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Why Amazon Can't Manufacture a Kindle In the US
theodp writes "Ever wonder why all those job listings for Amazon subsidiary Lab126 — the internal group behind the Kindle and, by all accounts, an upcoming Android tablet — have travel requirements? Over at Forbes, Steve Denning explains why Amazon can't make a Kindle in the U.S., and why that really does matter. 'The idea that there is a lot of outsourcing going on is hardly news', writes Denning. 'The idea that it is irreversible and destructive of the economy's ability to grow is less well known. Even so, it's not exactly new news: the HBR article that I cite is two years old. What is really new news is that (1) these fairly obvious truths haven't yet dawned on economists at the Federal Reserve Bank of San Francisco, CEOs, accountants, politicians, among others and (2) the way to manage in a radically different way to deal with these issues is now more fully articulated than it has been before.' Denning concludes his trilogy-of-management-terror by noting that the decline is also occurring in software."
...it dawned upon them a very long time ago. But at the end of the day they'll get a bigger paycheck if they outsource something to lower the costs. Let's be honest, there's always someone somewhere on this planet who does it cheaper...and now guess what Capitalism is about.
Not really. The US used to have much better manufacturing plants than Taiwan, South Korea, China... what happened is that companies decided to outsource for slave-labor wages.
What is killing US manufacturing now is both slave-labor wages in other countries and the fact that the fab plants have moved there. This wouldn't have happened in the first place if the dickfaced politicians on the take from an elitist multibillionaire class hadn't been so gung-ho on "global free trade", aka Slavery Exported.
Much more destructive than the recent outsourcing to China and India has been the much bigger outsourcing to a place called Technologyville.
Outsourcing to Technologoville has been going on for close to 300 years now and has destroyed countless jobs, not to other poor people, but to machines. Clearly, CEOs, accountants and other must see the job-destroying evilness that is technology and stop all "outsourcing" to Technologyville immediately.
Value addition, cheaper goods accessible to more people and an increase in living standards are no reasons to continue this brain dead policy.
Read the article - it seems you completely missed the point. When you trade entire industries, you are also changing the comparative advantages of the remainder. If you get stuck in a feedback loop you will essentially keep going until you have gutted entire sectors of the economy - this is exactly what the West have been doing for many years.
Dell told its 905 workers there that the factory will be closed by January in a cost-cutting move that will send more of the company's manufacturing overseas.... Analysts said they expect Dell will transfer much of the work now done in North Carolina to lower-cost contract manufacturers in Asia, who already make PCs for Dell's rivals.
Here is a suggestion you could make to your local politician:
Companies selling products in the US or Europe must be obliged by law to ensure that some minimal labor standards are maintained in the whole production chain, including all subcontractors suppliers. If minimum industrial safety and labor protection requirements are violated the management of the company selling to the end-consumer must be held accountable for it and should definitely face prison terms in serious cases.
Such laws would in the long term help people in countries like India, China, and certain regions of Africa (cocoa plantations, mining, ...), where workers are sometimes held and de facto treated like slaves. In case of cocoa plantations, for instance, there is a market of child slaves in certain region in the world. One child costs around $200. That's why chocolate is pretty cheap all around the world. (I am not making this up! This is well-documented.)
Anyway, with such laws in place and being enforced, it would become more viable to produce in the US and Europe again. Of course, some products, especially clothes and chocolate, would also become much more expensive.
Software is another matter. I don't believe Indian programmers are treated significantly worse in terms of working conditions than elsewhere, and salaries are relative, of course.
The Yuan is not floated like many countries currencies are. This gives China a significant competitive advantage over all countries to produce goods and services in their country. China take the long view. They know that his will weaken manufacturing in several countries and drive demand to their economy where labour laws and conditions are under their control. Incrementally they will capture those markets.
The irony in all this is that China is still a communist country using capitalism to destabilise democracy.
My ism, it's full of beliefs.
The highly polished injection-molded case is made in China because the US supplier base eroded as the manufacture of toys, consumer electronics and computers migrated to China.
Considering I've worked on advanced injection molding machines IN the US this is such pure bullhockey.
The controller board is made in China because US companies long ago transferred manufacture of printed circuit boards to Asia.
Another BS line, again I've worked with an assembly line making PCB's and finished boards, right here in the midwest.
The Lithium polymer battery is made in China because battery development and manufacturing migrated to China along with the development and manufacture of consumer electronics and notebook computers.
The worlds largest lithium-ion battery facility is just being finished outside Dearborn, Michigan right now.
This whole article reads like some rant by a coastie who has no idea that we still make things here in the midwest, and if the MBA's would stop deciding to chase short term profits at the cost of long term brand erosion and control we would be happy to keep doing it. Over the next decade increased fuel costs paired with a decoupling of the Chineese Yuan from the dollar will lead many companies to pull manufacturing back to the US.
There are 4 boxes to use in the defense of liberty: soap, ballot, jury, ammo. Use in that order. Starting now.
Software and high speed pizza delivery...
Would it have been better if that slavery would not have been exported?
Don't fight for your country, if your country does not fight for you.
Would it have been better if that slavery would not have been exported?
Yes, because the bleeding hearts couldn't stand seeing it locally, so they got rid of polluters, sweatshops, abusive management. IF we could export those guys to China, they would clean up China, which is pretty much a hellhole. Better than it was 10 years ago, but still a hellhole..
"Science flies us to the moon. Religion flies us into buildings." - Victor Stenger
There's no reason Taiwan, South Korea, or China couldn't build good airplanes and undercut Boeing. All of these countries clearly have the engineering and industrial capacity to do so. The main reason they haven't done so, IMHO is due to the high startup costs associated with designing, manufacturing and certifying a passenger aircraft. It would be very difficult to bootstrap a new commercial aircraft business without some form of government support, or some very deep-pocketed investors who are willing to take on a lot of risk. Instead, these countries are gaining more and more work from EADS or Boeing, often as a pre-condition for sales to their national airlines. Through this work, they are developing engineering and production experience that will some day be used to compete directly against Boeing and EADS in the same way that ASUS took over most of Dell's business one bit at a time in TFA. Boeing has outsourced a significant amount of the development and production on the 787. Fortunately, or unfortunately for Boeing, designing and building aircraft components is very difficult and Boeing had to move a lot of the contracts back in house. It will probably take China another decade to build an indigenous commercial aviation industry, but I am confident that they will eventually do so.
Exactly! How dare those damned poor ask for a wage where they can afford rent AND food.
The audacity of it all... Rent AND Food? Next hey will ask for heat and running water. WE need to just put them all down for the sake of humanity.
I have to waste time today hiring a Plant manager to beat my employees... The last one developed tennis elbow from swinging the bat the wrong way so I had to fire him.
Do not look at laser with remaining good eye.
The arguments that retooling is hard, just doesn't make it. Planned retooling is now designed into the manufacturing process. The U.S. helped develop the the Japanese manufacturing base by ignoring Demming. The Japanese were known for poor quality, so even with their lower labor rates. The Japanese improve their quality by following Demming and eventually overtook U.S. manufacturing and steel production. The remaining U.S. industries learned to focus on statistically analysis integrated quality control, and designed retooling became part of the process. So what drives the decision to outsource: 1) lower environmental standards, 2) lower overall employee costs, 3) tax benefits, 4) economic stability.
I think the underlying article hits the problem straight on. These economic factors are enticing from a cost accounting perspective, but not from a competitive one. Eventually, the knowledge is transferred to the low cost producers and they no longer need the costly U.S. managers to drive the business. We see that now with the rise of Haier and Chinese manufacturers who are beginning to dominate the lower end market. Eventually, they will displace the high margin businesses.
The U.S. main advantage in the past has been easy access to capital via efficient markets. With the current crisis and the idiotic standoff over debt, these markets may give rise to competing capital markets in SE Asia. The Chinese are flush with cash and it won't be long before they start to bypass the Western capital markets.
So what do we do? First, stop letting corporations drive the political agenda, because their short term focus is killing our industry. If we changed our focus to research that will enable lower cost production even with high labor rates, we can pull back manufacturing. This will have to be done at a grass roots level, because Wall Street will not invest in this kind of retooling when they can invest in companies that outsource. This means that we need to stop electing corrupt corporate lackies and uneducated religious nutcases, and change the rules so we encourage companies to invest here. Here a though, remove ALL corporate loopholes, and offer tax incentives only to those companies that in-source production and service jobs. Offer tax breaks to companies who invest in basic research programs that will innovate product and keep the technology here. This incentive can extend to University research which is most corporate funded anyway.
If you believe our problems stem from big government and the fear of socialism, then you are an idiot. Socialism is beating the f..king pants off of us right now, so that can't be the main issue. We as citizens must drive the political agenda and encourage Wall Street to invest in companies who develop our local economies. Otherwise, start learning Chinese because they are destined to be your overlords.
It isn't Unions, socialism, or big government that is killing us. It is the short term thinking of Wall Street. Once Wall Street was temporarily taken out of the picture at GM where they perpetuated a management culture that was adverse to change, the company was able to shed its high cost assets and return to profitability. In essence, it took government action to force the correct change in direction.
Look on Slashdot, any time an economics article comes up, there'll be people who post, and often get moderated up, who declare that the "US doesn't make anything anymore except imaginary property." That is of course not just false, it is exceedingly false. Until this year, the US made more manufactured goods than any other nation. China now makes slightly more than the US, but the US still makes more than anyone else (by a reasonable margin).
There's no question that there is a large amount of outsourcing going on, but this make-believe that the US doesn't make anything, particularly anything high tech, is beyond stupid.
My favourite example is always processors. Intel has fabs in a few other countries but most of their fabs (7 of 10) are in the US. All their 32nm stuff is in the US and nealry all their 45nm stuff. So if you buy a modern Intel CPU, it was fabbed in the US. It was tested and packaged somewhere else most likely (though they now have a US packaging site for things sold in the US mostly) but the high tech work, the fabrication, was done in the US.
The US used to be better at manufacturing electronic components then the US. This is no longer the case.
How long do you think it will be before the US is no longer top dog in making planes? Tell me... which is the biggest passenger plane in the world? Airbus came out of nothing and is build with EXPENSIVE european workers and the US can barely compete. How do you think it will fair against Chinese build aircraft in 2 or 3 decades?
This discussion is nothing new, a few days ago I asked people to name a US consumer electronics firm. People named Motorola (been selling off its divisions since the 70's to asia) and Apple (a design company that has everything build in Asia).
There is the dream in the US that you can outsource all the drudge work and keep marketing, sales and design... and run the economy on that. 300 million people, all selling, marketing and a handful of designers...
If you can't see just how silly this concept is, well, then there is no hope for you. Vote tea party and pray the end comes swift.
MMO Quests are like orgasms:
You may solo them, I prefer them in a group.
"Slave-labor" wages are really a matter of perspective, based on your personal standard of living. The people filling these jobs, particularly in China, are from rural areas, who take them because they are a substantial increase in pay for their family from what they as farmers were making toiling over fields. As hard as the manufacturing work seems to us in America who comparatively have it pretty easy, isn't sitting in a chair putting electronics together somewhat less back-breaking work than bending over harvesting crops all day?
An impartial observer does not care by definition, thus your question is a red herring.
Put up protective tariffs and make it difficult to send money from the country, but easy for people to move in. You know, what we had in the past when everything went well and the opposite that we have now, when everything is going straight to Hell.
Good riddance. If they aren't doing anything for us, why would we want them around? Away with them, so new companies can rise in their stead to actually benefit us.
Good. With any luck, it kills off the multinationals, thus restoring economic power to where it belongs: in the hands of national governments and through them Us the People.
It's about time we grew a spine and fought back against these rich assholes who would have the whole of humanity compete on who can grovel best before them.
Forget magic. Any technology distinguishable from divine power is insufficiently advanced.
Which also happens in the US.
Apple are the heavyweight in cheap consumer electronics, and American owned. We should be asking why they aren't building in the US, especially as most of what they "build" is putting together other companies' components.
And we should be defining what "make (or made)" and "build (or built)" mean. If I buy a motherboard from taiwan and build a computer from it in the US, is it "Made in America"? What if the motherboard is from taiwan, CPU from Arizona, hard drive and case from China, power supply from California and I build the computer in Dallas, is it "Made in America"? What if the parts are mostly from the US but they're assembled in Mexico, what is that? And we can take it further, what if the parts are made in the US but the rare earth elements used in those parts are from China, where is it "made"?
Car manufactures have been playing this game for years, buying parts from overseas but assembling the car in the US and calling them "American made". It's so bad that there's a American-Made Index where they rate cars based on how many of their parts come from the US and vehicles like the Toyota Camry and Honda Accord are more "American made" than the Chevy Traverse or Ford Explorer and American icons like the F-150 and Silverado don't even make the list, so people buying trucks from Ford or GM thinking they're supporting America really aren't, they'd be better off buying a Toyota Tundra.
Obviously if the metal, chemicals and other rare materials were mined in the US to make the parts in the US used to assemble the device in the US then it's 100% American made, but that's almost never going to happen so we need to clear this up before we can call something "Made in America".
my karma will be here long after I'm gone
The A380 has sold for shit because there just aren't many routes where carriers have a use for a plane that big. You have to have a lot of passengers that want to go on one flight to make it a worthwhile purchase. Thus currently they have had a total of 236 orders and delivered 56 jets, and the ordering seems to have dropped to near nothing (they've had 2 this year).
Now compare that to the Boeing 747, which has a total of over 1,400 delivered, and 114 orders for their new variant, the 747-8, which is still in final testing, and another hundred orders for older variants.
Or how about the Boeing 787, their next generation mid body plane? Expensive little thing, because of all the carbon fibre, and has had more than a few delays in delivery (if it gets certified it'll start shipping fourth quarter of this year). Yet despite that they still have 827 orders for the thing.
Seems like Boeing is doing just fine when it comes to aircraft, in particular making aircraft companies actually want. Remember that having the biggest doesn't mean anything. Who cares if you can make a big jet? Biggest for its own sake isn't useful. The A380 has been a pretty big boondoggle. The R&D cost was about 11 billion euro. They are still in the red on it, and will be for quite some time, perhaps until 2020. They made a jet that cost a lot to design and there isn't a big market for.
Remember the A380 started in 1991. 2 years later, Boeing discontinued a similar project because they felt the demand wasn't there.
To quote Douglas Adams: There is another theory which states that this has already happened.
Specifically, it happened about 10 years ago. But luckily, the banks were willing to give us mortgages we couldn't pay. (Due to complete and utter insanity on their part.) If people needed more money, heck, they could just get a second or third mortgage and get money from there.
Tada. Problem solved forever.
This will of course cause everyone to ignore the fact the economy is actually getting worse and worse, because they personally can continue to survive. They're falling deeper and deeper in debt, but surely that's just them and not some sort of nationwide statistical truth. (What if we held a slow-motion economic collapse and no one notices?)
As long as the banks don't figured out that the mortgages they've been issuing are shit, and just because they put them in complicated financials Shit-Holding Instruments doesn't mean they still aren't shit. As long as that doesn't happen, the 'economy' is great...sure, the actual 'producing things' sector is gutted, but people can borrow from the banks and work min wage jobs selling Chinese stuff to each other. Actual economies can't work like that, but as long as the banks keep ignoring that and loaning to us, we'll be fine.
Let's hope no one ever, Wile E. Coyote-style, looks down and realizes they're standing in mid-air.
*checks the news*
If corporations are people, aren't stockholders guilty of slavery?
The problem is that even if unions led to good things in the past, you have to recognize that they can also go very, very wrong. To be 100% pro union or 100% anti union is an unthinking position. People in those camps are no better than a cardboard sign.
I guess people want to work 12-18 hours a day, every day... and that is just their kids in the coal mines who will get black lung disease before 18.
I'm sorry, but that is just a fuckheaded thing to say. No, people are seeing some very corrupt and broken unions today, and want it fixed, but people like you can't raise yourselves out of the muck of extremist bullshit rhetoric. It's all false dichotomies and dilemmas with you people.
Nothing is perfect, but unions have made life a lot better than it was before. But because they are unions and get in the way of profits, I guess they are bad.
Can you not even understand that they can be both? That different unions are different things? You demonstrate the #1 problem with this country today. No one can see any nuance or individuality. Instead of seeing the different unions out there and judging them individually, it's just "DERP! UNIONS GOOD!" and "DERP! UNION BAD". You are part of the problem. I hope you're fucking proud of yourself.
The average American is worse off? Funny, I didn't see Iphones, PCs, drugs that actually work, etc. in the 1950s?
http://american-business.org/uploads/posts/2011-03/1301047846_work-time-in-minutes-required.jpg
How long do you think it will be before the US is no longer top dog in making planes?
It will be quite a while (if ever) before the US does not have world class aircraft manufacturing. There is of course no guarantee that the US will maintain dominance in this industry but it isn't going to go away quickly.
Tell me... which is the biggest passenger plane in the world? Airbus came out of nothing and is build with EXPENSIVE european workers and the US can barely compete.
Airbus has been around since 1970 and was form out of a consortium of existing aerospace manufacturers - hardly out of nothing. I'm pretty sure that the folks at Boeing would be very surprised to hear they they cannot compete with Airbus. The 747 is built with expensive US labor and Boeing is still selling plenty of those. Both companies have delivered similar numbers of planes for the past 20 years and there is no reason to believe that will change soon. The fact that the A380 is larger means very little by itself.
There is the dream in the US that you can outsource all the drudge work and keep marketing, sales and design... and run the economy on that. 300 million people, all selling, marketing and a handful of designers...
The US has a $3.7 TRILLION manufacturing sector. That is larger than the GDP of all but about 5 countries in the world. Even China does not manufacture anywhere near as much stuff as the US does. The notion that the US has exported all its manufacturing is simply not supported by the facts. There are (and always have been) some industries that are dominated by firms in other parts of the world. That does not however translate to the US outsourcing all its manufacturing expertise.
I bought a Sears lawn mower over 20 years ago. Last year, the plastic spokes on the rear wheels started cracking, the friendly Sears parts and service on-line had replacement wheels. I bought those wheels rather than a new mower because I cannot buy a new mower with such large rear wheels any longer (at least in the U.S.).
The large rear wheels allow one roll over mole holes and such. I just recently stumped for a new engine for my trusty lawn mower, again Sears on-line had it.
That sort of service from Sears has got to be expensive, I will sorely miss Sears when it goes the way of the dodo because Americans cannot be arsed to fix a quality piece of equipment rather than buying some cheap foreign replacement.
The competition for cheap foreign labor is not cheap domestic labor.
It is highly automated manufacturing.
Robots cost the same in China and the USA. Most are currently not made in China.
John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
That reminds me of my German build washing machine, still working at 30 years old.
I always *think* about buying a new one, since the program settings have become a little erratic any you have to turn the dial very carefully, but the company that made it has since moved all manufacturing to china, and from what I hear they only last a few years now.
They "choose" to live in a dorm style environment"? Are "free" to look for other work?
Yeah right. And Marie Antoinette's peasants were free to eat cake.
Also, you're free to go fuck yourself. Moron.
Hi there - I live and work in China, a free-lance engineer and production consultant, mainly for US and EU companies looking to use production in China and Thailand (I specialize in both countries). Been doing so for 7 years now, mainly in the Shanghai area (Wuxi down to Ningbo, out into Zhejiang province) in China, and the Bangkok-to-Chaiyaphum corridor in Thailand.
For background, I've set up and run my own manufacturing facility in the US, and done the same in Belgium and Chile (the latter two on a contract basis).
Most Chinese factories offer free room-and-board for their employees; it is not mandatory, you're free to live off-campus. However, that means you'll also have to pay for those things - and since most factory workers are planning to only stay in the factory for 5-7 years, saving every kuai they can so they can start their own business or buy a house when they move back home, they choose the dorms. Some factories will give you a small stipend for off-campus housing if they do not have space in the dorms for you, but if you choose to not stay in the dorms and there is space available - you're on your own.
Living in the dorms and eating in the cafeteria, you also typically get first-shot at all overtime work (which, by law, pays 1.5 times). Here in Shanghai, minimum wage (taxable) is 2388 RMB per month; add in typical 12 hours of overtime, and your costs are essentially zero (company provided uniforms are normal), and you can save upwards of 2500 RMB per month - basically your entire salary. Do that for 7 years, and you'll head home with 200,000+ RMB - enough to buy a small home in most of the smaller villages, or buy a car or truck or tractor, or start a nice little business. Which is really the dream of most of the production workers I've spoken with over the last several years.
Most of the larger factories actually have hiring fairs - trying to entice quality workers to come and work for them, especially with higher-than-normal bonuses for those who do jump ship - it's part of the reason 10-12% of the production workforce moves every year. You get more money when you move, so you jump around every year, earning more and more. Most places have a shortage of decent workers - and by that, I mean workers who can actually read and learn new skills (basics like soldering, gluing, inspection, stuffing through-hole components, turning screws, etc).
However, actual labor costs for most modern production is a very small (like less than 4%) part of the overall cost; raw materials dominate, and the savings in labor is almost always offset by shipping and tariffs on imported products to the US. On a typical iPhone-type product, labor accounts for maybe $6 of the cost; if it was done in the US, the direct labor cost would add something like $2 to the labor cost (based on the productivity gain of US labor relative to Chinese labor). Labor costs really don't drive offshoring in manufacturing.
For higher end workers, say programmers at Microsoft of Oracle, or engineers at GE and TI, salaries in China are very close to what is paid in the US - perhaps just a 10-15% cost savings in labor when all is said and done. Knowing some higher-level managers at Microsoft in Shanghai, and the salaries paid in Shanghai relative to Redmond, you really don't save much, if any, by using Chinese labor.
So if you don't really save on labor costs in any meaningful way, why do companies work in China? Simply put - taxation. China and Hong Kong (which, contrary to most Western beliefs, really is pretty much independent - sure, it flies the Chinese flag and is nominally Chinese, but it has its own currency with its own exchange rate, its own passports, its own legal system, its own tax structure, and Chinese nationals need a special
Browsing at +1 - no ACs, I ignore their posts. So refreshing!