Weak US Dollar Means Nintendo Favors Europe For Now
No you are incorrect! The decision whether to go with a labour-intensive or capital-intensive operations largely depends on local conditions. Nevertheless, labour intensive manufacturing processes tend to be cheaper (especially in rather mature industries such steel manufacturing). To prove my point, just look at the rust belt. Manufacturing is never coming back to the US! When you have 2 billion people living on next to nothing, there is no justification for hiring overpriced American labor. They kind of shit you need to do in a steel mill is not hard.
I am not just taking this out of my ass you know. I live in the Mid-West, I am Ukrainian national (which means I go there pretty often) and my dad works in commodity import/export business (in Ukraine/Russia). His career depends on understanding this kind of stuff...
Your smart location theory is interesting, but it's again incorrect. If you read up on IMF (or worldbank, I forget) reports on this issue, they are suggesting that in the worst case scenario the world might revert to a slightly more regionalist mode of operation. So even with increasing transportation costs (and in the long term transportation costs are approaching zero), manufacturing will simply be located in Mexico. However, I am even skeptical of the regionalist model, there are simply way too many benefits from globalization for people to just bail on it. Oil prices are increasing, so what? This only creates more incentive for us to find alternative sources of energy for transportation.