Andy Grove, the former chief executive of Intel, has famously argued that the best innovation takes place when design teams are integrated with production teams. Product designers can get feedback about the practical constraints involved in manufacturing and can fine-tune their designs accordingly.
Apple has said that it is investing $100 million in new U.S. plants — a move hailed as bringing manufacturing back to our shores. However, Apple has always done most of its prototype manufacturing in the United States. The company may mass-produce iPhones in China, but it has maintained U.S. factories as laboratories to perfect its products before launch. Now, rising wages in China and transportation costs have encouraged Apple to manufacture some of its Mac lines here.
It is naive to think we can keep design in America without retaining some manufacturing capacity. Harvard Business School professors Willy Shih and Gary Pisano have shown that the offshoring of semiconductor manufacturing that shifted silicon processing to Asia, for example, gave companies there an advantage in designing solar panels and energy-efficient lighting.
3. U.S. manufacturing can't compete with China.
Over the past decade, the growth of Chinese manufacturing has exceeded America's, so for the first time, China has taken the lead in global manufacturing. Yet, for all the hype about the BRIC economies — Brazil, Russia, India and China — the United States remains neck-and-neck with China in manufacturing output, and we still far outstrip such traditional powerhouses as Japan and Germany. China and the United States each produce about one-fifth of the world's manufacturing, yet we do so with only about 10 percent of our economy devoted to that sector, compared with nearly 40 percent of the Chinese economy.
What keeps us in the race is our productivity advantage. U.S. manufacturing workers are almost six times as productive as Chinese workers and 1 1/2 times as productive as those in Japan and Germany.