The Changing Face of Shenzhen, the World's Gadget Factory
motherboard.vice.com
motherboard.vice.com
This time I'll actually be living on-site at one of our partner manufacturer's factory towns. It's difficult to wrap your head around the sheer scale of what has happened.
The factory town I'll be living in is 2 hours from the nearest city. Until the founder decided to build a factory there it was a tiny tropical village with population in the 100s. The air is clean. The weather in April a balmy 72F.
Today, it is home to 10000+ workers who all work for the manufacturer. Some live in company housing, but most have homes with their families in the surrounding villages. There are basketball courts, tennis courts and a running track that circles the compound.
The facility is vertically integrated - one building die casts metal molds, another uses them to injection mold plastic. They meet another truck from the PCB building and all get together at the assembly line.
The assembly line itself is a pressure positive facility - the air pressure inside is slightly higher than the atmospheric pressure so that air with impurities never gets in.
I was there for around 8 hours and I spent it in a daze. The kind of physical product development you could do with the kind of resources available there are otherworldly. I can't wait to be back.
The US has factories which look like Shentzen factories. Here's one.[2] It's run by Flextronics. More typical in the US are huge factories without many people doing direct labor.
[1] https://en.wikipedia.org/wiki/Lower_Trenton_Bridge [2] http://www.usatoday.com/story/money/business/2013/12/06/jobs...
It's VICE, what did you expect? I recommend EDGE for harder-hitting fact-based journalism https://www.youtube.com/watch?v=FWVNDfDSE44
One of the main reasons why I think engineering is failing in the west is the deep separation between the math and actual production.
Software is an exception and this is why the US churns out world class software engineers.
But I think rather and throwing more billions into teachers and saddling students with more debt it would be be much better if the mid-level technical jobs existed to allow mid-level engineers to learn from experience rather than excel purely symbolicly ( in maths )
The big truth here is in one of the last paragraphs of the article - Shenzhen (and China) is going through an accelerated industrial revolution - they're making many of the same mistakes the west made (don't forget the killer smogs of the 50s in London), and learning from them - Shenzhen has simply banned the 2-strokes scooters ubiquitous throughout Asia, replacing them with electric ones, petrol powered taxis incur a 3 kwai tax over the blue electric ones ....
Just because most people don't know about US manufacturing doesn't mean it's not still around, and in fact has hit recent peaks as the economy has recovered after the global recession (we'll see what happens now that economies are wavering again).
This has nothing to do with engineering and everything to do with management.
Take Tektronix, for example. They used to have world class engineering and manufacturing in Oregon. Then they got bought by Danaher, a conglomerate that exists solely to acquire and "monetize" companies, while not investing sufficiently in future R&D.
Now Tek is a hollow shell of itself. The remaining engineers travel often to China, where all the production is.
But a lot of non-technical people got very very rich in the process. So I guess it's a good thing. Right?
But it's also a yin and yang thing. Tek wouldn't have been scooped up by Danaher if they were able to succeed on their own. But maybe they would be even worse off if Danaher hadn't bought them? That's the eternal lifecycle of most companies. Scrappy startup -> successful -> ossified -> bankrupt or merged away.
Is that an eternal lifecycle?
Or is it merely one of the unintended consequences of a largely unregulated financial market that doesn't have the patience for research and development?
I keep thinking about acquisitions like Tek's and the incredible value that was accumulated over decades that's being destroyed in favour of a quick return and I keep thinking that 'market efficiency' doesn't lead to a lot of wealth.
Unless you manage a hedge-fund, I guess. Even then, though - they'll only be able to pick the meat off of the bones of western industry for so long - sooner or later the corpse will be picked clean and all of that wealth and technology will have migrated east. And no one in the east is so tolerant of that sort of selfish wealth-destruction and corporate vandalism as we are.
Assuming you were investing, would you personally be more likely to park your money in Danaher or Uber?
Managing future value is challenging. It's easy to say that the market is thirsty for value now. However, if you submit to a golden "invest in the future" strategy, your company may be inefficient (from an investor's perspective): Returns will be lower than what you can get elsewhere, meaning that the company should release funds to investors instead of investing internally. On the other hand, if you submit to maximizing local (in the time axis) returns, you'll surely forego disruptive jumps, their gains on efficiency and the future profit they entail.
It's not a simple problem.
Given a choice, you have $10k to spend on either Uber, Facebook or Danaher shares. Danaher will continue to invest in the future, rather than being gutted.
Where do you park your money?
Market efficiency leads to a massive burgeoning of wealth - for investors, producers and consumers. Look at everything around you. All produced by market efficiency ruthlessly killing off poorly managed, run or outdated products and companies.
The siren song of 'dem markets done me wrong' is a pleasant place to submit to - nothing soothes the soul like a blame-figure to pin the ills of the world on - but I would suggest thinking it through a bit further.
For a start, hedge funds have nothing to do with conglomerates acquiring businesses and failing to understand that business.
What I'm suggesting is that the cost of entering and leaving a position in equities is now so low that it's become difficult to be an income investor, especially when there are so many growth investors seeking positions. And its only income investors who want R&D - growth investors carry axes to shareholder meetings.
Market efficiency leads to a massive burgeoning of wealth - for investors, producers and consumers. Look at everything around you. All produced by market efficiency ruthlessly killing off poorly managed, run or outdated products and companies.
I know that 'creative destruction' is a popular valley trope, but everything around you was actually the product of a whole lot of expensive R&D which is difficult to do now in 2015 unless you own a market and can tell your own investors, blindly demanding quarterly price growth, to go fuck off for a bit.
We have equity markets filled with investors all maximizing their portfolios by selling mom's and dad's silverware and china. Maybe Tek's name and reputation really is worth more in the next 5 years than the company itself. Fire the engineers and run lean until the market passes you by and you close up shop. But is that actually creating wealth? Killing off 'poorly managed companies' isn't creating wealth - it's a crude form of arbitrage. Real wealth always comes from new technology.
For a start, hedge funds have nothing to do with conglomerates acquiring businesses and failing to understand that business.
Hedge funds are a symptom of the same problem, which is that no one wants to be an income investor when there's more money in selling mom's and dad's house.
In essence, a massive leverage is used to grab a controlling share, followed by a disassembly and sale to cover the initial leverage.
Shit been going on since the 80s, if not before.
Companies that could well have provided a steady income for generations end up being slaughtered for short term Wall Street profits.
It's not that. It's just not economically viable to manufacture in the west when western currencies are kept artificially high, Asian currencies are kept artificially low and Asian manufacturers face less stringent environmental and labor regulations.
Designed in California, Assembled in China, soon to be Vietnam or Malaysia.
After SE Asia it will be Africa. Then who knows?
Was it? I wasn't around for that time, but I was under the impression that in the pre-glory days of "Made in Japan" it was still designed in Japan by Japanese companies (which is how Sony, Toshiba, Panasonic got their starts). They didn't have the global manufacturing outsourcing we have today with "Made in China".
Whereas these days, any startup Chinese brands have to compete with international brands who can still enjoy the same cost of Chinese manufacturing
Probably not so much for end consumer devices, like you say.
In the end, quality of living will increase world-wide until the cost of manufacture is roughly equal in all locations.
This is perturbed by a variety of costs that make it more expensive to pay an Elbonian worker $10/hr than an American worker $10/hr if the goods are to be sold in America- but it could close the gap dramatically.
unit {big number}, building {big number}, sector {big number}...
Just based on these addresses I'd formed a mental picture of some dystopian industrial megacity.
Google reverse image search show they collected images from different places. If I remember corectly this was the article : http://www.unknownfieldsdivision.com/blog/?author=2 it is from Summer 2014.
I think if China could transform these very workers into consumers, it would be unstoppable.
It surely isn't an easy life [0], but what always gets to me is the old people who are poor. At least the young has hope, especially in anomalous city like Shenzhen. Who knows what is going to happen in 5 or 20 years. It might even show itself to be one of the best places in the world to be born right now.