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7 February 2017

Robots

From the New York Times

Factories play a central role in President Trump’s parade of American horrors. In his telling, globalization has left our factories “shuttered,” “rusted-out” and “scattered like tombstones across the landscape of our nation.”

Here’s what you might call an alternative fact: American factories still make a lot of stuff. In 2016, the United States hit a manufacturing record, producing more goods than ever. But you don’t hear much gloating about this because manufacturers made all this stuff without a lot of people. Thanks to automation, we now make 85 percent more goods than we did in 1987, but with only two-thirds the number of workers.

This suggests that while Mr. Trump can browbeat manufacturers into staying in America, he can’t force them to hire many people. Instead, companies will most likely invest in lots and lots of robots.

And there’s another wrinkle to this story: The robots won’t be made in America. They might be made in China.

Industrial robots — which come in many shapes and perform a range of factory jobs, from huge, precisely controlled arms used to build cars to graceful machines that package delicate pastries — were invented in the United States. But in the last few years the Chinese government has spent billions to turn China into the world’s robotic wonderland.

In 2013, China became the world’s largest market for industrial robots, according to the International Federation of Robotics, an industry trade group. Now China is working on another big goal: to become the largest producer of robots used for factories, agriculture and a range of other applications.

Robotics industry experts said that goal could be a decade away, but they see few impediments to China’s eventual dominance.

“If you look at the comparisons in investment between China and the U.S., we’re going to lose,” said Henrik Christensen, director of the Contextual Robotics Institute at the University of California, San Diego. “The investments in China are billions and billions. I’m not seeing that investment in the U.S. And without that investment, we are going to lose. No doubt.”

There’s a way to address this problem, but it’s politically perilous: The United States should invest in robots. Mark Cuban, the internet and sports entrepreneur (and Trump nemesis), recently called on the president to offer $100 billion in funding for robotics. Frank Tobe, the publisher and editor of a trade magazine called The Robot Report, said government investment was imperative.

“We better do something, or we’re going to be behind the gun,” he said. “We should be in the robot business, not just users of foreign robots.”

If we don’t, robot scholars said the president’s plans for a resurgence in manufacturing could backfire. Today, we buy a lot of stuff made in China by Chinese people. Tomorrow, we’ll buy stuff made in America — by Chinese robots.

How China learned to love robots is instructive. For years, China’s chief selling point was cheap labor. But over the last couple of decades, its population has gotten older and richer, and its workers’ wages rose faster than the rate of economic growth. Chinese leaders worried that manufacturers would get priced out. In the same way that America lost manufacturing to China, Chinese manufacturers would lose work to India, Vietnam and other developing Asian economies.

So the Chinese did what the Chinese do: They centrally planned a revival. Over a succession of five-year economic plans, the government pushed a series of manufacturing reforms. One of its central ideas is automation. Local governments have offered billions in subsidies for companies to buy and manufacture robots. The government has been especially interested in building robots that can be installed in China’s car factories, which have been criticized for poor workmanship. Robots that build cars would not just save labor costs; the government also believes they would build better cars. In 2014, Xi Jinping, China’s president, called for a “robot revolution.”

Like other centrally planned initiatives, China’s robotics initiatives have not proceeded without trouble. There have been overinvestment and waste, and many Chinese robotics companies aren’t making very good robots.

“Many are low quality, and safety and design standards are really not good,” said Dieter Ernst, a senior fellow at the East-West Center, an organization that aims to improve Asian-American relations. “There are supposedly a bit more than 100 Chinese robot companies. I would say about 50 of these companies may survive.”

But the Chinese government and its companies are persistent. Mr. Ernst expects slow, steady gains in the Chinese robotics industry. And in five to 10 years, he predicts, China’s robot business will be producing industrial robots that are on par with those from Germany and Japan.

Pushing a robotics revival in the United States would be more difficult than in China, where there hasn’t been much outcry from workers over the government’s embrace of automation.

“There is not a public conversation in China about the pluses and minuses of automation,” said Scott Kennedy, a China scholar at the Center for Strategic and International Studies. “They don’t talk about the losers in society from globalization or potential automation.”

In the United States, on the other hand, losing is all we seem to talk about. Mr. Trump rose to power in part because he crystallized a feeling among voters that we have lost our edge to China. He promised to bring jobs back to America. In a hot-take political climate that can’t stomach nuance, an investment in robots would be seen as a betrayal of the manufacturing workers he promised to save.

But that would be a mistake. Mr. Christensen of the University of California, San Diego, pointed out that even the most automated of factories still employ people. To the extent that an investment in robotics might make it easier for companies to build their factories in the United States rather than in China, it might well create new jobs in the United States.

What’s more, America enjoys many advantages in robotics that China lacks. Some of the world’s leading roboticists work at American universities. The United States has a start-up culture that knows how to create big new companies. And America has a head start in the most advanced robotics technologies. For instance, American companies are the leading purveyors of surgical robots, and they are at the forefront of “collaborative robotics,” in which robots can work side by side with humans.

“All of this robotics technology was invented in the U.S., but we basically let other companies take it from us and make it cheaper, and now we’re buying it from them,” Mr. Christensen said. “In some sense, we’re not being very good at making sure we remain competitive in areas that we’re leading.”

And that’s how huge government funding can help, the robot experts said. As in China, an infusion from Mr. Trump could turn some of the most far-out ideas in robotics into a structural advantage for the American economy.

“What we can learn from the Chinese example is that the government plays a nurturing and fostering role for developing the robotics industry,” Mr. Ernst said.

“We can do the same. We must do the same.”

Email: farhad.manjoo@nytimes.com; Twitter: @fmanjoo

 

 

 

Tech Companies Should Do the Right Thing on Conflict Minerals

Kelly Witherspoon, Program Manager, Social & Environmental Responsibility, Jabil Circuit

 

“Character is doing the right thing when nobody’s looking.”

I believe these words of wisdom are more relevant now than ever before for technology companies as they ponder the future of their conflict-minerals policies.

Changes in the US political environment may result in the imminent demise of Section 1502 of the Dodd-Frank Act, which requires American companies to disclose the usage of these raw materials to the Securities and Exchange Commission. The repeal of this legislation would result in a major decrease in activity related to conflict-minerals compliance. This is because decision makers in many technology companies may determine they no longer need to concern themselves with the issue.

That would be a mistake.

There are many good reasons to continue complying with the spirit and the letter of Section 1502, ranging from public perception, to conforming with industry protocols, to meeting overseas rules and regulations. But the most important motive is much more fundamental: Avoiding raw materials obtained through human suffering is simply the right thing to do, whether the government is looking over the corporate shoulder or not.

Conflict resolution

The genesis of Dodd-Frank 1502 was the ongoing conflict in the Democratic Republic of the Congo (DRC). Warring factions in the DRC have used the proceeds from mining to finance their military activities. These groups sometimes employ forced labor in their mines, subjecting workers to dangerous and inhumane conditions.

Under the terms of 1502, companies are required to report their use of conflict minerals widely used in electronic components, including tantalum, tin, gold, and tungsten.

The improved transparency mandated by Dodd-Frank has yielded impressive results in choking off the supply of conflict minerals in the electronics supply chain. More than 80% of global smelters used in the production of these metals have passed audits or are in the process of being audited by the Conflict-Free Sourcing Initiative or other programs, according to The Enough Project.

Brand X

In the event of a rollback of 1502, the most likely group of companies to dispense with restrictions related to conflict minerals would be those that don’t have prominent, consumer-facing brand names. Such companies don’t bear as much media scrutiny as well-known brands do.

 

Meet the press

In contrast, companies with established brand names are expected to stick with the status quo on conflict minerals disclosure. For these entities, the chief concern is avoiding the negative headlines that could be generated by revelations that their businesses are funding war crimes.

Several well-known technology firms in recent weeks have announced they intend to continue their compliance efforts, calling the issue a matter of human rights. Any company concerned about its brand image would be wise to follow the example of these firms.

Furthermore, smaller companies that are suppliers for big technology firms have a strong motivation to maintain compliance with the major brand’s conflict-minerals policies. These mid-tier companies need to remain aligned with the policies of their customers.

 

Code words

Big and small companies throughout the electronics supply chain have an additional reason for continuing to conform to 1502: Many of these enterprises belong to industry groups whose membership requires responsible sourcing of materials. For example, the Electronic Industry Citizenship Coalition’s code of conduct specifies that minerals sourced by participants should not finance armed groups in the Democratic Republic of the Congo.

 

Overseas overseers

Yet another reason for continuing to observe Dodd-Frank is the international legal climate.

Whatever changes occur in U.S. laws, technology companies still operate in an international marketplace. And throughout the world, the trend is toward tighter regulations aimed at improving social and environmental conditions.

The European Union has led in this area, and recently agreed to ensure responsible sourcing of more than 95% of imports of tin, tantalum, tungsten and gold. Other countries working on such legislation include China and Brazil.

To operate in these nations, U.S. companies need to ensure their products conform with laws that bear similarities to the 1502 provision.

 

Do the right thing

Apple recently stated in a Bloomberg article that it is “deeply committed to the responsible sourcing of materials that go into our products. We do this because it’s the right thing to do, not because it’s required by law.”

For Apple and other U.S. technology firms, the question of funding human-rights abuses has a simple answer: Do the right thing, regardless of whether anyone is looking or not.

 

 

Apple and the Battle for American Manufacturing

Jan 26, 2017 Steve Minter | IndustryWeek

Waiting for the Next Big Thing

After decades of offshoring, President Trump is making a concerted effort to return manufacturing to the U.S. Could the world’s most valuable company become the poster child for that reshoring tide.

“I’m going to get Apple to start making their computers and their iPhones on our land, not in China. How does it help us when they make it in China?”

After his victory last March in the Super Tuesday primaries, that was the message from candidate Donald J. Trump, who also had criticized dozens of other companies for moving, or planning to move, production offshore from the United States.

While Trump criticized Apple a number of times during the campaign, he took a very different tone at a December 14 meeting with a bevy of Silicon Valley giants, including Apple CEO Tim Cook, Amazon CEO Jeff Bezos and Alphabet’s Larry Page. “I’m here to help you folks do well,” Trump said at the start of the meeting, according to a Bloomberg report.

Like it or not, Apple may find itself at the center of a debate concerning the future of American manufacturing. Over the past few decades, many manufacturers have moved jobs from the United States to low-cost countries. In business circles, it has been accepted that this was an inevitable evolution and that the future of the United States lay mainly in the service sector, a transition from low-paying brawn jobs to high-paying brain jobs.

While it originally manufactured its computers in the U.S., Apple long ago moved to a system where it designed its products in the United States but used a network of largely Asian manufacturers, in particular Taiwan-based Foxconn, to produce components and assemble its products ranging from the MacBook and the iPad to the ubiquitous iPhone.

Both the products and the process have been roaring successes, making Apple the most valuable company in the world. For the past two fiscal years, the Cupertino, Calif., firm has had sales exceeding $200 billion annually and net income of $45 to $53 billion. Moreover, the company is sitting on a cash reserve of more than $237 billion.

With a market cap of approximately $640 billion, Apple is much too big to escape the notice of a president who has repeatedly stated his intention to bring manufacturing jobs back to the United States.

Trump isn’t the first president to want Apple to put more manufacturing in the United States. In February 2011, then-President Barack Obama asked the late Steve Jobs why the iPhone couldn’t be made in the U.S. The reply, according to a New York Times report: “Those jobs aren’t coming back.”

When a Times reporter asked a former Apple executive why the company had focused on manufacturing in Asia, the executive said Tim Cook, Apple’s supply chain mastermind, had concluded, “Factories in Asia ‘can scale up and down faster’ and ‘Asian supply chains have surpassed what’s in the U.S.’ The result is that ‘we can’t compete at this point,’ the executive said.”

Is Apple Ready to Reshore?

What would it take for Apple to start manufacturing substantial numbers of its products in the United States? Some observers think a deal could be in the works, where Apple reshores some portion of its manufacturing in exchange for repatriation of its substantial profits sitting overseas at a lower tax rate. The company currently has more than $200 billion in overseas accounts. President Trump has suggested a one-time 10% tax rate for these funds. Trump has also promised to substantially lower the U.S. corporate tax rate, among the highest in the developed world at 35%.

Such financial incentives would certainly be needed for Apple to shift production from China. As the New York Times reported in “How China Built ‘iPhone City’ with Billions in Perks for Apple’s Partners,” Foxconn has received more than $1.5 billion from the Chinese government to build its huge factory in Zhengzhou. That factory can produce up to 500,000 iPhones a day. Not only did the local government help finance the factory and roads leading to it, but it “helps cover continuing energy and transportation costs for the operation. It recruits workers for the assembly line. It pays bonuses to the factory for meeting export targets.”

“I can see through political pressure and needing a seat at the table that they may consider moving some element of production or even assembly to the U.S.,” says Peter Bryant, managing partner at Clareo, a business strategy consulting firm. “I think they are going to struggle to do nothing in this area.”

Moving production of iPhones to the U.S. would be not only expensive and difficult but also risky in a number of ways. Experts such as Bryant point out that moving production to the U.S. would increase the cost of the iPhone.

“Apple products are already premium priced,” says Bryant. “I’m not sure there is room to keep jacking the price up. If they have to absorb that price increase, that’s a pretty big margin erosion that shareholders won’t like.”

Higher production costs could lead to less investment in R&D and new technologies over time, worries Gary Pisano, a professor at Harvard Business School. As a result, he warns, “they hurt themselves and they hurt the U.S. economy.”

Rather than “using the bully pulpit to push companies to put a factory in the U.S.,” said Pisano, the U.S. should bolster its trade enforcement policies so U.S. firms are not forced either to manufacture in other countries or to hand over their intellectual property. He said manufacturers would also be more likely to invest in the U.S. if the country adopted “rational” tax policies, more investment in jobs training and improved regulatory schemes that promote, for example, faster permitting of facilities and processes. Overall, he said, the U.S. needs to work to create an industrial ecosystem where manufacturers want to locate and where “high wage, high productivity” jobs are created.

“I don’t want to make things the Chinese make,” said Pisano. “I want to make things the Chinese can’t because our productivity and our skill base is so much higher.”

Alan Tonelson, an economist and trade expert, says Foxconn’s recent revelation that it was considering investing $7 billion to bring a flat panel display factory to the U.S. undercuts arguments that the electronics supply chain could not be brought here.

He notes that Foxconn is considering creating 30,000 to 50,000 jobs in America and that it has already announced plans, as AFP reported, for a “$40 million investment in a facility in Pennsylvania to build precision tools and develop a robotics program.”

“That sure sounds like supply chain stuff to me,” Tonelson wrote in his RealityChek blog.

Apple will consider a complex web of factors before committing to substantial U.S. manufacturing. China offers an established supply chain, financial support and abundant manpower, but wages are rising in China, eroding its price advantages. The labor component of the price of Apple products is almost certain to diminish as Foxconn and other manufacturing partners employ more automation in the production and assembly of products. And China can be an unpredictable partner with U.S. businesses. China has blocked Apple’s iBooks and Movies online stores and recently ordered the removal of the New York Times app from the Apple store.

Still, China offers a huge and growing market for U.S. companies such as Apple and retaliation by the Chinese government for a withdrawal of manufacturing by Foxconn would surely damage Apple from both a manufacturing and retail standpoint.

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