Because there's nowhere in the US like Shenzhen, Guangdong or Hong Kong.
Remember how Apple couldn't just pick up and move the production of iPhones to India or Vietnam? You need all the ancillary industries around the production to be there, along with being competitive and commoditized as well.
When a supplier has something go wrong a line of manufacturing doesn't go down. You go down the street to the same guy selling the same thing and have them pick up the slack. If you want a 1uF ceramic cap come hell or high water there's going to be a dozen people selling them all quoting a price a little above cost. When Apple moved production to India and Vietnam? When you hear Apple talking about a few billion in investment in Indonesia? This is what they're helping set up and what takes a decade to do.
Anyone can buy automation equipment but there's nowhere in the US you can do what JLCPCB/PCBWay do with PCB and electronics assembling because we literally don't manufacture all the ancillary stuff required in the US, little alone manufacture it all in the same place. If the SMT components are manufactured domestically say for military purposes it's going to be spread out all over the US because politicians pork barrel contracts for their districts and states.
You could setup next to a Mouser distribution hub but Mouser is a middleman and they have you over a barrel. What do middlemen do in that situation? They raise prices just enough to the point where it's uneconomical to leave.
You metaphorically need to invent the universe to make it work in the US.
> You metaphorically need to invent the universe to make it work in the US.
You didnt answer the obvious question of the why things are the way they are now? US used to have their entire electronic supply chain, save from raw materials, in USA in the 70s... So why cant US build its own Shenzhen or Hong Kong? taxes? corporate taxes are relatively low in some US states, infrastructure? US has all the infrastructure needed. Engineers? US claims to have the best universities in the world...
That is extremely simple, because there is less money to be made compared to just going into pure software/finance/etc, which is why all the US talent shifted there in the past.
Economically speaking it was a big advantage because you could get all the gadgets manufactured at chinese wages for the last decades-- electronics made in the US will be more expensive even after all the necessary investments are paid for (duh).
A possible model sector for how this could look like is agriculture:
Most nations subsidize the shit out of it to keep a good chunk of it local (~$20 billion/year for the US). You could treat heavy industry/electronics manufacturing the same way, it would just cost taxpayers a bunch and also increase prices in general (because you then poach manpower and capital from other unsubsidized industries).
What I would love to see is a public payer heath plan paid with a VAT. Then every startup gets subsidized as do large corporations. It sucks when you have to think about health care costs when doing a startup or rolling the dice.
Shenzhen is a Special Economic Zone and Hong Kong is/was a major hub for finance. People used to say, "China didn't take Hong Kong, Hong Kong took Shenzhen". It would be hard to replicate the opportunity of Deng's liberalizations being new and adjacent to a major center for finance. It would be like having Manhattan across the bay from an untapped backwater like rural Mississippi and have Mississippi declare, "anything goes, we're open for biz".
Look at the existing issues with the Rust Belt as an example. The higher cost of labor could be offset by higher worker productivity. The issues are in regulatory compliance, demands from politicians and unions. As soon as a major project is announced, the demands start flowing in. Look at what happened with Amazon's attempted fulfillment center in NYC. Look at the amazing strategic location and port infrastructure of a city like Baltimore, and ask why it cannot attract more development. There are major political obstacles which need to be tackled in every case. Even California's failed highspeed rail project should tell us something.
>Among major economies and regions, the United States has the highest rate of production of goods and services per hour worked, with only a few small European economies outperforming it. Productivity rates in most parts of the world are well below the US’. Indeed, according to research conducted by The Conference Board, nearly 75% of the global population lives in economies where productivity rates are below the global average of US$21.6 per hour worked.
Of course, it may be reasonable to suspect that at least some of these productivity gaps are a result of different sectors which are served, ie manufacturing vs. services.
>A day before she quoted Marx at the Oscars, Jacobin briefly chatted with American Factory co-director Julia Reichert about her democratic socialism and long history on the Left.
>At Saturday’s Film Independent Spirit Awards ceremony Julia Reichert mentioned “income inequality” during her best documentary acceptance speech for American Factory. The first film released by Barack and Michelle Obama’s Higher Ground Productions, American Factory is about a Chinese capitalist who reopens a closed plant in Ohio, employing thousands of American workers.
>The only effective means of worker power is through unionizing, and both Chinese and American executives resist it mightily, using pages from the exact same playbook, like targeting leaders and paying for propaganda campaigns. In a sense, the American executives going overseas was like finding a pool of scabs to cross the picket line. As one of the state congressmen observes in speaking to the workers, corporate profitability and treating workers respectfully via a living wage are not incompatible things, and it's shameful that they're treated that way out of unfettered greed in extreme capitalism. (Hmm, if only there was an international labor organization, lol)
>>The issues are in regulatory compliance, demands from politicians and unions. As soon as a major project is announced, the demands start flowing in.
Without getting into the weeds of the documentary's agenda or methods of argumentation - it isn't hard to see that the same methods employed on the mainland with low productivity per worker, will not magically produce different results in the US. Higher productivity, along with higher wages may require automating much of the production process. This may be more capital intensive up-front.
Serious comment: how does comparing productivity (or anything) by dividing into GDP work - let alone to three significant figures - when all countries measure GDP differently?
The USA for example includes about $7t of hedonic and imputed values that a) never happened in the real world, but b) exceed Japan's entire GDP.
US: Large public sector of debatable value (please no flames)
Japan: Paves entirety of Yokohama
China: Tofu real estate and more...
I agree that it is silly. If the state or the public sector digs holes and refills them, it adds to GDP. Typically economists say, "Yes, GDP is a flawed metric, but it is better than no metric"
That said, we can evaluate the added benefits of automation and the productivity gains thereof, purely from first principles, without resorting to empiricism.
In the 1800s the UK led the industrial revolution. Most things were manufactured there. Raw materials were shipped in from all over the Empire but the manufacturing was usually happening in the mills of the UK.
In the 1900s the USA took that crown. Most things became manufactured there. A lot thanks to Britain bankrupting itself to defeat Germany in WW1.
In the 2000s China has taken that crown. Now most things are manufactured there. But the owners and customers are in the US. The US corporations have outsourced their manufacturing to China and get rich from it.
And now the USA workers wonder if it was all actually a good idea?
The financiers are still getting rich and looking not to move their manufacturing back to the US but rather to a less developed and so cheaper country further abroad...
Best engineers are working at shoveling more adverts down our throats, tracking our every thought to maximise the value they can extract for us.
The goal isn't to have 50 people selling a batch of capacitors for $10, it's to sell them to Alfie for $6, Barbara for $12, and because it's absolutely critical for Colin he gets to pay $623
The western world is about maximising the value middlemen can extract.
It barely explains the full situation, but I feel like in the US we have lifestyle expectations (which is more than just money) that go with our education and career choices. This puts a virtual boundary on where you'll be able to get talent to go. (Relating it to our common experience, there's a reason why San Francisco or Austin is a much more attractive city for developers than Houston)
I'd almost say that the lifestyle expectations come first. I care about getting paid a lot primarily because high pay is necessary to live somewhere like San Francisco/Austin/NYC.
The boston-95-ring-vs-silicon-valley/noncompete-enforcement story gets close to this. Or the detroit-automotive-supply-chain story.
It's largely about can you set up an effective ecosystem of suppliers.
The story of the Traitorous 8 https://en.wikipedia.org/wiki/Traitorous_eight is basically the tale of how free-market competition spawns the economic prosperity of an entire region. In those times, Boston's 95 ring was the favored home of semiconductor tech, but the popular story goes that Massachusetts enforced non-compete clauses while California didn't, and the result was the ascension of Silicon Valley as people out west intermingled between semiconductor and computer companies, traded ideas, started new firms from those ideas, etc.
Shenzhen is amazing because it's an entire village of micro-manufacturies... one bodega specializes in one type of capacitor, a neighborhood specializes in rapid prototype boards, there's institutional social connections between all these folks so you can just run to the other side of town if you need something for this week's production run or if your assembly line controller board failed.
As for why we can't reproduce that in the US, my best guess is we've had the "get big or get out" mentality since Nixon. VC's won't fund a bodega specializing in some obscure electronics niche -- we favor rapid injection of capital into something that can quickly grow and dominate an entire industry. "Lifestyle business" is a pejorative here. The Shenzhen model on the other hand is an interconnected cottage industry village of generalists that focus on small runs of whatever Temu gadget is trending today and can rapidly change and adapt week to week. No individual bodega dominates, but as an ecosystem it does. Something something anti-fragile.
Yes, there are also the megafactories that make our iphones and galaxies and have dormitories for the basically-slave-level workforce, so the models do mix. But it's largely a different business mindset -- ecosystem vs. winner-takes-all.
You are forgetting insurance/healthcare. Public healthcare would make it way easier for individuals to setup small boutique bodega manufacturing shops.
Walking through there and nearby HongKong it’s literally well educated individuals in garages each doing a ‘thing’ that all comes together to make something bigger. No investment needed here.
As in I witnessed a bespoke electric motor manufacturer that was in the ground floor garage space with a couple of guys neatly winding insulated copper around an iron bar cut to the size needed (very large).
You might see a massive train motor and say ‘where’d they get the funding to start this bespoke train motor company’. But it’s literally a couple of guys in an area where they have another couple of guys make the custom brushes, someone else doing the housing, they wind on the coils and boom you have a bespoke motor manufacturer. No investment needed.
My armchair understanding is they're closer to "lifestyle businesses", and if there's larger funding sources at play it's in supporting the ecosystem at large.
But I'm just an armchair commentator here. I hangout here cause I'd love to hear some better firsthand experiences if my story is off.
> So why cant US build its own Shenzhen or Hong Kong? taxes?
I would guess labor costs and practices are a big aspect. We send all our kids to stupid school instead of paying them pennies to get their tiny little fingers to work building micro-controllers for us and stuff.
The degree of automation affects this very little, for 2 reasons:
- Anything you can easily automate (like pick & place machines for electronics, industrial robots for welding/assembly) will be automated anyway (no advantage for the US as location there)
- Even if you have 100% automation, you still need to pay (mainly) local workforce to set the whole thing up, and a lot of those jobs are even less competitive in the US wage-wise (construction crews, etc.)
Neither of those calculations is probably going to change much in the next decades. If you want to keep low-wage industry (like PCB assembly, heavy industry etc.) in a country like the US, then you will need to subsidise this with taxpayer money one way or the other (tariffs are essentially just that).
Agriculture is an example where this is already done (for obvious reasons related to people not starving in a trade crisis). But this is somewhat expensive (US agriculture subsidies are ~$20billion/year).
I think this will happen, and that some degree of it is a good idea (for strategic reasons), but framing this as a benefit for the average american is pretty much a lie-- because in the end, the taxpayer is on the hook for those subsidies, all those industries products are gonne get more expensive and other sectors are gonna get dragged down, too, because they have to compete for talent and might suffer from foreign trade retaliation.
So China subsidizes a lot of their factories and now they have all the factories and they also have rising standards of living so ... seems to be working for them?
The factories are not in China because they were subsidized, they are there because wages are lower. Yes, some caveats apply, there is some network effect, and you need sufficient infrastructure, suitable workforce and administrative stability to get the process rolling, but the notion that China "bribed" those industries into their country is nonsensical.
Also note that this development (low-skill manufacturing migrates to growing, lower-wage country, then the migration propagates up the tech level) is something that occured basically exactly the same way in the past (with Japan in the 1990s).
> now they have all the factories and they also have rising standards of living so ... seems to be working for them?
This is basically the point of international trade.
Things also worked out for the US, because they reaped the fruits of that cheap Chinese labor-- all-American electronics would have been significantly more expensive.
I'd also like to point out that those living standards are WAY below US levels-- there is absolutely no way that US-americans with comparable education levels would be willing to work in comparable conditions.
Note also that artificially messing with this process has consequences: If the US had forced electronics and heavy industry to stay fully domestic starting in the 80s or so (with tariffs, regulations and subsidies), then their products would have stayed much less affordable for decades, and a lot of bright STEM graduates that made software/CPU development/Hi-tech happen might have taken cushy, tax-payer funded jobs instead...
China has a demographic collapse coming so there is probably baked in inflation coming in the 2030s. The era of cheap chinese junk might go away. It doesn't just mean Aliexpress/Temu junk. It means a lot of fun things we take for granted may not make sense in a more inflationary environment so they dont get made.
If you watch manufacturing videos, its crazy how many people actually come together to make the cheap mundane things we take for granted: For example, count the number of people who touch this random RGB bluetooth speaker: https://www.youtube.com/watch?v=yFYxSX6xP2U
Maybe you could automate that, but it really would be more effort than its worth to set up robots to make what I assume is a fairly cheap product.
> Remember how Apple couldn't just pick up and move the production of iPhones to India or Vietnam?
You left out the part about dormitories full of modern-day slaves, complete with nets so they don't leap to their deaths. Generally this is frowned upon in the West. India and Vietnam wouldn't tolerate it either, despite being developing countries. Wasn't there a riot at Apple's India factory over work conditions or am I thinking of something else?
Bury this post all you want; I know a guy at Apple that saw the nets in person. It's quite a sight to behold and humbling experience.
> Generally this is frowned upon in the West. India and Vietnam wouldn't tolerate it either
Yes, "frowned upon" is the perfectly realistic way to describe it.
Dior was just caught using slave labor including illegal immigrants in Italy (so they can say "Made in Italy" on the label), all working round the clock shifts and sleeping locked in the makeshift factory, operating machines with safeties disabled so they're more productive, making 2700E handbags for 53E [0]. The court just called it "Unethical Supply Chain" but no criminal charges. Luxury brands are "put on notice".
> thousands of small foreign-owned manufacturers supply luxury brands with goods that can claim the prized “Made in Italy” label but are produced at “Made in China” prices.
If you thought now you can sleep well but still buy cheap (or even a 2700E handbag) because your product isn't made in China, think again. And this isn't just Italy, it's everywhere. And it isn't just iPhones or Dior handbags, it's almost every cheap thing you buy and some expensive ones too. Business owners are greedy and chase profits, and customers are cheap and don't care beyond their own needs and wants.
There are nets on bridges and other places in the US, too.
Also I don't think the suicide rate of those workers you are referring to is higher than the general population. There are simply lots of workers. For example, Foxconn has more than 1 million employees so it is normal that there would be some level of suicide within such a large population.
The US? Your suicide rates are higher, and you do have nets[0].
In their worst year, Foxconn had 15 suicides from 930,000 people for a rate of 1.6 per 100k[1].
The US region with the current lowest rate is the District of Columbia, at 6.1 per 100k; the US national average in Foxconn's worst year was about 13 per 100k[2].
Today, the USA national average ranks them #31 highest in the world with a rate of 14.5 per 100k, while China's national average of 6.7 per 100 is close to your best region (DC) and ranks them #122 (higher rank number means lower rate)[3].
Foxconn, in that year, had a workforce about the same size as the total population of South Dakota. South Dakota in that year had a suicide count of 139 [4].
While I agree with the sentiment, the new administration clearly doesn’t care about that and has no intention of fixing it. This political theater so they can fix it later.
> You left out the part about dormitories full of modern-day slaves, complete with nets so they don't leap to their deaths. Generally this is frowned upon in the West.
These are the extremely obviously different. A company that has to take specific measures to prevent the suicide of their workers should raise a much different level of scrutiny that the fact that a massive bridge available to millions of people is used to commit suicide.
The company had just shy of a million people in it at the time, making the comparison "about the entire population of South Dakota" (which had 139 suicides that year) or "121% of the population of San Francisco" (32 jumped from specifically the Golden Gate bridge in 2010, which was Foxconn's worst year[0], and that doesn't count any of the other suicides in SF that year, just jumping specifically off that specific bridge), and it's nowhere near the only example of this in the USA.
This university had three students jump to their deaths in 2010, out of about 26k students, compared to 15 in Foxconn's worst year out of 980,000 employees:
"""In late 2003, the library was the site of two suicides. In separate incidents, students jumped from the open-air crosswalks inside the library and fell to the stereogram-patterned marble floor below.
After the second suicide, the university installed Plexiglas barricades on each level and along the stairways to prevent further jumping. In 2009, a third student jumped to his death from the tenth floor, apparently scaling the plexiglas barricade.[7]
The library has since added floor-to-ceiling metal barriers to prevent any future suicide attempts. The barrier is made of randomly perforated aluminum screens that evoke the zeros and ones of a digital waterfall.[8]"""
2 out of 59,144 students would be equivalent to 33 out of the 980k Foxconn employees, double the number who actually jumped.
Why should a company require more strict scrutiny than, say, a public bridge? Well of course there are many reasons, but specifically: in the case of addressing suicide? If a bridge is being used to commit suicide then... perhaps the problems causing suicide should be addressed instead of (or... in addition to) the symptom of suicide being prevented.
Foxconn is the same size of the combination of all of San Francisco on one side of the bridge with quite a lot of the small settlements on the north side.
Treating Foxconn as "a company" is fine for legal purposes, but it's on a scale of "one of the larger incorporated cities, close to the top 10" by US standards — or indeed "South Dakota". (Similar population, but Foxconn's revenue is about 3.7x South Dakota's GDP or 81% of San Francisco's GDP).
I don't get all the hubbub about the nets. Classic example of trying to do something good (save lives) and getting attacked for it.
Compare to barriers around train/subway platforms, nets or high barriers on bridges. All sorts of things. It's pretty much a "large number of people living around tall structures" thing.
When I'm feeling positive about humanity, I think it's a failure of comprehension of the scale of Foxconn. The company is about the size (both population and economic output) of a small country all by itself, and people are bad at imagining things on that scale.
> complete with nets so they don't leap to their deaths.
These nets are everywhere here. In the our other building's (which is an R&D facility where nobody is a modern day slave by your definition) stair well, construction sites, bridges, etc.
I saw it all over Europe in buildings, bridges, etc.
Sorry, but comparing the living/working standards of [developing country] to the wealthiest nation on earth is a silly 1990s emotional appeal ignoring the reality that, every society has to climb the ladder. And actively harms this process.
You do realize the default state of humanity is living in the dirt and fighting off starvation daily right? It takes decades/hundreds of years to develop an advanced economy and fight for the institutions that enable this not to be the case. Undesirable manufacturing jobs lead to desirable manufacturing jobs (as is happening rapidly there!)
Foxconn not being a rung on the ladder in China doesn’t mean locals suddenly get American living standards, it means they never climb the ladder and get stuck with even worse alternatives —- I don’t think you realize the history of China is basically constant mass starvation:
You can't even get a bare PCB manufactured anywhere else for a price even remotely close to that of JLC, PCBWay etc.
Component availability has nothing to do with that, JLC have always been way cheaper than US/EU board houses even before they started doing assembly services
Their cheap as chips PCBs are garbage for anything but hobbyist use. They use crappy substrates and have poor tolerances. If you want decent quality substrates and decent quality finishes for fine pitched work the price quickly shoots up.
> If the SMT components are manufactured domestically say for military purposes it's going to be spread out all over the US because politicians pork barrel contracts for their districts and states.
Or possibly politicians attracting investment to their districts for the benefit their voters. What's the alternative here, a centrally planned economy?
I don't understand your comment. None of it makes any sense.
> because politicians pork barrel contracts for their districts and states.
> Or possibly politicians attracting investment to their districts for the benefit their voters
That's literally the same thing - you just gave the definition of pork barrel spending. It isn't purely bad, it's just excessive or unnecessary to benefit one politician's constituents.
And pork barrel spending is also literally a centrally-planned economy. It's the federal government saying "put this industry here" despite the fact that capitalism would not have put it there.
Remember how Apple couldn't just pick up and move the production of iPhones to India or Vietnam? You need all the ancillary industries around the production to be there, along with being competitive and commoditized as well.
When a supplier has something go wrong a line of manufacturing doesn't go down. You go down the street to the same guy selling the same thing and have them pick up the slack. If you want a 1uF ceramic cap come hell or high water there's going to be a dozen people selling them all quoting a price a little above cost. When Apple moved production to India and Vietnam? When you hear Apple talking about a few billion in investment in Indonesia? This is what they're helping set up and what takes a decade to do.
Anyone can buy automation equipment but there's nowhere in the US you can do what JLCPCB/PCBWay do with PCB and electronics assembling because we literally don't manufacture all the ancillary stuff required in the US, little alone manufacture it all in the same place. If the SMT components are manufactured domestically say for military purposes it's going to be spread out all over the US because politicians pork barrel contracts for their districts and states.
You could setup next to a Mouser distribution hub but Mouser is a middleman and they have you over a barrel. What do middlemen do in that situation? They raise prices just enough to the point where it's uneconomical to leave.
You metaphorically need to invent the universe to make it work in the US.