Slashdot Mirror
Tech Manufacturing Is a Disaster Waiting To Happen
Hugh Pickens writes "Peter Cochrane writes that since globalization took hold, geographic diversity has become distorted along with the resilience of supply so we now have a concentration of limited sourcing and manufacture in the supply chain in just one geographic region, south-east Asia, amounting to a major disaster just waiting to happen. 'Examples of a growing supply-chain brittleness include manufacturers temporarily denuded of LCD screens, memory chips and batteries by fires, a tsunami, and industrial problems,' writes Cochrane. 'With only a few plants located in south-east Asia, we are running the gauntlet of man-made and natural disasters.' Today, PCs, laptops, tablets and smartphones are produced by just 10 dominant contract manufacturers, spearheaded by Foxconn of Taiwan — which manufactures for Apple, Dell, HP, Acer, Sony, Nokia, Intel, Cisco, Nintendo and Amazon among others. The bad news is that many of the 10 big players in the IT field are not making good profits, so economic pressure could result in the 10 becoming seven."
You forgot to mention floods, like what happened in Thailand last year, and could possibly happen again this year.
#naabhaprzrag, #sverubfr-000, #agi-fcbafberq, negvpyr[pynff*=' negvpyr-ary-'] { qvfcynl: abar !vzcbegnag; }
How much more would an Apple iPad/iPhone cost to make in the USA than in Taiwan?
$5/$10/$50/$100/$500?
Problem is less of South East Asia, and more w/ China. When China's bubble bursts - and it's a 'when', not 'if', everybody in the world who shovelled their manufacturing there b'cos it is cheap are going to have a major meltdown in their hands.
B/w that and the jobs situation everywhere else, equilibrium will be achieved b/w what companies can afford, and what employees need.
If you aint happy, start paying the 2k these phones are worth, not the 50$ phone plan bs.
Not just technology, this is more a phenomenon of globalisation if you ask me. The consumer is willing to save 3.2% on something at a macroeconomics level in spite of it's own industries because the apparent value on diversity in the supply chain and having local within-jurisdiction industry is practically zero. I'd love for someone to show me otherwise though as it's depressing.
Although I agree that in a business sense, the unfavourable economic terms these producers are facing, with extremely tight supply chain coordination on the part of large brands is a challenge. As an effect of this, they might face considerable difficulties in the not so distant future. The consumers might see prices rise considerably in the future. But that is not the pending disaster we're facing: The real disaster here is this: Have you considered what we are doing to this earth? How much energy does it take to forge all that aluminum, steel, lead, silicon. How much energy does it take to power those factories? Did you think about how much resources we are spending producing these items, many of which become obsolete, broken and unwanted after a short time! Exacerbating this, what will happen when the BRIC's and the NEXT-25 wants the same level of affluence as us? Recycling is not a suitable solution. We still produced it, we still took the materials out of the ground, and spent the energy forging it. The solution is ending this insane level of over consumption the entire world (the part that can afford it) is doing. / Development economist
People not being able to get the latest TV / MP3 / phone / iwhatever isn't a disaster. It would be bad for business and I can see how the resulting unemployment will be awful for those people; but they'll have lost more than that locally should this happen. So apart from the Disaster that causes the "disaster" I don't think I'll worry too much.
I recall something about putting all eggs in one basket being a bad thing.
This could probably be chalked up as being deliberate, judging by the standards of our current power structures. When everything collapses, the rich and powerful will find ways to concentrate and extend their power even further. While not having to starve while the rest of the population does, of course. I mean, it is a reasonable possibility that some current wars are fought to fuel the military industrial complex, so an economic collapse to gain power seems plausible to me.
Dvorak on Doomtech
This is precisely why my company does R&D and Manufacturing in the same location - right here in South Carolina. If we have a manufacturing problem, I can take a walk to the other side of the building from my office in R&D and help them fix it - right now.
No waiting for a convenient time for a world-wide conference call where nothing gets done and my instructions are misunderstood by someone who doesn't speak much English.
It's all coming back to this, now. My previous employer did the globalization experiment and realized it is a miserable failure. But, they couldn't abandon it because of the "religion" of globalization. Guys who graduated Harvard Business School with a Masters in Excel Spreadsheets infect the boards of large companies and insist that globalization results in higher profits, and it doesn't.
We make so much money it's almost disgusting. I have a pretty much unlimited budget for lab equipment and investigatory activities, and we engineer some pretty awesome stuff as a result of having the time and money. The 15 hours/week I _don't_ spend on frustrating conference calls with Asia is time well-spent inventing Cool Stuff(TM).
Redundancy costs money. So the real question is: "Are customers (consumers) willing to pay?"
Or perhaps a better idea is: You will pay either way. Chose: (1) Pay money now for redundancy and a guarantee of supply; or (2) "Pay" later through the unavailability of products.
The bad news is that many of the 10 big players in the IT field are not making good profits ...
Absolute and utter sprouted nonsense!
CAPTCHA = sprouted
Slashdot cracks me up sometimes. Trying to make non-stories into stories and making ant hills into mountains.
Decades ago, when it was profitable to do so, all good tech was manufactured in the US. The entire world used to have to depend on a few companies and one region back then, why is today any different?
Manufacturers and competitors will come and go as they have for decades, and the world will be fine. If it starts becoming a hindrance to the world, the world will shop somewhere else.
***Of course, there will be dozens of replies to my post, all complaining about how "evil" corporations have ruined manufacturing in the US and completely missing the point. Manufacturing isn't and never was the end all be all of economic well being.
"Not making good profits" another corporate-speak, purposefully weakly defined term.
500% is not good profits for some of these people...
Its been well known for years that its possible to automate manufacturing to the point where you can make it back here in North America and still enjoy healty profits. The problem is mindset, plain and simple.
If you absolutely HAD to spend billions in stimulus money, this situation would be perfect. Create a consortium with the major manufacturers and have the feds build a memory/hard drive/LCD plant(s) here in the states, absorbing all the capital costs (a pittance, compared to the over all stimulus bill).
The consortium would run the plant(s) and probably be competitive with overseas plants because they won't have the burden of the initial capital costs.
Of course, details, details, details but this approach would make sense in many industries.
When Fascism comes to America, it will call itself Anti-Fascism, and tell you to give up your guns.
I think this article misses the point, it's economic not natural disasters that are the problem! Foxconn might produce a huge proportion of the worlds shiny toys, they are however spread over 9 cities in mainland China and other massive factories in Brazil ,Hungary, Slovakia, Czech Republic, India, Malaysia, Mexico. If all of those plants were hit at the same time we would have a much larger problem. In addition they have well developed DR procedures for outages at any one plant.
The recent increase in the price of hard disk drives was only partially attributed to the floods in SE Asia and more to do with an artificial price hike by re-sellers looking for a quick buck.
Incompetent bankers not Gaia are the real problem.
The Git
Software vendors typically have > 30% margins. ANSS operating margin = 38.01% , MSFT 38.44%, ORCL 37.87%, SAP 31.81%, GOOG 32.12%. Apple may be charging premium prices for its hardware, but its margins are lower than other pure software vendors. So the hardware division, despite charging premium prices, is probably dragging down the profit margins of the software and entertainment divisions.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
I'm just excited about learning a new word that I'll have to try to work into a conversation today.
...except that the software and entertainment divisions wouldn't be half as successful if they didn't have the hardware spurring sales. You know, like when Microsoft sells an Xbox at a slim profit (used to be a loss!) and makes it up on licensing fees for software, or when you get a free razor handle in the mail (New Shickette Yodawg: we put a razor on your razor so you can shave while you shave!) and then you find out that additional cartridges are $20/4pack.
get downmodded and screamed at
a sense of humor, a valuable commodity in today's world
intellectual property law is philosophically incoherent. it is your moral duty to ignore it or sabotage it
I think the little known fact is that the specialty hardware makers probably have even better margins than Apple. Have you seen the junk peddled by the set top box makers like Scientific Atlanta and its peers? Have you noticed their price list? I think medical equipment makers, lab equipment (oscilloscopes, digital probes, signal generators) have higher profit margins than Apple. After all, Apple still competes in the consumer market place, and there is a limit how much more it can charge for a laptop or phone over its competitors. Then there are hardware makers totally insulated from the market vagaries, the military vendors and their suppliers. Bank robbers will hang their heads in shame if they see how these guys rob their clients blind.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
The Marianas Trench is just east of Shanghai along with Taiwan plus even Japan.
Pacific Rim countries are going to be continuously in the threat corridor of Tsunami risk area because of that trench and many others from Chile to the Aleutians at the northern edge near Alaska and Siberia.
Walmart actually though is the first company that such a Tsunami hit reaches the stock price. More than high technology, the trade curtailment from the one port most likely to sustain or protected is Hong Kong. But that port alone cannot handle the volume of China. Nor can we assume that it will be totally protected by such an event despite the natural level or protection being higher than most world ports.
The port of New York is also another one of concern with La Palma off the west African coast potentially creating a 30 meter wave that would inundate the United States east coast is a geologically proven.
http://www.aisnota.com/slashdot/ Welcome to Logic and the Future
actually they are now
Foxconn's profits are something like 4% of its revenue. That's about what food companies make.
Stuff like that is happening already. Look at hard drives.
Yeah, they do commodity work. If they want 5% someone else will come along and do it for 4%.
http://www.oracle.com/us/products/servers/overview/index.html
Like sugar, steel and automotive manufacturing for instance? The "start" happened a while ago, and each of those industries I've mentioned have suffered or caused problems that are directly due to them being protected. Uncompetitive steel prices moved manufacturing offshore, a protected car industry produced almost unsellable crap even when overseas branches of the same companies were making quality designs and local sugar priced itself out of the market so the USA got twice as fat on corn syrup as it would have on sugar.
It's not just about getting others upset. It's about shooting yourself in the foot.
China wants Taiwan back. If they chose to invade Taiwan what exactly could we do about it? Iran type embargo? It'd collapse our economy worse than the great depression. We are totally dependent on China for not just tech products but everything from food and clothing to furniture. It'd be hard for them to make a grab for all of southeast Asia because they need us as well but they are in a position to make certain grabs and we'd have to keep our mouths shut or at the most symbolically rattle some sabers.
It often appears that even the local distributors have a higher markup than Apple's product margin, let alone the entire profit :(
Oddly enough in a post above (about protectionism) I pointed to protectionism as being the reason US steel companies were so complacent and failed to compete - it's the textbook case for that - but here I see you using it to blame those greasy working class people or something!
I suggest you look into the barriers to importation of steel into the United States so that you can learn that your above anecdote is nothing but partisan bullshit. Call me whatever names you like in return - I'm one of those nasty foreign people that was making steel that the company I worked for wanted to export to the USA in the early 1990s but couldn't.
TOASTER: Howdy doodly do! How's it going? I'm Talkie -- Talkie Toaster, your chirpy breakfast companion. Talkie's the name, toasting's the game. Anyone like any toast?
LISTER: Look, _I_ don't want any toast, and _he_ (indicating KRYTEN) doesn't want any toast. In fact, no one around here wants any toast. Not now, not ever. NO TOAST.
TOASTER: How 'bout a muffin?
LISTER: OR muffins! OR muffins! We don't LIKE muffins around here! We want no muffins, no toast, no teacakes, no buns, baps, baguettes or bagels, no croissants, no crumpets, no pancakes, no potato cakes and no hot-cross buns and DEFINITELY no smegging flapjacks!
TOASTER: Aah, so you're a waffle man!
If last year's floods in Thailand are an example of a "disaster" in tech manufacturing, then we have nothing to worry about. Hard drives stayed available. The price rose from ludicrously "is-this-a-joke?" shockingly cheap, all the way up to "holy crap even after the prices doubles these are still dirt cheap" cheap.
Take a look at the photos and read about the damage, and it's just plain amazing the factories are already open again.
If this is as bad as things get, we have little to worry about. It's probably better to think of last year's floods as an eye-opener, tickling your imagination about what could really go wrong.
Well lets all pray that natural disaster doesnt interrupt my supply chain. God knows what will happen if i dont get my harddrives. I know when i talk about mass disasters the first thing im concerned about is "are the products i want still being produced at exceptionally low overheads" and "are the ultralow cost labourers easily replaced?" The writer is worried about supply chain at the manufacturing end, what about on the consumer end? what if california suddenly drops 4 meters inthe ocean? Should we be preparing steps to make sure those consumers are still adaqeutly (and still nuerotically) consuming after a natural disaster? This is a real potential problem, we need to setup safety nets to make sure our consumers will still /need/ four different ipodpadtouchphones and blueray dolby 6.0 3d theaters in thier cars and dockstations to park thier deskops up thier ass in case they need to send me a fax from the toilet. This is all very important stuff. THE IPADS MUST FLOW!
Seriously, i found the undertone of this artical cold.
One day, we'll all be out of ipods... oh noessss !
Oracle most definitely have hardware sales, they sell servers and storage solutions, their hardware devision used to be known as SUN.
... consumer electronics. I think we could coast for a year or two on the stuff we have.
This idea that we can't "afford" to make anything here anymore is ludicrous. For decades we managed to do so just fine, during our boom years of 1945-1980, when most everyone that was willing to work could find a decent paying job that afforded them a living wage.
The nation managed to do fine in those years because the US was the primary manufacturer of anything (that majority of the world was living in abject poverty. By the 70's Japan was a better manufacturer, and nations kept improving their standard of living. Now, the same people who before could not afford anything (or if they could, they would buy it from the only manufacturer, the US), now they can manufacture them themselves. Most importantly, they have a lot to choose from where to buy.
To get those golden years back, the solution is simple - stop nations from developing, and if possible, push global poverty levels back to were they were post WWII.
There are thing we can afford making, and there are others that we cannot (unless we change the nation's ethos with its hunger for the cheapest deals.) But, by and large, what you observe is simply the result of nations improving their standards of living (and with it, the means to manufacture things.)
When GM was doing well it was making something like $14 billion a year.
The largest profit in GM's history was in $7.6 billion in 2011.
Yet they were still laying off workers.
And that likely was the correct decision. If you close a factory and don't need the work force elsewhere, keeping them employed is incredibly stupid. Having a profitable year one year means absolutely nothing the next year. When the economy turns down (and it inevitably does), keeping workers that are not needed means you simply will be digging a bigger hole to bury to company in. It's not just about making profits this year, it's about having a strong enough balance sheet to survive the years that aren't so good.
What is so wrong with making $13 billion a year and keeping the workers, especially those that gave a significant part of their lives to that company.
If you need the answer to that, you simply have to fast forward a few years. GM couldn't shed payroll and benefits costs fast enough in 2008-2009 and they went bankrupt as a result. Keeping someone employed that the company does not actually need does no one any favors in the long run. Not management and not the workers. By postponing the pain you are simply making it worse later on for everyone.
When they helped the company earn that $14 B, I don't think charity is a word that applies.
They were paid for their services that helped earn that $14B. If those services are no longer needed and they are still being paid, that is charity. They were hired to do a job, paid for that job and the job is done. There is no further obligation on either side aside from any residual contractual obligations.
If flat panels, HDs or tablet memory double in price, don't buy one or find an alternative. Your day to day life will still go on. OMG disaster strikes, iPad prices went up $200!!! What will I do during this time of chaos! If you REALLY need one, you buy it for $200 more. If you really don't need one, you skip it. In the big picture of the economy and your personal collection of gadgets, things won't change much at all. Big businesses will do the same and they will spend just as much as before but they will paying more to some people and less to others for their technology needs.
During past memory and recent HD prices fluctuations I did that. I held off buying unless I really needed them. No big deal.
although the head office of Yaesu Radio (ham, commercial/public safety radios) is in Tokyo, main manufacturing and some critical suppliers of displays and stuff were all downwind of Fukushima's Reactor Roulette game.
after nearly a year of burning through the warehouses, they're using Chinese manufacturers now.
if this is supposed to be a new economy, how come they still want my old fashioned money?
Actually, we're seeing the first stage of Replicator Technology, aka digital copying, and look at the absolutely thundering effect of the affected industries. In a way, Star Trek was sweet, because I actually recall very few lawyers were ever parts of the plots. Today, it would be more dystopian, with a Copyright Infringement SWAT teams. "Someone copied a Justin Bieber song. Alpha Force, Move Out! Go Go Go! GET the Terrorist Sonofabitch!"
My first Journal Entry ever, in 8 years! http://slashdot.org/journal/365947/aphelion-scifi-fantasy-horror-poetry-webzine
And what pray tell do you suggest the billions of workers of the world do once we reach the end point of automation technology - rendering the bulk of today's jobs obsolete?
There is no way we can continue supporting billions of people on this planet with increasing and sustained levels of unemployment, starvation and homelessness. Who's putting their hand up first for elective self-elimination? Or do we wait and let "nature" take its course with a pandemic?
You are American and you call Chinese businesspeople "cleptocrats" ?? Now whatabout the CEO of Lehman Brothers ? He must then be part of the Sicilian Mafia, in your classification of criminals. I have Secret Intelligence for you: Mr Fuld did not even sit for a single day in jail. Maybe you Americans get your ass out of your head and clean up that shithole called "New York", because this place is killing your economy. It is not China, even if that nicely meshes with your deep-running belligerent instincts. Free advice from Germany, no Chinese relation whatsoever, except that the cars we build are selling in record numbers in China, because they are high quality, high priced.
I worked for a financial data dissemination company and they officially had "business continuity" plans to handle things like "building burns down with some critical computers".
In REALITY, there was very little redundancy and an actual disaster event would have eliminated a lot of services for many customers. It was just "too expensive" and nobody in the management circles attempted to do anything except hand-wringing. "Oh, we should do something, BUT IT IS SOO EXPENSIVE" and "we cannot tell the customers". Just buying redundant x86 servers was too expensive.
But I also know that most real-world customers are dumb fucks (Mr Zuckerberg coined that term) who do not want to hear the truth.
I am a software developer (C++) and I don't need any mobile phone. Before I had a dumbphone until it broke. I take the train/bus to work and back. We have a car to move the food to our home and for leisure activities. We could even do without a car, I guess. Taxis might actually be cheaper, if you add up all the costs. I am living and working in Germany.
The difference is quite simple, Americans and Britons think it is "all about money". At least they did in the auto industry. In Germany, there is more than money involved in the car business. Boys become engineers because there is a long tradition of craftsmanship, because their fathers show them all sorts of ancient and current locomotives, aircraft and so on. VW's long-term CEO Ferdinand Piech has an aeronautical engineering degree, which is much harder than mechanical engineering. So he has the best education you can get on earth for making cars (and many other machines). Compare that to the GM CEOs, who are all Master-Beancounters. Their cars are consequentially crap and rational buyers go for German or Japanese cars, even if their purchase cost is higher. TCO will certainly be better, as VW cars normally just don't break (except for regular wear and tear).
Will do like they did in the US. First cut medical severely then layoff 15,000 or so and the rest should work over time and double duty at the same rate. There problem fixed
Jack of all trades,master of none
All those vocal Anglosaxon Crap Economists will write tons of papers which claim that one dollar of revenue from sandwich-making is as good as one dollar made from a car or measurement instrument.
That is, because their Finance Paymasters see those sandwiches every day when they take a break from their insane money-manipulations. They never see Industrial Robots in Canary Wharf or the NY finance district. So, Sandwiches are KEY FACILITATORS to the WORLD ECONOMY ! Everything would break down without a continuous supply of sandwiches ! Not just collateral-debt-obilgations, BUT THE WHOLE CASINO would stop !!
Never mind you can change German cars cars against Arab oil, but they don't want your sandwiches because they don't taste after being shipped for three weeks. Sandwiches and cars are wholly the same, proven by Anglosaxon idiots, I mean "Economists".
Healthcare costs and tons of regulative papers that prevent an employee to be killed by boredom in the toilet.
A) Driving heavy cars over long distances every day and B) Having shitty housing isolation.
..or thousands of other American corporations who critically depend on worldwide, cross-border business being possible. Then your job is on the line when protectionism is being set up.
Germany and South Korea actually do quite well in international trade. We don't abuse workers, have excellent healthcare and pay proper wages. Maybe this is a specific problem of America and England not using their brains when it comes to worker education and proper regulation of financial markets ? The southern Euro suckers can be dropped in one bag with UK-USA. Poland, Finland, Denmark are doing quite well with international trade, thank you very much.