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Tech Manufacturing Is a Disaster Waiting To Happen

timothy posted about 2 years ago | from the to-be-fair-so-is-everything-else dept.

Businesses 224

Hugh Pickens writes "Peter Cochrane writes that since globalization took hold, geographic diversity has become distorted along with the resilience of supply so we now have a concentration of limited sourcing and manufacture in the supply chain in just one geographic region, south-east Asia, amounting to a major disaster just waiting to happen. 'Examples of a growing supply-chain brittleness include manufacturers temporarily denuded of LCD screens, memory chips and batteries by fires, a tsunami, and industrial problems,' writes Cochrane. 'With only a few plants located in south-east Asia, we are running the gauntlet of man-made and natural disasters.' Today, PCs, laptops, tablets and smartphones are produced by just 10 dominant contract manufacturers, spearheaded by Foxconn of Taiwan — which manufactures for Apple, Dell, HP, Acer, Sony, Nokia, Intel, Cisco, Nintendo and Amazon among others. The bad news is that many of the 10 big players in the IT field are not making good profits, so economic pressure could result in the 10 becoming seven."

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224 comments

Floods (5, Interesting)

Megane (129182) | about 2 years ago | (#40437229)

You forgot to mention floods, like what happened in Thailand last year, and could possibly happen again this year.

Re:Floods (3, Insightful)

alphatel (1450715) | about 2 years ago | (#40437259)

... and could possibly happen again this year.

OR will inevitably happen as long as there is a method for corporations to profit more from disaster than from manufacturing.

Re:Floods (3, Insightful)

Anonymous Coward | about 2 years ago | (#40437261)

Yes. Considering the timing and impact that had on storage pricing, it is surprisingly absent from the summary.

Re:Floods (3, Interesting)

Skuto (171945) | about 2 years ago | (#40437281)

There's been quite some evidence mounting that most of the (continuing) price hike cannot be explained by the disaster itself.

Re:Floods (4, Insightful)

AngryDeuce (2205124) | about 2 years ago | (#40437343)

You mean *gasp* it could have just been plain old fashioned greed and profiteering?!?! Well, knock me over with a feather!

Re:Floods (1)

ericloewe (2129490) | about 2 years ago | (#40437533)

Yeah, but it served as the excuse for the initial price hike.

Re:Floods (0)

Anonymous Coward | about 2 years ago | (#40438237)

Don't worry, the Free Market will soon cause prices to fall. Yay Free Market!

Re:Floods (1)

nedlohs (1335013) | about 2 years ago | (#40437555)

Of course not, that's how capitalism is supposed to work (doesn't mean it works in practice al the time of course).

HDD prices are now higher providing an incentive for another player to enter the market with manufacturing outside that geographic area (or one of the existing players to bring up some manufacturing there).

Higher prices make is economically feasible especially considering the payoff bonus of that region gets flooded again.

Re:Floods (4, Funny)

SlippyToad (240532) | about 2 years ago | (#40437657)

Of course not, that's how capitalism is supposed to work

Well, when someone gets capitalism working would you please let us know?

Re:Floods (1)

Anonymous Coward | about 2 years ago | (#40437995)

You pre-suppose that capitalism does not work which of course you cannot support.

Re:Floods (4, Insightful)

GameboyRMH (1153867) | about 2 years ago | (#40438111)

If these devastating market crashes and massive wealth disparities are what capitalism does when it's working, then can we try turning it off?

Re:Floods (1)

Anonymous Coward | about 2 years ago | (#40437669)

And profits are supposed to be reinvested into the company and distributed to shareholders instead of looted by executives and wall street insiders. Good luck with that!

Re:Floods (4, Insightful)

ivoras (455934) | about 2 years ago | (#40437781)

HDD prices are now higher providing an incentive for another player to enter the market with manufacturing outside that geographic area (or one of the existing players to bring up some manufacturing there).

Higher prices make is economically feasible especially considering the payoff bonus of that region gets flooded again.

...except if you have external factors such as patents which effectively prohibit anyone truly new entering the industry ever again...

Stimulus (4, Interesting)

sycodon (149926) | about 2 years ago | (#40437445)

If you absolutely HAD to spend billions in stimulus money, this situation would be perfect. Create a consortium with the major manufacturers and have the feds build a memory/hard drive/LCD plant(s) here in the states, absorbing all the capital costs (a pittance, compared to the over all stimulus bill).

The consortium would run the plant(s) and probably be competitive with overseas plants because they won't have the burden of the initial capital costs.

Of course, details, details, details but this approach would make sense in many industries.

Re:Stimulus (4, Interesting)

CastrTroy (595695) | about 2 years ago | (#40437679)

Yeah, but that kind of gets everyone else in a huff, and complaining about free trade and stuff. The American's were boycotting Canadian lumber because the Canadian rules are different. Because the logging companies didn't have to pay (more than an administrative fee) to log the land, whereas in the US, they auction off the logging rights to the highest bidder. If you start government-subsidizing large parts of your industry, then other countries might not like this. Granted the US would probably be able to sell a lot of tech products within it's own borders, but dumping a ton of money into industry can be against trade negotiations with other countries.

Additional problems on top of the above (5, Insightful)

dbIII (701233) | about 2 years ago | (#40438181)

If you start government-subsidizing large parts of your industry

Like sugar, steel and automotive manufacturing for instance? The "start" happened a while ago, and each of those industries I've mentioned have suffered or caused problems that are directly due to them being protected. Uncompetitive steel prices moved manufacturing offshore, a protected car industry produced almost unsellable crap even when overseas branches of the same companies were making quality designs and local sugar priced itself out of the market so the USA got twice as fat on corn syrup as it would have on sugar.
It's not just about getting others upset. It's about shooting yourself in the foot.

Re:Additional problems on top of the above (1)

sycodon (149926) | about 2 years ago | (#40438311)

I don't think you can strictly call it government subsidies.

One way to look at it would be to get rid of government road blocks...permits, studies, applications, etc. All the crap you have to go through to build a large manufacturing plant.

You could also make an argument that government policy has raised the cost of U.S. labor. This would actually be a negative subsidy.

So if you offset the burdens imposed by the government, is that a subsidy?

Re:Stimulus (1)

sycodon (149926) | about 2 years ago | (#40438277)

As I said...Details.

But how is the low wages due to lack of labor laws and such differ from the lower cost due to no capital costs to deal with. Both are the result of government policy.

Plus, it could be argued that this kind of action is strategic in nature, to guarantee the ability to continue to manufacture products essential to the economy. Throw in self defense if you want.

But I'd much rather have this policy discussion rather than frittering away billion and billions (apologies to Carl Sagan) on financial companies.

Re:Stimulus (4, Interesting)

boristdog (133725) | about 2 years ago | (#40438301)

Yeah, but that kind of gets everyone else in a huff, and complaining about free trade and stuff

I'm sure if Obama does it the republicans will conveniently forget that Reagan did the same thing. I used to work for a tech consortium that was formed under Reagan's aegis, and I'm a member of another. But if it's done now, it will be socialism.

Where I worked we even had a whole division that sent someone to Japan every month to buy samples of all the latest electronic gew-gaws. Then we'd tear them apart. And let me tell you, if you think any gadget or feature is "new" in the USA, I can guarantee they've had it in Japan for 5 years. I laughed my ass off when everyone was saying how "new" and "revolutionary" the Iphone was. I had seen similar phones for years from Japan.

Re:Floods (0)

Anonymous Coward | about 2 years ago | (#40437487)

You forgot to mention floods, like what happened in Thailand last year, and could possibly happen again this year.

Actually they said "man-made natural disasters" which is a complete oxymoron. It's either man-made, or natural, by definition it can't be both at the same time. The rest of the article is of similar quality.

Re:Floods (4, Interesting)

wisty (1335733) | about 2 years ago | (#40438127)

People who work in risk reduction joke about man-made natural disasters.

The 2008 Sichuan earthquake was natural, but the quality of buildings may have contributed to the death toll. Katrina was natural, but the government response was pathetic (perhaps in a neo-liberal attempt to show how useless governments are). Anything climate change related would be both natural, and man-made.

Re:Floods (4, Informative)

Zero__Kelvin (151819) | about 2 years ago | (#40437751)

Floods were not forgotten. You simply didn't follow the link [slashdot.org]. In fact you could have just hovered over it, and you would have seen that the word flooding is the first word in the article the link points to.

Re:Floods (4, Funny)

wisty (1335733) | about 2 years ago | (#40438091)

You forgot to mention floods, like what happened in Thailand last year, and could possibly happen again this year.

But ... if you're outsourcing it shouldn't matter, because you don't carry the risk anymore. It all comes from the cloud, and you can instantly switch to another supplier.

(Obligatory xkcd comic - http://xkcd.com/908/ [xkcd.com])

Re:Floods (1)

citizenr (871508) | about 2 years ago | (#40438251)

You forgot to mention floods, like what happened in Thailand last year, and could possibly happen again this year.

That flood was GREAT for business. Both WD and Seagate got record profits out of it.

Cost of some where other than South-East Asis (1)

Anonymous Coward | about 2 years ago | (#40437251)

How much more would an Apple iPad/iPhone cost to make in the USA than in Taiwan?

$5/$10/$50/$100/$500?

Re:Cost of some where other than South-East Asis (5, Insightful)

MickyTheIdiot (1032226) | about 2 years ago | (#40437311)

It's almost an irrelevant question as the real reasoning behind it means that a CEO can put more money in his/her pocket. The entire decision process is about how much money they can get their fat greedy paws on RIGHT NOW. The fact that it could all fall down tomorrow doesn't come into the equation. This is yet another corporate culture problem.

Re:Cost of some where other than South-East Asis (5, Interesting)

Anonymous Coward | about 2 years ago | (#40437473)

It's almost an irrelevant question as the real reasoning behind it means that a CEO can put more money in his/her pocket. The entire decision process is about how much money they can get their fat greedy paws on RIGHT NOW. The fact that it could all fall down tomorrow doesn't come into the equation. This is yet another corporate culture problem.

Well said and accurate.

Further examples are becoming painfully obvious by observing--
- The term of many CEOs, and other executives, particularly hi-tech
- The so called "golden parachutes" that many receive
- The fixation with stock market values to the point that they have more to do with the weather than the financial health of a company

The incentive structure for executives is tied to stock prices today, the theory being that:
- A financially healthy and well run company has an appreciating stock price
- Stocks are longer term investments, so it creates an incentive to build a long term profitable company

But we've got the whole thing distorted now...

Re:Cost of some where other than South-East Asis (5, Insightful)

Anonymous Coward | about 2 years ago | (#40437719)

Not to mention the fact that, oh let's say there was a crash in every consumer-oriented supply chain next year...

The majority of end-users and consumers won't REALLY be on the hook for about 5 years, at which point in time, we'll all come to realize that we never actually even needed 64GB of RAM, 25TB hard drives, 96 core 233GHz CPUs, 10 exabit network cards, 65536px wide by 36864px high flat panel displays, and that we were able to "limp" along with our crappy, dumpy 16GB of RAM, 2TB hard drives, 4 core 3GHz CPUs, gigabit network cards, 1600px wide by 900px high flat panel displays, all of which are probably lasting well beyond the manufacturers warranties once we start actually caring for them as if we had to buy new ones for $1,000...

Oh boo-hoo!

Re:Cost of some where other than South-East Asis (1)

Anonymous Coward | about 2 years ago | (#40437823)

This has nothing to do with the article. It really bothers me how slashdotters can offer responses that have absolutely nothing to do with the topic at hand, but are ethically or morally "right" for the crowd, and thus a swarm of thumbs up are garnered. The issue is that the supply chain is geographically concentrated. At least read the headline. And here I go taking the bite.

Anyways, there are other CEOs worth criticizing, but not the guy who's in charge of Foxconn. This may need verification but is likely true:

"Gou founded Hon Hai in Taiwan in 1974 with $7500 in startup money and ten workers, making plastic parts for television sets in a rented shed in Tucheng, a suburb of Taipei."

That's the guy who founded Foxconn. Pretty impressive..

Re:Cost of some where other than South-East Asis (4, Informative)

RabidReindeer (2625839) | about 2 years ago | (#40437909)

It's almost an irrelevant question as the real reasoning behind it means that a CEO can put more money in his/her pocket. The entire decision process is about how much money they can get their fat greedy paws on RIGHT NOW. The fact that it could all fall down tomorrow doesn't come into the equation. This is yet another corporate culture problem.

I won't dispute that. But it's not the only factor involved, and it's as much a symptom as it is a disease.

Throughout the 20th Century the emphasis was on efficiency. First we replaced individual start-to-finish craftsmen with stations on an assembly line. Then we focussed on Economies of Scale, amagamating and merging. Then we added automation. Then went back and replaced people on the assembly line with robots. Finally, we wrapped up the century by developing an ever-expanding suite of business analytics tools. It wasn't quite as tidy and sequential as this, of course, but that was the general trend.

The end results were very efficient indeed. Instead of many factories and offices clanking and banging along, you end up with a few hyper-efficient factories and offices, all running at high speed and in precise tune. Leaving lots of profits for the executives and shareholders and Lower Prices Everyday for customers.

Until they don't.

The downside of efficiency is that it has no "wiggle room". The only direction you can go is down, and the more finely-tuned your processes are, the bigger the chance that a relatively small kink in the tracks can derail the whole high-speed train.

Floods are bad enough, but they're only one possibility. If you concentrate your resources enough, even a really low-probability limited-scope event like a chunk of space debris coming through the roof can have a major impact. No pun intended.

Sometimes being too efficient isn't so good.

Re:Cost of some where other than South-East Asis (0)

Anonymous Coward | about 2 years ago | (#40437335)

You still have to get the parts and companents from South-East Asia.

Now, if those manufacturers were to set up here in the States, then their manufacturing costs would go up too subsequently further increasing the costs of the end product manufacturer/assembler.

Re:Cost of some where other than South-East Asis (2)

Anne Thwacks (531696) | about 2 years ago | (#40437723)

In the "olden days" you never bought products that were only available from a single source. If the manufacturer did not license the technology to someone else, you did not buy it and in order to maintain this situation, you bought from both (all) suppliers in inverse proportion to their prices.

Re:Cost of some where other than South-East Asis (2)

chill (34294) | about 2 years ago | (#40437889)

It isn't a single-source, it is multiple sources in a single geographic area.

These technologies are licensed, but manufacturing facilities are incredibly expensive to set up. Consequently, they are in areas where the shipping costs of individual components is cheapest at an aggregate.

A manufacturing facility for something like an iPad in the U.S. would still be shipping all the parts from SE Asia because the vast bulk of the supply chain just doesn't exist here anymore.

Re:Cost of some where other than South-East Asis (4, Insightful)

allcoolnameswheretak (1102727) | about 2 years ago | (#40437339)

The prices for the consumer could stay the same. It would cut Apple's profit margin from "obscene" to "above average" however.

Re:Cost of some where other than South-East Asis (-1)

Anonymous Coward | about 2 years ago | (#40437365)

You live in a dream world. You think apples profits are obscene, just look at oil or big pharma. Take the bias out eye and have a look around.

Nice trolling though

Re:Cost of some where other than South-East Asis (5, Informative)

SJHillman (1966756) | about 2 years ago | (#40437401)

Apple's profit margin: 29.66%
Exxon's profit margin: 7.62%

Oil and Pharmaceuticals might have larger profits in absolute terms, but that's because that have a much larger customer base. When it comes to profit per unit sold, Apple blows just about everyone else away.

Software company margins beat both pharma and oil (1)

140Mandak262Jamuna (970587) | about 2 years ago | (#40437543)

Software vendors typically have > 30% margins. ANSS operating margin = 38.01% , MSFT 38.44%, ORCL 37.87%, SAP 31.81%, GOOG 32.12%. Apple may be charging premium prices for its hardware, but its margins are lower than other pure software vendors. So the hardware division, despite charging premium prices, is probably dragging down the profit margins of the software and entertainment divisions.

Re:Software company margins beat both pharma and o (0)

Anonymous Coward | about 2 years ago | (#40437587)

...except that the software and entertainment divisions wouldn't be half as successful if they didn't have the hardware spurring sales. You know, like when Microsoft sells an Xbox at a slim profit (used to be a loss!) and makes it up on licensing fees for software, or when you get a free razor handle in the mail (New Shickette Yodawg: we put a razor on your razor so you can shave while you shave!) and then you find out that additional cartridges are $20/4pack.

Re:Software company margins beat both pharma and o (1)

140Mandak262Jamuna (970587) | about 2 years ago | (#40437825)

Ansys, Oracle and SAP have absolutely no hardware sales. Microsoft's xbox is just a small fraction of its over all sales. These companies are completely hardware agnostic and will run on any platform. It is not always the case, you need a loss making hardware division to help the software division.

I think the little known fact is that the specialty hardware makers probably have even better margins than Apple. Have you seen the junk peddled by the set top box makers like Scientific Atlanta and its peers? Have you noticed their price list? I think medical equipment makers, lab equipment (oscilloscopes, digital probes, signal generators) have higher profit margins than Apple. After all, Apple still competes in the consumer market place, and there is a limit how much more it can charge for a laptop or phone over its competitors. Then there are hardware makers totally insulated from the market vagaries, the military vendors and their suppliers. Bank robbers will hang their heads in shame if they see how these guys rob their clients blind.

Re:Software company margins beat both pharma and o (0)

Anonymous Coward | about 2 years ago | (#40438163)

http://www.oracle.com/us/products/servers/overview/index.html

Re:Software company margins beat both pharma and o (1)

dbIII (701233) | about 2 years ago | (#40438247)

I think medical equipment makers, lab equipment (oscilloscopes, digital probes, signal generators) have higher profit margins than Apple.

It often appears that even the local distributors have a higher markup than Apple's product margin, let alone the entire profit :(

Re:Cost of some where other than South-East Asis (2)

foobsr (693224) | about 2 years ago | (#40437557)

In 2002, for example, the top 10 drug companies in the United States had a median profit margin of 17% ( http://www.cmaj.ca/content/171/12/1451.full [www.cmaj.ca] ).

Just to give an idea. 'Obscene' seems appropriate.

CC.

Re:Cost of some where other than South-East Asis (1)

geoffrobinson (109879) | about 2 years ago | (#40437893)

How much should a pill that saves my life cost?

Re:Cost of some where other than South-East Asis (0)

Anonymous Coward | about 2 years ago | (#40437941)

How much should a pill that saves my life cost?

Not as much as you might be willing to pay in your frenetic despair to avoid the cold, icy grip of death.

Yes, all of us appreciate a doctor who saves our life, but the doctor rarely tries to hold us hostage over it. Why should the chemist get a free pass?

Re:Cost of some where other than South-East Asis (0)

Anonymous Coward | about 2 years ago | (#40437623)

Not just profit per unit sold, even in absolute terms, Apple is up there with the biggest and baddest:

Exxon's total profits in the past five quarters: 10.7bln, 10.7bln, 10.3bln, 9.4bln, 9.5bln.

Apple's total profits in the past five quarters: 6.0bln, 7.3bln, 6.6bln, 13.1bln, 11.6bln.

Re:Cost of some where other than South-East Asis (-1)

Anonymous Coward | about 2 years ago | (#40437459)

Ignorant AC's are the best!

Re:Cost of some where other than South-East Asis (4, Insightful)

AngryDeuce (2205124) | about 2 years ago | (#40437501)

This idea that we can't "afford" to make anything here anymore is ludicrous. For decades we managed to do so just fine, during our boom years of 1945-1980, when most everyone that was willing to work could find a decent paying job that afforded them a living wage. My grandfather drove a truck for a large portion of that period and was able to make enough money to buy a modest house, get a new car every couple years, support himself, his wife, and their four children, pile said kids into the woodie every summer for a road trip/vacation, and put something away for both his retirement and his kid's college educations. He didn't even get a high school diploma until his later life, having dropped out to enlist and do his duty.

What I want to know is what happens when even China isn't cheap enough to prop up those hyper-inflated executive salaries. What is the next area we're going to be exploiting? Africa, probably. Hell, all they'd have to do is not be murderous blood diamond warlords and the African people will probable weep tears of joy at the opportunity to poison themselves and their environment for 3 cents a day, and the "job creators" will talk up how goddamned benevolent it all is. By that point the US economy should be thoroughly dead and they'll just bring the sweatshops back home, and we will weep our own tears of joy at the opportunity to be slave laborers...

Re:Cost of some where other than South-East Asis (0)

foobsr (693224) | about 2 years ago | (#40437613)

What is the next area we're going to be exploiting?

It already happens (has happened). It is called along the lines of 'bailout' or 'parachute'. All who pay taxes are exploited.

CC.

Re:Cost of some where other than South-East Asis (4, Interesting)

bws111 (1216812) | about 2 years ago | (#40438015)

It is pointless to just look at those decades. Between the Great Depression and WWII, there were 15 years where nobody bought anything. By the end of WWII there was a huge pent-up demand for things. Add in all of the people now wanting to start a family, and you have even more demand for housing, cars, furnishings, clothing, appliances, etc. Now add in the fact that people were coming back from the war with money, and people were willing to give cheap credit, and you have a huge manufacturing boom.

However, a lot of the seeds of a future downturn were sowed during that time. For instance, steelworkers, angry that their wages were frozen by the government during WWII, even though the company made a ton of money, staged a lengthy strike to force the companies to give them their due. While in the short term they were successful, in the long term they failed miserably. The long strike forced customers of the steel companies to get steel from elsewhere (like Asia), and they found that while the quality was not very good, it was incredibly cheap. As time went on, the price of steel manufactured in the US kept going up (due to the contracts that ended the strike), and the Asians got better at making steel. As a result, all of the customers switched to Asian steel, and the US steel companies either ceased to exist altogether, or are only a small fraction of what they used to be.

Lastly, things like environmental laws (which did not exist until the 1970s) have a huge impact. In the US, when an electronics manufacturer pollutes the groundwater, they are made to clean it up, and a huge cost. No so everywhere else in the world.

Re:Cost of some where other than South-East Asis (5, Insightful)

AngryDeuce (2205124) | about 2 years ago | (#40438213)

Lastly, things like environmental laws (which did not exist until the 1970s) have a huge impact. In the US, when an electronics manufacturer pollutes the groundwater, they are made to clean it up, and a huge cost. No so everywhere else in the world.

I'm hoping that I'm not picking up criticism of our environmental laws. There are [wikipedia.org] numerous examples [wikipedia.org] of what happens [wikipedia.org] when there are no regulations concerning pollution. The only reason why these consumer goods are so cheap in China and elsewhere is because we've externalized all of these costs to societies where the average citizen has no power whatsoever to do anything about it.

If the U.S. enforced labor and environmental standards with its imports in the same way it regulated domestic production, we wouldn't be in this mess right now. The only reason any of that offshoring bullshit is possible is because we allow it to occur. The race to the bottom is completely unsustainable. Like I said, what happens when even China isn't cheap enough to manufacture our consumer crap? What happens when oil finally gets so scarce that the cost of bringing the shit here is prohibitive in itself? I refuse to believe that the only answer is "Well, we'll just have to get over this whole "clean air, land, and water thing, and be willing to work like a slave laborer" and that's precisely what I keep hearing needs to happen, especially by people that are financial secure enough that their own existence won't be tainted by that bullshit.

Sorry, that is incorrect (3, Interesting)

dbIII (701233) | about 2 years ago | (#40438343)

The long strike forced customers of the steel companies to get steel from elsewhere

Oddly enough in a post above (about protectionism) I pointed to protectionism as being the reason US steel companies were so complacent and failed to compete - it's the textbook case for that - but here I see you using it to blame those greasy working class people or something!
I suggest you look into the barriers to importation of steel into the United States so that you can learn that your above anecdote is nothing but partisan bullshit. Call me whatever names you like in return - I'm one of those nasty foreign people that was making steel that the company I worked for wanted to export to the USA in the early 1990s but couldn't.

Re:Cost of some where other than South-East Asis (5, Insightful)

MickyTheIdiot (1032226) | about 2 years ago | (#40437505)

I don't agree with everything that Michael Moore says, but on CNN one time he had a very important point.

When GM was doing well it was making something like $14 billion a year. Yet they were still laying off workers. What is so wrong with making $13 billion a year and keeping the workers, especially those that gave a significant part of their lives to that company.

There is no incentive for a corporation to treat its workers with respect. The unions gave that incentive but their own decadence has greatly ruined their own power. Couple that with the fact when you put in huge golden parachutes and pay millions of dollars to upper management a year there is no incentive for them to care if the enterprise is even there after they are gone. If a huge cluster-fsck.

Re:Cost of some where other than South-East Asis (1, Insightful)

bws111 (1216812) | about 2 years ago | (#40438157)

The people who invested their money in GM did so because they thought GM would give them the best return on that money, not to give $1B in charity to workers who are not needed.

The only way you can afford to do what you are suggesting (long term) is to have an unregulated monopoly, so you can get your customers to pay for your inefficiency and still make a good enough profit for your investors. For instance, IBM did not lay off a single employee for the first 80 years of its existence, through good times and bad. However, once they lost their monopoly prices plummeted, profit went with it, and investors fled in droves. When they had to do their first layoff it was extremely painful not just for the company and employees involved, but for whole towns and all of the people and businesses in them. While it certainly sucks for the employees involved in a layoff in a company making profit, it is far better overall to not carry inefficiencies to the point where you are forced to deal with them.

The same thing happened with steel companies. The unions were successful in making the operation very inefficient, to the benefit of the unions. No layoffs, strict work rules, ridiculous vacation plans (really paid furloughs), etc. Worked great for a while, led to the death of the companies long term.

China (1)

unixisc (2429386) | about 2 years ago | (#40437273)

Problem is less of South East Asia, and more w/ China. When China's bubble bursts - and it's a 'when', not 'if', everybody in the world who shovelled their manufacturing there b'cos it is cheap are going to have a major meltdown in their hands.

B/w that and the jobs situation everywhere else, equilibrium will be achieved b/w what companies can afford, and what employees need.

Re:China (2)

khallow (566160) | about 2 years ago | (#40437359)

When China's bubble bursts - and it's a 'when', not 'if', everybody in the world who shovelled their manufacturing there b'cos it is cheap are going to have a major meltdown in their hands.

That's not necessarily so. A recession would mean cheaper capital and labor which is an advantage for export oriented businesses. A meltdown due to the Chinese government going crazy and/or klepto could drop those businesses in their tracks.

Re:China (5, Interesting)

benjfowler (239527) | about 2 years ago | (#40437405)

China is ALREADY full-blown klepto. They have a major deep-seated cultural problems where their only morality is getting rich, no matter how much damage they cause or how many people they hurt.

See a recent article on the Bronte Capital blog, "The Macroeconomics of Chinese Kleptocracy".

http://brontecapital.blogspot.co.uk/2012/06/macroeconomics-of-chinese-kleptocracy.html [blogspot.co.uk]

To be fair, it's no worse than our own feral and out-of-control overclass here in the West.

Re:China (0)

Anonymous Coward | about 2 years ago | (#40437435)

When China's bubble bursts - and it's a 'when', not 'if', everybody in the world who shovelled their manufacturing there b'cos it is cheap are going to have a major meltdown in their hands.

That's not necessarily so. A recession would mean cheaper capital and labor which is an advantage for export oriented businesses. A meltdown due to the Chinese government going crazy and/or klepto could drop those businesses in their tracks.

You're assuming a Chinese bubble burst wouldn't lead to revolts. That's a tough stance to take, given how the Chinese's long history of grabbing pitchforks.

karma is a bitch (0)

Anonymous Coward | about 2 years ago | (#40437293)

If you aint happy, start paying the 2k these phones are worth, not the 50$ phone plan bs.

Re:karma is a bitch (1)

GameboyRMH (1153867) | about 2 years ago | (#40438141)

I've always bought my phones unlocked and at retail prices, always top-of-the-line phones too, and the most expensive phone I ever bought was $550.

Globalisation (2, Insightful)

Anonymous Coward | about 2 years ago | (#40437297)

Not just technology, this is more a phenomenon of globalisation if you ask me. The consumer is willing to save 3.2% on something at a macroeconomics level in spite of it's own industries because the apparent value on diversity in the supply chain and having local within-jurisdiction industry is practically zero. I'd love for someone to show me otherwise though as it's depressing.

Economic profits are not the pending disaster (1)

unixhero (1276774) | about 2 years ago | (#40437325)

Although I agree that in a business sense, the unfavourable economic terms these producers are facing, with extremely tight supply chain coordination on the part of large brands is a challenge. As an effect of this, they might face considerable difficulties in the not so distant future. The consumers might see prices rise considerably in the future. But that is not the pending disaster we're facing: The real disaster here is this: Have you considered what we are doing to this earth? How much energy does it take to forge all that aluminum, steel, lead, silicon. How much energy does it take to power those factories? Did you think about how much resources we are spending producing these items, many of which become obsolete, broken and unwanted after a short time! Exacerbating this, what will happen when the BRIC's and the NEXT-25 wants the same level of affluence as us? Recycling is not a suitable solution. We still produced it, we still took the materials out of the ground, and spent the energy forging it. The solution is ending this insane level of over consumption the entire world (the part that can afford it) is doing. / Development economist

"Disaster" (3, Interesting)

ciderbrew (1860166) | about 2 years ago | (#40437341)

People not being able to get the latest TV / MP3 / phone / iwhatever isn't a disaster. It would be bad for business and I can see how the resulting unemployment will be awful for those people; but they'll have lost more than that locally should this happen. So apart from the Disaster that causes the "disaster" I don't think I'll worry too much.
I recall something about putting all eggs in one basket being a bad thing.

Re:"Disaster" (3, Insightful)

betterunixthanunix (980855) | about 2 years ago | (#40437395)

People not being able to get the latest TV / MP3 / phone / iwhatever isn't a disaster

This. Right now, tech manufacturing is feeding the demand to do things like upgrade computers and phones every 18 months. We need to get used to the idea that the existence of a faster CPU with more cores does not imply a need to have one.

Re:"Disaster" (0)

Anonymous Coward | about 2 years ago | (#40437529)

We need to get used to the idea that the existence of a faster CPU with more cores does not imply a need to have one.

What do you mean by "need to have one"? Nobody needs a TV, toaster, or tablet, and most people do not, strictly speaking, need a computer either---not even at work. Heck, you also don't need toilet paper, you can use your left hand and lots of soap instead.

However, people buy things they like if they can afford them. I'll sure continue to buy the fastest CPUs and GPUs I can afford, I like photorealistic games and simulations, and if I have the money, why shouldn't I?

Re:"Disaster" (0)

Anonymous Coward | about 2 years ago | (#40437687)

The problem is you don't have the money, no one in the US or Canada does. The simple fact is that you need to take the national debt and divide it by the number of working men and women (those that can actually make money) and that is YOUR debt.

The reality is that we are broke, just a few dotted i's and crossed t's from bankruptcy. Everything the US and Canada are doing now (and Europe for that matter) is delaying the inevitable so that the "real" rich (the ones where you can't get how much money they actually have) can move money into less tangible assets (land and resources).

So, yes, you are right, if you have money just waste it, seems pointless either way....

Re:"Disaster" (0)

Anonymous Coward | about 2 years ago | (#40438005)

This will take care of itself in a couple of decades when we reach the limitations of physics in cpu/memory design. At some point the CPU you buy now will be exactly the same CPU you buy 5 years from now. At that point the entire industry will have some serious change.. I'm not sure what the outcome will be but it should be interesting to watch.

Re:"Disaster" (1)

SJHillman (1966756) | about 2 years ago | (#40437421)

Fun fact: Healthcare, government, infrastructure, power, water, etc all rely to some degree on these technologies. If a local disaster wipes them out for any serious length of time, the effects will trickle globally in very bad ways.

Re:"Disaster" (1)

DarkOx (621550) | about 2 years ago | (#40438183)

Fair enough but it isnt as if an individuals or an industry for that matter needs change that rapidly. Wants and perhaps efficiencies do but not needs. There is 0 things I can think of need'ing to do with my PC that was not possible with my first PC AT. There are lots of multi-media type stuff I 'like' to do but nothing I 'need' that could not be effected with that old AT.

People would be able to get by just fine with the tech they have for years. When things start failing they most likely could still be sourced from the secondary market. Which will still exist. Sure hospitals and folks who *need* a computer might have to pay thru the nose for it to acquire it from someone like me who has one and does not *need* it; but they will be able to get it.

Re:"Disaster" (1)

Kjella (173770) | about 2 years ago | (#40438023)

Yup, in case of a real disaster how many old usable computers and TVs could we find lying around? I could probably have a dozen crappy old cell phones in a day if I just asked around the office if they got any lying around. It's starting to get fewer and fewer companies but most companies are at least a little bit geographically distributed.

Obligatory tin foil hat (1)

Nichotin (794369) | about 2 years ago | (#40437353)

This could probably be chalked up as being deliberate, judging by the standards of our current power structures. When everything collapses, the rich and powerful will find ways to concentrate and extend their power even further. While not having to starve while the rest of the population does, of course. I mean, it is a reasonable possibility that some current wars are fought to fuel the military industrial complex, so an economic collapse to gain power seems plausible to me.

One Location (5, Interesting)

EmagGeek (574360) | about 2 years ago | (#40437367)

This is precisely why my company does R&D and Manufacturing in the same location - right here in South Carolina. If we have a manufacturing problem, I can take a walk to the other side of the building from my office in R&D and help them fix it - right now.

No waiting for a convenient time for a world-wide conference call where nothing gets done and my instructions are misunderstood by someone who doesn't speak much English.

It's all coming back to this, now. My previous employer did the globalization experiment and realized it is a miserable failure. But, they couldn't abandon it because of the "religion" of globalization. Guys who graduated Harvard Business School with a Masters in Excel Spreadsheets infect the boards of large companies and insist that globalization results in higher profits, and it doesn't.

We make so much money it's almost disgusting. I have a pretty much unlimited budget for lab equipment and investigatory activities, and we engineer some pretty awesome stuff as a result of having the time and money. The 15 hours/week I _don't_ spend on frustrating conference calls with Asia is time well-spent inventing Cool Stuff(TM).

Re:One Location (-1, Troll)

circletimessquare (444983) | about 2 years ago | (#40437451)

folks, don't get too excited

all this emaggeek guy makes is toaster ovens

his idea of Cool Stuff(TM) is a toaster oven with a red handle

Re:One Location (0)

Anonymous Coward | about 2 years ago | (#40437491)

Hey, toaster ovens with red handles are pretty cool!

Re:One Location (0)

Anonymous Coward | about 2 years ago | (#40437525)

What are you a shill for the government? So what if they are successful at this? Its better for the locals than the globalist crap that exploits cheap labor. Why make fun? Oh I know this is slash dick, where we have a rich envy problem. CEO anyone rich doesn't deserve it except for me the rich programmer geek.

Re:One Location (0)

Anonymous Coward | about 2 years ago | (#40437561)

Hey, man, there's a market for toaster ovens that can connect to your wireless network and provide a web interface to check the current status of your toast, adjust settings, and so forth. I mean, I'd buy one.

Re:One Location (5, Funny)

EmagGeek (574360) | about 2 years ago | (#40437845)

Our Cool Stuff(TM) goes way beyond just the red handle.

Our ToastyBread XL4300 has Wifi and sends you an email and SMS when your toast is done, and has internal cameras that stream video of your toasting bread live to the Internet or your Android Phone. It can even post pictures of the finished product to your Facebook page so you don't even have to do the work to tell the world what you had for breakfast.

In any case, we really only put the Red handle on it for legacy compatibility with older users who still need the interface to be there. All the handle does today is connect to a mechanical linkage that presses the "toast" button internally. We have a Patent on that, too, so don't get any ideas, or I shall sick our team of American lawyers on you.

Re:One Location (0)

Anonymous Coward | about 2 years ago | (#40437951)

But this is soooo last year!

The latest toaster ovens chew your toast!

Re:One Location (0)

Anonymous Coward | about 2 years ago | (#40437607)

I didn't know they made fleshlights here in the U.S....

Willingness to pay (4, Insightful)

Jazari (2006634) | about 2 years ago | (#40437373)

Redundancy costs money. So the real question is: "Are customers (consumers) willing to pay?"
Or perhaps a better idea is: You will pay either way. Chose: (1) Pay money now for redundancy and a guarantee of supply; or (2) "Pay" later through the unavailability of products.

Re:Willingness to pay (1)

Anonymous Coward | about 2 years ago | (#40437575)

Customers are already paying the maximum amount they can be fleeced out of. When a more expensive supplier is chosen, generally that means that the CEO's pay shrinks from obscene to merely excessive. Nothing else will change much and the fact that nothing is done means that corporate culture puts too much power in the hands of said CEO.

The bad news is that many of the 10 big players in (0)

Anonymous Coward | about 2 years ago | (#40437379)

The bad news is that many of the 10 big players in the IT field are not making good profits ...

Absolute and utter sprouted nonsense!

CAPTCHA = sprouted

Re:The bad news is that many of the 10 big players (1)

MickyTheIdiot (1032226) | about 2 years ago | (#40437429)

"Not making good profits" another corporate-speak, purposefully weakly defined term.

500% is not good profits for some of these people...

Re:The bad news is that many of the 10 big players (1)

alen (225700) | about 2 years ago | (#40437897)

actually they are now

Foxconn's profits are something like 4% of its revenue. That's about what food companies make.

Re:The bad news is that many of the 10 big players (1)

h4rr4r (612664) | about 2 years ago | (#40438085)

Yeah, they do commodity work. If they want 5% someone else will come along and do it for 4%.

Why is this a problem? (1)

Anonymous Coward | about 2 years ago | (#40437393)

Slashdot cracks me up sometimes. Trying to make non-stories into stories and making ant hills into mountains.

Decades ago, when it was profitable to do so, all good tech was manufactured in the US. The entire world used to have to depend on a few companies and one region back then, why is today any different?

Manufacturers and competitors will come and go as they have for decades, and the world will be fine. If it starts becoming a hindrance to the world, the world will shop somewhere else.

***Of course, there will be dozens of replies to my post, all complaining about how "evil" corporations have ruined manufacturing in the US and completely missing the point. Manufacturing isn't and never was the end all be all of economic well being.

Re:Why is this a problem? (0)

Anonymous Coward | about 2 years ago | (#40437463)

Manufacturing isn't and never was the end all be all of economic well being.

But piling on debt to fuel consumption is?

Its very possible (0)

Anonymous Coward | about 2 years ago | (#40437433)

Its been well known for years that its possible to automate manufacturing to the point where you can make it back here in North America and still enjoy healty profits. The problem is mindset, plain and simple.

Diversity within Consolidation (0)

Anonymous Coward | about 2 years ago | (#40437483)

I think this article misses the point, it's economic not natural disasters that are the problem! Foxconn might produce a huge proportion of the worlds shiny toys, they are however spread over 9 cities in mainland China and other massive factories in Brazil ,Hungary, Slovakia, Czech Republic, India, Malaysia, Mexico. If all of those plants were hit at the same time we would have a much larger problem. In addition they have well developed DR procedures for outages at any one plant.

The recent increase in the price of hard disk drives was only partially attributed to the floods in SE Asia and more to do with an artificial price hike by re-sellers looking for a quick buck.

Incompetent bankers not Gaia are the real problem.

The Git

use-it-here/make-it-here (1)

noshellswill (598066) | about 2 years ago | (#40437807)

Good reason for a stiff, republican nationalist economic policy ... if a product is used in America it will be manufactured in America. Raw materials actively traded of-course. Local technology explosion going-for'ard, lots of jobs at all levels, improved SS & TAX recovery, 4% ROI for child-molestors, gutted pure-play cosmopolitan investors, lots of serial emntrepreneurs lapping-da-graaavy and a good azz-fyucking for Wall Street. BLACK MARKET is handled by Coast-Guard and Air-National-Guard target practice. WW2 is over! Let jungle Muzzi-wogs and The Peoples Republic fight their own WW3. Why depend on our chi.com enemies and slave-labor Thais for one-single-transistor? Let iPOD nancy-boyz drool in their strawberry daqs. No reason except financial greed, to depend on forweign production while screwing our-own! And we can march those entitled, acquisitive, globalist bastards to the Utah gulag fast as ever we may. Break stones bytch!

Shanghai Surprise? Tsunami is east Asia & US R (3, Informative)

aisnota (98420) | about 2 years ago | (#40437865)

The Marianas Trench [wikipedia.org] is just east of Shanghai along with Taiwan plus even Japan.

Pacific Rim countries are going to be continuously in the threat corridor of Tsunami risk [wikipedia.org] area because of that trench and many others from Chile [wikipedia.org] to the Aleutians [wikipedia.org] at the northern edge near Alaska and Siberia.

Walmart actually though is the first company that such a Tsunami hit reaches the stock price. More than high technology, the trade curtailment from the one port most likely to sustain or protected is Hong Kong. But that port alone cannot handle the volume of China. Nor can we assume that it will be totally protected by such an event despite the natural level or protection being higher than most world ports.

The port of New York is also another one of concern with La Palma [wikipedia.org] off the west African coast potentially creating a 30 meter wave that would inundate the United States east coast is a geologically proven. [wikipedia.org]

More concered over war or land grabs (1)

Grayhand (2610049) | about 2 years ago | (#40438197)

China wants Taiwan back. If they chose to invade Taiwan what exactly could we do about it? Iran type embargo? It'd collapse our economy worse than the great depression. We are totally dependent on China for not just tech products but everything from food and clothing to furniture. It'd be hard for them to make a grab for all of southeast Asia because they need us as well but they are in a position to make certain grabs and we'd have to keep our mouths shut or at the most symbolically rattle some sabers.
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