As a percentage of GDP, manufacturing has been on a downward trend, but that's because of the growth of service industry.
https://www.macrotrends.net/countries/USA/united-states/manu...
But that's not really the point. The point is, look at those numbers sans semiconductors and you see a pretty scary decline in manufacturing output.
It is totally fair to point out that this has been a strategic choice to focus on profitable industries, and that that's even a good thing. That's sort of the point here: the choice has been made, semiconductors are now a key industry for the US manufacturing sector, and AFAICT we don't have any plans for what would replace semiconductors.
IDK if we have a healthy amount of manufacturing output, but it's pretty clear that losing leadership in semiconductor manufacturing would be quite bad for the USA.
Not at all: https://www.nam.org/state-manufacturing-data/2019-united-sta...
Semiconductor manufacturing is a component of the second-largest US manufacturing bucket in 2017, and was only #8 of the top 10 manufacturing buckets for job growth in 2018. It is certainly an important sector for economic and strategic reasons, but you are significantly overstating its importance.
But I'm not talking about jobs, at all. The US needs a robust manufacturing sector so that it remains economically competitive. Figuring out how to translate that economic competitiveness into material benefits for individuals is a separate problem. Confusing the two is itself a risk to our economic competitiveness. (To make this point is a somewhat hyperbolic way: if the goal is jobs, build a canal through the center of the country. Using spoons.)
Also, I think the manufacturing output numbers alone miss something important from my original post. Losing semiconductor manufacturing as a core competency also threatens the most profitable and important components of the US services sector.
Why, then, did you ignore the other chart I pointed out that specifically dealt with the economic value?
> Also, I think the manufacturing output numbers alone miss something important from my original post. Losing semiconductor manufacturing as a core competency also threatens the most profitable and important components of the US services sector.
I agree that losing this competency would be damaging. I disagree that it represents a threat. The threat is the continued consolidation of certain types of semiconductor manufacturing into an ever-shrinking pool of companies. While it would be slightly better if that pool were partly concentrated in the US, the size and diversity of that pool is a much bigger issue than where its members are located.
The only other chart lists "Computer and electronic products" as the second-largest manufacturing sector, which seems to confirm my assertion that semiconductors have been an important source of growth. It's the second largest category and has had annualized real growth rates 2x+ the rest US manufacturing for decades.
I don't see any breakdown of semiconductors/not-semiconductors for that category, and this is a 2017 snapshot as opposed to longitudinal data, so it's hard to say anything more specific using the data you linked to.
> The threat is the continued consolidation of certain types of semiconductor manufacturing into an ever-shrinking pool of companies. While it would be slightly better if that pool were partly concentrated in the US, the size and diversity of that pool is a much bigger issue than where its members are located.
Sure, I agree. (Caveat of course that geopolitical diversity matters too. N separate SOEs would increase diversity in a way that wouldn't be particularly helpful to the USA, for example.)
In any case, this is actually something I more-or-less agree with, and hence the last sentence of my original post.
It also causes a huge vulnerability.
as the developing world improves their standard of living, so does the same decrease for people in the developed world, because these developing nations are no longer dependent on the developed one's.
It was always just a question of time with globalization in effect.
personally, i think that this is a good thing though. we in the developed world have been living unsustainable lives for generations, living off of the developing nations.
though thats most definitely not the only reason why everything has been getting harder for the working population. automation, higher efficiency, extreme concentration of wealth and more do their part in the current situation as well.
>According to a study by consulting firm McKinsey & Company, 76 percent of China’s urban population will be considered middle class by 2022. In 2000, just 4 percent of the urban population was considered middle class.
https://www.businessinsider.com/chinas-middle-class-is-explo...
Meanwhile, in America:
>Fewer millennials in 2019 are middle class compared to baby boomers when they were in their 20s
https://www.marketwatch.com/story/why-the-middle-class-is-sh...
Also, valuearb is kind of right. Except that the right solution is more efficient onshore manufacturing, not offshoring.
Of course it does. They do have that extra trillion people to bring the average down.
However, moving the manufacturing jobs from here to there has certainly raised their average standard of living while reducing our own.
The unemployed here are not better off.
In addition, a Walmart cashier, Starbucks barista or Uber driver does not have the same standard of living that a UAW member once did.
People are, on average, worse off than the preceding generations, all in the name of higher profit margins for the few.
>Across Western Europe and North America, the middle class is shrinking, according to a new report by the OECD. With each new generation, a smaller share of the population find themselves earning middle incomes.
When the Baby Boomers, who were born between 1943 and 1964, were in their twenties, some 68% were in middle-income households. Only 60% of Millennials, who were born between 1983 and 2002, could say the same at a similar time in their lives.
https://qz.com/1592826/the-middle-class-is-shrinking-generat...
You need to research a bit more what is behind these digits.
A lot of funny accounting where companies which haven't manufactured literally anything on US soil for decades somehow manage to accrue billions in "manufacturing output"
Slight refinement: it’s a barbell: production of low value goods that are not worth shipping has remained, e.g. paper. But that’s just damning.
The only examples I can think of right now where we are genuinely number one is high priced low volume boutique aerospace (SpaceX and other new space companies, satellites, experimental military aircraft, electric planes, etc.) and of course weapons.
We can manufacture decent cars, but at least half of this is under the direction and management of overseas companies like Toyota and Nissan. US car companies have been on the ropes for decades.
We seem to be losing the bulk of aerospace, generation turbines, electronics, chips, medical devices, power equipment, materials, ... ?
Seeing graphs like this makes me wonder if I am living in the late days of the USSR when I'm sure many optimistic graphs were published by Pravda.
As for medical devices and tech, the US probably creates more new drugs and treatments than the rest of the world combined. when's the last time china, india or russia made a break through in medecine? When's the last time the US did? Last year?
It will be the same story for jet engines, Chinese improvement is very rapid. It was the same story for every rising power so far, there is no real reason that China will never be able to build a jet engine, and no reason that they will never be able to run a fab (and indeed, they are accelerating quite fast).
They have started to deploy the WS-10 Taihang engine for their J-10 fighter, but the performance of this engine is markedly worse than comparable Western engines. Military grade engines are hard!
Even the US relied on foreign jet engines for a time, although you won't hear about it a lot - for example, an absolutely huge amount of engineers were hired from AVRO in Canada after the development of the superior Iroquois engine (which had by quite a margin the highest nominal thrust as well as the highest) as well as other Orenda engines, and their work was absolutely instrumental to the US becoming superior to the USSR in jet engine technology. I don't know if this is publicly available information, so you might have to trust me on it, but I guarantee you even the US had a 20+ year period where it had to steal engineers and tech in order to jumpstart it's lead, which is exactly what we are seeing with China.
So say they iron out the kinks in the WS-15 (though odds are they'll settle for the WS-10). They then have a roughly 1990s era engine, when the US will be deploying Adaptive Cycle Engines etc.
As far as adaptive cycle engines, China is also already researching them. They also have a lead in supersonic combustion as of today.
This view is rampant throughout this thread and I keep wondering why South Korea is omitted. I thought SK semiconductor tech was comparable the US and Taiwan?
But beyond SK I cannot think of any other countries with competitive fabs.
Also only a tangent but I really believe that deal where TSMC is going to put a N7 fab in the USA is either going to get restructured into something way smaller or never ever going to happen.
2015.
https://www.nobelprize.org/prizes/medicine/2015/tu/facts/
(PS. This took less than 30 seconds to find and confirm).
(PS. This took me most of a minute of reading the link you provided).
Russia invented and built and then sold to the USA the RD-180 rocket engines that are used for the first stage of the American Atlas V launch vehicle.
Which the USA will no doubt "reverse engineer" soon :)
The OP needs to get out more often.
SpaceX, a privately-held American company, is the only source of innovation in rocketry at the present time. Their reusable launch platform plays in its own league; everything else is steam power, Falcon is internal combustion.
That's just a fact. Unlike insisting that China, Russia, India are incapable of innovation more generally, which is risible.
My vague impression, in fact, is that jet turbines are quite a bit more difficult to manufacture than rocket engines, even if the latter are thought of as 'higher tech'.
I'm fairly certain we'll discover, in the next ten years, that China is quite capable of making cutting-edge computer chips, and just hadn't gotten around to it yet.
I've never shared my countrymen's obsession with insisting on being 'the greatest'. This country is great in its own right, along many dimensions; it is, in fact, right at the cutting edge for medicine and CPUs; denigrating the work of other nations only detracts from this.
My impression is that “real” rocket engines include a jet engine just to pump fuel. They have many other pieces as well.
Not that a modern high-bypass turbofan is simple, but don’t discount the complexity of rocket science.
As true today as when it was written!
We're also really good at manufacturing houses and food. Besides cars, houses, and food actually representing a good chunk of physical things we buy, more of our spending is moving towards software/information in which we have a crazy lead.
I see it as manufacturing was displaced by an even more value adding industry. Though certainly it isn't good for our national security to be relying so much on imports for physical goods.
Tesla does, after all, manufacture cars — it doesn’t just write software that goes into cars made by others.
If not, The 1997 number would be ~$2,200B, after adjusting. That would still only be a slight decline.
Or is it the other way around? Manufacturing is declining, and services are growing because they're the only jobs left for former manufacturing employees?
My last statement is ridiculous, but also TFA is correct in its diagnosis of Intel.
So... where does that leave us?
I don't pretend to have good answers to your question. There are some smaller shops nowhere near the scale of Intel. Some foreign-owned companies have fabs in the USA (including TSMC). Also, Intel is made of people who might be interested in striking out on their own.
But, yeah. Building things is hard and expensive and risky.
The "diagnosis" of Intel is that it threw away the chance of higher volume for lower margin which gave TSMC a bunch of money to catch up to them. (I think that's a very hindsight is 20/20 kind of view too...I don't think anyone thought that the iPhone would become larger than the entire PC market when it came out...and at those volumes Apple would eventually realize anyway that it wouldn't make sense to keep paying Intel to make chips for them.) I don't see how a start up is going to capture that volume without some sort of pseudo-captive market to grow with (which is basically how the various companies in China are progressing...).
And the wall at 14nm is them not investing in EUV, so they'd have even more work versus say the 14nm/28nm transition.
Well yes, but... you could hire a bunch of foreigners to run things, as that's where the current experience mostly is, as you point out. But that experience includes use of semi fab equipment, essentially all of which is built in the USA.
That said, I'm not a fan of industrial policy; not sure what results were generated by the megabucks spent on Sematech (and I worked for Sematech sibling/neighbor MCC in its day too).
I haven't followed them much since, but 10 years ago, they were doing good stuff when I worked there.
I didn't know, but I'm not surprised.
Micron is perhaps a candidate, though not sure it meets all your criteria.
While I highly support US investing there more, it’s not something that gives US blue collar jobs in the rural America. And push for more manufacturing in USA is about that.
The US should be focusing on decoupling the need to be able to survive (food, housing, healthcare) from holding a job instead of pushing for bringing back these jobs that are not likely to ever come back.
At the moment regional differences in the price of manufacturing labor are so large that corporations are basically labor market arbitrageurs. But arbitrage opportunities are by their nature kind of ephemeral, ending when the relevant markets stop mis-pricing things.
Your POV seems to be that labor is correctly priced in the current cheapest labor market (the "Race to the Bottom" hypothesis) but I don't know that this is automatically true. It's at least possible that one can only arbitrage the price of labor in developing markets for so long until they develop and drive up the local price of labor, and until they are all developed.
"The Jobs Ain't Comin' Back" is an appealing position for professional automators like us, because it lays the credit for manufacturing labor market dynamics at our own self-important feet, when in actuality it's shaped largely by brutally exploitative and probably transient (on the scale of decades, though) labor-price arbitrage. In particular the current manufacturing labor market artificially rewards centralization because the profit made by labor-price arbitrage is so large compared to shipping costs.
I don't think it's a foregone conclusion that manufacturing is either Sweatshops or Robots in the long run.
This is a fairly optimistic point of view, IMO. What I think is much more likely to happen is the following cycle:
1. Manufacturing comes to a new place due to low wages (relative to the cost of labor in the previous place), lax environmental regulations, low tax rate for corporate profits, and very low worker safety regulations.
2. This goes well for 20-40 years, but as things typically do, environmental regulations are put into place by the local government, the tax rate rises to pay for the externalities of the low wages, and workers organize, agitate, and win higher wages, more safety regulations, and worker protections. All of this raises the cost of labor.
3. Manufacturers move to a new location because it is much cheaper. This causes people in the old location to lose their jobs, become impoverished, and craters their economy to the point where the government, implored by all of these laid off and angry workers, need to do something to help the situation. This results in a lowering of wages, rolling back of environmental regulations, lowering the corporate tax rate, and repeal of the safety regulations and worker protections.
4. Twenty years later the manufacturers come back to the country because people have become so desperate for jobs that moving back to the country is relatively cheaper compared to the country that manufacturing just moved to.
Just view the policy decisions with respect to manufacturing that the leaders of the United States and Mexico have proposed to "bring back" these blue collar jobs. It all follows this playbook.
To the extent that this is true, one cause is that governments (with the notable exception of China) handicap themselves by honoring agreements, which they absolutely do not have to do absent a bigger, badder government to make them. A savvy, Machiavellian US government policy would:
1. Promise corporations the world
2. When factories are built, expensive machinery shipped in, and personnel trained, renege and hike taxes, but not so much as to force a write-off
3. When foreign governments make it difficult for US corporations to operate factories abroad and they ask for diplomatic support, shrug and tell them play stupid games, win stupid prizes
4. Do not apply the above policy for US corporations doing natural resource extraction abroad.
(i.e. act more like China)
It probably won't be in my lifetime, but my kids need to plan for the day when there isn't a cheap labor source waiting to tap. It will be a good problem to have (think about all the engineers making life better), but it will be a problem.
Which at the moment looks to be china, despite textiles trying to move to lower cost countries, the magnetic force of ongoing factory automation in china might pull them back. The US deindustrilized to early for any of these really to come back without some seriously focused "billionaire" class investors putting their money first (aka Musk).
That is a lot of spending that could be transitioned to robotics if humans become too costly.
1: https://trainingmag.com/trgmag-article/2019-training-industr...
Unfortunately this election gives us a choice between an utterly unacceptable racist crackpot and a bland candidate who belongs to the old guard who still believes that you can have an economy based on nothing. That doesn't make me optimistic.
> the advice of the business schools long ago and outsourced all its core competencies.
Business schools recommend the opposite. Outsource everything OTHER THAN core competencies. Core competencies are your competitive advantage; keep them in house.
The core competency of the US today is finance. We've been actively outsourcing everything else we can.
Since when? It didn't look very competent in 2008...
> The US followed the advice of the business schools long ago and outsourced all its core competencies.
Bashing metal and low-tech widget-forming has never really been a core competency of the US. It was useful to keep people employed for a 50 years or so but for the past century the US seems to have aimed for technological synthesis and increasingly high-tech production as a core strength.
> The US' loss of technical and manufacturing expertise is going to be extremely hard to reverse, and reversing it is going to require a rejection of financial capitalist economic ideology and things like "maximizing shareholder value" as the prime directive.
It is unnecessary to reverse something which was not lost in the first place. As others have repeatedly pointed out all over the comments on this article the US has continued to climb up the manufacturing food chain and dominates the top-end. It may employ fewer people, but the productivity and economic benefit of the US manufacturing sector has simply not declined at all and therefore no 'rejection of financial capitalist economic ideology' will be required.
Unfortunately wanting something to be true, and it actually being true are not the same thing.
Even if a whole bunch of your peers say the same thing, it still doesn’t make it true.
I’m not really sure what to say... please go and do some actual research on this topic.
For many years, I have observed that folks in the Bay Area (if I might use that as the shorthand for those at the "top-end" of the technical food chain) tend to dismiss and deride the work further down the food chain, whether that work is "bashing metal" or piecing together business applications.
There are two truths I believe about this work that some do not acknowledge:
1. People who bash metal or piece together business applications have expertise and knowledge that folks higher up the food chain do not have.
Most people who make their living high up the food chain did it by proving they could rise up above those further down the food chain, so it makes sense to believe that this work is beneath them. But the domains are different, and the choice to live high up the food chain necessarily means that one chooses to miss out on experiences and knowledge that those further down the food chain will have.
2. The folks higher up the technical food chain are dependent on those lower on the food chain.
If I might pick up an imperfect analogy: Sharks are higher up the food chain than fish. Fish get bossed around by sharks. But sharks are dependent on fish to survive, not the other way around.
If you think the far east only dominates low-tech widget forming, you should look into where the iPhone and Macbook are manufactured :)
I also know that the iPhone and Macbook are not particularly difficult pieces of engineering and that the tech required to make the shiny bit of tech you see in the store is the bit of the iceberg beneath the waterline that represents a lot of the value in what we are talking about.
If we want to trade vaguely related aphorisms: “Amateurs talk tactics, professionals talk logistics.” The tip of the spear is less impressive than the logistical tail that makes it possible.
and let's not forget disruptive pizza delivery services.
As far as new investments though, China arguably picks their winners and has learned valuable lessons in boosting manufacturing from garage to factory. Their lead in solar manufacturing was astronomical.
The US have also done this, look at how Boeing, HP, Intel, the Auto industry and others had their start. Lots and lots of loans and grants.
If anything our policies are overly conservative and careful with new investment, investing heavily in the "idea factory" models surrounding higher education and subsidiaries. Fortunately that's also led to a large and mostly competent investment community that is willing to bet the farm on new companies.
Comparing the industrial & investment growth to industry in Europe and the ME has informed my view that we do a pretty decent job. Corruption is there, but it isn't the norm that I've see in other parts of the world.
When China plays clear favorites with its companies, the US is forced to compete in tis unfair market.
This is especially relevant for industries that require such an extreme amount of capital to be bootstrapped, that it is essentially impossible for a competitor arise in the market fair and square.
Because "winners" in this sense right now just means "who can build it cheaper" -- and there's no intellectual bankruptcy there. The answer is pretty much always "K, build it cheaper? Build it somewhere else then."
It would be as if in the late 70s deciding we had to subsidize supercomputer and mainframe computer development, to hire all these talented engineers who were wasting time building and programming kit computers and “pc”s that could never be as important to our economy, and our “technological leadership”.
We can’t industrial plan the future.
The market doesn’t care if US democracy triumphs over (or even survives) Chinese state managed capitalism. But I think a lot of us have skin in the game on this one.
China has long recognized the strategic importance of this kind of thinking, see the massive subsidies they provide many of their industries to create the very dependencies you’re crediting as a natural market efficiency.
Semiconductor manufacturing is truly one of the few remaining manufacturing industries in which the USA has a competitive advantage (albeit quite eroded by TSMC over the past few years).
Especially with US aviation circling the drain, this is an industry we can't afford to lose. Removing semiconductors from US manufacturing statistics makes US manufacturing statistics go from "stagnating" to "extraordinary decline".
And it's not just the manufacturing sector. Semiconductors power some of America's most valuable companies (including but not limited to the FAANGs).
US economic and actual security absolutely depends on a robust supply of world-class semi-conductors manufactured on-shore.
Congress should take the advice in this piece and avoid making the same mistake with Intel that it made with Boeing (piling the bulk of all federal and state support for an entire sector into a single clearly dysfunctional company)