iPhone lesson for our economy

There is a lot of reaction to a recent NY Times article on Apple’s production of iPhones in China.  It is a very important article for a number of reasons.  The most significant, IMO, is the recognition that these sorts of products for mass markets are not going to be produced domestically.  We can argue as some do about whether we should be trying to retain low skilled, low wage domestic manufacturing jobs, but the salient point is that the Chinese (and soon others will follow) are basically subsidising our consumer based economy through their industrial policy. 

Under these conditions, brands and developers of consumer products are acting rationally by moving manufacturing overseas.  We will not be successful competing against manufacturing firms in countries like China that use industrial policies to stimulate their economies.

The larger lesson for the domestic brands is not to fight this inevitable trend – rather to take advantage of this trend.  We can grow our economy through innovation and commercialization of technologies in which the US leads the world.  Let the manufacturing of high volume, low value devices go to those countries who need to grow their own economies through exploiting economies of scales.  We should emphasize the start-up and creation of advanced technology products and custom services.  And we should shift our remaining industrial production to focus on high value, low volume custom engineered products. 

Amazingly enough the US still manufacturers a tremendous number of products that are consumed domestically or exported.  And Los Angeles still ranks as the leader in domestic manufacturing.  It is incumbent upon us to continue to invent and innovate for mass consumer products even though those products will be manufactured elsewhere.  And we should continue to focus on the design, engineering and production of custom products locally.

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About johndmo

Serial Entrepreneur, Cleantech Mentor, Executive Coach, Executive Confidant and start-up consultant View all posts by johndmo

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