Everyone at Micro Industries gets together around July 4 every year to celebrate the fact that we still manufacture products here in Westerville, Ohio. This might sound unusual, since American electronics manufacturing has largely moved to the Far East over the past 30 years. Corporate consultants and Wall Street analysts believed that profits from manufacturing should fund new ventures, in higher-profit growth markets . . . like financial services. We all know where that led—to huge bonuses for executives and Wall Street managers, and to a massive recession for the rest of us. Without reinvestment, a lot of U.S. manufacturing quickly became obsolete, especially in the technology sectors.
One advantage at a privately held company like ours is not needing to worry about any negative reviews from Wall Street. Micro Industries continues to invest in the manufacturing resources that help us remain competitive worldwide. In electronics manufacturing, the cost of labor is only a tiny portion of the overall costs—typically, just 3 to 5 percent. More than 80 percent, however, goes for materials. To stay competitive, we have to shop globally for our components. Unfortunately, this also means that we have to guard against inferior Asian components and a flood of counterfeit parts.
A case study by Charlie Barnhart & Associates shows that when all costs are considered, OEMs have never achieved significant savings by shifting manufacturing to Asia. This was always the case for low-volume, high-mix production. Now, as Asian manufacturers invest in the capital equipment necessary for producing advanced electronics, it’s also true for medium- and high-volume production. And this doesn’t factor in the appalling piracy of intellectual property (think about iPhone clones, for example). If Apple can’t protect its IP in Asia, it’s not very likely that any other U.S. company can, either.
The Fourth of July represents the United States’ great independent spirit. Yet, even as we celebrate, we rapidly become more dependent on a global economy created on Wall Street. Companies make quick profits and executives get obscene bonuses, at the expense of workers and customers. America’s greatness has always been driven by dynamic leaders whose vision disrupted the status quo. Today, though, we see only consensus building to placate a financial model that is devastating the American economy and others. The Information Age has made it possible for our leaders to gauge the response to their decisions even before choosing a direction—which only ensures that we’ll sink deeper into mediocrity.
