. While services exports might increase, it doesn't seem likely that they will offset the surplus of goods imported--at least not for a while. And what's preventing other nations from evolving their services industries? The relative barriers of entry in those markets are low, and when you factor in the wage or labor cost "advantages," why would those countries maintain a trade deficit in services?

You make a very valid point. The traditional assumption concerning manufacturing is that it typically uses unskilled labor. By that, it typically refers to things like textiles, commodity goods like toys, and low tech goods like toasters. Recently though, basically the past 20 years or so, there has been rapid advancement in Asian technological prowess, where they could now produce goods they traditionally weren't capable of. This is most visible in China. The availability of cheap labor, coupled with companies willing to do joint venture with Chinese companies (share technology), a government willing to subsidize technology (even steal it), and the potential market of a billion people have made it an irresistible destination for all the major consumer tech companies in the world. In 2012, there really aren't many things that Chinese companies cannot make, that includes aerospace equipment, medical imaging, ships, and even robotics. In 2012, I suspect their weakest tech area is actually in defense. They recently built a 2nd generation stealth fighter, but it's nothing like F-35JSF or F-22 Raptor.

I'll take your word for it on Chinese manufacturing capabilities, but it seems plausible. Though ironically, China has "struggled" to make a competitive automobile. Good point about defense, which is why I think it's important that the sector keeps growing (or, to put it in more political terms, that we keep spending on defense). Much like the arguments supporting the space program, there is a technological trickle-down effect from defense. Defense is a catalyst for advancements in materials science, which evolves at a slower rate than other types of technology.

Certainly there is no reason the US can't have a workforce that can make anything, from textiles and toys to aerospace and robotics. The problem is cost of labor. This is really off the top of my head, so I'm not 100% sure, but I recall an MRI machine made in the US costs about $3 million, one made in China that is "almost" as good costs about $1 million. This was about 3 years ago when I attended a High Tech Fair in Shenzhen. It's easy to say an American worker is "more productive" and can actually lower labor costs. The problem in 2012 is that just about anybody else can copy the practices that make an American worker "more productive." One example is Dell. Dell has a crazy super-efficient assembly plant in Texas. They really did invent "just in time" inventory management. Parts would come in and leave completely assembled in a day. They didn't need warehouse space for parts or completed goods, their warehouse was a fleet of container trucks constantly coming and going. This was unique in the 1990's. In 2012, not so much.... People use this technique now to make furniture.

Good point, and I agree. The benefits of Lean are not really a competitive differentiator as anyone can (and should) utilize them. However, for companies looking to reduce operating expenses, the supply chain is probably a good place to look instead of simply looking at wages. Companies may find that by optimizing their processes and becoming more Lean, they can reduce OPEX without offshoring or trimming their labor force. There are a lot of "hidden costs" with offshoring or outsourcing as well: freight, taxes, real estate, permits, etc. Factor in the risks around quality, shipping delays, longer lead times, etc., and that $4/hr wage might not be as attractive as it seems on paper. Just as Lean isn't a competitive advantage, neither is offshoring: anyone can do it.

The problem with manufacturing in 2012 for countries like the US is that even basic components are no longer made in the US. Let's say you're making a smartphone, and you want to change the screw design. In China, the screw manufacturer is probably 30 minutes away, and he can have prototypes for you in a couple of hours, and with approval he can deliver a million in 2 days. The same applies for literally any component, including the more advanced ones. You want to change the size of the PCB? The PCB factory can have prototypes by the morning and a hundred thousands pieces in 3 days.

This is part of the case *for* more domestic manufacturing: downstream industry/job creation. I certainly don't think that increasing manufacturing here is easy and that there wouldn't be growing pains, though. And some manufacturing, like small electronics, just might not make sense to bring back--at least not without a seismic technology shift.

We certainly do not have a completely free-market economy. I never said we do. Even in the US we certainly have our share of tariffs, regulations, prohibited items., etc., etc., etc. I simply stated that protectionism is bad. That's not to say it's always bad. There are instances when a country should limit trade. Things like produce that can carry insects which can potentially turn into ecological disasters is an obvious example. Trade in weapons and weapons technology is another. The current trade sanctions against Iran is yet another. Trade in consumer goods though, typically works out beneficially for all concerned.

I agree to a large extent, primarily on the basis that government involvement is largely artificial. But, I think the flip-side is true as well. The lack of government involvement in other countries also is an artificial advantage. It's not an apples-to-apples comparison when, say, a foreign country is more attractive for manufacturers due to the lack of EPA regulations. All these laws and regulations should regularly be revisited, but if we deem them important enough to uphold here, then should we allow companies to "skirt around" them by manufacturing offshore, but selling here? I don't know...it's a complex issue. But, as you mentioned below, there are trade-offs with "doing the right thing" and playing fairly, and maybe those need to be accepted (or enforced?).

The USA is a consumer spending culture, no doubt about it, and consumption is the single largest component of GDP. The US is currently suffering from very real and very large trade deficits. Are there any solutions to this? It's hard to say, but the solution is not as easy as saying we should move manufacturing back to the US and limit imports of foreign goods. Here's the problem with restricting trade to improve the balance of trade. Other countries can do it too. Let's say we stop importing from China, China stops buying our exports. Where does it stop? We only trade with countries that are willing to buy more of our goods than sell to us? But every country wants it that way. All trade stops. We have the 1920s again. What about trade for items that the US does not naturally produce or produce enough of? The most obvious item being oil. What happens when other countries stop selling us oil? Supply curve shifts in dramatically and we start paying $20 for a gallon of gas. How does that effect us? GDP will drop by at least 5% over night guaranteed and we face the worst case of stagflation since the 1970's. Let's say we maintain our trade with oil producing nations like Canada, but what about something as simple as the lithium that powers all our portable gadgets? The US doesn't produce lithium and most of the nations that produce it in quantity are not very friendly. There are numerous rare earth metals that China produces in quantity, but the US does not. How do we get them to sell that to us during a trade war? The benefits of free trade is that it gives the consumer access to everything in the world, and that includes cheap labor, oil, lithium, silk, and whatever you want that your country doesn't have. I can go on and on, but I think you get the picture.

Good point, but this just underscores what I mentioned earlier about the sustainability of services economies. In a services economy, you have to import goods and the ability to offset those imports with services exports is questionable, especially in the long-term. In a manufacturing economy, decreases in exports can be offset by decreases in imports since we can domestically produce more of the goods we demand regardless of foreign demand for those goods. I don't know if oil is still a great example, but sure, there always will be things that cannot be easily or realistically produced domestically. Those goods allow for more "natural" trade vs. trade around artificial differentiators like cheaper labor. I realize things are not that simple, but you get the point. While a trade surplus with every country might not be reasonable, you certainly can't want a trade surplus as well as only "high-end" non-manufacturing jobs domestically. The bottom line is that we have to *want* to make things, and I think America does.

In fact, making things might be necessary for maintaining a consumer spending culture. Who controls the spending culture domestically? The middle class. What companies don't realize is that for every manufacturing job that's offshored, there's potentially one less person who can afford to buy your goods at home. Companies might think that domestic demand will be offset by foreign demand, but again, the benefits realized by offshoring manufacturing can be obtained by any other country as well as by the country producing your goods. U.S. companies will be competing with domestic companies in foreign markets, and if it's cheaper for us to manufacture there, it will be cheaper for domestic companies in those countries as well. In other words, unlike what we're seeing here, American goods imported in foreign markets will always be more expensive than domestic goods in those markets. So, not only are American-made goods not competitive price-wise domestically, they're not competitive price-wise abroad either.

To have a consumer spending culture, you have to empower the consumer to spend. You can't move one type of job overseas without providing a comparable--if not better--replacement job domestically. In fact, manufacturing jobs have higher average salaries than services jobs, so we should want those jobs here. Instead, we're moving more jobs overseas while reducing our domestic spending power. And then we're surprised when GDP grows at a lower rate. Now, you might say that, to be competitive and to keep manufacturing jobs here, the average manufacturing salaries would have to be lowered, so the end result is the same. That may be true to an extent, but just as desiring a trade surplus with every country is idealistic, so is thinking that all manufacturing jobs can be replaced with comparable services jobs. I think the current recession demonstrates this.

You're quite right. I attended a very right winged university, and studied economics under some people who are frequently in the news lately. Our school was very traditional, and it's a miracle I'm not Republican. When I was in school, my views on things like public policy tended to be very right wing, basically let the "invisible hand" solve all our problems. Since then I've come to realize that this is not the way an enlightened society should operate. Economic policy shouldn't necessarily be dictated by "efficiency" and "utility." Quite often, you have to take a humanitarian view of society too.

I didn't know very right-winged universities existed. ;-) But I agree with you on the humanitarian component and doing what's right. Sure, we can wish people would be willing to pay a little more for Made in America or that Wall Street would stop rewarding companies who offshore jobs just to add a couple cents to their EPS. But, that's not realistic. Instead, we need to do more to make it so that "doing the right thing" is also the logical thing to do.