US Manufacturing Comes Back Into Vogue

From government to universities to businesses big and small, the focus is not only on service, but making things

AMERICA is rediscovering the importance of manufacturing. The Clinton administration wants to fund help-centers for manufacturers. Universities are starting to pay closer attention to industrial issues. Corporations are tuning in to the factory floor.

Analysts and corporate leaders disagree about how much progress the "back-to-manufacturing" movement has made. But there is little doubt that there has been a sea-change in thinking.

"Ten or 15 years ago, there was a general assumption ... that the US was going to be a service economy," says Keith McKee, director of the Manufacturing Productivity Center here on the campus of the Illinois Institute of Technology. Now it is becoming chic again to make things.

Take computer-chip manufacturers. A few years ago, the high-flyers in the chip industry were those who did not make their own semiconductors. They contracted fabrication plants (known as fabs) to manufacture their designs. But that strategy has faltered in the '90s. The "fabless" companies are in retreat.

"It's good to be able to make what you sell," says T. J. Rodgers, president and chief executive officer of Cypress Semiconductor Corporation in San Jose, Calif. "The fabless companies are getting worried."

"You can't be big and be fabless," says W. J. Sanders, chairman of chipmaker Advanced Micro Devices. "Those new companies seem to have very short lives."

But that does not mean that there is no place for a fabless company.

"It works, provided that the value-added of the product can afford two profits [the designer's and the manufacturer's]," says Ed Sack, chief executive officer of Zilog Inc., a small California chipmaker that is partially fabless - designs but does not manufacture about 10 percent of its chips. But "if you are going to stay with a product when the going gets rough, when there is price competition, you're far better to have your own fab."

Universities are also taking a new look at manufacturing. "Students are coming [to interview at Intel] who never would have talked to us," says Andrew Grove, chief executive officer of Intel Corporation. Mr. Grove, who also teaches at the Stanford Business School, says the school has placed increasing emphasis on manufacturing. Whereas a few years ago the school offered no courses in manufacturing, today it has a whole program devoted to the subject, he says.

And the change is not limited to high technology. Chicago Mayor Richard M. Daley caused a ruckus last fall when he said publicly that manufacturing was dead in the city. The statement reflected Chicago's frustration as many light- and heavy-manufacturing companies closed down or left the city in the 1980s.

"It took a concerted effort to convince the mayor and his aides that manufacturing ... wasn't dead," says Lynne Cunningham, executive director of the Southeast Chicago Development Commission. Now, "the tone of the city and Department of Economic Development has changed."

The change in tone has helped build initiatives already under way. In 1990, the city formed the Chicago Manufacturing Technology Consortium (CMTC), aimed at improving the competitiveness of the city's small- and mid-sized manufacturers. The consortium has attracted nearly $2 million in state and local funding, reviewed more than 200 manufacturers who might need help, and conducted in-depth analysis of about 50 of them.

"The CMTC has allowed us to focus on these mid-level companies," says Mr. McKee of the Manufacturing Productivity Center. Previously, the center worked only with large companies.

The city also seems more willing to help its manufacturers. For years the Verson Corporation, a maker of machine tools on the city's southeast side, could not build very big machines because trucks had to pass under a low viaduct coming in and out of its plant. Recently, the City Council approved some $500,000 to raise the viaduct. "What these companies need is not sophisticated technology necessarily, but some basic environmental support," says Jim Notter, spokesman for the city's Economic Development C ommission.

NOT even the optimists, however, believe that the back-to-manufacturing movement will lead to a dramatic increase in the number of manufacturing jobs in the United States. What will happen, the optimists maintain, is that manufacturing will take the same road as agriculture. The number of factory workers will dwindle, just as the number of farmers has fallen. But manufacturing will create new support industries - and jobs - just as agriculture has.

Today, "people understand the interdependence of services and manufacturing," says Demetria Giannisis, director of international strategic planning for Chicago's planning and development department. "Without manufacturing, service jobs don't expand."

Efforts at the local level are now being echoed at the top. The Clinton administration has targeted efforts to create manufacturing extension centers. These centers would be federally funded with roughly the same mission as Chicago's CMTC. The CMTC is hoping to qualify.

"People recognize the importance of doing this," says Maryellen Kelley, professor of management and policy at Carnegie Mellon University. "The Clinton administration has the potential of unleashing a lot of ... well-agreed upon policy initiatives."

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