4 ms·

At a certain point, does automation/robotics swing the manufacturing base back towards the west?

by Tycho 6y ago

jbay808 6y ago
It's mostly being deployed in Asia, where the demand is high and the supply of complementary parts is also high. PCB manufacturing is almost completely automated, for example. Didn't move back.
s1artibartfast 6y ago
Unlikely in our lifetime. The same automation will be available in the east, but with cheaper technicians, electricity, taxes, regulation, and land.
- bmitc 6y ago
  Also, what is there to automate in the U.S.? Most of what could be a target of automation is already in China.
  - Tycho 6y ago
    Well if cheap labour is not an input then there's no reason that the manufacturing has to be done somewhere with cheap labour costs.
    - bmitc 6y ago
      But the automation will need engineers and technicians. China is likely not super reliant if at all on the west for automation expertise, and is likely closing any gap that may exist. They have a legion of more and more well educated people to fill those roles. I’m super worried that the U.S. is turning into Russia, i.e., a corrupt oligarchy with no want or ability to mobilize and educate its people. China saw that happening to themselves and specifically steered away from it back in the 80s.
      - Tycho 6y ago
        On the plus side, if China innovates new technologies, it will make everyone else's life better too, as US innovation has done for the last century or so.
MartianSquirrel 6y ago
Yes, but no. Automation could, should and will bring back more manufacturing towards the west, in the sense that the west will produce more goods, in terms of net quantity/value compared to today. It does not necessarily mean more jobs. It does not mean the west will produce a higher percentage of global products. Paul Krugman, amongst others, has written about the subject, I will try to link articles once I get home. Quick edit: example: GM produces more cars than before the crisis but employs less people Edit 2: here's one https://www.scientificamerican.com/article/krugman-trade-jobs-wages/ https://www.scientificamerican.com/article/krugman-trade-job...
- Tycho 6y ago
  Might not mean more jobs in the west, but I suppose it will mean less jobs for the east.
  - MartianSquirrel 6y ago
    No, the job market isn't zero sum. If the west produces more goods/services it needs a higher input of lesser tier goods and services to which value can be added.
blululu 6y ago
It depends, but probably not. The main benefit would be transportation/logistics, but intercontinental freight shipping is pretty cheap and fast (especially China -> USA). Assuming equivalent machine costs (Chinese firms can potentially get government backed deals from to local & international vendors), equivalent financing (subsidized loans are common in China), equivalent operating costs (rent in the US is ridiculously expensive), equivalent labor costs (you still need skilled technicians to operate, maintain & repair the machines, and China has a much larger pool of labor), and equivalent access to input materials (the supply chain is mostly in China/East Asia, so it is often cheaper and faster to source components in Asia than in North America), then yes it would make sense from a cost perspective to reshore operations to the USA. Given that none of these conditions are met, and given that American firms are ideologically committed to their balance sheet it seems unlikely that there is much will to make any changes here.
- Tycho 6y ago
  But without the need for cheap labour, it becomes much easier for governments to impose tariffs on imports (or provide subsidiaries, etc), to even the scales, no?
- jbay808 6y ago
  > Assuming equivalent machine costs I know of at least one automation equipment company that prices their machines in China at about half of what they charge to US customers, because that's the price point that the market will bear. Exact same machines, same specs. Just like any other region-based price discrimination.
coliveira 6y ago
No, the automation/robotics train has already left and China is leading there too.
hangonhn 6y ago
No. Because China is working on that too. This is what their Made in China 2025 initiative is all about: https://en.wikipedia.org/wiki/Made_in_China_2025 https://en.wikipedia.org/wiki/Made_in_China_2025 "The plan aims to upgrade the manufacturing capabilities of Chinese industries, growing from labor-intensive workshops into a more technology-intensive powerhouse.[6] The goals of Made in China 2025 include increasing the Chinese-domestic content of core materials to 40 percent by 2020 and 70 percent by 2025." This is a major source of all the economic anxieties the US government and allies are feeling. China isn't just a source of cheap labor anymore. Cheap labor was what it had to offer because it was so under developed but they aren't blind to history. They know they have to move up the value chain and have been gradually but steadily moving up.
- Tycho 6y ago
  But cheap labour is a sustainable advantage that the west can never rival. Everything else, we can compete on, in theory.
  - hangonhn 6y ago
    It's not an advantage that China can maintain though, hence the movement upwards. China, and other countries like that, was cheap because they were underdeveloped and the goals/wants of their population were minimal. But now some of the highest home prices in the world are in Shanghai. Many of China's coastal cities have gotten wealthy and China's remaining source of cheap labor are in the interior cities, hence the development of major railways into the interior, etc. But everyone knows how that story is going to go. The interior cities will also become wealthy and then the last remaining source of cheap manual labor will dry up. Making your people wealthier and moving up the value chain are good goals but once you get there you need to switch. which is what China is preparing for.
jonkho 6y ago
Not until the USD loses reserve status. Until then, it’s cheaper to print and export these USD tokens for imports rather than to exert labor to make stuff to trade for imports.

At a certain point, does automation/robotics swing the manufacturing base back towards the west?

by Tycho 6y ago

At a certain point, does automation/robotics swing the manufacturing base back towards the west?

It's mostly being deployed in Asia, where the demand is high and the supply of complementary parts is also high. PCB manufacturing is almost completely automated, for example. Didn't move back.

s1artibartfast 6y ago

Unlikely in our lifetime. The same automation will be available in the east, but with cheaper technicians, electricity, taxes, regulation, and land.

bmitc 6y ago
Also, what is there to automate in the U.S.? Most of what could be a target of automation is already in China.
- Tycho 6y ago
  Well if cheap labour is not an input then there's no reason that the manufacturing has to be done somewhere with cheap labour costs.
  - bmitc 6y ago
    But the automation will need engineers and technicians. China is likely not super reliant if at all on the west for automation expertise, and is likely closing any gap that may exist. They have a legion of more and more well educated people to fill those roles. I’m super worried that the U.S. is turning into Russia, i.e., a corrupt oligarchy with no want or ability to mobilize and educate its people. China saw that happening to themselves and specifically steered away from it back in the 80s.
    - Tycho 6y ago
      On the plus side, if China innovates new technologies, it will make everyone else's life better too, as US innovation has done for the last century or so.

MartianSquirrel 6y ago

Yes, but no. Automation could, should and will bring back more manufacturing towards the west, in the sense that the west will produce more goods, in terms of net quantity/value compared to today. It does not necessarily mean more jobs. It does not mean the west will produce a higher percentage of global products. Paul Krugman, amongst others, has written about the subject, I will try to link articles once I get home. Quick edit: example: GM produces more cars than before the crisis but employs less people Edit 2: here's one https://www.scientificamerican.com/article/krugman-trade-jobs-wages/ https://www.scientificamerican.com/article/krugman-trade-job...

Tycho 6y ago
Might not mean more jobs in the west, but I suppose it will mean less jobs for the east.
- MartianSquirrel 6y ago
  No, the job market isn't zero sum. If the west produces more goods/services it needs a higher input of lesser tier goods and services to which value can be added.

blululu 6y ago

It depends, but probably not. The main benefit would be transportation/logistics, but intercontinental freight shipping is pretty cheap and fast (especially China -> USA). Assuming equivalent machine costs (Chinese firms can potentially get government backed deals from to local & international vendors), equivalent financing (subsidized loans are common in China), equivalent operating costs (rent in the US is ridiculously expensive), equivalent labor costs (you still need skilled technicians to operate, maintain & repair the machines, and China has a much larger pool of labor), and equivalent access to input materials (the supply chain is mostly in China/East Asia, so it is often cheaper and faster to source components in Asia than in North America), then yes it would make sense from a cost perspective to reshore operations to the USA. Given that none of these conditions are met, and given that American firms are ideologically committed to their balance sheet it seems unlikely that there is much will to make any changes here.

Tycho 6y ago
But without the need for cheap labour, it becomes much easier for governments to impose tariffs on imports (or provide subsidiaries, etc), to even the scales, no?
jbay808 6y ago
> Assuming equivalent machine costs I know of at least one automation equipment company that prices their machines in China at about half of what they charge to US customers, because that's the price point that the market will bear. Exact same machines, same specs. Just like any other region-based price discrimination.

coliveira 6y ago

No, the automation/robotics train has already left and China is leading there too.

hangonhn 6y ago

No. Because China is working on that too. This is what their Made in China 2025 initiative is all about: https://en.wikipedia.org/wiki/Made_in_China_2025 https://en.wikipedia.org/wiki/Made_in_China_2025 "The plan aims to upgrade the manufacturing capabilities of Chinese industries, growing from labor-intensive workshops into a more technology-intensive powerhouse.[6] The goals of Made in China 2025 include increasing the Chinese-domestic content of core materials to 40 percent by 2020 and 70 percent by 2025." This is a major source of all the economic anxieties the US government and allies are feeling. China isn't just a source of cheap labor anymore. Cheap labor was what it had to offer because it was so under developed but they aren't blind to history. They know they have to move up the value chain and have been gradually but steadily moving up.

Tycho 6y ago
But cheap labour is a sustainable advantage that the west can never rival. Everything else, we can compete on, in theory.
- hangonhn 6y ago
  It's not an advantage that China can maintain though, hence the movement upwards. China, and other countries like that, was cheap because they were underdeveloped and the goals/wants of their population were minimal. But now some of the highest home prices in the world are in Shanghai. Many of China's coastal cities have gotten wealthy and China's remaining source of cheap labor are in the interior cities, hence the development of major railways into the interior, etc. But everyone knows how that story is going to go. The interior cities will also become wealthy and then the last remaining source of cheap manual labor will dry up. Making your people wealthier and moving up the value chain are good goals but once you get there you need to switch. which is what China is preparing for.

jonkho 6y ago

Not until the USD loses reserve status. Until then, it’s cheaper to print and export these USD tokens for imports rather than to exert labor to make stuff to trade for imports.