Links 9 Nov: Apple's Foxconn Might Manufacture In The US. But Those Jobs Still ... - Forbes

DigiTimes has reported that Foxconn, the assembler of Apple's kit, might open factories in the US. If true this will indeed create some small number of jobs in the US: but it's not going to lead to the onshoring of vast numbers of manufacturing jobs. As Steve Jobs himself has said, those jobs just aren't ever going to come back.

Foxconn Electronics (Hon Hai Precision Industry) reportedly plans to establish manufacturing plants in the US and is currently conducting evaluations in cities such as Detroit and Los Angeles, according to market watchers. Since the manufacturing of Apple's products is rather complicated, the market watchers expect the rumored plants to focus on LCD TV production, which can be highly automated and easier.

Various papers have reported the news. The Telegraph adds:

However, Foxconn will have to adapt its operations, as its business in China has been hit by worker suicides, industrial accidents and riots. With its iPhones and iPads mainly put together by humans, the company has been forced to raise pay levels three times since 2010.

That's such a farrago of nonsense that it's painful. The reported suicide rate at Foxconn was well below the average for China as a whole, pay is rising at Foxconn because all manufacturing pay is rising in China and the riot was a couple of hundred people. Which, out of a workforce of over 1 million doesn't really qualify as a riot. Small ripple in teacup possibly.

The Guardian carries on in much the same vein:

Foxconn will have to adapt its working conditions to operate in the US market. Worker suicides, industrial accidents and riots have dogged its mainland China plants, which were recently discovered to be employing workers as young as 14. The scandals have proved a source of embarrassment for its largest client.

Sigh. But there is one truth there, that Foxconn will have to adapt its working conditions.

In Foxconn's huge assembly halls in China, iPhones and iPads are largely put together by human hands, with very little automation. In the US, sources say Foxconn will specialise in flatscreen TV sets, which are easier to assemble with the help of robots.

It won't be with the help of robots, it will be by robots:

If DigiTimes' sources are correct, therefore, don't expect Foxconn's US expansion to make much of a dent in the unemployment rates in Detroit or Los Angeles, which hover around 18 per cent and 11 per cent, respectively.

Quite. I think it would be unlikely that even if Foxconn does build factories in those areas that it will move the unemployment rate by anything that we'll be able to capture from the statistics. The reason being those robots.

There are, conceptually, two ways to manufacture something. Use lots of labour to do it by hand or use lots of robots to do it by machine. OK, there's a spectrum running from the Foxconn method at one end to the modern one man and a dog one at the other. The man being there to feed the dog and the dog to bite the man if he tries to touch any of the machines.

Which method you use depends partly upon what it is that you are making, how it has been designed to be made. But more important is the relative cost of labour and capital. If labour is $5 a year and a robot is $100,000 then you'll stray more to the Foxconn system. If the prices are reversed then the man plus dog looks better.

And what we'd really like to know is what is the, at the current sort of pricing for robots, the cross over point? When is labour cheaper, when more expensive? That's something we can work out from Foxconn itself. Wages in China have been rising strongly for years now. They're in the $5,000 to $6,000 a year per worker range now. And at these prices Foxconn has already announced that it's going to automate its lines with up to 1 million robots over the next three years.

Given that US electronics assembly wages are in the $25-$30,000 a year range clearly and obviously anyone assembling in the US is going to move further away from the current Foxconn model and closer to the man plus dog automated one. And it's no use saying that US workers are more productive thus the price is OK: that's what US workers being more productive means. That we'll use fewer of them for any given level of output. Precisely and exactly because we replace them with machines.

Manufacturing may well come back to the US. Indeed, it never really left as manufacturing output, rather than employment, has kept on going up in recent years and decades, despite what you hear about offshoring. But even if the process, the factories and the output, come back, that's not going to lead to mass employment in manufacturing. Simply because machines can do it cheaper these days.