Manufacturing in China vs. America

Introduction

• "Made in China" is a common label on products.
• China has become a leader in global manufacturing, overtaking the U.S. in 2010.

Manufacturing Statistics

• China: 30.5% of global manufacturing output (2021)
• U.S.: 16.8% of global manufacturing output
• Significant growth in China from 3.5% (1990) to 30.5% (2021).

Recent Trends

• Supply chain issues due to COVID-19 pandemic have sparked a push for "Made in America" products.
• Industries like semiconductors and battery manufacturing are expanding in the U.S.

Tech Giants and Manufacturing

• Tech companies, especially Apple and Alphabet, have extensive manufacturing operations overseas.
• Engineers are frequently sent to factories abroad for oversight.
• Example: Apple was United Airlines' biggest customer in 2019, purchasing 50 business class seats daily for travel to China.

Historical Context

• U.S. manufacturing strong until mid-1960s, after which the U.S. lost a significant amount of manufacturing to countries like Japan and China.
• Current supply chain for smartphones primarily exists outside the U.S.

Challenges of U.S. Manufacturing

• Tim Cook (Apple CEO) emphasizes skilled labor availability in China despite rising costs.

Labor Costs Comparison

• U.S. Federal minimum wage: $7.25
• Zhengzhou, China (Foxconn): ¥19.6 (~$3).
• Chinese factory workers' wages have increased with demand.

Apple and Manufacturing Options

• Apple has moved some production to India (1/4 iPhones predicted to be made there by 2025).
• Cook argues consumer electronics were never significantly manufactured in the U.S.

Purism Case Study

• Purism manufactures the Librem 5 USA phone in California, claiming to be the only U.S.-made smartphone.
• The Librem 5 USA costs $2,000 compared to the $1,300 model made in China.
• Nearly all components are sourced in the U.S., with some exceptions.

Business Model Viability

• Purism's success attributed to healthy margins and crowdfunding origins.
• Offers competitive pay and focuses on mechanical labor rather than physical labor.

Academic Perspectives

• Baizhu Chen (USC Marshall School of Business) argues labor-intensive manufacturing jobs won't return to the U.S.
• Emphasis on data analysis and engineering jobs over assembly jobs.

Future of U.S. Manufacturing

• Rebuilding the U.S. manufacturing ecosystem requires time and investment.
• August 2022: Biden signed the Chips and Science Act to encourage semiconductor manufacturing in the U.S.

Foxconn's Attempt in Wisconsin

• Foxconn's promise to create jobs and build an LCD manufacturing facility fell short (from 13,000 jobs to <1,500).
• Market conditions and investment climate affecting manufacturing viability in the U.S.

Security Concerns

• Purism emphasizes data protection and security by manufacturing in the U.S.
• Market demand for security may push more companies to relocate manufacturing.

Conclusion

• Despite pressures and some success stories, the general consensus remains that it is cheaper and more efficient to manufacture in China.
• The decision ultimately rests with companies and consumer choices.