'Q:What does China's competitive edge look like in practice?'
'A: One example from The Times article: When Jobs decided just a month
before the iPhone hit markets to replace a scratch-prone plastic screen
with a glass one, a Foxconn factory in China woke up about 8,000 workers
when the glass screens arrived at midnight, and the workers were
assembling 10,000 iPhones a day within 96 hours.
'Another example: Apple had originally estimated that it would take nine
months to hire the 8,700 qualified industrial engineers needed to oversee
production of the iPhone; in China, it took 15 days. Anecdotes like that
leave you "feeling almost impressed by the no-holds-barred capabilities
of these manufacturing plants," says Edward Moyer at CNET News,
"impressed and queasy at the same time."'
From:
https://theweek.com/articles/478705/why-apple-builds-iphones...
A popular misconception is that manufacturing is done in China because it’s cheaper. That hasn’t been true for a while. There are cheaper places, many of them. China is now simply the best, at least when it comes to electronics and adjacent stuff.
A lot of things are much more efficient in China as well. Compare the cost in time and money for travel between Beijing to Shanghai vs New York to Chicago for example.
Especially if you want to make like 100,000 units per day of your product.
Best == cheaper. Could you do it in the US? Probably. But it'd take longer and you'd have to pay more money.
This is not true. There is now a skill gap. There are countless examples that it isn't about being cheaper. The organisation and optimization of the workforce and infrastructure isn't something we can ignore. The choice of China isn't because it is cheaper, a lot of high-end and even luxury products are produced in China because they can ensure a high-quality manufacturing.
There are other places, as the comment above mentioned, that can produce for cheaper.
Of course it's true.
The US could do the exact same. Many high-quality, sophisticated goods are made in the US.
It's just cheaper to do in China because the salaries are lower and the costs of establishing more efficient business infrastructure are lower.
And since these companies care more about cost than anything, they choose China.
I think it was "Smarter Every Day," but there's a YouTube channel where the guy went all-out in trying to design, source, and manufacture a simple grill scrubber 100% in the US, and failed. He got the product finished and on the market, but it was literally impossible to do it with 100% American content. IIRC, part of the problem was suppliers that lied about their sourcing, but that still represents the complete lack of availability of US sources.
Yeah. Why wouldn't US sources be available?
People invest in things that maximize returns. 30 years ago they had a choice: invest in building out more manufacturing infrastructure in the US, or doing it in China. China was, and is, less expensive to run. So China got the investment dollars.
You could absolutely build any product in the US. You'd just also have to build the infrastructure to build the industrial base, and that means spending more money than you would in China.
It always comes down to cost. Always.
The US literally doesn't have the people to do this.
Yes and no.
The US is still an economy with the ability to tackle very complex tasks with its industrial base. Up until fairly recently, it was a major destination for people seeking higher education and work in specialized fields in STEM, which is necessary for the execution of the projects that companies like Apple want to do.
The problem is that we now have an anti-immigration administration, and are home to a number of multinational companies - Apple's a great example - that feel that their one and only obligation is to create value for shareholders. They don't want to throw the money needed at American engineer salaries, because money paid to the American engineer is money not paid to a shareholder.
We can possibly deal with the administration. The US isn't the only country in the world with a nativist movement; China does it with non-Han peoples within its borders. The real hangup is making a bunch of Americans with capital feel some sort of loyalty towards their own country and its workers.
No and no. US companies started offshoring in 2022. There are no new STEM jobs since than.
> US companies started offshoring in 2022. There are no new STEM jobs since then.
"The real hangup is making a bunch of Americans with capital feel some sort of loyalty towards their own country and its workers."
China didn't either, until it did. US business isn't willing to build up the workforce to do this but we definitely have the people.
The US used to have a more built out industrial base but since those days a lot of things have changed, structurally, economically, culturally, and in their regulatory environment. The people who would have been doing this work are doing cushy service industry jobs today.
If there's one thing that places like Gary, Indiana and Flint, Michigan are known for, it's their cushy service industry jobs.
I'm not sure if you've been following economic and demographic trends over the past 50 years, but people have largely left those places to go elsewhere for work.
Huh? The people who would have been doing this are doing shitty HVAC jobs (but still getting to be a bit creative). Are doing shitty welding jobs. Are doing HEAVILY underemployed service industry jobs they hate. Etc, etc. None of the people I know with a mind for making/tinkering/refining processes are working service industry jobs happily.
People didn't culturally decide they don't want these sorts of jobs, business did, because short term monetary benefit. The other stuff may have come along after but could easily be reversed. But currently there is no need to reverse because US business only cares about short term monetary gain.
All this talk like this is some huge systemic thing is BS. If there were jobs, it would all happen. Just like it did in China.
This goes far beyond skilled labor. But I'll start with that point. The US already has a huge shortage of skilled labor, and it's not like we would ever take people from the HVAC industry and put them in a factory. People in the US are gonna still want air conditioning. Culturally, the US absolutely pushes young people to aim for white collar service industry jobs.
Second, it takes a huge amount of engineering talent to do what China is doing as well. In the US, a lot of engineering talent has been attracted to software (or other service industry jobs), where there's a lot of money to be made, and you can sit on your ass and argue on an orange-colored website all day. I prefer that to wearing a hardhat and waking up at 6 AM to go to a factory.
Third, China concentrates a lot of this talent into dense cities, and people make a lot of sacrifices to live there. You're definitely not gonna convince an HVAC guy to leave his suburban home and sell his pickup truck to go live in a dormitory in a dense city and ride a scooter. In China, there's plenty of people that are itching to leave the countryside for the city, leave their families, and search for a better life. In the US, people that live outside of cities, generally want to live there, and aren't interested in relocating. Most developed nations feed this need for skilled labor by importing labor from countries where people have a strong desire to better themselves but don't have a cultural expectation of a backyard and a white picket fence. But the US has had a fucked up immigration system for a long time now.
Fourth, China pulls out all of the roadblocks in order to facilitate the growth of their industrial base. They don't need to go through 10 years of planning to build something, they don't need to argue with a local zoning board, and if they want to build something they don't wait for the free market to decide to do it. If they want to support an industry, they just do it. Single-party unitary governments are efficient as fuck. Of course, this comes with many drawbacks, which politically are just not viable in the US.
Edit: I grant I could be old and outdated. But having seen cycles. Having seen Japan go up and down. Having seen offshoring first go to Mexico then easily transition to China, I just don't see any black and white here.
1. The HVAC guys would definitely fill the the quick turnaround, small shops that surround the manufacturing industry in China if that was an option.
Culturally doesn't matter. The majority of young men I know are underemployed and hate the service industry, but would be a fit for having their own adjacent business like that ones in China that get so hyped as enabling their dynamics. I think you are very focused on the crowd you know. The young people I know are so itching to create they have 3d printers, or make fishing flies, or make their own clothes.
2. Sounds great, if you live in the bay area or other tech scenes. I no longer do. I left tech to work (albeit tech) in a factory. For the majority of people I know, what you lay out it isn't an option or on the table. They are under-employed in brain dead service jobs they hate, and that do not provide them a future. They would jump on building up the adjacent small businesses that China's manufacturing depends on and that people here hype as 'wow, you can find a shop that does XYZ'. The stuff people say 'we just don't have in the USA'.
3. Small town America was factories since forever. I don't think China's way is the only way. We have a very good transportation system whereas when China established it's manufacturing it didn't. I think your view is myopic here and clouded with 'the China way'.
4. Again, the 80% of America you seem to ignore, pulls out all the stops for shitty ass 50 employee employers to build. You seem to be focused on a very small part of the US.
Nothing you say is a limiter IF the jobs are there. American companies pulling the jobs killed American dynancism, not any of the things you list. If it's TRULY no longer about cost, we could EASILY do it again. The people I met in China weren't better than the average American. They were great, and I think very highly of China. But the advantage I saw were wages, and people from the countryside willing to put up with a lot, but I don't think they will put up with as much long term (and I hope they don't have to, again the people I met are all great people and I hope the best for all of us). And a side of environmental pollution (I know 2 guys that moved their factories to China purely because of savings by not having to be environmentally friendly. So many that falls under your regulation, but that isn't a long term solution/state for China and that was a decade ago, maybe things are changed for the better already).
I don't think you realize the difference to which cultural expectations of the workers are different. Yeah, people "hate" their service industry jobs here, but you can get a job in Iowa wrangling spreadsheets making $50,000 a year, grab coffee from the office coffee pot, sit in air-conditioning all day, then you clock out at 5 PM and drive your truck home to your house in the suburbs with a yard and a white picket fence. Nobody wants to make that same money or less working on a hot factory floor with a clipboard on a 996 shift and live next to a factory belching smoke. But in China, you can find people who will do that, and they'll wake up at 3 AM to work on an urgent customer request. And collaborate with all the factories down the road, and have a prototype out by 8 AM. In the US you're not gonna get somebody to respond to your email before 10:30.
> 80% of America you seem to ignore, pulls out all the stops for shitty ass 50 employee employers to build. You seem to be focused on a very small part of the US.
It's easy to get politicians to give out some tax breaks for a reelection campaign. It seems to be damn near impossible to actually get anything done that actually matters. We frequently spend billions of dollars to support manufacturing investment and have nothing to show for it.
Just look at Foxconn in Wisconsin, as an example. Over $1 billion and half a decade and still nothing. China could've had a whole city built. We were just trying to get 13,000 factory jobs, but we couldn't even manage that.
I worked in a plastics factory in a 10,000-person Wisconsin town through the 2010s. Hot plastic extruders, no air conditioning, 12-hour days 3-4 times a week with some mandatory overtime. You're always shorthanded but I might be the only person I know who ever left for a spreadsheet job. So the cultural expectations might not be as different in the heartland as they are in the cities.
I think we live in two different Americas. My mom who was a controller and CFO in Cali couldn't land a $50k spreadsheet job when she semi-retired here to be near grandkids. Old boy with a pickup definitely isn't doing that. We have plenty of actual non-grift factories going up here from owners relocating. The Apple 3am example isn't making or breaking an industry product, it's just shitty management, probably needed because the product was scheduled to go onto a boat, something that isn't needed if made here, or some artificial bs. Imagine operating that way as a public company, I think that's working with unacceptable risk and a failure of management.
But we'll probably just talk past each other past this point. It will be interesting to see what happens. Like I said, I remember the Japan scare. Then all manufacturing going to Mexico (and my dad making sure he didn't buy the heche en mexico lable) before it finally landed in China.
That's pretty amazing, honestly.
Here I can't even get a tradesperson to give me a quote, much less show up on a dime. I guess I need another eight billion dollars, give or take a penny
> a Foxconn factory in China woke up about 8,000 workers when the glass screens arrived at midnight
Yea must be really amazing living a crowded factory dorm room with suicide safety nets under the windows only to be abruptly woken up because some schmuck in California demands his precious phones be assembled. Must be a wonderful gig.
Project this a decade or two into future and I honestly don't have a solution for the west but a gradual decline into mediocrity. We have less corruption and communicate directly also about problems, so at least that will work for us for some time too.
But maybe China and similar places will elevate their overall prosperity enough that people will refuse to be treated like this en masse, so there is some hope.
These anecdotes come from the very peak of Chinas demographic dividend. In a decade or two their demographic dividend will be in a steep decline.
China also needs to change something drastic to avoid brain drain. The migration of competent people is still one-way. There no path to become a Chinese citizen. China has come a long way, but Europe is still ahead on building liveable communities and wok/life balance, while the US is still attractive to those seeking freedom and prosperity. China has avoided issues due to a huge population and that demographic dividend. But eventually it’ll become an issue
>China also needs to change something drastic to avoid brain drain.
Why does this matter? I hear this a lot but at the same time I look at what's coming out of China, especially in the AI space, and it's clear that brain drain isn't really hampering them.
It's almost as if you don't need the absolute best and brightest. Heck we used to get by retraining people from other industries to be programmers. I know companies absolutely can't do that now nor be expected to help grow their workers and can only work with exact match H1Bs, but it used to be a societal expectation of companies.
>very peak of Chinas demographic dividend
No, 2000s-2020s was peak blue collar dividend, think world combined, but low value dividend. When PRC had lots of hands but few brains, i.e. fraction of STEM vs US / west.
2040s-2080s is PRC peak tertiary skilled dividend. They'll have about 2-4x US in just STEM who'll be in workforce for most of our and our children's life times, even while tfr math starts eating away at future cohorts. The TLDR is they've just started cooking, their highend human capita pool will be exploiting greatest high skill demographic dividend in recorded history for high value. Their final form is OCED combined in talent and world combined in bluecollar backstopped by robots/automation (currently on trend to be more than world combined).
Brain drain barely a problem now, this isn't 2000s where there's shit domestic opportunities and PRC lose large % of the few best they produce. They now they mint so much talent, brain drain a rounding error, top talent increasingly stay in PRC. And many of the best that went abroad are returning. Or future trend is many of best that are leaving will recirculate back to PRC eventually. TBH most of those go abroad now are frankly PRC B/C tier talent, i.e. most international students are those too mid to do well on gaokao and even then they turn into A students in west. Like there's still some sectors where west can draw because they can afford to pay magnitudes more (which is matter of FX/geopolitics), but PRC now also in position to attract foreign talent via $$$, so much so that places have to ban nationals from working in PRC strategic sectors. China's expat draw is it's PRC, if you're high end talent and you want lab built in a few months, bottomless access to resources including human capital, dynamism of Asian tier1 cities, that EU+US can't offer. But immigration point really secondary to fact that when PRC produces plurality of high performing global talent, and retains most of them, they don't need to worry about immigration of competent people, just need to hold on people they have, which by and large is happening, i.e. Tsinghua brain drain rate went from 30% to single digits in last few years and returnee rate higher than ever. As in west depend on PRC talent surplus (because western talent pipeline shit vs PRC), trains them, and now that PRC rich with opportunities, many recirculate/reverse braindrain back to PRC anyway when they're high level.
At end of the day _most_ people are economic migrants, they move for $$$ not muh freedom/community. Ultimately US/EU strength is they have money/FX money multiplier, US way more than EU. When that goes away/decline people start making different choices. And again, PRC demographics will be lingering in background... but just means cheaper housing/less crowded cities, i.e. less drag on PRC living. It terms of active demographic dividend, most of us will be dead before PRC declines, imo not really worthwhile extrapolating on that timescale.
I just wanted to thank you for sharing your opinions on this site -- the sole poster here who I actually bookmarked to read like a blog.
Cheers.
I think all these factory manufacturing labor problems will be a thing of the past soon. The way robots are improving in China and the US, they will probably end up being an equalizer. It might become just as cheap to produce goods in either country at that point.
less corruption?
maybe time to check your priors
I should also link Tim Cook's comments on "why China" from a talk in China at a Fortune event. https://www.youtube.com/watch?v=2wacXUrONUY
Transcript: