[Paquadez]

Originally posted by Sarge:
Paq, the US isnt the only country that does this. If Im willing to sell you my product for a cheap amount and you turn around and sell it for a higher amount, why should I be upset? I believe this is called capitalism.

Sarge

Here I was alluding to the rape of Third World assets by the West.

Having spent many years in international trade and shipping, before I moved back to technology, the problem is invariably one of corruption.

The UK's Commonwealth was built on swopping glass beads and old muskets for all sorts of hugely valuable assets!

Unfortunately, today, this still goes on with a subtle difference.

A 3rd W state grants an exclusive mineral extrationd eal to large powerful multinational ABC Corp. The president of 3rd W state gets a large bribe into his Swiss bank account.

Then the President negotiates large loans with the World Bank, IMF and commercial lenders (for which the President receives more "dash" into his Swiss account!).

When the commercial loans tank, the average guy picks up the tab by higher loan rates on his mortgage. And extra taxes, as the G7 governments have to provide aid.

In the early 70s, OPEC flexed its muscles, refused to accept being ripped off by the Seven Sisters (the major oil companies who then controlled the world's oil and gas) and many states sequestrated Western assets. Good for them.

Smaller countries keep their citizens living in poverty, in order that Western corporations can continue to pile up obscene profits at their expense.

If you think this scenario is fairytale land, study the government of Lopez Portillio, the then President of Mexico in the late 70s.

Portillio and his gang, robbed the country of circa $50 biillion.

Mexico defaulted on its loan commitments and the rest is history.

I was there, in 1979, negotiating a $1 billion loan with the Government. The number of guys lining up with their hand out was awesome.

At one point, they even caused a real estate boom and bust in Dallas and Houston, coming over the border with suitcases full of greens and buying up office blocks, hotels, apartment blocks whatever. Downtown Houston and Dallas expolded and much of it is still almost empty, all these years later.

As CFix correctly points out, manufacturers of sneakers, have kept contract factory workers on poverty wages, in Asia. Sports sneakers leave the factory at about $12-15 per pair for the Top End models.

US and UK manufacturers complain like hell, when their products are cloned. However, all that is happening is that the Aisian factories are working extra shifts and producing spare product, made on the same machines, by the same people and sold on the clone market. The trade term for this is "Cabbage".

Can you blame them?

Paq

[ComputerFix]

As CFix correctly points out, manufacturers of sneakers, have kept contract factory workers on poverty wages, in Asia. Sports sneakers leave the factory at about $12-15 per pair for the Top End models.

Close to what I was saying.

Poverty wages by my or your standards, but that is subjective. In fact, many industries and companies that we look upon as having disfavorable practices in such regions have actually paid quite well, but just for that region.

I worked for one such company. Our service engineers in the Philippines made less than I did, a "paper pusher", to say nothing of their American counterparts. Compared to their locality, however, they were paid quite well. That is how they came to be our employees, in fact, as we "bribed" them away from their employer with a significantly higher paycheck.

This doesn't make it ok (in that I disagree with averaging down), but I do think it important to view the entire context.

[AlbertB]

Point taken CF. The workers may well be on sensible wages in their own location, but doesn't that make a mockery (or scandal) of the prices charged at the outlet in the West though? Oh. I forgot, that's called capitalism!



(Or just plain GREED!!!)

[ComputerFix]

Originally posted by AlbertB:
Point taken CF. The workers may well be on sensible wages in their own location, but doesn't that make a mockery (or scandal) of the prices charged at the outlet in the West though? Oh. I forgot, that's called capitalism!



(Or just plain GREED!!!)

Value is determined by more than the sum of somethings parts.

The human body, as raw material, has almost no value.

Does that make a human worthless?

Obviously no reasonable mind would say yes to such a philisophical statement, so therefore there has to be more to "value" than just the dollars in.

Back to commodities.....

A playstation game console has a very low production cost, but the return on what I paid for it has now reached hundreds of hours of entertainment (the purpose of my buying it years ago). If I were to even make a conservative estimate of 200 hours of entertainment (and believe me, that is very conservative, probably several times that), that puts it at about $0.50 per hour, not including the material costs ( or intellectual value for development, or any of the other facets to getting that product from nothing to my livingroom), just entertainment to price. Half a buck, how greedy of Sony!



BTW, what does the "West" have to do with it?

[Paquadez]

Having studies (and written quite a lot on this) there is a hidden reality.

Japan was the first Asian "Low Cost" production area, following on from the Marshall Aid Plan.

As Japanese workers slaved away, eventually, they wanted some of the cake, too.

Japanese companies - who had been making consumer goods for the West (particularly the USA) - the turned their KNOWLEDGE, gained from Technology Transfer, into competing with the USA. And they did, eventually taking over from US manufacturers.

Then came Hong Kong: same story: then Taiwan; next Korea.

The hidden danger in all this is, is that eventually, once these "Cheap" production areas have cornered the market in contract manufacturing, thereafter, they will start to market their own brands (Acer e.g) and steal market share and eventually dominate that market.

The one to watch, presently, is China. Each year China - having moved from cheap Christmas Cracker toys, is now raking in circa $100 billion per year surplus, and growing - which it lends back to the USA to fund its deficit!

This is smart?

Taiwan now dominates the Silicon Fab market: dangerous!

Also the notebook/laptop market and excepting Dell, the PC market, too (HP, IBM etc).

In the modern globalised World, beware of the "Biting the hand that feeds you" scenario!

Trouble with "Junk" products, such as sneakers, is that the majority of "Value" is in advertising, distribution, sponsorship, retailer profit etc but NOT product value. Marketing hype - which tends to be illusiory - means that a sneaker is a sneaker, despite the fact that a particular "Sports" mega-star pretends to wear them!

The empowerement of the Internet, means that soon, these Asian manufacturers will be delivering "own Brand" sneakers, to your door at say, $19 a throw. Where does this leave (e.g.) Nike?

Paq

[ComputerFix]

Somehow I doubt it Paq, they will deliver them for $10 USD less than Nike, just to gain marketshare, while the workers still make 12-15 per pair.

Greed knows no nationality.....

Curious about your statement re: Taiwan. They certainly have some great standing in the semi biz, but close inspection will show you that the big semi factories there do sub work, since no one wants to pay the price to have the chip made here. There is one chip manuf that tried recently to start moving some ops (beyond R&D) back to the US, but were unable due to costs, and everyone wants their product cheaper, not more costly. They (Taiwan co's and the one in the US I mentioned) were my biggest customers



BTW, I do not question your intelligence on the matter. Clearly, you do see that this is one issue that doesn't boil itself down to "conservative/liberal" ( ) and that there are no singular causes/effects. You mention Japanese "turning their knowledge", I am sure you know that they did a heck of alot more than that. I personally feel that their ability to form government assisted trusts and monopolies in order to secure international market power helped out quite a bit in the butt whoppin the US manuf got. Even then, it still goes deeper, as I am sure you know.....

[ComputerFix]

As an aside, since we have taken this thread Lord knows where.....

The problem you were citing is not with capitalism, but with political and corporate abuses of the capital system, as you described here....

The system itself is not inherently evil, just those who choose to use it that way!

A 3rd W state grants an exclusive mineral extrationd eal to large powerful multinational ABC Corp. The president of 3rd W state gets a large bribe into his Swiss bank account.

Then the President negotiates large loans with the World Bank, IMF and commercial lenders (for which the President receives more "dash" into his Swiss account!).

When the commercial loans tank, the average guy picks up the tab by higher loan rates on his mortgage. And extra taxes, as the G7 governments have to provide aid.

[ComputerFix]

Originally posted by plschwartz:
The fact is that much of the world is still in dire poverty with average pay a couple of bucks a day.
Paying them three bucks a day with some decent work environment is ahead of where they are.
What exactly do you think would happen if Nike etal were forced to pay US wages and decided to stay.
Who would get the jobs. Who would allow others to get these jobs. What would they have to pay to keep these jobs.
In whos pocket would this money finally end up?

Thus the difficulty PL.

The first two sentences are the "justification" some companies offer up, with mixed reactions.


Throw another wrench out there....what happens to the local economy if one company is paying with such disperity to local norms? (and by disperity I mean everyone else getting a few bucks a day, while one set of workers get it in half an hour)


One other thing I wanted to mention, since Paq brought it up..... Re: "value", if utility were the only basis of pricing, a pound of ground beef would cost $20 and a work of art by Picasso would be free.

[Paquadez]

Very interesting thread this is turning into!

_________________

Originally posted by Sarge:

Paq, the US isnt the only country that does this.
If Im willing to sell you my
product for a cheap amount and you turn
around and sell it for a higher amount,
why should I be upset? I believe this is called capitalism.

_________________

Yes agree, Sarge, however there is what is known as
the"Standard Margin" which applies to most ethical
businesses.

Above average margins CAN be achieved by exploiting lower
cost countries. There is a sting in the tale, howver, as I pointed
out before. After some time, the workers demand more.

South Korea is perhaps the best contemporary example.

Only a few short years ago, South Korea was paying its workers the classic Bowl of Rice a Day. No annual leave - other than perhaps three days and a standard working week was 6 1/2 days!

However, in order to keep the workers happy and earn yet more profits, the large corporations had to create a domestic market.

As costs rose, then low-end manufacturing moved to mainland China.

Same, earlier with Japan, then Hong Kong, then Taiwan, then Korea, and so on.

From this background, however, some major Korean companies became dominant in their field. Samsung are perhaps the best example.

Now one of the largest electronics companies in the World.

The UK, during Thatcher's time, neglected manufacturing industry
and focused on their new saviour: the so called, "Service Industries". Great.

Except, having exported all the main manufacturing jobs, we are now exporting all the service jobs, too! Big problem is that we are racking-up massive month on month trading deficits!

In the US at present, I am following, closely, what is now called
"Out-Sourcing" of US jobs, to low-cost areas.

In the UK we have NO silicon industry to speak of. (Just two 4 inch wafer fabs: Digital only at Glenrothes, in Scotland's Silicon Glenn) and Allied Signal, in Birmingham, which produces 4 inch mixed signal, low production runs of mainly expensive Application-Specific ICs, or ASICS, as they are known.

We have NO independant computer industry: the last, ICL, was sold off to Fujitsu.

Thus in an age of digital electronics and ICT running everything,
we now have a G7 state which is strategically vulnerable, in terms
of both commerce and military areas. Comforting!

In Desert Storm, NO allied airplane or Missile system could have flown without Asian silicon: and that includes the USA!

Presently, you have IBM and HP outsourcing manufacture of laptops and PCs to mainly, Taiwan. Dell import (low cost again!) most of their components. Most of the PC components, themselves, are imported from all around the globe.

Dangerous!

Corporate greed can often overcome basic prudence.

________________________

Posted by CFix.

Somehow I doubt it Paq, they will deliver them for $10 USD
less than Nike, just to gain marketshare, while the workers
still make 12-15 per pair.

Greed knows no nationality.....

________________________

Dissagree with that statement CFix. As did Japan, they will ship at a modest margin in order to build market share on a value strategy.

Once they have established market share, then they will add the glitz and the glamour to the product and crank up their margins.

Personally, I hardly ever wear trainers, but when I do buy the odd pair, I buy mainly Hi-Tec (made in the same factories as Nike, Addidas, Reebok etc) but only pay circa £15 pair. In fact I know the guy who started Hi-Tec. A smart Dutchman, now a multi-millionaire. He latched on to the Value, strategy when he started. Why should I pay £125 for a pair of the "Latest" Reeboks or whatever, when I can buy a pair of hand-lasted solid leather craftsman made British leather Loakes Bros brogues for the same price??

Fashion is why most people do: ;'cos (e.g.) Tiger Woods promotes a brand, everyone without much of a brain is seduced into wasting their money. Good Luck!

__________________________
CFix posted:

Curious about your statement re: Taiwan. They certainly have
some great standing in the semi biz, but close inspection will
show you that the big semi factories there do sub work, since
no one wants to pay the price to have the chip made here.
There is one chip manuf that tried recently to start moving
some ops (beyond R&D) back to the US, but were unable due to
costs, and everyone wants their product cheaper, not more cost
ly. They (Taiwan co's and the one in the US I mentioned) were
my biggest customers

___________________________

CFix, see if you grab a copy of Businessweek (November 3rd) a
very interesting article that provides much food for thought,
or worry!

SMIC (Mainland China), after only TWO YEARS, their two fabs
are running flat out! Motorola are in process of selling their brand new fab in Tianjin, which cost $1 billion.

Taiwan Semiconductor, the World's largest foundry are on course
to achieve $5.9 billion in revenues this year, with earnings
projected at $1.3 b.

UMC's Taiwan plants are fully booked. Meantime, Motorola's
Chip division has just lost $76 million, in the last quarter.

As you know, state-of-the-art Fabs are now 12 inch wafer and these run circa, $1.5 billion of front-end capital cost.

With the exception of Intel and perhaps Texas Instrument, few can afford the capital cost of the new fabs and thus turn to foundries.

Worse, more and more US electronics and IT companies, are
now outsourcing R & D (as you say) and wafer CAD.

If you are Carly Fiorina and just want to make a rep and a quick half a billion bucks from your stock options: great in the short term, Dangerous and wrong in the long haul!

I spent quite some time in the Silicon biz, before turning totally to software, even founding a Silicon System Design House in the UK, in the early 80s AND raising the necessary Venture Capital in London, which was unheard of !

One interesting comment. I well remember flying back from Orange County, LA to San Jose in the mid 80s and my travelling companion was a very bright Senior Engineer from Fairchild, who were then very successful in silicon.

He told me that Fairchild were still producing wafer in Malaysia,
but were bringing packaging and final test back to Texas. They
could justify this on cost grounds, by using robotics.

Luddites will instantly cry UNFAIR", as this puts even more manufacturing workers out of a job. However, the Industrial Revolution proved as have other historical realities (Railways, Automobiles) that each paradigm shift in employment, if managed correctly, creates MORE work, not less.

I re-emphasise: if managed correctly: and that's the big problem.
____________________________
CFix posted:


BTW, I do not question your intelligence on the matter.
Clearly, you do see that this is one issue that doesn't boil
itself down to "conservative/liberal" and that there are no
singular causes/effects. You mention Japanese "turning their
knowledge", I am sure you know that they did a heck of alot
more than that. I personally feel that their ability to form
government assisted trusts and monopolies in order to secure
international market power helped out quite a bit in the butt
whoppin the US manuf got. Even then, it still goes deeper, as
I am sure you know.....

__________________

Cfix, I never saw any issue as Liberal/Conservative! that was others (incorrect) opinion of me - particularly one I won't mention!
I'm a pragmatist and think all politics sucK!

Japan: Ah me. I remember when a little old company in California,
Aswercall, used to make their telephone answering machines themselves.

In California. Then they "Outsourced" some of the work to Japan.
Then they outcourced ALL the work to Japan. Then the Japanese (having had the technology and the market given to them (Smart!), started making better answering machines - cheaper!

This was about 1981 and one of my comms companies used to sell them - And then sold Panasonic, 'cos they were far better and cheaper, too. And didn't go wrong as much.

Then we moved on to distribute the UK's first approved Twin Tape VOX machine, designed by a guy I knew, here in the UK, who moved to Hong Kong. It retailed, including tax for less than £100. Quite a break-through.

I agree that the Japanese matter is more involved; MITI
(Ministry for International Trade and Industry) co-ordinated a huge industrial research and design intiative, exploiting all university campuses and creating symbiotic groups of manufacturers who worked together.

Sony, for example, stepped out of line with VCR and designed Betamax.

A cartel of the major manufacturers created VHS. The rest, as they say, is history. Again, with industrial robotics, the Japanese Government funded loss making robotics manufacturers until the demand was high. That's why Japan still leads the World in industrial robotics.

And now, good old US and UK companies can't wait to rush off and "Exploit" mainland China!

And then once China is the largest and most dominant industrial force in the World, they'll all shout "Foul"!

One final point, if Briggs and Stratton can operate (very successfully too!) a "Made in the USA" policy, why can't others?

At the end of the day, the blame falls squarely into senior managements' lap.

Paq

[ComputerFix]

Cfix, I never saw any issue as Liberal/Conservative! that was others (incorrect) opinion of me - particularly one I won't mention!
I'm a pragmatist and think all politics sucK!

Not what I was getting at.

Wanted to reply to this, as I may not get replies out for the rest (lots to read).

Was mearly commenting that while in politics we can try to boil positions/actions to either A motive or B motive, business is hardly so simple.

[GoneForNow]

Originally posted by Paquadez:
In the US at present, I am following, closely, what is now called
"Out-Sourcing" of US jobs, to low-cost areas.

In the UK we have NO silicon industry to speak of. (Just two 4 inch wafer fabs: Digital only at Glenrothes, in Scotland's Silicon Glenn) and Allied Signal, in Birmingham, which produces 4 inch mixed signal, low production runs of mainly expensive Application-Specific ICs, or ASICS, as they are known.

We have NO independant computer industry: the last, ICL, was sold off to Fujitsu.

Thus in an age of digital electronics and ICT running everything,
we now have a G7 state which is strategically vulnerable, in terms
of both commerce and military areas. Comforting!

In Desert Storm, NO allied airplane or Missile system could have flown without Asian silicon: and that includes the USA!

Presently, you have IBM and HP outsourcing manufacture of laptops and PCs to mainly, Taiwan. Dell import (low cost again!) most of their components. Most of the PC components, themselves, are imported from all around the globe.

Dangerous!

Corporate greed can often overcome basic prudence.

Paq.........While I understand your concern I don't believe it to be as drastic as you feel it to be. First, wafer production is at best a "soft" industry and can be quickly built and up to speed in very short order. In all of the Far East refused to sell chips to the West tomorrow, in less then six months the West would be producing as many chips as the Far East had before. The "magic" of chip production is long gone.
On the other hand, the "hard" industries have not gone overseas to the Far East. "Hard" as in military ships, airplanes, fighter planes, tanks etc etc. These are industries which can not be up and run in a short period of time. I believe you will find that both the US and Britain have maintained their hard industries.
The "out sourcing" concern is IMO a red herring as well. I was reading about all the companies moving their tech support to India as well as software coding with computer programmers and engineers trained and educated at IIT. I realized and so have others that India doesn't have enough engineers nor will it in the future to meet the demand created by the influx of these western companies. So tell me Paq what happens when supply is less then demand? Thats right wages go up to attract the talent. Problem is once you start competing on wages the "savings" from out sourcing overseas to India begins to erode and eventually is lost. So now a substantial part of your company is in India and you no longer have a competitive advantage. So what is any self-respecting American/British upper level manager going to do. Thats right fire them all and bring the out sourcing back home.

As a side note, I read and found it interesting that when a software company has really complex coding involving mathematical formulas they out source the coding to Russia. That concerns me more then chip production in South Korea.

[AlbertB]

So what is any self-respecting American/British upper level manager going to do. Thats right fire them all and bring the out sourcing back home.

Your thought fills me with hope GB. Do you think I will still be of working age when it happens? No joke or jibe intended here by the way.

As a side note, I read and found it interesting that when a software company has really complex coding involving mathematical formulas they out source the coding to Russia.

Which is precisely my little niche! D**n those Ruskie Commie Software Job Stealing Sons of Stalin!

[plschwartz]

GB and I have been havibg a running disagreement about the future of the american economy.
So above he states something very interesting:
On the other hand, the "hard" industries have not gone overseas to the Far East. "Hard" as in military ships, airplanes, fighter planes, tanks etc etc.
Obviously it doesn't refer to autos which are almost commodities, nor commercial avaiation as Boeing is subcontracting like made even willing at last to share wing technology (why is this the last?) with the Japanese if they help with the new plane (maybe the 797) and we have no unsubsidized shipbuilding so he is referring to the one area of our expertise which is military. So then the use of military force by Bush might make sense.
Other then that what do we have to justify the wages we pay versus the rest of the world?
Can we survive without the WTO. What would our economy look like.
Are the bilateral treaties Bush is forging an answer or just a way in which we are burning muscle tissue.
SAome see progress as a straight line some like me as a cycle.

Am fading fast and will continue these questions tomorrow.

[ComputerFix]

Paq,

Allong with GB's comments, also consider that you may suffer from the same semiconductor myopia that I do.

you are talking about wafers, I was talking about the "back end" assembly aspect.

Obviously, the areas we are professionally familiar with.

Unfortunately, my division did not fare well with China a few years back (when it still existed) as they were not far along enough to really need to buy our product. However, that is not to say that our other divisions didn't; particularly re: an aspect of wafer manuf., and I know quite well an individual who practically lived in Tanjin visiting, among others, Motorola.

SMIC (Mainland China), after only TWO YEARS, their two fabs
are running flat out! Motorola are in process of selling their brand new fab in Tianjin, which cost $1 billion.

?????

Is Motorola a good example? Are there other factors re: Motorola Chip Div. that may have played into their poor financial state? As I recall, they were in a whole lot of trouble some 2-3 years ago (around my exit from the industry)

I wouldn't mind reading the article, though, and will take a look for it.

[ComputerFix]

Other then that what do we have to justify the wages we pay versus the rest of the world?

Expectation.


More involved, but this is a HUGE part of it, IMO.