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The Laptop Supply Chain
Carl Bialik from the WSJ writes "When a U.S. consumer orders a laptop from HP or other big sellers, how does the machine get made? Often via a complex supply chain in Taiwan and China, shaped by rocky cross-Strait relations, according to the Wall Street Journal: 'Outsourcing to low-cost, high-quality Taiwanese manufacturers has helped make Dell and H-P the world's top two PC companies in terms of sales...But the relationship between U.S. computer firms and their third-party manufacturers can be tricky. In the struggle to retain an element of control over their suppliers, H-P, Dell and others play contract manufacturers against each other to keep prices falling and ensure no supplier gains too much leverage.'"
means at least the saving are pass onto the consumer. Admittedly though, there are not a whole lot of choices when you buy a laptop. More often then not you will not be told where the laptop are made unless you can see the underside of it.
Since customer perfers price over quality in general, it is not really the companies fault to find the cheapest supplier.
Are you sure it's not Dire Straits?
I always worried about the effect that any Taiwan-China conflict could have on the supply of computers. It seems almost all motherboards are made in Taiwan and a whole lotta RAM.
Now, imagine what would happen to America's high tech industry if Communist China invaded...
Lawrence Person (lawrencepersonh@gmailh.com (remove all "h"s to mail)
http://www.lawrenceperson.com/
<insert any type of product here> manufacturers seek to produce their products at the lowest possible cost. They outsource to overseas contractors who in-turn outsource to even lower cost labor in the emerging manufacturing economies of Asia.
Where have you been the last 30 years?
I think you'll find that China could cripple pretty much all of the American economy should it choose to, and without bothering to invade Taiwan.
Deleted
Are you really serious when you make a statement like this? Do you even know that all of IBMs lapotops are/were manufactured in China/Taiwan since early 90s? Same with Apple, HP, Dell, Gateway....
What I found interesting was the move to manufacturering the more expensive components in China - that is the next place to look for cost reductions. It'll take a while, but it will happen - leaving Tiawan to do higher end engineering and component fab, with the commodity stuff outsourced (much like we do today).
China's also developing the engineering talent to do the design work - Siemen's already does cell phone work their; China certainly has the talent to develop into a major player. Of course, political challenges - how do you keep such diverse country in one piece if you lessen the central control.
If I were India, I'd be worrying about the Chinese developing enough English speakers to capture the call center business.
I'm a consultant - I convert gibberish into cash-flow.
IBM products were good, but too cheap for IBM to make money on it. And their opinion was clearly that technical superiority meant nothing in a market that appears to be dominated by price.
The market says the cheapest laptop is the best.
You missed a spot. When you say "the market," you mean the CONSUMER market. A market that, frankly, IBM hasn't expressed any desire to play in for years (disclosure: worked in their personal systems group until about a year ago).
IBM doesn't want to be a consumer laptop brand. They don't sell retail--you can't buy an IBM laptop from any store. If you watch their commercials, most of the features they're touting (rapid restore, etc.) are features that most appeal to businesses with hundreds of laptops, not consumers.
The market IBM wants to play in is the business market. And, frankly, most business do NOT have "price is the only consideration!" restricitions. Dell does well in some parts of the corporate space, but things like total cost of ownership and support costs matter MUCH more to business than consumers. And IBM's pretty darn good at that. They're in no way hurting.
You assume that highest volume and being a strong competetor in the consumer market are IBM's aims, or at least are what's in the best interest of their shareholders. IBM disagrees, and frankly they're probably right. They're not going after the low-margin business of competing with Dell for the cheapest PC on the block. They're going after higher-margin, higher-quality, feature-rich needs in the corporate market. It's a considerably better strategy than Gateway's unfocused "we need to beat Dell at their own game" approach.
The market research says you're an idiot.
Having our laptops and PCs made this way may seem great -- for as long as the Chinese keep funding our ever-increasing trade deficit by taking our declining dollars and purchasing our treasury bonds.
:-/
Dell and HP are at least keeping some design and marketing jobs in the US.
But if they follow the lead of many other American companies (e.g. GE), that design will be out-sourced overseas. American corporations are being destroyed by their own greed and shortsightedness. Many American companies are now only shells -- they're a brand name with a US-based sales and marketing force and everything else done overseas.
Fool yourself if you want, this is not a sustainable way of doing business. Consumers may think they've got it great now, with prices going down. But those same consumers are transferring wealth overseas and we're only able to do it now because the rest of the world allows the US to get into debt that no developing country could -- we can do it only because of the dollar's dominance.
Eventually that dollar dominance will evaporate and we'll realize that we transferred huge amounts of wealth and industrial power to foreign countries, all based on an ideology of greed and "free" trade.
Now, none of these are my own ideas; this is seen clearly by those on the political left and also by "traditional" conservatives. People like Reagan's Asst. Sec. of the Treasury and former Wall St. Journal editor Paul Craig Roberts have written extensively on this foolish but deliberate economic suicide. The mainstream corporate mass media avoids this -- it may upset people, cause them to question the conventional wisdom, or, worse in their view, impact their short-term profits.
Laugh and enjoy it while we can; things that can't go on forever don't.
Progress has always left some jobs behind. Buggy whip and block ice jobs used to be well paying
These jobs were replaced by technology. Their roles were antiquated. Fortunately, advancments in technology opened up the door for other career paths.
We are seeing something different now. These jobs are not antiquated. Many of the jobs moving overseas are still relevent and will be in the future. They are simply moving out side of the country to cheaper labor. The problem I see regarding this trend is that most of the countries lack labor laws. There for we have to be careful and bring those countries up to our standards and not regress to third world/US circa 1900 standards. I would rather read a Dickens novel not live one.
That's because companies are only looking as far ahead as the next quarterly report, or maybe the next annual report. That's all the shareholders care about so that's all the companies care about.
China, Inc. and others are looking much farther down range. China is working on 50-year plans, which currently involve them taking over the world in many different areas of commerce if not military.
Shortsighted American and Japanese companies worried about short-term profit and loss can't compete against something willing to take losses for decades. Eventually the US companies die or get bought out by China on the cheap.
If there's ever a war between the US and China -and I think there will be one within the next 100 years- we're going to have a difficult time sourcing parts. China will be sure to ban trade with the US so nobody else will sell to us, and meanwhile the US will have totally gotten out of the R&D, chipfab and assembly business. Nobody will know how to make anything and it will take years to get going again.
Sig for hire.
American companies are now only shells -- they're a brand name with a US-based sales and marketing force and everything else done overseas. Fool yourself if you want, this is not a sustainable way of doing business.
Sure it is, as long as the companies are quick to begin marketing outside of the US and Europe as consumers here reduce their spending. The fact that the wealth has moved from one population to another doesn't really impact the multinationals, except to require them to shuffle the shells around. That's an advantage to having a layered, flexible corporate structure, actually.
Corporations aren't being shortsighted, because they'll be able to get their profits elsewhere when profitability declines here.
The result will be painful to the members of the declining economies, and very pleasant to the members of the increasing economies. The corporations will continue making money for their shareholders (who will increasingly be from the newly-wealthy nations).
There's nothing unsustainable about it.
What you meant to say is that it's not an approach that sustains the American economy and American jobs.