Let’s get this out of the way early, before somebody starts a boycott. Tom DeVesto absolutely did not vote for Donald Trump.
But now that Trump is in office, DeVesto wants to take him up on his offer to make consumer goods in the US again. He is exploring what it would take to have his Boston-based Como Audio, which produces stereo speakers and Internet music streaming systems, open a factory in Massachusetts.
“I’d love to put three or four hundred people to work in downtown Boston,” DeVesto said.
But he wants government assistance in finding cheap real estate and training workers. And he’s hoping for a Trump tax cut as well. DeVesto thinks he could open a local plant with an annual output of 30,000 to 50,000 units for about $2 million, and he could get the doors open in about one year.
DeVesto knows what he’s doing. He started Cambridge SoundWorks and Tivoli Audio, and worked under audio technology legend Henry Kloss at Advent Corp. and Kloss Video Corp. Kloss Video and Cambridge SoundWorks built audio and television equipment in Cambridge and Newton decades ago, when America still did that sort of thing.
But at Como Audio, the workers wouldn’t exactly make products; rather they would snap the parts together like Legos. The microchips, video screens, and batteries that go into in Como’s devices would still be made in China, South Korea, and other Asian countries. US tech companies went to China for the low wages; they stayed for the robust supply chain, an array of nearby companies, big and small, that make every component they need.
A small company like Como Audio might succeed by assembling imported parts. But Apple, Hewlett-Packard, and Dell sell millions of devices every month. They need same-day service from their critical suppliers. And virtually all those suppliers are over there.
“It took a good 15 years for China to localize the supply chain,” said Willy Shih, a Harvard Business School professor and former executive at several companies, including IBM Corp. and Eastman Kodak Co. “If you want to move it back it’s going to take time to move all your suppliers along with you.”
Maybe Apple could assemble products in the US out of Asian parts. But a 2016 study by research firm IHS found this would add between $30 and $100 to the cost of an iPhone, making it more expensive than products from foreign rivals like Samsung Corp.
The Trump administration might respond with a tariff to raise the price of imported phones. We’d end up with new tech jobs for thousands of US workers, but higher phone prices for millions of US consumers. The Consumer Technology Association estimates that Americans will buy about 185 million smartphones this year. Raise the price of each by, say, $50, and that’s $9.2 billion in higher prices.
Besides, doing domestic assembly would require a brain transplant. “We have lost the industrial engineering ability to do that kind of work in the US,” said Shih.
Just ask Alphabet Inc., the company formerly known as Google. Back in 2013, Google partnered with electronics manufacturer Flextronics to open a factory in Fort Worth, Texas, to assemble the company’s Moto X smartphone out of imported parts. The company had to fly in 150 experts from around the world to teach assembly processes to the Americans. Recruiters couldn’t find anyone under age 40 with the know-how to act as shop floor managers. And Google had to recruit 6,500 assembly-line workers to find the 2,500 they needed.
Even then, the tedium of the assembly line drove workers to quit.
“We don’t have a labor force in the US that’s willing to do that type of work,” said Shih, who conducted a study of the Fort Worth experience.
One plant manager told Shih that soon after they were recruited, “people would be going out the door and they’d be throwing their badges in the trash can.” Google shuttered the factory after one year because the Moto X was a slow seller.
Shih cites another reason US electronics companies won’t come home: Asians are their best customers. China became the world’s largest consumer electronics market in 2013; its citizens now buy more iPhones than Americans do. Consumers in other Asian nations purchase millions more. On Wednesday, the Wall Street Journal reported that Apple plans a new factory in India, a booming cellphone market that the company has barely tapped.
There’s a glimmer of hope. Foxconn, whose Chinese factories assemble the iPhone, is in talks with Apple to build a $7 billion factory in the United States to make video display screens like those used in phones, laptops, and TV sets. The plant, which might employ up to 50,000 workers according to Foxconn, could be a key supplier for device makers that want to make electronics in the United States.
That would be one step toward restoring tech manufacturing in the United States, a process that would take years and cost billions.
DeVesto wants to see it happen as much as Trump.
“I like what our president is saying about trying to look at making things here,” he said. But DeVesto added, “You can’t just all of a sudden flip a switch, and make everything here.”