random shower thought:
the main reason nearly all production went overseas (SE-Asia, mostly) - is that they have very low labor cost, compared to US/Eu.
Q:
If automatization cought on on a wider scale, will we see (automated) factories coming back to western countries (as “robots” in the US/Eur aren’t more costly to operate than in SE-Asia, and a whole lot of supply chain issues [think: covid related problems] can be sidestepped.)
any thoughts - or is my reasoning to naïve?
Automatization requires fewer jobs, but not none. Many factories overseas are already highly automated. They still need plenty of unskilled and low skilled labor, and plenty of skilled technicians. Those positions are paid less overseas. It may even be too late for us to be the premier robot makers to supply them.
I think Tesla tried to fully automate their factories a while ago, but they ended up failing and hiring a bunch of people instead. They also seem to be in a race to the bottom, having moved from California to Texas (but that’s probably also due to Elon’s contempt for the Cali regulators). Generally speaking, I think China is not not just winning because of cheap labor, but they’re also decades ahead on the automation and logistics front, along with having a well-integrated long tail of raw materials and intermediate components, along with established import partnerships with many countries where those things come from? They’ve really ramped up their manufacturing, with heavy government subsidies, while we mostly focused on software and warfare.
And on the higher end (CPU and GPU fabs), I think it’s mostly a skilled labor and equipment shortage? Almost all the world’s fanciest devices are made by a Taiwanese company (TSMC) using a Dutch process (ASML). And maybe some stuff from South Korea too. I don’t think that’s something the US can easily replicate? I think the government is trying to encourage it with the CHIPS Act and such, but who’s left to actually do that work nowadays…? Intel seems to be circling the drain these days and I wonder if they’ll even survive the decade, much less bring back semiconductor manufacturing at any meaningful scale. Maybe Nvidia will get rich enough to start their own foundries, who knows, but even there, it seems like they’re well positioned to just become Skynet and not need to limit themselves to any one country.
What would make the US competitive in this regard? On the labor side, we demand much higher qualities of life, safety standards, working hours, etc. On the demand side, mostly our biggest companies produce intellectual property and consume hardware as commodities, and most of our tech companies don’t run their own fabs, just design chips for Taiwan to manufacture.
Factories everywhere are already heavily automated, just based on what I’ve seen on factory tour shows like How It’s Made.
And yes, part of the advantage in China is the entire supply chain is there. Plus they have armies of industrial and other engineers needed This article describes part of the reason.
“The entire supply chain is in China now,” said another former high-ranking Apple executive. “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.”
Here’s another article on why Apple assembles the iPhone in China.
But labor costs are rising in China as well, so India, Vietnam and other countries are trying to capture manufacturing jobs and China is trying to automate its production.
Yeah, he seems to have some real beef with the State of California. He seems to be moving everything he can to Texas- I believe it was announced that X is moving to Bastrop(?- it’s near Austin, but not that close) in the near future.
I think as far as factory automation goes, @Dewey_Finn has it pretty much in one. Most modern manufacturing is highly automated already and have been for decades. Most of the jobs that people perform are not the kind of thing that machines can readily perform, at least not yet.
Generally speaking, manufacturing is moved overseas when the labor costs can be decreased and/or the supply chains can be shortened. Our labor costs are relatively high when compared to places like Vietnam, or even China and Mexico.
I think (but honestly I am not 100% sure) that you overestimate the % of factory automatization, based on stuff you see:
everybody is very eager to show off their newest and hottest factory, which might lead you (generic you) to believe all factories are as highly automaticated (selection bias?). Just like so many YT shows are about the latest and greates sports-cars, but the bulk of what we see on our streets are 2015 Corollas (you get my drift).
Step away from flagship products and think lower value stuff like your kitchen range, shoes, garments, furniture, fixtures, water kettles, sofas etc… (looking around in my place 
) … those all seem to have a lot of human intervention going on in a factory …
Lot’s of manual labor still, but machinery is forming sheet metal off the roll into ready to assemble parts. Final assembly is still largely done by hand for most things.
The cost of land is higher in the EU / US. The cost of all (good) regulation is higher in the US/EU. The cost of business insurance is higher in the US/EU. The cost of taxes is (AFAIK) higher in US/EU. There is substantially nothing which is more costly in China. Nothing.
The only thing you gain by moving a notional fully-automated zero-labor factory from China to the US/EU is less transport cost of finished goods. But where did all the parts that go into the finished good come from? Even if they’re all made locally in the US/EU, where did the raw materials for those parts come from?
And where did all the tools to build and equip the factory the factory come from?
What COVID showed us is that long supply chains are vulnerable. But the length that matters is not miles of transport. It’s number of intermediaries between the mine and the final customer. Supply chains can have their mileage reduced, but the nature of specialization and of chasing the cheapest possible supplier at every level ensure the chains won’t get shorter in terms of layers of intermediaries.
The public won’t pay more for a more robust supply chain. The short term shareholders (the only ones who matter) won’t accept less profit for a more robust supply chain.
My bottom line:
NO, robotic factories won’t be re-industrializing the US/EU. And even if they did, the only real value of industrialization is the relatively high wages for relatively non-academic work that pre-automation factories supplied.
The US has more factories than we have ever had and more factory production than we have ever had.
The percentage of the labor force in manufacturing started to decline in the1970s and has continued to shrink at a fairly linear pace.
Likewise, we progressively make more food every year and the number of people working on farms has shrunk massively.
The US only has so much land and so many people. For any thing that you try to grow, you’ll have to take from elsewhere. Now, if you ban foreign products or tariff them by 900%, maybe you’ll start to achieve that but, clearly, that’s going to hurt. All of our factories that are currently making airplanes and CPUs are going to need to convert over to making basic supplies like t-shirts and toasters. They’re going to have to pull in extra workers from other parts of the economy and pay them enough to convince them to give up their cushy desk job.
But what’s the benefit of that?
At the end of the day, there’s a small national security interest in ensuring that we can produce food, shelter, and armaments sufficient to survive and fight through some attack by a foreign party. Outside of that one, specific and fairly unlikely case, there’s not really any need to make t-shirts here versus there. If our workers can happily have jobs that pay more, working inside air-conditioned office spaces, then oh the darnedy darn!
We have corn, soybean, wheat, cotton, and rice subsidies. Our construction industry has, to date, not found a way to overshore itself. The weapons industry has been force to produce equipment locally.
Our actual minimum needs are already met and probably have been for the entire life of most Americans.
while I agree 95% with you, a few thoughts (the 5%) …
Supply chain issues are not only cost issues … response time is becoming more and more of an issue it seems (e.g. Zara pulling their fast fashon production out of China, back into europe, to be able to react faster to trends, etc…) Seems relevant in our ever-faster-paced world to deliver an updated (electronic) product within a month instead of 3 months (e.g. smartphones with a known but easily fixed issue, …).
Also there IS a risk factor in distance, as the drought in the panama channel showed us (16 ships per day?) and the “Evergreen (?)” accident in the Suez canal, that threw trade out of whack for a couple of weeks.
they will! … they might not know it, but Covid showed us that they will, in a scenario where you are the one able to deliver with a more robust suppChain… Case in point: my wife bought a car in early '22, and her choice was highly influenced by availability (delivery within days instead of months) … This brand (that was never on the radar before) made the sale, b/c of their better SC and their ability to deliver when others couldn’t.
That is something that shareholder also see value in … of course this is a continuum with “extreme efficiency/low cost SC” on one end and “robustness/resilience in SC” on the other … but the pendulum moved def. into the robustness zone - and a willingness to incur higher cost at the benefit of ability to deliver.
again, I mostly agree with you … but it is not as clear cut as it often seems.
I don’t have time to look up sources at the moment, but hasn’t there already been a pretty big increase in onshoring/reshoring manufacturing in the last 3-4 years? Supply chain vulnerabilities were exposed during COVID and greatly exacerbated by just-in-time inventory. With few or no warehouses, there’s no slack in the system, and a non-disrupted transportation system is critical.
Also, offshoring has lost a lot of its luster because the producing countries are generally not markets for the product. They’re outright stealing or running 3rd shift manufacturing runs of your product and selling it under their own brand names. This sort of corruption is supported and encouraged by the governments in say China and India. Other countries are either just as corrupt, or they don’t have the supply chains and shipping infrastructure to support much manufacturing.
So yes manufacturing has been coming back to the US (I don’t know what the situation is in Europe), and in fact a lot of it never really left in the first place, but because of advances in automation, the jobs are generally not coming back with it.