But while the opportunity that a regrowth in manufacturing has the potential to bring to the U.S., it is vital that “we don’t underestimate the competition,” Flextronics’s Seitz described, confirming that “China is pursuing automation of the production facilities every bit as quickly as the U.S.”
“Yes, China may lose some jobs that are going back to the U.S., but as their middle class continues to expand, that may well offset this,” said Hoak. “So it may not even be a negative loss of jobs for China. But it is certainly something that we know firsthand that they are very focused on in China.”
In meeting with several senior level officials in the Chinese government, Flextronics’ Chief Executive Officer Mike McNamara discussed Made in the USA, to which the country expressed concern over the domestic initiative.
“The Chinese government wanted to know ‘what can we do so we don’t lose the competitive advantage? We understand labor arbitrage is going away—but what else can we do?’” Hoak continued. “The tax, the permitting, the single point of contact—those are all also important factors, not only for Flextronics but for any company that is looking to do manufacturing.”
In gaining leverage to the U.S. industry situation, the manufacturer also met with the offices of Senator Burr (NC), Senator Hagan (NC), Senator Graham (SC), Congressman McCaul (TX) and Congressman Honda (CA); and with representatives from the Department of Commerce's SelectUSA program. In doing so, the issue of job growth was put on the table which became a much “broader discussion than simply the people that go into a factory and work on a particular line,” explained Seitz.
“If you look at the total R&D status in the entire U.S., 70 percent of that R&D status is attributable to that 10 to 20 percent of manufacturing” that makes up the U.S. economy, he said. And while the statistic is relevant, he explained that “it is not really indicative of anything other than the address you put on a product patent application.”
“One of the things that there is a lot of concern on, is as that manufacturing leaves, there is a real dissipation of that sensor of where the R&D occurs,” Seitz continued. “What’s more important is ‘where is that R&D that is supporting that patent?’”
And while it may be too early to tell what investments will be made at the federal level to support the R&D that goes specifically into the U.S. manufacturing of a product, perhaps the existence of the ARPA-E fund, which supports research in all areas of energy R&D, points to positive initiatives in more U.S. R&D to come.
“Today, more and more of the R&D that goes in to supporting that incremental innovation that occurs when you have the product line next door to the people that are sitting down and doing the R&D—that is done where the manufacturing is done,” said Seitz. “So when you talk about jobs, it’s all of the support, all of the R&D and all of the high-value engineering and innovation that goes on around that.”
So what qualifies as “Made in the USA?” While its original concept 20-plus years ago was in a period of traditional manufacturing, before U.S. companies started largely outsourcing overseas to offset costs, the challenge today is in the value preservation of the IP that goes into the making of a product.
“The value is in the IP—the software and the programming and the development that goes into making things work, that is often times developed here in the U.S. So it’s R&D and it’s IP—it’s an intangible good that is manufactured within the U.S. The hardware is not a value anymore—it’s the software that runs it.”
As reports such as this one continue to be generated regarding the state of U.S. manufacturing, businesses must weigh all the necessary factors—including that R&D, consumer demand for their specific product, IP, labor costs, site selection and regionalized markets—more to decide what part they play in this discussion.