The US remains quite competitive in many sectors of its manufacturing base.
The proportion of our GDP going to China imports is less than 3% and not growing much at all considering that China-India represents 30% of the world's population.
Dismissing American manufacturing entirely requires some serious fact checking.
Maturing industries, having decaying return on assets and on equity will naturally migrate towards low cost countries. We do not want them anywhere.
It is perfectly Ok for a high tech mature industry to migrate, as long as we had pioneered it and retained the surpluses it generated while rapidly growing.
The human factor is an issue, particularly when most technical professionals did not take their economics courses very seriously, thinking that high tech = leading edge = high growth.
You can have high tech and stagnation (i.e. airplanes).
Good wages are always around rapidly growing industries.
Manufacturing is simply a cost factor in the processes and should be outsourced if that makes you more competitive.
Outsourcing engineering, design and marketing will also happen as the center of gravity moves towards APEC members (the Pacific Rim).
Can we sustain high standards of living in the US ? I believe so, focus on innovation, on IP and on business models evolution; these requires freedom, a flexible economy, free flow, minimal regulation and transparency.
The more subsidies we provide for manufacturing, the harder it gets to compete since those condemned funds should be used instead to educate, upgrade infrastructure, subsidize unemployment spikes and establish social programs.
The future of manufacturing in the US is great, except it won't look at all like the past!
How about gov't subsidies to encourage semiconductor manufacturing? I believe Germany, Japan, Singapore, China, Taiwan, Korea all provide subsidies for semiconductor manufacturing. Not a fair playing ground for the USA to compete. I guess spending 1 trillion on a useless war is a better use of money...
For readers who missed it, here is today's EE Times newsletter commentary on the manufacturing debate:
The argument is advanced by a Harvard University professor of business administration that it costs too much to make stuff in the U.S. In a forum we are highlighting, Harvard's David Yoffie maintains that "the future of U.S. competitiveness in high tech industries such as computers, software, communications and electronics may depend more on the transition to services than trying to retain the country's manufacturing base." Yoffie was replying to critics who say excessive outsourcing of U.S. manufacturing jobs in undermining U.S. high-tech competitiveness. Yoffie's argument may hold some water in sectors like auto manufacturing where wages and benefits don't reflect the global nature of the business (nor does executive compensation at U.S. auto companies, for that matter). He also chooses to ignore the skills and high productivity of American workers and the reality that we have documented among electronics manufacturers: Manufacturing quality at overseas plants is uneven at best, prompting many to companies to shift some design and manufacturing work back to U.S. facilities.
If the U.S. is better at engineering services compared to electronics manufacturing, and China is better at electronics manufacturing compared to engineering services, and the U.S. is better at services than China, and China is better at manufacturing than the U.S. then we have basis for trade and a good currency exchange rate. However, if China becomes better at both electronics manufacturing and engineering services compared to the U.S., then U.S. engineers will suffer. I believe that outsourcing electronics manufacturing to China with engineering design services proved by the U.S. reveals U.S. engineering design know-how to Chinese engineers. Design information can be stolen, masked, and reproduced much more cheaply than products. Therefore, I think the engineering design services model from the U.S. to China will not work over the long term.
I have thought about this for a long time. One possible solution: Why not tell the silicon foundries (TSMC, UMC, SMIC, etc.) that they must build fabs in the U.S.? Make it a government mandate. Foundries provide great manufacturing, but they have taken our jobs. IDMs have used the foundry model to rationalize and shut down their own fabs. In some cases, that makes sense. IDMs say it cuts costs. I say it's an excuse. What's done is done. Now that foundries have benefited from outsourcing, they must put some money back into the U.S.--and perhaps Europe--by putting up fabs in those regions. TSMC has one fab in the U.S., but is that enough? X-Fab has one. IBM has a U.S. fab. GlobalFoundries will put a fab up in 2012. That's not enough to save U.S. manufacturing. Make it attractive to set up foundries in the U.S. Try tax incentives, holidays, etc. Silly idea? Not really. Besides Intel, Samsung and a few others, who will build fabs in the U.S. Try the foundries. The rest is nothing but talk.
"Innovation results from having the freedom to try something new and the US is still way out in front in providing that liberty."
If we are already "crippled" by the greedy analyst, accountants, lawyers, congressmen/women, and last of all CEOs, where is the "freedom", and what is the probability for us to be "way out in front in providing that liberty"?
As far as cost of labour is concerned, the living standards in China is relatively lower than that in US. Besides, many of the social structures there are different than that in US. As such, their lower (than US & Europe) cost of manufacturing is by default.
Just think. All our semiconductor mfg. is in China. This means if we need any semiconductor parts for military (world's #1 military), we are at the mercy of China. China has to just shut down all fabs and we are done!!!
Blanket statements may stimulate debate but they provide little useful information. There are some jobs that are best done locally with local talent and locally available resources.
The successful new venture will be the one where the entrepreneur studies and understands the dynamics of our changing economy and uses that information to build a viable company. Whether this is in manufacturing or adding value to existing information. Innovation results from having the freedom to try something new and the US is still way out in front in providing that liberty.