Andy Grove, one of Intel’s earliest employees and its former Chairman and CEO, offers his take on how the US must create jobs at home instead of in China. As he sees it, the cost of rising wages and benefits in the US has eroded the nation’s ability to compete versus China’s low-cost labor machine.
US companies have understandably chosen to ship work overseas in order to boost profits and please shareholders in the short term. However, the number of offshored positions has become staggering. These decisions have contributed to the frailty of the US manufacturing sector, and Grove probes what could be done differently.
From his opinion piece in Bloomberg:
“Today, manufacturing employment in the U.S. computer industry is about 166,000 — lower than it was before the first personal computer, the MITS Altair 2800, was assembled in 1975. Meanwhile, a very effective computer-manufacturing industry has emerged in Asia, employing about 1.5 million workers — factory employees, engineers and managers.
“The largest of these companies is Hon Hai Precision Industry Co., also known as Foxconn. The company has grown at an astounding rate, first in Taiwan and later in China. Its revenue last year was $62 billion, larger than Apple Inc., Microsoft Corp., Dell Inc. or Intel. Foxconn employs more than 800,000 people, more than the combined worldwide head count of Apple, Dell, Microsoft, Hewlett-Packard Co., Intel and Sony Corp…
“…You could say, as many do, that shipping jobs overseas is no big deal because the high-value work — and much of the profits — remain in the U.S. That may well be so. But what kind of a society are we going to have if it consists of highly paid people doing high-value-added work — and masses of unemployed? Since the early days of Silicon Valley, the money invested in companies has increased dramatically, only to produce fewer jobs. Simply put, the U.S. has become wildly inefficient at creating American tech jobs.”
Foxconn’s employment of 800,000 — more than Apple, Dell, MSFT, HP, Intel, and Sony combined — is simply astounding. It’s a stunning example of how quickly offshoring has transferred employment from the US to China. And, it’s not a mechanism that works so easily in reverse.
Grove implores today’s US executives to develop US employment strategies of the same caliber as their China offshoring practices. If the US is going to avoid overwhelming unemployment, and retain some potential for manufacturing leadership, he recommends that action be taken immediately, before it’s too late.
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