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SurfaceManufacturing

Back in 2015, Microsoft trumpeted the opening of a new factory in Wilsonville, stamping "Made in Portland, Oregon" on each and every huge affect-screen computer it fabricated in the US. The visitor hired more than 100 people to build Surface Hubs. The Surface Hub is an extremely expensive machine, at ~$22,000, then this plain wasn't a high volume product. Only Microsoft insisted it could make the economics work.

Now, just two years afterward, Microsoft has appear that it will close the Wilsonville plant and fire all 124 employees that worked there. Panos Panay, head of Surface development, went to the plant and announced that Microsoft is consolidating its manufacturing and volition build the Surface Hub in the same place as its other Surface devices. Microsoft has previously disclosed that it builds its Surface hardware in China, so that's the causeless location for these new products every bit well.

The Oregonian has published a story on the layoffs and factory history, which reads in function:

The company hasn't explained, in public or to its Wilsonville employees, why it gave upwardly on domestic manufacturing so quickly and didn't reply to repeated inquiries for comment. But the only thing surprising about Microsoft's decision is that it tried to make its computers in the US in the first place.

These layoffs are ironic, arriving even as President Trump heralds "Made in America" week. In reality, nigh all tech manufacturing is at present washed in East Asian countries like China and Taiwan. For all the emphasis placed on manufacturing jobs and the blue collar workers that have them, US-based manufacturing has shrunk drastically over the past 47 years.

In 1970, manufacturing jobs deemed for 25 percent of all US employment. Today, manufacturing jobs are simply eight.5 percent of all non-farm payroll employment. That's not to say that manufacturing jobs are unimportant. But in the US, employment in this sector peaked in 1979 and has fallen dramatically even since 2000.

The problem with manufacturing in the Usa isn't just a question of wages. It's as well nearly supply lines, and how easy it is to hire and train qualified employees and source proper components. EquallyThe Oregonian reports, the vast outsourcing of manufacturing to foreign countries has made it easier to source components and industrial supplies from China or Vietnam than it is to buy them locally.

The other ii factors in play here are whether the Surface Hub sells in any kind of sustainable volume and Satya Nadella's clear disdain for manufacturing actual products. Since Nadella took the helm on February 4, 2014, Microsoft close down its Windows Phone manufacturing division. Nadella has previously stated that Microsoft volition eliminate 3,000 jobs, mostly in sales, as it shifts its focus to cloud computing. Devices like the new Surface Pro are iterations on existing products, not trendsetters in the way the original Surface RT and Surface Pro were supposed to be. And equally for the new Surface Laptop, I've fabricated my thoughts on that rather clear.

Microsoft's decision to shift Surface Hub manufacturing to Communist china highlights the difficulty in bringing manufacturing jobs back to the United states. Information technology's not merely a question of opening a manufacturing plant and hiring employees. There are supply line considerations, source costs, and the unproblematic fact that American companies now produce many more products with far fewer employees than they used to require in the 1970s, thanks to automation and improved productivity.

The existent value of the dollar tends to lag roughly five years behind the electric current account.

The 20-percentage BAT (Border Adjustment Tax) that Paul Ryan and some other GOP members favor could also make information technology more difficult to build and sell products in the US, depending on how the BAT is implemented and which goods it applies to. If applied universally, it would raise the toll on a number of materials that aren't every bit readily available in the US equally they are elsewhere.

China, for example, produces 5x more rare world materials than the rest of the Elevation 10 producers combined. Some economists take argued that the dollar volition appreciate sharply if the BAT passes, but it'due south not clear whether this will happen immediately or over a longer period of time. A BAT that affects finished goods wouldn't touch on raw material imports, but would still hit companies like Amazon, Walmart, Best Buy, and Costco pretty hard. While this could boost local sourcing of some products, it could also lead to less need for US exports, depending on how other countries react to the BAT (if enacted).

As the graph to a higher place shows, the value of the U.s. dollar tends to lag its current account balance past roughly five years. (The current account is the difference between a nation'south savings and its investment; a more expansive definition and explanation is available here.)

In curt, tech manufacturing in the United states of america isn't really showing much sign of growth, thanks to complex issues that could exist adjusted in the long term, but are likely to be highly resistant to precipitous, short-term alter. "Fabricated in America" remains a complex proposition depending on how you lot ascertain "fabricated."

Acme epitome credit: Microsoft