SwampFox

Do we want the ability to design and make iPhones here?

Submitted by: John Warner on Jan 26, 2012 at 8:10 am Tagged with: Innovation Source: Swamp Fox

A few days ago, I sent a link to a number of thought leaders in South Carolina to a New York Times article, How U.S. Lost Out on iPhone Work. A wake-up call in the article was a quote from a high-ranking Apple executive, "Factories in Asia “can scale up and down faster” and “Asian supply chains have surpassed what’s in the U.S.” The result is that “we can’t compete at this point.”

See Michael Porter's presentation to New Carolina last fall, especially starting at about slide 15. High wage states have deep and sophisticated industry clusters, and South Carolina has recruited branch manufacturers who are all over the board. Dr. Porter said, "If there is one reason our wages are low, that's it."

This week, there is an interesting response to the New York Times article in Forbes, The Real Reason the U.S. Doesn't Make iPhones: We Wouldn't Want To.

I would rather my children designed iPhones than made them. For our young generation, 400,000 workers in rows and rows assembling iPhones is a scene that they could comprehend only in a Charles Dickens’ novel. The day that America starts to assemble iPhones will be the day that China is designing those cool products. That will be a day when our smartest and brightest young people are flocking to China.

The point of the Apple article is that an entire ecosystem of firms that "make them better, faster, cheaper, and leaner than anyone else" develops distinctive capabilities that no one firm individually has. China has moved from being only cheap in electronics, to having capabilities that cannot be replicated in the United States today. A high value added innovation culture is only possible where there is an ecosystem of operationally excellent firms that "make them better, faster, cheaper, and leaner than anyone else."

Mr. Milliken said, "Operational excellence secures today. Innovation excellence secures tomorrow." We won't be globally competitive unless we focus on building deep and sophisticated industry clusters that allow us to do both.

That requires leadership.