What the world wants to know about Donald Trump and America’s Lost Manufacturing Industry

Author: Yuning Chang, Translator: Athena Chen, Editor: Yunchieh Tsou

When people talk about the manufacturing industry, it usually conjures up images of large factories with uniformed workers slaving away at repetitive and monotonous jobs. These factories, have been the economic foundations for innumerable families in Asian countries such as China, and have also been responsible for the rise of China’s as a superpower. In the recent US election, many American citizens have put high hopes on president elect Trump in restoring factories back on US soil, and thus bring back the manufacturing jobs “stolen” by China to America, where unemployment rates are on the rise.  

But, if America wants to revive its manufacturing sector, then the belief that factories only consist of tens and thousands of laborers and heavy duty equipment needs to change. To understand modern day manufacturing, nothing would be better than diving deep into the inner workings of household name, Apple. From product design to manufacturing to customer services, Apple is branded with its own name. But, without manufacturing process engineers from Taiwan, or if China’s skilled workers on the production line went missing, Apple would have a very hard time ensuring that its’ latest iphone offering, would not go on the tragical route of Samsung’s note7, where the brand has suffered considerable blow from a high defection rate.

Smart devices require a highly complex and sophisticated manufacturing process than other products. Because of the sophisticated manufacturing, smart consumer electronics have developed an unique manufacturing process with a regional division of labor based on specialty, within Asia.

China, as it is widely known, creates an extremely low labor cost production line through current mechanisms of currency control. A whole generation of production line workers, dominated by capitalism have brought on an unprecedented phase of economic growth for this communist government. At the same time, Taiwan and Korea have both leveraged the low-cost labor of neighboring China, but going on very different pathways.

Since the blow of the Asian Financial Crisis of 1997, South Korea has created mighty conglomerates through government backing. Samsung is illustrative of the ties formed between the government and the private sector, and is responsible for competing on an international scale with the U.S.’s Apple, Japan’s Sony among other smart consumer electronic device manufacturers globally. Samsung, in similar vein to Apple, has tried to build up a complete offering of branded products, with in house divisions in charge of design to manufacturing to sales and marketing services. With Samsung’s own factories, they manage to fabricate their own smart phone devices and laptops, alongside manufacturing core components for their competitors, it even provides internal chips for a fraction of iphones.

On the other hand, Taiwan– a small island democracy of 23 million, lacks a sufficient domestic market, and with the surge of democratic development which undermined the idea of a nationalist country-led backing to corporations, few Taiwan companies dared try to bet on developing their own branded products.

The swift rise and demise of HTC, points to the fact that Taiwan has a disadvantage in establishing consumer brands such as Apple or Samsung. Even in the face of these less than ideal conditions, Taiwan plays an important part in the global production chain of smart consumer electronics, as a specialized original equipment manufacturer. What Taiwan is capable of, is not cheap labor, but highly skilled technical workers, where they are in a race everyday against Moore’s Law, exerting their control over advanced technology nodes, and ensuring highly efficient production and quality control rates. This competitive advantage has resulted in 90% of Apple’s manufacturers being Taiwan companies, officially laying ground for the international reach and loyal reputation of Taiwan’s original equipment manufacturing.

Under such specialized manufacturing , Taiwan’s tech manufacturers and America’s tech industry have established partnership. While America’s tech brands focus on the latest innovations and designs of the product, their Taiwan counterparts are responsible for a smooth and reliable production process of these designs, and ensuring a scalable and consistent quality of manufacturing. Taiwanese tycoon Terry Gou, founder and chairman of Foxconn, which listed at 31st on the Forbes 500, alongside Pegatron Corporation, Compal Electronics, and TSMC are all international manufacturers that are important partners to America’s tech industry. If Trump wants to bring back America’s manufacturing, then strengthening relations with Taiwan– cream of the crop in manufacturing processes– will be an important task.

What Trump cannot overlook in his plan to overhaul the manufacturing industry is that, scalable manufacturing is now also being challenged head on by IOT trends.

The next wave of consumer electronics, are being led by a bunch of small to mid-sized tech companies and startups in the Bay Area and Silicon Valley. These innovators have inherited from the last-generation tech giants, such as Apple and Google, the ability to create software apps on smartphones to control IOT products. They devote themselves to connecting all objects, and it won’t be limited to just your fridge and door lock, but even your mug, backpack or clothes.

But in this vast world of IOT, what these startup nerds need and lack the most, is the ability to design and manufacture hardware. Looking at the numerous failed IOT product campaigns on Kickstarter, many were due to the lack of hardware design and manufacturing skill in the US, lacking collaborators that might help them produce and scale their products.

A fraction of these hardware startups have now crossed the Pacific to China’s Shenzhen and Taiwan in search of manufacturing partners. Many of those in Shenzhen complain about the lack of respect for intellectual property rights, where as soon as you turn over your designs to the Shenzhen factories, you see identical products popping up on China’s largest e-commerce websites– but not under your brand name. As a result, more and more companies are coming to Taiwan, as they are not looking for a massive scale of production but quality manufacturing, and most importantly a good sense of business ethics.

For Taiwanese manufacturers, the rise of IOT is seen as both a challenge and an opportunity. Taiwan’s advantage in quality manufacturing, has led them to partnering with innovative clients from Silicon Valley and the Bay Area. Though the quantity of production is not high, but through these collaborations, Taiwan companies in turn can also improve on their traditional manufacturing process, and adapt to new market needs.

This will give Taiwan a significant head start over their Korean counterparts. Including Pegatron Corporations and Compal Electronics have both zoomed in on this trends, and have started to restructure their organization, actively seeking chances to work with these small to mid-sized companies and startups, as well. With the aid of Taiwan’s quality manufacturing process, these IOT-related smart devices have an even better chance of being made back on US soil. If Trump’s plan to bring back manufacturing jobs have any chance of being realized, then Taiwan will be an strategic partner that cannot be overlooked.

(圖片來源:Gage Skidmore, CC licensed)