Why Everything is Made in China & What it Means for U.S. Jobs

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Virtually everything today is manufactured in China. While it used to be that gadgets, gizmos and other products were made in the U.S., Taiwan or a brand's home country, businesses are now outsourcing mostly to manufacturing facilities in China. Amid calls for offshored jobs to return to local soil, will China retain its advantage in this industry?

If you inspect the label on your iPhone, iPad or other tablet or smartphone, it's most likely Made in China. These days, "designed in Cupertino" will mean a device has been conceptualized and designed at a brand company's own premises, but almost always manufactured in a facility in China. This has been the case for some time now, although a series of articles published by the New York Times seems to have brought the issue back into the limelight.

Bring Back the Jobs

It reportedly stemmed from a conversation between U.S. President Barack Obama and the late ex-Apple CEO Steve Jobs about how manufacture of the iPhone and other Apple products could return to the U.S. The iconic Jobs said that "[t]hose jobs aren't coming back."

While most would initially think cost to be the primary reason companies are turning to Chinese manufacturing, it's only half the story. The real reason for gadgets being made in China today are speed and flexibility. Take for instance the iPhone. There's the proverbial story about a foreman at a Foxconn facility waking up 8,000 dorm-residing factory workers in the middle of the night to promptly start 12-hour shifts to produce the iPhone after an assembly line overhaul, resulting in 10,000 iPhones produced daily just 96 hours aftera major production overhaul.

Factories in Asia can "scale up and down faster," says a former Apple executive, and supply chains in the region "have surpassed what's in the U.S." As such, manufacturing facilities in Asia -- particularly China -- have the competitive advantage, both in cost and efficiency.

There is a Price

There is a price to this efficiency, though, and it's mostly measured in human terms. The story has been told and re-told: explosions in poorly-ventilated production facilities, depressed employees leaping to their death from dormitory buildings, and inhuman working hours and conditions. Even with the likes of Apple setting up Supplier Responsibility programs -- to the extent of Apple listing down 90% of its worldwide suppliers -- conditions are not likely to change. After all, with their production lines and time-to-market at stake, companies can usually afford to turn a blind eye to supposed shortages in social responsibility and safety standards.

Learning Opportunities

As TechCrunch's Devin Coldewey writes, "Foxconn and China have our all-important tech companies by the scruff of the neck," as these manufacturing firms can easily retool their production lines to cater to another customer when necessary. Still, the likes of Apple are major customers, and are still "the money in the relationship."

But is the U.S. Really at a Disadvantage?

To return to the original premise -- whether outsourcing to China is really at the expense of the American middle class, as the original Times piece would have us believe. A Forbes Op-Ed by Brett Swanson attempts to quantify the economic benefits that the technology industry has brought about. He posits that even as most of Apple's manufacturing business is outsourced to Asia, the domestic economic activity in the U.S. remains active, with higher-value jobs in the digital music industry, filmmaking, cloud computing, application development and the like.

As such, even if your iPhone is made in China, all other software and services that power it are made, developed or maintained in the U.S., from iOS to the various App Store applications, as well as the cloud servers that run iTunes Match.

And so it means that Made in China is not so bad after all, because while the Chinese are benefiting from their competitive advantage, the rest of the world can get U.S. developed products cheaper, and American employees get to focus on higher-value information-oriented jobs. It begins to look like the U.S. is benefiting from a competitive advantage, as well.