Forbes columnist Steve Denning wrote an article recently called “Why Amazon Can’t Make a Kindle in the USA.” In it he listed the specific parts of the Kindle and where they are manufactured. Directly from the article, the following quote: “The flex circuit connectors are made in China because the US supplier base migrated to Asia.
“The electrophoretic display is made in Taiwan because the expertise developed from producting [sic] flat-panel LCDs migrated to Asia with semiconductor manufacturing. The highly polished injectionmolded case is made in China because the US supplier base eroded as the manufacture of toys, consumer electronics and computers migrated to China.
“The wireless card is made in South Korea because that country became a center for making mobile phone components and handsets. The controller board is made in China because US companies long ago transferred manufacture of printed circuit boards to Asia. The lithium polymer battery is made in China because battery development and manufacturing migrated to China along with the development and manufacture of consumer electronics and notebook computers.”
Denning went on to say that this overall trend is destructive to the American economy and that CEOs, accountants, consultants, investors, governments, politicians, and economists must change a large number of policies to save the American economy. But there is another way that this can all be looked at.
That is, this is the perfect time for Asia to take the lead in innovation. What is a loss for the US economy is a gain for Asia. Denning gave the example of ASUSTeK, a company based in Taiwan that started out making circuit boards for Dell computers. They negotiated from there to motherboards, then to computer assembly, then supply chain management, and finally computer design. At that point they had everything they needed to become their own computer supplier, and that’s exactly what they did. ASUSTeK should be looked upon as the perfect example company for companies everywhere in Asia. Their first expertise led to them developing another type of expertise, then another, and another. Now they are in the perfect position to make their own products and do their own innovation.
Innovation is not just some fairy dust to be sprinkled on people to give them new ideas. It comes from experience and the desire to do things better. It is a million little incremental steps, most of which seem obvious and simple to people in the thick of the industry, but which are seen as brilliance to those further away from day-to-day happenings in manufacturing or design. It takes a working manufacturing sector to fuel innovation – that and money. Asia now has both. It has everything it needs to make another Edison or Tesla. Expect to see the innovation driven by simple, clear steps and changes coming from the East now, while the West struggles to realize what it has lost.
However, there is a time limit on the time for Asian companies to strike, because the costs of outsourcing are rising rapidly, and soon it will not make much sense for US-based companies to do so. When this shift happens, they might begin to regain the innovation advantage. In the window between now and then, Asian companies are poised to take the innovation stage and become leaders in their own right in as many sectors as they desire.
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