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10
Manufacturing Globalization: Is the Glass Half Full or Half Empty?

Margaret Eastwood

Motorola

GLASS HALF EMPTY

If you walk through almost any store today and read the labels on the merchandise, you will find: “Made in China”; “Made in Indonesia”; “Made in Mexico”; “Made in Hungary.” Whether you are in a toy store, an electronics store, a sports store, or a general department store, chances are there will be fewer items labeled “Made in the USA” than ever before. From the viewpoint of the U.S. economy, it is very easy to think of the globalization of manufacturing as a “glass half empty.” Newspapers report on U.S. balance-of-trade deficits, factory closings, and big job layoffs at the same time that they advertise the products from many countries that are in demand by U.S. consumers.

Two primary factors are responsible for the movement of manufacturing to sites outside of the United States: substantially lower labor costs and production of acceptable quality. Lower labor cost has always been available elsewhere, but previously it was often paired with substandard goods that did not meet minimum customer expectations. Today, this has changed, and many non-U.S. factories produce products with equal or superior quality compared to U.S. factories.

The electronics industry is an example of an industry that has experienced a shift in manufacturing locations in recent years. In the early 1990s, semiconductors, computers, cell phones, and similar products saw an upsurge in both their market and production in the United States. It seemed as though technological advances were being introduced daily. Computers and cell phones evolved from big-ticket special purchase items shared by the entire family to must-have items acquired for every member of the family. Semiconductors proliferated in everyday items from microwave ovens to automobile airbags. Initially, the majority of these products were produced in the United States. Production swelled for a number of years, only to be cut back near the end of the decade as competitive pressures forced the transition to lower cost locales. Factory closings in the United States followed, along with the loss of many jobs.

It can be argued that the loss of these jobs was not necessarily a bad thing, if it is assumed that they were all held by unskilled workers, laboring at mind-numbing assembly lines in unpleasant, hazardous environments. For several reasons, however, that is not an accurate assessment. First, state-of-the-art electronics factories in the United States today, particularly those owned by large, multinational companies, have a very sophisticated workforce probably running a highly automated line in a clean environment complying with demanding health, safety, and environmental regulations. Less obvious, however, are the vast number of degreed engineering jobs and research and development infrastructure organizations that were added and then lost during this same decade. Those engineers were the primary source of innovation and competitive advantage in the industry. Manufacturing engineers created new processes,



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