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What we can do about China manufacturing

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Two issues that have surfaced with regard to the manufacturing of technology products in Asia are the treatment of workers who build our products and the loss of manufacturing jobs in the United States. In this column, I’ll offer a suggestion to address each.

Treatment of the workers who make our tech products

Many of the sweeping charges that we’ve seen in the press in recent weeks relating to poor treatment of workers have been sensationalist reporting, bearing little resemblance to the experiences I’ve encountered while working in the Asian factories over the last several decades. While, for the most part, the working conditions are satisfactory, I have a proposal for ensuring that the exceptions that do occur are identified and eliminated.

This initiative would require a new seal of approval to be added to consumer electronic products, alongside the UL, Federal Communications Commission and CE seals that certify that the product meets established electrical, safety and radiation standards. The new seal would signify that the product was made in a factory that met acceptable standards for working conditions and for its treatment of workers. The seal would be administrated by an international nonprofit organization experienced in such activities and funded by a small surcharge added to each product. This would supplement the companies’ individual responsibilities to police their own suppliers, and it would ensure that a broad consistent standard is applied and recognized by the end users of the products.

Regaining lost jobs

In last week’s column, I discussed the issue of our consumer electronic products being made in China, not solely because of cost, but because of China’s huge infrastructure and its ability to develop and manufacture products quickly and efficiently. Through decades of hyper-growth, the city of Shenzhen in southern China's Guangdong Province, an hour north of Hong Kong, has become home to thousands of manufacturers and suppliers that provide a huge support system to their customers.

We’ve heard for years how our manufacturing jobs have moved to China. Now the question is what, if anything, the United States can do to bring back some of these jobs.

More than 95 percent of our consumer electronic products are made in China at companies such as Foxconn, as well as thousands of others. Foxconn is by far the largest, with sales of $100 billion. It employs 1.2 million workers, spread across a number of city-like campuses in China, as well as in several factories, design centers and offices in 18 countries. Apple products make up about a quarter of its revenue, with the rest of its resources supporting hundreds of customers, including Motorola, Sony, Nokia, Hewlett-Packard, Dell, Philips, Amazon, etc.

I’ve spent time in Foxconn’s factories as well as those of many other companies over the years. These companies can do what few companies in the United States or elsewhere are capable of doing because of their huge scale. For example, Foxconn is capable of building 300,000 iPhones per day. One of its campuses that I visited is literally the size of a city, with tree-lined roads, shopping strips, dormitories, restaurants, hospitals and theaters interspersed among the hundreds of factories.

If I were formulating policy for the United States with the goal of bringing back some of these jobs, I’d recommend creating a huge design and manufacturing center in our country where a large number of factories and office buildings would be built. I’d call it the United States Manufacturing and Design Enterprise (USMADE). It would include resources for product design, engineering and manufacturing, as well as a training and education center. Basically, it would be a center with resources that do everything associated with creating and building technology products.

I would enlist some of the large corporations, which could benefit and contribute, such as Apple and even Foxconn, to create the nucleus of this design and manufacturing community, with the government contributing through tax incentives, land grants and the building of infrastructure.

Is something like this feasible?

It’s certainly possible to do if we set our minds to it. We’ve undertaken equally ambitious projects before, such as rapidly constructing naval and army bases in times of war and building huge dams and other structures of enormous complexity.

Taiwan has created the famed Hsinchu Science and Industrial Park, inspired by Silicon Valley, which has attracted scores of companies to develop and make products there. Silicon Valley became our technology center because of the proximity to Stanford University and early startups, such as HP, Fairchild and Intel. We’ve also seen Japanese, Korean and European car companies establish manufacturing and design centers in the United States to be closer to their customers.

There’s another precedent for this. Foxconn has recently made large investments in Brazil to create new factories to address the growing consumer demand and use Brazil’s rich labor pool. In turn, Brazil provided tax relief on products made in Brazil.

This would be just the beginning of solving a problem that began 30 years ago, and it could take another couple of decades to make a real impact. Both our government and the companies that invest in building such a complex will have to have the foresight and the patience to think long term rather than expecting immediate gains. But by planting the seed for such a center, it will attract many more companies that supply design and manufacturing services and parts.

What about product cost? It will be more expensive to make products here; estimates range from 10 to 30 percent more. Nearly every component that goes into the product is made in factories in China, so these parts will all need to be sent weeks in advance because of the long ocean trip. But over time, more of these component manufacturers would co-locate their facilities in the center and eliminate both the time and the cost of shipping.

Some would argue that we never could compete on price with products made in China because of the labor rates, their willingness to work long hours and their large population of young workers. We have more regulations pertaining to environment controls and manufacturing processes, which increase costs.

But do we need to be the lowest cost producer? I think many of us would pay an additional cost knowing that it was made in the United States by U.S. workers.

If we all believe that bringing manufacturing jobs back to the United States is vital to our economy and to our national interest, we should address it head-on once and for all with a massive initiative. I fear, however, that many politicians will not be willing to take the big steps needed to bring this about, and that many companies, and their stockholders, will continue to think of short-term profits rather than long-term growth.

I hope I’m wrong about this, but if we’re really serious, this is a suggestion that could get the ball rolling. And most of all, stop blaming others for our predicament and allow us to do something about it.

Baker is the author of "From Concept to Consumer" published by Financial Times Press and available at Barnes & Noble, Amazon and other booksellers. He has developed and marketed consumer and computer products for Polaroid, Apple, Seiko and others; holds 30 patents; and is an Ernst & Young Entrepreneur of the Year. Baker can be heard on KOGO AM the first Sunday of each month. Send comments to phil.baker@sddt.com. Comments may be published as Letters to the Editor. Baker's blog is blog.philipgbaker.com, and his website is philipgbaker.com.

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