Real Estate Thought Leadership Blog

A Case for Manufacturing in the U.S. that’s About Innovation, Not Just Whining

  

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If the U.S. loses more of its share of manufactured goods to China, we lose our ability to create advances in technology and innovation.  The U.S. now manufactures 19.4% of world's manufactured goods, guess how much China makes? 19.8%! I thought it would be more but figure that the U.S. used to make close to 30% in the 1970s.  We’ve all heard this before, and the half-time commercial during the Super Bowl was a powerful representation of the American desire to begin our "second half." However I have a hard time with the argument that we need more manufacturing simply because we need more jobs.

On my way back from a ski-trip from Park City, Utah I finally read this month’s issue of MIT’s Technology Review and was intrigued by the arguments on the need for U.S. manufacturing:

• The U.S. is world’s most prolific source of new technologies – especially new technologies for rapidly growing markets such as batteries, electric vehicles and solar
• Most companies pushing manufacturing to China lose the ability to make advances in technology since a key component of the innovation is the process itself
• Integrated photonics are an example of going “backwards” in innovation as technology advances were discovered but could not be implemented in China because it was too costly to upgrade the machines for a new process that was needed

So why are companies moving to China?

It’s not about labor. Labor makes up only a small percentage of overall cost since equipment, factories, and materials make up the bulk of the investment (typically in the hundreds of millions of dollars for a new plant).  For a lot of companies it’s about funding and getting the money they need to build their plant.  For others it’s about feeling like they have to be in China to compete.

What does this mean for companies today?

• Companies should seriously consider the cost-benefit of separating R&D from manufacturing and think longer term than the immediate product being manufactured today
• Consider the ability to incorporate new materials, new processes, and new products entirely as these rapidly changing markets attract (and lose) ever more players
• Understand the processes that enable the technology and innovation. This is the secret sauce!

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