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Google Taking the Lead on “Reshoring” Movement?

One of Google’s newest products—the Nexus Q—has an interesting new feature. In addition to the futuristic design, the product has one, more unique, characteristic: It was manufactured in America.

As the New York Times reports, Google is beginning to experiment with shifting some of its manufacturing to the US. Bucking the trend in Silicon Valley, where nearly all manufacturing of small electronics has long since shifted to China, Google’s products have been manufactured entirely in a California factory, and nearly all of the components are American as well—which is also a rarity. Although this is only a test run, and will only be implemented on one of Google’s many products, a successful result could inspire Google—and others in Silicon Valley—to implement a similar process on more of its products. We have discussed the nascent phenomenon known as “reshoring” before on Via Meadia; Google’s decision shows that major companies, and in this case one of the most forward-thinking companies in the world, are engaged with the idea.

Nor is this purely a patriotic gesture on the part of Google—as the Times notes, there are good economic reasons for the move:

Rising labor and energy costs have made manufacturing in China significantly more expensive; transportation costs have risen; companies have become increasingly aware of the risks of the theft of intellectual property when products are made in China; and in a business where time-to-market is a competitive advantage, it is easier for engineers to drive 10 minutes on the freeway to the factory than to fly for 16 hours.

Although the piece is highly anecdotal, the findings track very closely with what we have seen before in other industries that have shifted manufacturing back to America. Tyler Cowen puts it best in an excellent recent piece here at The American Interest:

The more the world relies on smart machines, the more domestic wage rates become irrelevant for export prowess. That will help the wealthier countries, most of all America. This logic works on both sides. America is using less labor in manufacturing, but China is too, even as its manufacturing output is rising. The fact that Chinese manufacturing employment is falling along with ours means that both our higher wages and their lower wages are becoming less relevant for the location of manufacturing decisions. The less manufacturing has to do with labor costs and relative wage levels, the greater the comparative advantage of the United States.

It’s still too early to say how widespread this trend will become, and there will still be ample opportunities for political incompetence, economic malaise or excessive regulation to mess things up.

And we need to remember that no matter how successful this trend turns out to be, manufacturing is not going to provide the kind of employment that it did in the past. Productivity has increased so much that it just doesn’t take as many workers to make widgets and gizmos as it once did.

But in an era of scarce jobs, the Google story serves as a helpful reminder that America’s future remains significantly brighter than many think.

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  • Lorenz Gude

    Unfortunately the Nexus Q is little more than a $100 Apple TV but costs $300. It lacks compelling competitive advantages from what the technorati are saying – so it may well flop. The new 7inch Android tablet is made by Asus, an excellent Taiwanese company. I don’t know if manufacturing costs caused the Q to cost too much for what it is, but it is more expensive than the new 7 inch Nexus tablet which is a much more complex product going for $199. Color me skeptical on this one. .

  • Anthony

    Reshoring has economic advantages for some manufacturing interests – human capital, costs shifts, smart machines, etc. – but as mentioned manufacturing will no longer be employment provider fondly remembered by many Americans.

  • Gary L.

    Nor is this purely a patriotic gesture on the part of Google—

    Google is not exactly renowned for its patriotic gestures….

  • Mick The Reactionary

    I’m curious what is larger, number of jobs paying more than $20K+/year + benefits that have returned or number of published articles about them.

    I bet on the latter.
    Two reasons some many pundits write these mis-informing articles:

    1. Deep down many free-trade ideologues know that they are wrong

    2. Lots of it is propaganda for Joe Six Pack consumption payed for by big importers like WalMart or outsourcers like Indian software plantations.

  • Eurydice

    Well, according to a Boston Globe article from a couple of weeks ago, European high-tech companies have been “flocking” into the area.

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