Andy Grove has done his homework. The former chairman and CEO of Intel knows a lot about technology and innovation. About taking risks. And about manufacturing.
He also knows a lot about the American high-tech job market. In fact, he’s the source of all of the data in a chart that accompanies his bylined article (“How to Make an American Job Before It’s Too Late") in a recent issue of Bloomberg Businessweek that shows that the cost of creating U.S. jobs grew from about $1000 in the early 1960s (Hewlett-Packard was Grove’s example here) to a hundred thousand dollars today. (Google gets the nod here in the chart.)
Grove says the cost of creating new jobs is growing because companies simply hire fewer employees as outside contractors do more work, usually in Asia. He was barely into his second paragraph before mentioning that Bay Area unemployment is even higher than the national average and that the great Silicon Valley innovation machine hasn’t been creating many jobs of late—unless you’re counting Asia, which has been adding jobs and people to fill them for years.
HR executives in the Asia-Pacific (APAC) region complain that the job market is very competitive. Foxconn, which has been in the news lately, employs more than 800,000 people. That’s more than the combined worldwide workforce of Apple, Dell, Microsoft, HP, Intel, and Sony, Grove points out.
So who’s responsible? In this industry, just about everyone. Who isn’t trying to get their products out faster and cheaper, or trying to get a leg up in the Chinese or some neighboring market?
Applied Materials, Analog Devices, Agilent Technologies, and Adlink Technology are just a few of the American companies that have recently opened or expanded their APAC operations in recent months. Almost everyone is hiring as they upgrade both their design and manufacturing activities in the region.
Grove is a free-market guy. He says we’re oblivious to emerging evidence that while free markets beat planned economies, there may be room for a modification that is even better. He believes the relentless push by U.S. companies to move manufacturing overseas breaks the innovation and job-creation chain.
But he sticks his neck out a little bit when he makes a few suggestions for change, starting with the “room for a modification.” For example, he says the government might consider levying an extra tax on products produced offshore, even though, as he admits, it sounds protectionist. If the result is a trade war, treat it like other wars, says Grove—“fight to win.”
He also talks about scaling, citing advanced batteries where offshore sources clearly have the jump on the U.S. because, says Grove, we let them. “Knowhow accumulates,” he says. “Experience builds on experience, and close relationships develop between suppliers and customer.”
But the U.S. lost its lead in batteries 30 years ago when it stopped making consumer electronic devices. For Grove, it’s bad enough that the U.S. can’t meet the demand for batteries in the PC market. What about missed opportunities in new, mass-produced electric cars and trucks?
Grove believes that manufacturing is undervalued. Again using the battery analogy, as Grove says, abandoning today’s “commodity” manufacturing can lock you out of tomorrow’s emerging industry. (Didn’t Radio Shack used to make a big deal about the fact that it was a manufacturer—remember Tandy computers?—and a retailer and therefore had the advantage of knowing what its consumers wanted and how to more intelligently price products?)
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The idea that what happens to factory jobs doesn’t matter as long as “knowledge work” stays in the U.S. doesn’t matter doesn’t fly in Grove’s book. By no longer making television sets, for instance, Grove says we broke the chain of experience that is important to technological evolution.
But wouldn’t bringing manufacturing jobs back to the U.S. boost the price of PCs, smart phones, and so many other products that America’s consumers enjoy? Even Grove admits this might be naïve given the financial pressures venture capitalists and technology executives are under from directors and shareholders.
Are we going to keep buying stuff we invented from offshore manufacturers and face the prospect of giving up our competitive edge in technology in the process? Probably, but we do so at our own risk, Grove suggests.
And what about protecting our so highly vaunted innovation? Apple has sued its rival smart-phone maker and giant Taiwan-based HTC for allegedly infringing on 20 of Apple’s patents related to the iPhone’s user interface. HTC CEO Peter Chou’s response to the suit: “It’s part of business.”
Do American consumers, the beneficiaries of the best technology money can buy, ever think about these issues—including those who haven’t been able to find a job in more than a year? Not likely, even though twice in the past few weeks I mentioned to someone with a Droid Incredible smart phone (produced by HTC) that the new Droid X (produced by Motorola) will soon be available. Their first question was, “HTC or Motorola?”
What’s increasingly disturbing to many Americans (including, no doubt, Grove) is that the Asian companies barely compete with the U.S. anymore. They’re competing with each other for the biggest market share and the best engineers to build the strongest economies in the region, largely through the growth and strength of their manufacturing. To do that, they must rely heavily on American technology.