Tag Archives: China

Manufacturing Outlook and History In the USA and Globally

I write primarily about management improvement on this blog – which makes sense given the title. In the very early days I had more on investing, economic data, science, engineering and travel. Then I created three new blogs (Curious Cat Investment and Economics Blog, Curious Cat Science and Engineering Blog, Curious Cat Travel Photos blog) and that made this blog more focused.

Even so the lines of what fits where can be a bit fuzzy and I continue to write about manufacturing, and health care, with a focus on economic data, occasionally. And that is what I am doing today while touching on management related to manufacturing a bit.

As I have written before the story of manufacturing in the USA, and globally, is greatly increased quality of processes and output as well as greatly improved productivity over the last few decades. Manufacturing output also increased, including in the USA, as I have written consistently for a decade now. For example: (Top 10 Countries for Manufacturing Production from 1980 to 2010.

Still many people have the notion that USA manufacturing has been declining, which hasn’t been true, and certainly isn’t true now (the last couple of years have been especially strong and even the general public seems to realize the idea of the USA losing manufacturing is a myth).

Chart of Manufacturing Output fro 1992 to 2012 - USA, China, Japan and Germany

Based on data from the UN. See my blog post on my economics for more details on the data (to be posted next week).

The chart is impressive and illustrates the point I have been hammering home for years. The USA manufacturing base is growing and far from crumbling (job losses are deceiving as they are global and not an indication of a USA manufacturing decline). China’s manufacturing growth is incredible. China and the USA are far away the top 2 manufacturing countries. Japan and Germany make out the top 4 before a large gap which then is followed by a group of countries that are very close (Korea is 5th with less than half the production of Germany).

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Leading Manufacturing Countries from 2000 to 2010: China, USA…

chart showing leading manufacturing countries output from 2000-2010

Chart of manufacturing production by the top 10 manufacturing countries (2000 to 2010). The chart was created by the Curious Cat Economics Blog. You may use the chart with attribution. All data is shown in 2010 USD (United States Dollar).

Over the years I have been posting data on the manufacturing output of leading countries. In 2010 China finally overtook the USA to becoming the leading manufacturer (long after you would have thought listening to many news sources and political leaders). In a previous post on the Curious Cat Economics Blog I looked at the output of the top 10 manufacturing countries with a focus on 1980 to 2010.

In 1995 the USA was actually very close to losing the lead to Japan (though you wouldn’t think it looking at the recent data). I believe China will be different, I believe China is going to build on their lead. There has been some talk for several years of manufacturing moving out of China seeking lower cost countries. The data doesn’t support any decline in Chinese manufacturing (or significant moves away from China toward other South-East Asian countries). Indonesia has grown quickly (and is the largest SE Asian manufacturing country), but their total manufacturing output is less than China grew by per year for the last 5 years.

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Marketplace Looks at the Apple Economy

Marketplace looks at the Apple economy in China [the broken link was removed]. Marketplace is an excellent source of actual journalism; rare in the post Bill Moyers days, sadly.

A look inside a Foxconn factory< [the broken link was removed]

The first misconception I had about Foxconn’s Longhua facility in the city of Shenzhen was that I’ve always called it a ‘factory’ — technically, it is. But after you enter the gates and walk around, you quickly realize that it’s also a city — 240,000 people work here. Nearly 50,000 of them live on campus in shared dorm rooms. There’s a main drag lined on both sides with fast-food restaurants, banks, cafes, grocery stores, a wedding photo shop, and an automated library. There are basketball courts, tennis courts, a gym, two enormous swimming pools, and a bright green astroturf soccer stadium smack-dab in the middle of campus. There’s a radio station — Voice of Foxconn — and a television news station. Longhua even has its own fire department, located right on main street. This is not what comes to mind when you think “Chinese factory.”

Yet it is: as you walk beyond the civic center of Longhua, the buildings begin to change.

[the embedded video was removed, so I removed the link]

From a management perspective there is a great deal to be desired in Apple’s manufacturing practices. The economic perspective however, for me, provides a much different picture than those in rich countries (USA, Europe, Singapore, Japan…) often feel.

The jobs provide workers a chance to earn what for them is a great deal of money. Yes the conditions are harsh – I wouldn’t want to have to work there. But I am pretty sure I would not be happier, if I lived in China, and everything else remained the same in China except now all the Apple products were made in Singapore, USA and Spain.

It is good that Apple has pressure to improve conditions at their plants. I also wish they would adopt more lean thinking in their management system. Doing so would likely include moving production to at least 2 or 3 locations (probably adding the Americas and Europe while remaining in China). Apple pays a great deal of attention to customer focus (though they still have plenty to do here too); they really need to pay much more attention to respect for employees (I include their sub-contractors in this statement).

The market is also working. Chinese salaries are rising rapidly. From a very low wage, but still rapidly which is a great thing for tens of millions of people. And there are huge economic spillover affects as those people spend and invest their money (as one of the workers was quoted as saying he is saving up money while working at Foxconn to open his own construction business).

2010 Deming Prize

image of the Deming Prize medal

The Union Japanese Scientists and Engineers (JUSE) has awarded the Deming Prize to 4 companies in 2010: Corona Corporation (Japan), Meidoh (Japan), GC Dental (China) and National Engineering Industries Limited (India).

Organizations receiving the Deming Prize since 2000 by country (prior to that almost all winners were from Japan):

Country	Prizes
India	16
Thailand	9
Japan	7
USA	1
Singapore	1
China	1

This is the first time a Chinese company has won a Deming Prize. The parent company, GC Dental (Japan), was awarded the Deming Prize in 2000 and the Japan Quality Medal in 2004.

The 2010 Deming Prize for Individuals went to Dr. Takao Enkawa, Professor, Department of Industrial Engineering and Management, Tokyo Institute of Technology. Previous recipients include: Kaoru Ishikawa, Genichi Taguchi, Shoichiro Toyoda, Hitoshi Kume and Noriaki Kano.

Manufacturing in the USA, and Why Organizations Often Don’t

Manufacturing in the USA continues to do well. But it could do better. There are reasons manufacturing that could be located in the USA is not. And addressing those can increase USA manufacturing. Some reasons are sensible, based on the existing economics and realities of comparative advantage. Some reasons are just flawed thinking, such as the “spreadsheet management” taught at many business schools that Deming and lean thinkers can understand the flawed thinking that leads to outsourcing.

Typical wall street thinking (also driven by “spreadsheet management think” rather than an actual understanding of value stream of a potential investment) also hampers raising investment capital for USA manufacturing. The broken USA health care system also is a big problem driving up costs of doing business in the USA enormously.

Fighting for ‘made in the USA’

Safer and longer-lasting than conventional lithium-ion car batteries, the 52-year old MIT professor’s invention packs 600 cells into a case the size of an airplane carry-on bag. His technology has transformed the batteries used in many cordless power tools. So why are Chiang and his company, A123 Systems, having trouble moving to full-scale commercial production and creating thousands of new American jobs with his better mousetrap?
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Despite the promise of Chiang’s batteries, many on Wall Street and in Silicon Valley were incredulous when he and other leaders at A123 asked for capital to build factories in America — Asia, yes, but Michigan, why would you want to?

Even more daunting, nearly all of the world’s battery manufacturing industry is in Asia, where plants can be built faster and supplies and equipment are much easier to get than in the United States. These days, it’s hard to find Americans who even know how to build a battery factory.

That’s why A123 had to give in and build its first plants in China, where the company could move into production quickly to show auto industry customers that it could deliver on future contracts.

“Without question, we would rather have done it all in the U.S.,” said Chiang, who left Taiwan as a 6-year-old with his family, earned degrees at MIT and has been a materials science professor there since the mid-1980s. “I’m an American citizen. We’re an American company. It’s an American-born technology.”

Despite the obstacles, A123 and a few other advanced battery producers are building plants in Michigan and other states, thanks to massive government support that has offset Wall Street’s skepticism and should help domestic producers narrow cost disadvantages with Asian rivals.

A123 is getting $250 million in aid from the Obama administration’s stimulus program as well as tax incentives from Michigan. Its first U.S. plant opens in June in an abandoned brick building near Detroit that once made VHS tapes for Disney.
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A123 has five plants in China, coincidentally located in Chiang’s father’s hometown of Changzhou, about two hours’ drive west of Shanghai. Bart Riley, an A123 co-founder and chief technology officer, figured it took about nine months to get a Chinese factory up and running, one-third the time typical for the U.S.

The quicker launch helped A123 make a name for itself through Black & Decker, which in early 2006 began putting A123 batteries in its DeWalt power tools.

Since then, A123 has been supplying batteries and battery systems for New York City buses built by Daimler, among other customers, and the company has agreements to develop products for Chrysler, Navistar and American green-car maker Fisker Automotive.
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By the end of next year, A123 expects to have two plants in Michigan employing 400 people, with plans to go up to 2,000 workers able to produce about 30,000 battery systems a year. The company’s sales reached $91 million last year, and it has about 1,700 employees, two-thirds in Asia.

The success of science and engineering university based research is still a huge advantage to the USA. Though other countries have seen the value in this and have invested in building their own capacity. The economic value of such is increased many fold by manufacturing the innovations created in your country.

Global Manufacturing Data 2007

The updated data from the United Nations on manufacturing output by country clearly shows the USA remains by far the largest manufacturer in the world. UN Data, in billions of current US dollars:

Country	1990	1995	2000	2005	2006	2007
USA	1,041	1,289	1,543	1,663	1,700	1,831
China	143	299	484	734	891	1,106
Japan	804	1,209	1.034	954	934	926
Germany	438	517	392	566	595	670
Russian Federation	211	104	73	222	281	362
Italy	240	226	206	289	299	345
United Kingdom	207	219	228	269	303	342
France	224	259	190	249	248	296
Korea	65	129	134	200	220	241
Canada	92	100	129	177	195	218

See manufacturing data for more countries.

The USA’s share of the manufacturing output of the countries that manufactured over $200 billion in 2007 (the 12 countries on the top of the chart above) in 1990 was 28%, 1995 28%, 2000 33%, 2005 30%, 2006 28%, 2007 27%. China’s share has grown from 4% in 1990, 1995 7%, 2000 11%, 2005 13%, 2006 15%, 2007 16%.

Total manufacturing output in the USA was up 76% in 2007 from the 1990 level. Japan, the second largest manufacturer in 1990, and third today, has increased output 15% (the lowest of the top 12, France is next lowest at 32%) while China is up an amazing 673% (Korea is next at an increase of 271%).
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California Uses More Gas than China

Amazing Stat: California Uses More Gas than China:

California alone uses more gasoline than any country in the world (except the US as a whole, of course). That means California’s 20 billion gallon gasoline and diesel habit is greater than China’s! (Or Russia’s. Or India’s. Or Brazil’s. Or Germany’s.)

That’s according to the California Energy Commission’s State Alternative Fuels Plan, which was posted online last Christmas Eve (pdf). The whole report makes for some fascinating reading because it’s a blueprint for a low-carbon and renewable transportation fuel future. The dominant takeaway: it ain’t going to be easy.

One more choice statistic: gasoline usage in California has increased 50 percent, that’s 10 6.7 billion gallons, since 1988.
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But China’s oil thirst is growing — to almost 20 billion gallons in 2007 — and perhaps as early as this year, China’s 1.3 billion people will overtake California’s 37 million people in total gasoline and diesel usage.

Interesting data. The Curious Cat Economics Blog recently posted on the top oil consuming countries.

China Outsourcing Manufacturing to USA

Chinese firms bargain hunting in U.S.

Liu is investing $10 million in the Palmetto State, building a printing-plate factory that will open this fall and hire 120 workers. His main aim is to tap the large American market, but when his finance staff penciled out the costs, he was stunned to learn how they compared with those in China.

Liu spent about $500,000 for seven acres in Spartanburg — less than one-fourth what it would cost to buy the same amount of land in Dongguan, a city in southeast China where he runs three plants. U.S. electricity rates are about 75% lower, and in South Carolina, Liu doesn’t have to put up with frequent blackouts.

About the only major thing that’s more expensive in Spartanburg is labor. Liu is looking to offer $12 to $13 an hour there, versus about $2 an hour in Dongguan, not including room and board. But Liu expects to offset some of the higher labor costs with a payroll tax credit of $1,500 per employee from South Carolina.

“I was surprised,” said the 63-year-old president of Shanxi Yuncheng Plate-Making Group. “The gap’s not as large as I thought.” Liu is part of a growing wave of Chinese entrepreneurs expanding into the U.S. From Spartanburg to Los Angeles they are building factories, buying companies and investing in business and real estate.

True this is still a relatively small macro economic factor. However, it is growing. The primary push so far is economic – not a move to lean manufacturing (as far, as I can tell) to put manufacturing close to the customer. What is the biggest factor? The USA is spending more than $400 billion every year more than it produces. The only way to consume more than you produce is to borrow (and take an obligation to pay back those that lend you money) or sell the stuff you own to those that are producing more than they are consuming. China is producing more than $200 billion more than it consumes every year.

For decades foreigners have taken debt from Americans that promise to pay back later (to pay for what they consumed). Now many are deciding that these debts are not attractive investments and are looking to own productive assets in the USA (companies, factories…). Which is smart on there part in my opinion.

Top 10 Manufacturing Countries

The newest data from the UN* confirms most of the recent trends in manufacturing output – most notably that China continues to grow dramatically. The data also shows a stagnation in USA manufacturing output over the last several years, though the USA remains by far the largest manufacturer. The most significant news from this latest data, I believe, is that that manufacturing output growth in the USA has been slower than global manufacturing output growth from 2002-2005. This was not the case prior to 2002. I will be writing more on this data in the Curious Cat Investing and Economics Blog. UN Data, in billions of current US dollars:

Country	1990	1995	2000	2001	2002	2003	2004	2005
USA	1,040	1,289	1,543	1,460	1,471	1,488	1,545	1,493
Japan	809	1,217	1,033	857	807	886	962	964
China	143	299	484	527	573	664	788	895
Germany	437	517	392	389	407	490	566	594
United Kingdom	207	221	230	218	222	239	283	no data
Italy	240	226	206	205	218	259	295	291
France	200	233	190	185	192	228	256	253
Korea	200	233	190	185	192	228	256	253
Canada	92	100	129	119	120	149	170	196
Brazil	117	149	120	102	95	109	130	171
Spain	108	107	98	100	108	134	153	160
Mexico	50	55	107	110	111	104	111	122
Russia	201	104	73	77	54	64	92	117
India	50	60	67	68	72	84	100	116

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Womack on Lean in China

From the Lean blog another valuable podcast: Lean in China with Jim Womack. He is not impressed with the state of lean in China yet. Lean Enterprise China [the broken link was removed] has been established to aid the adoption of the best management practices in China.

Read articles by Jim Womack