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.