Grove has been telling anyone who will listen the last couple years that the American technology sector is in decline and he has proven himself eager to diagnose its ailments. Unlike other tech leaders, these days you won’t hear Grove calling for a bunch of extra H1B Visas or other short-term tactics to buoy the tech sector. Instead, Grove has turned idealist, some would even say, “protectionist.”
Grove has become even more passionate about another issue: The decline of the U.S. manufacturing sector, especially in tech. He has attacked the current American ideal that a continual stream of startups can provide all of the jobs and innovation that we need to build a healthy economy and maintain our leadership in the tech sector.
In a guest column for Bloomberg, Grove recently stated:
“Americans love the idea of the guys in the garage inventing something that changes the world… Startups are a wonderful thing, but they cannot by themselves increase tech employment. Equally important is what comes after that mythical moment of creation in the garage, as technology goes from prototype to mass production. This is the phase where companies scale up. They work out design details, figure out how to make things affordably, build factories, and hire people by the thousands. Scaling is hard work but necessary to make innovation matter. The scaling process is no longer happening in the U.S. And as long as that’s the case, plowing capital into young companies that build their factories elsewhere will continue to yield a bad return in terms of American jobs.”
He pointed out that Apple has 25,000 employees but it outsources its manufacturing to a Foxxconn facility in southern China that employs 250,000 workers to build Apple products. And this 10-to-1 ratio is essentially the same for Dell and other high-tech companies that use Foxconn, a company that now employs 800,000 workers — more than Apple, Dell, HP, Intel, Microsoft, and Sony combined.
The common refrain in the U.S. in recent decades has been to devalue and dismiss manufacturing jobs and hang our hats on the fact that most of the high-end knowledge workers remain in the U.S. for these tech companies, and that those jobs are much more valuable and much less commoditized.
Grove challenges that line of thinking, saying:
“Not only did we lose an untold number of jobs, we broke the chain of experience that is so important in technological evolution… abandoning today’s ‘commodity’ manufacturing can lock you out of tomorrow’s emerging industry… Transferring manufacturing and a great deal of engineering out of the country has hindered our ability to bring innovations to scale at home. Without scaling, we don’t just lose jobs — we lose our hold on new technologies. Losing the ability to scale will ultimately damage our capacity to innovate.”
The example that Grove uses to illustrate this is batteries. The U.S. makes a fraction of the Lithion-Ion batteries used to power the world’s computers and electronic devices. The U.S. lost the battery race a couple decades ago when it started shipping the manufacturing processes for consumer electronics to Asia. But now, Lithion-Ion batteries are going to be used to power electronic automobiles and that market could quickly dwarf the electronics industry and the U.S. is out of the game before it even begins.
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