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C o n s u m e r E l e c t ro n i c s D a i l y N e ws Th u r s d a y, J a n u a r y 8 , 2 0 1 5 4 8 THE NEW CYCLE OF MANUFACTURING By Russell Barton, President, BITS Limited After World War II, the United States became a manufacturing powerhouse because much of Europe's manufacturing capacity was destroyed along with that of many other parts of the world. Foreigners loved the new American goods, causing a further expansion of our exports. As the profits of American companies increased, so did the salaries of everyone working for them, leading to an increase of prod- uct cost. This caused companies to search for ways to reduce their costs by manu- facturing simple goods with cheaper overseas labor. Since the manufacturing sector was expanding faster than the export of jobs overseas, there was no net loss of U.S. jobs and the companies doing it increased their profits. The downside was that it created the new cycle of manufacturing. During the '70s, some U.S. compa- nies started manufacturing cheap AM radios in Japan that were inferior com- pared to the U.S. manufactured models, but the longer Japan manufactured them, the better they got. We engineered and sold them while the Japanese manufac- tured and continued improving the man- ufacturing process. This was a great part- nership, except the people manufacturing them wanted to buy them but didn't make enough money to afford them. As a result, the cost of labor started increasing until they could afford them. Despite the increasing labor cost, it was still more cost-effective to move some of the more complicated stuff over to Japan as their manufacturing expertise increased and the first part of the new cycle was born. The second phase of the cycle began when foreign manufacturers had learned to make product improvements as well as manufac- turing improvements, leading to the engineering of new products also moving overseas. The Japanese manufacturers now had higher prof- its than the companies that were selling these goods in the United States. The third phase of the cycle occurred when these foreign manufacturers decid- ed to further increase their profits by directly marketing their improved prod- ucts against the companies that contract- ed them to manufacture these goods. Now, the Japanese manufacturers were growing while their U.S. counterparts were shrinking. The fourth phase was when the Japanese companies purchased and closed their U.S. counterparts, leaving only the Japanese companies to sell the products. They became the name brand, and companies like Sony were born. At this point, it was too expensive for U.S. companies to use Japan for sub- contract manufacturing, so they started manufacturing in different foreign countries like South Korea which started phase one all over again, except they now have another country as a competitor. These cycles have continued until almost everything is manufactured overseas. Many countries are competing against each other, with their competition creating giant leaps in technology. With almost nothing being manufactured in the United States, our country has lost some of its engineering and manufactur- ing talent and infrastructure. While the task may seem to be overwhelming for many companies, the young entrepre- neurs of today are determined to bring jobs back to the United States. It is these small startups that will create the advances needed. Visit BITS Limited at booth 35155. For more information, visit www.bitsltd.net, call 631- 896-9855 or email russell.barton@me.com. Best of Best of Show 2015