Aug

5

Circuit boardDuring controversies about outsourcing, an executive I knew liked to hold up a 10-year-old circuit board next to a current circuit board. Typically the newer board was much smaller and had only about one tenth the number of components.

"What happened to the manufacturing of all these parts?" the executive would ask.

Slowly, the realization would dawn on the audience. "It is gone!" 90% of the manufacturing was not gone to China, it was just gone.

Stefan Jovanovich writes:

W TOur staff is 10% of what it was, but we still have the capacity to handle 75% of the unit volume we ramped up to during the dot.com boom. What used to be done by people with clipboards is now done by custom-designed software running on computers with wireless bar code scanners. What used to require hundreds of square feet of linear space can now be handled in 15% of the area using vertical storage and retrieval. The enterprise is now a joint venture (like the Pequod) with no "payroll" employees; the tax savings alone are greater than our net profit was during the last year (FY 2008) under the old structure. As Steve might have put it, the "jobs" (sic) are gone; and they are not coming back.

And we are not the only light industrial business in Califormia going virtual:

"The U.S. industrial [real estate] market has recorded negative absorption in four out of the last five quarters, third quarter 2008’s 38 million of positive absorption being the sole exception. Second-quarter 2009 saw 49 million square feet in negative absorption, a new high for the decade following the first-quarter's minus-48 million square feet." CoStar Group.


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10 Comments so far

  1. Hugh Strong on August 6, 2009 6:35 am

    Statistics contradict the assertion that there are fewer semiconductor components being made. Your executive's product has become simpler through a reduction in part count. Even if this long-running phenomenon is true across a broad swathe of electronics products, it does not follow that the component parts industry is being driven to shrink through this mechanism, thereby resulting in less manufacturing. In fact, it's impossible to ignore the increase in demand for finished electronics goods, which will swamp any reduction in component part counts, leading to a demand for more components.

  2. jeff watson on August 6, 2009 9:17 am

    Still, the current meme of all our going from the USA to China is wrong. Whenever I hear such statements, I ask, “Where’s the facts?” In this case, there are no concrete facts and the United States still happens to the biggest manufacturer in the world. The fact that China is the world’s largest manufacturer is patently false, and is a creation of someone with an agenda.
    http://tinyurl.com/mzul6c
    http://tinyurl.com/39znx5

  3. Links 8/6/09 | Froogalizer.com on August 6, 2009 9:36 am

    […] Where Did Manufacturing Go? Steve Ellison […]

  4. Steve Leslie on August 6, 2009 10:58 am

    Anacdotal vs statistical — which do we rely on? Kudlow showed some interesting charts The ISM new orders and sale I think. Both have shown steady increases all this year. The status is that inventories are being depleted to unsustainable levels thus factories are gong to have to eventually catch up. Now the second piece of the puzzle has to be put into place. That is new jobs that will follow demand for product in my view. In order for that to happen banks will have to cooperate and start lending. A tough program to put together but if Obama's administration can do it this will result in some great recovery for the economy. Looking forward, we will need to worry about the years 2011 according to Arthur Laffer but just like 1932 you have to start somewhere.

  5. Bill Welch on August 6, 2009 11:00 am

    Most manufacturing went out of here with GATT & NAFTA! Obama is gearing up some new manufacturing plants, outside the US of course, for our new cardboard box homes. Only G_d can help us now! We are the enemy!

  6. david higgs on August 6, 2009 10:09 pm

    most everything you pick up these days says made in china. thanks walmart, mcdonalds and the like, our landfills and garage sales are full of their cr_p. when's the last time you got a good old american made hammer in a garage sale, or teapot? you ask where the manufacturing went, it's gone the way of lawncare, custodial and fast food services. real american fingers are to fat to maneuver the wafer chip…

  7. Greg Hall on August 6, 2009 11:25 pm

    So much for the "peace dividend." It appears that the "guns and butter" spending on obsolete weapons components are a necessary make-work strategy.

  8. Moby Dick on August 7, 2009 3:27 am

    Per Global Insight, China will soon surpass the US in manufacturing.

  9. craig on August 7, 2009 7:34 am

    In many areas, manufacturing has increased. You don't see many cobblers anymore, because we throw away shoes instead of fixing them. Leased cars, manufactured homes… There are still toys around from my parents' generation but the cr_p we grew up with only was built to last a short period. On a different note, a North American currency called the Amero seems to be gaining momentum. Rumor has it that they might attempt it when Canada gets to 1:1 and the peso to 10c. Also that we've already sent billions of newly minted Ameros to China.

  10. Steve Leslie on August 8, 2009 7:03 am

    market makes a good rally for the day, and for the last four straight weeks. What are the underpinnings? Jobs report came in Friday still 9.5 but better than expected. Heard the White House spin that this is proof that stimulus package is working. Next cash for clunkers. White House will proclaim this to be a great success more money on the way. Where does the money come from? Keynesian Economics at work? Many questions here. Next question, Where is the money the banks were supposed to lend to people and small businesses? How is that logjam broken up. How long before this money gets in the hands of those who need it. A Pack of cigarettes went up so far this year in Florida $1.6 a pack. Argument is that this will help people to quit smoking. However isn't this also a regressive tax one levied on the same people who elected Dems into power. A plurality strongly oppose the new health care reform act. Obama declares first by August that it will be passed. However Congress went home for summer break. Furious town hall meetings ensue. President cancels his scheduled town hall meetings. Something about teleprompters not working (tongue in cheek) President declares these people need to shut up and go home. Something about the First Amendment does not apply here(tongue in cheek.) Similar to the argument used at the Boston Tea Party. Once again the question remains. Where does the 1 trillion or is it 2 trillion comes from to pay for it. Answer from White House were it always does we will tighten our fiscal belts and raise taxes first on the Rich and then on everybody else. I think I saw something on OMB report that White House numbers do not hold water! A billion here, a billion there, and pretty soon you're talking about real money. Or is it now 10 billion here….. And How many Senators have actually read the 1000 plus pages on health care reform. Of course that is assuming Bob Byrd and Ted Kennedy can read in their now well documented physically degraded state. Not to mention brilliant souls such as Pelosi, Saunders, Boxer, Feinstein Franken et al…….. Stay tuned in the words of Bette Davis "fasten your seat belts it's going to be a bumpy ride."

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