This morning I read the New York Times account of why the iPhone is manufactured in China and most of the manufacturing jobs for it are in Asia. The Times correctly warns of the jobs crunch facing America's middle class as mass manufacturing has moved to Asia.
For Mr. Cook, the focus on Asia "came down to two things," said one former high-ranking Apple executive. Factories in Asia "can scale up and down faster" and "Asian supply chains have surpassed what's in the U.S." The result is that "we can't compete at this point," the executive said.
As Steve Jobs correctly told President Obama, these mass manufacturing jobs are not coming back. As the Times writes, this problem has its roots in poor education of America's youth, poor planning for the future, and the globalization and integration of the supply chain for mass production. Since mass scalable production is the hallmark of 20th century economies, it only follows that integrated factories and proximity of components in the East would win the day.
Ergo, Obama and the West needs a leapfrog strategy. Much like Asia jumped the wireline generation of telephony and in many ways is more advanced in wireless technology and systems than the USA, America needs to do the same jump in manufacturing. Interestingly, the trend may just be America's best friend if it can move fast enough.
As Umair Haque keeps writing (and tweeting), the world is spewing out countless, mindless junk in mass production facilities. Thankfully and hopefully, consumers are becoming more conscious of resource utilization and junk accumulation. Well described in "What's Yours is Mine", the bible of "Collaborative Consumption," we want to fully utilize the excess capacity in the all industries through sharing and collaboration and reduce the amount of stuff made and thrown away. Finally, rising fuel costs and eco-consciousness are making transporting of goods and services more expensive and less desirable.
The solution is hinted to by the Corning executive in the NY Times article.
"Our customers are in Taiwan, Korea, Japan and China," said James B. Flaws, Corning's vice chairman and chief financial officer. "We could make the glass here, and then ship it by boat, but that takes 35 days. Or, we could ship it by air, but that's 10 times as expensive. So we build our glass factories next door to assembly factories, and those are overseas."
Obama's leapfrog is to turn America into the Global leader in local production by investing heavily in 3D printing and the maker class. In the same way that the Chinese government invested in glass factories that ultimately won business for iPhone production, America can start manufacturing again by setting up centers of low cost, mass customized production via 3D printing and this should be done locally. America's innovative class is already leading in 3D printing with the Maker Movement, making waves and gathering a following.
What is missing is ubiquity and lower costs. As a number of commenters discussed on Fred Wilson's AVC blog, cost and ubiquity still stand in the way of an explosion in 3D printing but it will come and when it does, America should want to be at the forefront because 3D printing can disrupt the current global supply chain. Yes, disrupt the current global supply chain.
Already, private companies are leading the way. 3D Systems (Nasdaq: DDD), Objet (in IPO process) and Shapeways are driving the costs of 3D printing lower. (Ironically Objet (Israel) and Shapeways (great prezi)(Netherlands) are both non-US companies.) They are making mass customization cheaper and more accessible. However, if you want to leapfrog, you need to go all-in. By subsidizing and encouraging the building of local infrastructure, retraining middle class manufacturing to start and operate 3D printing facilities and by building global/local supply chains by investing massively in 3D printing facilities, Obama can start altering the global supply chain dynamics.
The Chinese will continue winning on mass production. But as the world moves to less stuff and more rapid production, more customization and more sustainable practices, the USA has a chance to roar back through 3D printing and at the same time bring its local economies back to life and re-employ the middle class. Local supply chains and local employment is already growing in food and farming with companies like Farmigo and Bi-Rite leading the charge. With the advent of 3D printing and the prices of printers coming down, there is no reason it won't happen in manufacturing as well. This is Obama's and America's opportunity. Will he seize it?
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.