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Why Amazon Can't Manufacture a Kindle In the US 598

Posted by Soulskill
from the american-line-workers-try-to-eat-them dept.
theodp writes "Ever wonder why all those job listings for Amazon subsidiary Lab126 — the internal group behind the Kindle and, by all accounts, an upcoming Android tablet — have travel requirements? Over at Forbes, Steve Denning explains why Amazon can't make a Kindle in the U.S., and why that really does matter. 'The idea that there is a lot of outsourcing going on is hardly news', writes Denning. 'The idea that it is irreversible and destructive of the economy's ability to grow is less well known. Even so, it's not exactly new news: the HBR article that I cite is two years old. What is really new news is that (1) these fairly obvious truths haven't yet dawned on economists at the Federal Reserve Bank of San Francisco, CEOs, accountants, politicians, among others and (2) the way to manage in a radically different way to deal with these issues is now more fully articulated than it has been before.' Denning concludes his trilogy-of-management-terror by noting that the decline is also occurring in software."
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Why Amazon Can't Manufacture a Kindle In the US

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  • by Joe_Dragon (2206452) on Monday August 22, 2011 @09:02AM (#37166582)

    Over seas they still have the company store where part of the works pay go to having to pay to live at the factory and also where they don't need to spend on safety.

    China factory's are like the factory's of the past in the USA.

    As for software india code is a big mess.

  • Pure BS (Score:5, Informative)

    by afidel (530433) on Monday August 22, 2011 @09:19AM (#37166714)
    The highly polished injection-molded case is made in China because the US supplier base eroded as the manufacture of toys, consumer electronics and computers migrated to China.

    Considering I've worked on advanced injection molding machines IN the US this is such pure bullhockey.

    The controller board is made in China because US companies long ago transferred manufacture of printed circuit boards to Asia.

    Another BS line, again I've worked with an assembly line making PCB's and finished boards, right here in the midwest.

    The Lithium polymer battery is made in China because battery development and manufacturing migrated to China along with the development and manufacture of consumer electronics and notebook computers.

    The worlds largest lithium-ion battery facility is just being finished outside Dearborn, Michigan right now.

    This whole article reads like some rant by a coastie who has no idea that we still make things here in the midwest, and if the MBA's would stop deciding to chase short term profits at the cost of long term brand erosion and control we would be happy to keep doing it. Over the next decade increased fuel costs paired with a decoupling of the Chineese Yuan from the dollar will lead many companies to pull manufacturing back to the US.
  • by fuzzyfuzzyfungus (1223518) on Monday August 22, 2011 @09:21AM (#37166724) Journal
    Software and high speed pizza delivery...
  • Re:Pure BS (Score:4, Informative)

    by bberens (965711) on Monday August 22, 2011 @09:43AM (#37166890)
    I'm glad someone said it. The United States manufactures more today than it has at any time in history. It's just that technology improvements mean we do it with a LOT less people. Slave wages mean anything that's not easily automated is outsourced. The primary reason manufacturing has shrunken so much as a percentage of our economy is due to the financialization of the economy that started in the late 80s/early 90s.
  • Re:Outsourcing (Score:4, Informative)

    by sesshomaru (173381) on Monday August 22, 2011 @09:45AM (#37166918) Journal

    Completely, missed the point:

    The story is told in the brilliant book by Clayton Christensen, Jerome Grossman and Jason Hwang, The Innovator's Prescription :

    ASUSTeK started out making the simple circuit boards within a Dell computer. Then ASUSTeK came to Dell with an interesting value proposition: 'We've been doing a good job making these little boards. Why don't you let us make the motherboard for you? Circuit manufacturing isn't your core competence anyway and we could do it for 20% less.'

    Dell accepted the proposal because from a perspective of making money, it made sense: Dell's revenues were unaffected and its profits improved significantly. On successive occasions, ASUSTeK came back and took over the motherboard, the assembly of the computer, the management of the supply chain and the design of the computer. In each case Dell accepted the proposal because from a perspective of making money, it made sense: Dell's revenues were unaffected and its profits improved significantly. However the next time, ASUSTeK came back, it wasn't to talk to Dell. It was to talk to Best Buy and other retailers to tell them that they could offer them their own brand or any brand PC for 20% lower cost. As The Innovator's Prescription concludes:

    Bingo. One company gone, another has taken its place. There's no stupidity in the story. The managers in both companies did exactly what business school professors and the best management consultants would tell them to do--improve profitability by focus on on those activities that are profitable and by getting out of activities that are less profitable.

    Dell's management shortsightedly completely self-destructed their company by not hanging on to any of the necessary key components for manufacturing a computer. Eventually the firm they outsourced to said, "Why do we need to kick profits back to Dell?"

    Sure Dell wanted more profits, but they didn't want to create a competitor who could absolutely destroy them in the market place, and in no way was that a good business strategy for Dell.

  • Re:Pure BS (Score:3, Informative)

    by Anonymous Coward on Monday August 22, 2011 @10:02AM (#37167032)

    This comment is also bullshit. I am a mechanical engineer in the chemical industry and our manufacturing facility in Georgia (of all places, right?) is the top producer of small hydrogen plants. We have over 200 of them in almost every country in the world that has an industrial base. While we build a lot of our equipment in other countries (if a plant is in China, we do some of the work in China), we still manufacture the most important pieces of equipment here in the USA.

    Why?

    1) Chinese and Indian engineers are not consistent. Their education levels do not compare to American or European counterparts. If you have an engineer in India or China, he could be totally brilliant or equivalent to a high school student in physics. It's completely variable and usually closer to the high school student.

    2) Their computer workmanship is horrible. You should really see some of these CAD drawings I have to check. It looks like someone was learning AutoCAD using our money

    3) Their manufacturing workmanship is horrible. They do not understand what quality means. All the Chinese understand is fast and cheap. They don't understand that welds need to be radiographed to make sure they don't explode. They don't understand that I put a 1" weld on a pipe-to-pipe joint because it needs it to make sure the plant lasts 30 years. They see 1" as being a mistake and put a 1/4" weld on there. It costs us almost $100k to send inspectors to China to make sure the shit they're building is safe to operate.

    4) They have no sense of efficiency. You should see the pipe fitters try to put something together. There are no pipe stands or jigs or anything else that would make life easier. They lay on the ground and weld overhead instead of building a quick jig to aid in doing fifty of the same weld joint. There whole answer is the throw people at any problem.

    5) They will steal your IP. Everything we build in China we expect will be copied.

    Lastly, people need to shut up about this US regulations kills jobs thing. Maybe we do go overboard on some things, but have any of these people ever engineered anything in another country? Even--gasp--China has regulations. The vast majority of regulations that American engineers deal with are self-imposed, like the ASME codes and we only do this to make sure what we create isn't destroying human life more than helping it.

  • by Sycraft-fu (314770) on Monday August 22, 2011 @10:15AM (#37167146)

    Look on Slashdot, any time an economics article comes up, there'll be people who post, and often get moderated up, who declare that the "US doesn't make anything anymore except imaginary property." That is of course not just false, it is exceedingly false. Until this year, the US made more manufactured goods than any other nation. China now makes slightly more than the US, but the US still makes more than anyone else (by a reasonable margin).

    There's no question that there is a large amount of outsourcing going on, but this make-believe that the US doesn't make anything, particularly anything high tech, is beyond stupid.

    My favourite example is always processors. Intel has fabs in a few other countries but most of their fabs (7 of 10) are in the US. All their 32nm stuff is in the US and nealry all their 45nm stuff. So if you buy a modern Intel CPU, it was fabbed in the US. It was tested and packaged somewhere else most likely (though they now have a US packaging site for things sold in the US mostly) but the high tech work, the fabrication, was done in the US.

  • Short term idiot (Score:5, Informative)

    by SmallFurryCreature (593017) on Monday August 22, 2011 @10:20AM (#37167196) Journal

    The US used to be better at manufacturing electronic components then the US. This is no longer the case.

    How long do you think it will be before the US is no longer top dog in making planes? Tell me... which is the biggest passenger plane in the world? Airbus came out of nothing and is build with EXPENSIVE european workers and the US can barely compete. How do you think it will fair against Chinese build aircraft in 2 or 3 decades?

    This discussion is nothing new, a few days ago I asked people to name a US consumer electronics firm. People named Motorola (been selling off its divisions since the 70's to asia) and Apple (a design company that has everything build in Asia).

    There is the dream in the US that you can outsource all the drudge work and keep marketing, sales and design... and run the economy on that. 300 million people, all selling, marketing and a handful of designers...

    If you can't see just how silly this concept is, well, then there is no hope for you. Vote tea party and pray the end comes swift.

  • by jmactacular (1755734) on Monday August 22, 2011 @10:22AM (#37167214)

    "Slave-labor" wages are really a matter of perspective, based on your personal standard of living. The people filling these jobs, particularly in China, are from rural areas, who take them because they are a substantial increase in pay for their family from what they as farmers were making toiling over fields. As hard as the manufacturing work seems to us in America who comparatively have it pretty easy, isn't sitting in a chair putting electronics together somewhat less back-breaking work than bending over harvesting crops all day?

  • by iamhassi (659463) on Monday August 22, 2011 @11:02AM (#37167616) Journal

    Which also happens in the US.

    Apple are the heavyweight in cheap consumer electronics, and American owned. We should be asking why they aren't building in the US, especially as most of what they "build" is putting together other companies' components.

    And we should be defining what "make (or made)" and "build (or built)" mean. If I buy a motherboard from taiwan and build a computer from it in the US, is it "Made in America"? What if the motherboard is from taiwan, CPU from Arizona [wikipedia.org], hard drive [seagate.com] and case [alibaba.com] from China, power supply from California [usstuff.com] and I build the computer in Dallas, is it "Made in America"? What if the parts are mostly from the US but they're assembled in Mexico, what is that? And we can take it further, what if the parts are made in the US but the rare earth elements used in those parts are from China, [yale.edu] where is it "made"?

    Car manufactures have been playing this game for years, [wsj.com] buying parts from overseas but assembling the car in the US and calling them "American made". It's so bad that there's a American-Made Index [cars.com] where they rate cars based on how many of their parts come from the US and vehicles like the Toyota Camry and Honda Accord are more "American made" than the Chevy Traverse or Ford Explorer and American icons like the F-150 and Silverado don't even make the list, so people buying trucks from Ford or GM thinking they're supporting America really aren't, they'd be better off buying a Toyota Tundra.

    Obviously if the metal, chemicals and other rare materials were mined in the US to make the parts in the US used to assemble the device in the US then it's 100% American made, but that's almost never going to happen so we need to clear this up before we can call something "Made in America".

  • by Sycraft-fu (314770) on Monday August 22, 2011 @11:07AM (#37167662)

    The A380 has sold for shit because there just aren't many routes where carriers have a use for a plane that big. You have to have a lot of passengers that want to go on one flight to make it a worthwhile purchase. Thus currently they have had a total of 236 orders and delivered 56 jets, and the ordering seems to have dropped to near nothing (they've had 2 this year).

    Now compare that to the Boeing 747, which has a total of over 1,400 delivered, and 114 orders for their new variant, the 747-8, which is still in final testing, and another hundred orders for older variants.

    Or how about the Boeing 787, their next generation mid body plane? Expensive little thing, because of all the carbon fibre, and has had more than a few delays in delivery (if it gets certified it'll start shipping fourth quarter of this year). Yet despite that they still have 827 orders for the thing.

    Seems like Boeing is doing just fine when it comes to aircraft, in particular making aircraft companies actually want. Remember that having the biggest doesn't mean anything. Who cares if you can make a big jet? Biggest for its own sake isn't useful. The A380 has been a pretty big boondoggle. The R&D cost was about 11 billion euro. They are still in the red on it, and will be for quite some time, perhaps until 2020. They made a jet that cost a lot to design and there isn't a big market for.

    Remember the A380 started in 1991. 2 years later, Boeing discontinued a similar project because they felt the demand wasn't there.

  • by DavidTC (10147) <slas45dxsvadiv.vadivNO@SPAMneverbox.com> on Monday August 22, 2011 @11:14AM (#37167722) Homepage

    At least they won't pay attention until so many jobs have left America that people are so poor they can't find a job and can no longer afford their iPhone/Droid/Etc anymore. Not to mention not being able to afford to buy a car, or pay your mortgage/rent, etc.

    To quote Douglas Adams: There is another theory which states that this has already happened.

    Specifically, it happened about 10 years ago. But luckily, the banks were willing to give us mortgages we couldn't pay. (Due to complete and utter insanity on their part.) If people needed more money, heck, they could just get a second or third mortgage and get money from there.

    Tada. Problem solved forever.

    This will of course cause everyone to ignore the fact the economy is actually getting worse and worse, because they personally can continue to survive. They're falling deeper and deeper in debt, but surely that's just them and not some sort of nationwide statistical truth. (What if we held a slow-motion economic collapse and no one notices?)

    As long as the banks don't figured out that the mortgages they've been issuing are shit, and just because they put them in complicated financials Shit-Holding Instruments doesn't mean they still aren't shit. As long as that doesn't happen, the 'economy' is great...sure, the actual 'producing things' sector is gutted, but people can borrow from the banks and work min wage jobs selling Chinese stuff to each other. Actual economies can't work like that, but as long as the banks keep ignoring that and loaning to us, we'll be fine.

    Let's hope no one ever, Wile E. Coyote-style, looks down and realizes they're standing in mid-air.

    *checks the news*

    ...oh, FUCK.

  • by sjbe (173966) on Monday August 22, 2011 @12:23PM (#37168376)

    How long do you think it will be before the US is no longer top dog in making planes?

    It will be quite a while (if ever) before the US does not have world class aircraft manufacturing. There is of course no guarantee that the US will maintain dominance in this industry but it isn't going to go away quickly.

    Tell me... which is the biggest passenger plane in the world? Airbus came out of nothing and is build with EXPENSIVE european workers and the US can barely compete.

    Airbus has been around since 1970 and was form out of a consortium of existing aerospace manufacturers - hardly out of nothing. I'm pretty sure that the folks at Boeing would be very surprised to hear they they cannot compete with Airbus. The 747 is built with expensive US labor and Boeing is still selling plenty of those. Both companies have delivered similar numbers of planes for the past 20 years and there is no reason to believe that will change soon. The fact that the A380 is larger means very little by itself.

    There is the dream in the US that you can outsource all the drudge work and keep marketing, sales and design... and run the economy on that. 300 million people, all selling, marketing and a handful of designers...

    The US has a $3.7 TRILLION manufacturing sector. That is larger than the GDP of all but about 5 countries in the world. Even China does not manufacture anywhere near as much stuff as the US does. The notion that the US has exported all its manufacturing is simply not supported by the facts. There are (and always have been) some industries that are dominated by firms in other parts of the world. That does not however translate to the US outsourcing all its manufacturing expertise.

  • by LynnwoodRooster (966895) on Monday August 22, 2011 @08:08PM (#37173390) Journal

    They "choose" to live in a dorm style environment"? Are "free" to look for other work?

    Yeah right. And Marie Antoinette's peasants were free to eat cake.

    Also, you're free to go fuck yourself. Moron.

    Hi there - I live and work in China, a free-lance engineer and production consultant, mainly for US and EU companies looking to use production in China and Thailand (I specialize in both countries). Been doing so for 7 years now, mainly in the Shanghai area (Wuxi down to Ningbo, out into Zhejiang province) in China, and the Bangkok-to-Chaiyaphum corridor in Thailand.

    For background, I've set up and run my own manufacturing facility in the US, and done the same in Belgium and Chile (the latter two on a contract basis).

    Most Chinese factories offer free room-and-board for their employees; it is not mandatory, you're free to live off-campus. However, that means you'll also have to pay for those things - and since most factory workers are planning to only stay in the factory for 5-7 years, saving every kuai they can so they can start their own business or buy a house when they move back home, they choose the dorms. Some factories will give you a small stipend for off-campus housing if they do not have space in the dorms for you, but if you choose to not stay in the dorms and there is space available - you're on your own.

    Living in the dorms and eating in the cafeteria, you also typically get first-shot at all overtime work (which, by law, pays 1.5 times). Here in Shanghai, minimum wage (taxable) is 2388 RMB per month; add in typical 12 hours of overtime, and your costs are essentially zero (company provided uniforms are normal), and you can save upwards of 2500 RMB per month - basically your entire salary. Do that for 7 years, and you'll head home with 200,000+ RMB - enough to buy a small home in most of the smaller villages, or buy a car or truck or tractor, or start a nice little business. Which is really the dream of most of the production workers I've spoken with over the last several years.

    Most of the larger factories actually have hiring fairs - trying to entice quality workers to come and work for them, especially with higher-than-normal bonuses for those who do jump ship - it's part of the reason 10-12% of the production workforce moves every year. You get more money when you move, so you jump around every year, earning more and more. Most places have a shortage of decent workers - and by that, I mean workers who can actually read and learn new skills (basics like soldering, gluing, inspection, stuffing through-hole components, turning screws, etc).

    However, actual labor costs for most modern production is a very small (like less than 4%) part of the overall cost; raw materials dominate, and the savings in labor is almost always offset by shipping and tariffs on imported products to the US. On a typical iPhone-type product, labor accounts for maybe $6 of the cost; if it was done in the US, the direct labor cost would add something like $2 to the labor cost (based on the productivity gain of US labor relative to Chinese labor). Labor costs really don't drive offshoring in manufacturing.

    For higher end workers, say programmers at Microsoft of Oracle, or engineers at GE and TI, salaries in China are very close to what is paid in the US - perhaps just a 10-15% cost savings in labor when all is said and done. Knowing some higher-level managers at Microsoft in Shanghai, and the salaries paid in Shanghai relative to Redmond, you really don't save much, if any, by using Chinese labor.

    So if you don't really save on labor costs in any meaningful way, why do companies work in China? Simply put - taxation. China and Hong Kong (which, contrary to most Western beliefs, really is pretty much independent - sure, it flies the Chinese flag and is nominally Chinese, but it has its own currency with its own exchange rate, its own passports, its own legal system, its own tax structure, and Chinese nationals need a special

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