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

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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  • No no no no no... (Score:5, Insightful)

    by Robert Zenz ( 1680268 ) on Monday August 22, 2011 @08:56AM (#37166522) Homepage dawned upon them a very long time ago. But at the end of the day they'll get a bigger paycheck if they outsource something to lower the costs. Let's be honest, there's always someone somewhere on this planet who does it cheaper...and now guess what Capitalism is about.
  • by Moryath ( 553296 ) on Monday August 22, 2011 @08:57AM (#37166542)

    Not really. The US used to have much better manufacturing plants than Taiwan, South Korea, China... what happened is that companies decided to outsource for slave-labor wages.

    What is killing US manufacturing now is both slave-labor wages in other countries and the fact that the fab plants have moved there. This wouldn't have happened in the first place if the dickfaced politicians on the take from an elitist multibillionaire class hadn't been so gung-ho on "global free trade", aka Slavery Exported.

  • Outsourcing (Score:3, Insightful)

    by homer_s ( 799572 ) on Monday August 22, 2011 @08:58AM (#37166548)
    Much more destructive than the recent outsourcing to China and India has been the much bigger outsourcing to a place called Technologyville.

    Outsourcing to Technologoville has been going on for close to 300 years now and has destroyed countless jobs, not to other poor people, but to machines. Clearly, CEOs, accountants and other must see the job-destroying evilness that is technology and stop all "outsourcing" to Technologyville immediately.

    Value addition, cheaper goods accessible to more people and an increase in living standards are no reasons to continue this brain dead policy.
  • by Anonymous Coward on Monday August 22, 2011 @09:00AM (#37166560)

    In the USA, people don't want to do things that are hard. They want the quick buck without having to understand the underlying technology. How many USA people really understands the physics behind flat panel displays or rechargeable batteries? Almost none.

    Academics are much more valued in Asia, so that's where people actually UNDERSTAND what's needed to make the core components of a Kindle or whatever. USAians with business degrees and even with software degrees don't understand the things they would need to understand. So it's only natural that the expertise and production moves over there.

    In 1960s it was the opposite: US culture valued science and math, and the USA led the world in those fields. Since then, USA rests on its past while Asia adopted the science/math mindset, and it is kicking USA ass. USA is a has-been nation now and is being drained of all the value it built for itself as wealth and expertise leaves the country.

    You can't change this unless you fix the US *culture* that values ignorance and the superficial and the appearance of things over the depth of things.

  • by Anonymous Coward on Monday August 22, 2011 @09:00AM (#37166562)

    Read the article - it seems you completely missed the point. When you trade entire industries, you are also changing the comparative advantages of the remainder. If you get stuck in a feedback loop you will essentially keep going until you have gutted entire sectors of the economy - this is exactly what the West have been doing for many years.

  • Labor conditions (Score:4, Insightful)

    by aaaaaaargh! ( 1150173 ) on Monday August 22, 2011 @09:10AM (#37166640)

    Here is a suggestion you could make to your local politician:

    Companies selling products in the US or Europe must be obliged by law to ensure that some minimal labor standards are maintained in the whole production chain, including all subcontractors suppliers. If minimum industrial safety and labor protection requirements are violated the management of the company selling to the end-consumer must be held accountable for it and should definitely face prison terms in serious cases.

    Such laws would in the long term help people in countries like India, China, and certain regions of Africa (cocoa plantations, mining, ...), where workers are sometimes held and de facto treated like slaves. In case of cocoa plantations, for instance, there is a market of child slaves in certain region in the world. One child costs around $200. That's why chocolate is pretty cheap all around the world. (I am not making this up! This is well-documented.)

    Anyway, with such laws in place and being enforced, it would become more viable to produce in the US and Europe again. Of course, some products, especially clothes and chocolate, would also become much more expensive.

    Software is another matter. I don't believe Indian programmers are treated significantly worse in terms of working conditions than elsewhere, and salaries are relative, of course.

  • China's currency (Score:5, Insightful)

    by MrKaos ( 858439 ) on Monday August 22, 2011 @09:12AM (#37166650) Journal

    The Yuan is not floated like many countries currencies are. This gives China a significant competitive advantage over all countries to produce goods and services in their country. China take the long view. They know that his will weaken manufacturing in several countries and drive demand to their economy where labour laws and conditions are under their control. Incrementally they will capture those markets.

    The irony in all this is that China is still a communist country using capitalism to destabilise democracy.

  • by houghi ( 78078 ) on Monday August 22, 2011 @09:22AM (#37166726)

    aka Slavery Exported.

    Would it have been better if that slavery would not have been exported?

  • by Charliemopps ( 1157495 ) on Monday August 22, 2011 @09:28AM (#37166770)
    Politicians are always toadies. They are here, and they are in China.
    Irrelevant of government regulations, bad business leaders WILL find a way to fail. It's what they are good at.

    In most of these cases, wages aren't the driving force behind cost of manufacture. It's environmental regulation. In the US water is more expensive, electricity is more expensive, waste removal is more expensive, and most importantly, proving you meet all the environmental guidelines is expensive. Where-as, in Asia you build your plant next to a river for convenient removal of waste... free water... electricity is practically free from coal fired power plants. No government official ever shows up for an inspection.

    Even if our politicians cared (and they don't) how would they ever regulate us into a position to compete with that? And yes, you're going to rattle of a bunch of stuff that all comes down to implementing tariffs... which would be horrible for our economy, China would see as nearly a deceleration of war, and our government would use the proceeds of to invade another middle eastern country.

    It's not a problem the government can (or wants to) solve.
  • by DrXym ( 126579 ) on Monday August 22, 2011 @09:28AM (#37166776)
    The problem with outsourcing is often the savings are illusory. I worked in a company that moved a pile of work to new offices they built in India. Indian workers got paid less which means greater savings right? Except the Indians were joining and leaving as if the place was a revolving door. No knowledge was retained at all. They'd stay long enough to get their free trip to the US or whatever perk and then leave for somewhere else. On top of that the quality of work was very poor, there was zero initiative by staff to improve or take tasks on by themselves. It meant someone in a different office had to hold these guy's hands and practically dictate a solution otherwise you got shit. In the end the penny dropped that this thing was a disaster and they sold the entire operation to an outsourcing firm. The sad part is they continue to use the outsourcing firm for production support.

    I think there are times when outsourcing works, but looking at the balance sheets is not necessarily a good indicator. I also wonder why the US or Europe tolerates the situation the way it is. That enormous deficit is in part because the US has gone from being a producer to being a consumer. One would have thought that tipping the scales the other way would be a huge priority of any government. And if that means leaning on the likes of Amazon through cajoling & encouragement then so be it.

  • by vlm ( 69642 ) on Monday August 22, 2011 @09:33AM (#37166802)

    aka Slavery Exported.

    Would it have been better if that slavery would not have been exported?

    Yes, because the bleeding hearts couldn't stand seeing it locally, so they got rid of polluters, sweatshops, abusive management. IF we could export those guys to China, they would clean up China, which is pretty much a hellhole. Better than it was 10 years ago, but still a hellhole..

  • by Charliemopps ( 1157495 ) on Monday August 22, 2011 @09:37AM (#37166838)
    And we'd prove what happened in a foreign country how? Oh that's right, we couldn't.
  • by Anonymous Coward on Monday August 22, 2011 @09:53AM (#37166964)
    And what do you do for a living, exactly? More to the point, what do you do with your weekends? Thank a union member for that.
  • by bkmoore ( 1910118 ) on Monday August 22, 2011 @09:59AM (#37167016)
    There's no reason Taiwan, South Korea, or China couldn't build good airplanes and undercut Boeing. All of these countries clearly have the engineering and industrial capacity to do so. The main reason they haven't done so, IMHO is due to the high startup costs associated with designing, manufacturing and certifying a passenger aircraft. It would be very difficult to bootstrap a new commercial aircraft business without some form of government support, or some very deep-pocketed investors who are willing to take on a lot of risk. Instead, these countries are gaining more and more work from EADS or Boeing, often as a pre-condition for sales to their national airlines. Through this work, they are developing engineering and production experience that will some day be used to compete directly against Boeing and EADS in the same way that ASUS took over most of Dell's business one bit at a time in TFA. Boeing has outsourced a significant amount of the development and production on the 787. Fortunately, or unfortunately for Boeing, designing and building aircraft components is very difficult and Boeing had to move a lot of the contracts back in house. It will probably take China another decade to build an indigenous commercial aviation industry, but I am confident that they will eventually do so.
  • by Lumpy ( 12016 ) on Monday August 22, 2011 @10:01AM (#37167026) Homepage

    Exactly! How dare those damned poor ask for a wage where they can afford rent AND food.

    The audacity of it all... Rent AND Food? Next hey will ask for heat and running water. WE need to just put them all down for the sake of humanity.

    I have to waste time today hiring a Plant manager to beat my employees... The last one developed tennis elbow from swinging the bat the wrong way so I had to fire him.

  • by Lumpy ( 12016 ) on Monday August 22, 2011 @10:05AM (#37167056) Homepage

    Fact: if you want to retain employees you have to treat them well and pay them well.

    Problem: most (worthless) management does not give a rats ass about this. as this problem does not affect their 90 day outlook. Competent management does realize this and works to limit the impact.

  • short memories (Score:5, Insightful)

    by glebovitz ( 202712 ) on Monday August 22, 2011 @10:10AM (#37167106) Journal

    The arguments that retooling is hard, just doesn't make it. Planned retooling is now designed into the manufacturing process. The U.S. helped develop the the Japanese manufacturing base by ignoring Demming. The Japanese were known for poor quality, so even with their lower labor rates. The Japanese improve their quality by following Demming and eventually overtook U.S. manufacturing and steel production. The remaining U.S. industries learned to focus on statistically analysis integrated quality control, and designed retooling became part of the process. So what drives the decision to outsource: 1) lower environmental standards, 2) lower overall employee costs, 3) tax benefits, 4) economic stability.

    I think the underlying article hits the problem straight on. These economic factors are enticing from a cost accounting perspective, but not from a competitive one. Eventually, the knowledge is transferred to the low cost producers and they no longer need the costly U.S. managers to drive the business. We see that now with the rise of Haier and Chinese manufacturers who are beginning to dominate the lower end market. Eventually, they will displace the high margin businesses.

    The U.S. main advantage in the past has been easy access to capital via efficient markets. With the current crisis and the idiotic standoff over debt, these markets may give rise to competing capital markets in SE Asia. The Chinese are flush with cash and it won't be long before they start to bypass the Western capital markets.

    So what do we do? First, stop letting corporations drive the political agenda, because their short term focus is killing our industry. If we changed our focus to research that will enable lower cost production even with high labor rates, we can pull back manufacturing. This will have to be done at a grass roots level, because Wall Street will not invest in this kind of retooling when they can invest in companies that outsource. This means that we need to stop electing corrupt corporate lackies and uneducated religious nutcases, and change the rules so we encourage companies to invest here. Here a though, remove ALL corporate loopholes, and offer tax incentives only to those companies that in-source production and service jobs. Offer tax breaks to companies who invest in basic research programs that will innovate product and keep the technology here. This incentive can extend to University research which is most corporate funded anyway.

    If you believe our problems stem from big government and the fear of socialism, then you are an idiot. Socialism is beating the f..king pants off of us right now, so that can't be the main issue. We as citizens must drive the political agenda and encourage Wall Street to invest in companies who develop our local economies. Otherwise, start learning Chinese because they are destined to be your overlords.

    It isn't Unions, socialism, or big government that is killing us. It is the short term thinking of Wall Street. Once Wall Street was temporarily taken out of the picture at GM where they perpetuated a management culture that was adverse to change, the company was able to shed its high cost assets and return to profitability. In essence, it took government action to force the correct change in direction.

  • by DrXym ( 126579 ) on Monday August 22, 2011 @10:50AM (#37167480)
    I think it was more likely a symptom of a lot of western companies jumping on India as the solution to their problems. All at once. Workers were in demand and could literally hop from one big multinational to another because they were all constantly hiring. Spend six months in a place, stick it on the CV and head off to the next firm. Rinse and repeat.

    As for the other factors, no I think it was more a cultural thing. I supervised maybe half a dozen projects going on in India and proactivity was non existent. I was constantly asked "how do we fix this?", "what do I do?" etc. Never once did anyone come to me and say they'd found a problem and here was how they were thinking of fixing it. That's something I can appreciate since it suggests someone who knows what they are doing. I may as well have done the projects myself the amount of handholding I did for them. Projects would take 2-3x as long as they should have and would have.

    I don't think management thought this all the way through. To them it was all about daily rates not realising it probably cost more in time and bug fixing / maintenance of poor code.

  • by Quiet_Desperation ( 858215 ) on Monday August 22, 2011 @11:37AM (#37167930)

    The problem is that even if unions led to good things in the past, you have to recognize that they can also go very, very wrong. To be 100% pro union or 100% anti union is an unthinking position. People in those camps are no better than a cardboard sign.

    I guess people want to work 12-18 hours a day, every day... and that is just their kids in the coal mines who will get black lung disease before 18.

    I'm sorry, but that is just a fuckheaded thing to say. No, people are seeing some very corrupt and broken unions today, and want it fixed, but people like you can't raise yourselves out of the muck of extremist bullshit rhetoric. It's all false dichotomies and dilemmas with you people.

    Nothing is perfect, but unions have made life a lot better than it was before. But because they are unions and get in the way of profits, I guess they are bad.

    Can you not even understand that they can be both? That different unions are different things? You demonstrate the #1 problem with this country today. No one can see any nuance or individuality. Instead of seeing the different unions out there and judging them individually, it's just "DERP! UNIONS GOOD!" and "DERP! UNION BAD". You are part of the problem. I hope you're fucking proud of yourself.

  • by gtall ( 79522 ) on Monday August 22, 2011 @12:29PM (#37168440)

    I bought a Sears lawn mower over 20 years ago. Last year, the plastic spokes on the rear wheels started cracking, the friendly Sears parts and service on-line had replacement wheels. I bought those wheels rather than a new mower because I cannot buy a new mower with such large rear wheels any longer (at least in the U.S.).
    The large rear wheels allow one roll over mole holes and such. I just recently stumped for a new engine for my trusty lawn mower, again Sears on-line had it.

    That sort of service from Sears has got to be expensive, I will sorely miss Sears when it goes the way of the dodo because Americans cannot be arsed to fix a quality piece of equipment rather than buying some cheap foreign replacement.

  • by HornWumpus ( 783565 ) on Monday August 22, 2011 @01:35PM (#37168962)

    The competition for cheap foreign labor is not cheap domestic labor.

    It is highly automated manufacturing.

    Robots cost the same in China and the USA. Most are currently not made in China.

  • by aix tom ( 902140 ) on Monday August 22, 2011 @01:57PM (#37169160)

    That reminds me of my German build washing machine, still working at 30 years old.

    I always *think* about buying a new one, since the program settings have become a little erratic any you have to turn the dial very carefully, but the company that made it has since moved all manufacturing to china, and from what I hear they only last a few years now.

Whenever people agree with me, I always think I must be wrong. - Oscar Wilde