SAN DIEGO -- Outsourcing manufacturing to other countries is undermining the innovation that's supposed to keep our technology-based economy growing, states a new report from a San Diego-based entrepreneur and industry observer.
The physical process of manufacturing is closely linked to innovation, said Michele Nash-Hoff, president of ElectroFab Sales, which represents "job-shop" companies that perform custom manufacturing and are affected by outsourcing. When inventors operate at a distance from their inventions, they lose the hands-on experience that fuels innovation, Nash-Hoff wrote.
Innovation is how many American companies hope to compete as workers in other countries acquire manufacturing skills. The idea is that American companies will produce ever-more sophisticated products as lower-tech products become commodities. That won't happen by divorcing manufacturing from research because vital skills will atrophy, Nash-Hoff said in a Friday interview.
Nash-Hoff's May report is the latest in her series tracking the health of San Diego County manufacturing. She also maintains a frequently updated list of local manufacturing companies that have closed down or relocated.
Chuck Rabel, vice president of Vista cable manufacturer DDH Enterprise, called the report "recommended reading for us all." The company makes custom products in China as well as in Vista.
Rabel said manufacturing in Vista gives DDH needed experience to make the process efficient. When the process is streamlined, work is then sent to China.
"If we don't, there's no guarantee the transition to manufacturing there is going to occur smoothly," Rabel said. "To simplify the timeline for production, it's best that we do it here."
For example, he said, manufacturing may require color-coded wires to reduce assembly errors. That kind of observation is best made on the scene. A computer model is no substitute.
The hands-on knowledge also keeps costs down for clients, Rabel said.
"We oftentimes say, instead of this expensive custom cable, we've got this stuff off the shelf that will work," Rabel said. "The electrons don't know a damn bit of difference, and you're going to save a lot of money."
"Oftentimes, they'll call for a connector that could be molded," Rabel said. "We don't mold here, but if we bought an assembly out of a catalog that's twice as long as we need to have it, we can cut it in half and work just one end of it, saving everybody a lot of money."
However, some kinds of high-tech products appear to be less vulnerable to outsourcing, Nash-Hoff said.
San Diego wireless giant Qualcomm outsources almost all of its manufacturing, yet retains a commanding hold over its wireless standard for cell phones, called CDMA.
William Rastetter, former chief executive of Idec Pharmaceutical Corp., said outsourcing biotech work when it's cost-effective doesn't harm innovation in that industry.
Manufacturing activity rose slightly in April after a downturn in February and March. But the long-term outlook is grim unless the nation takes "drastic" action," Nash-Hoff said.
Nash-Hoff said that the county's manufacturing industry had entered a "danger zone" because of continued closures or relocations of local manufacturers. North County companies on her list of such companies include Design Enclosures Inc. of Escondido and Dothill of Carlsbad.
"I would say we have about a five-year window," or the U.S. will deteriorate into an economically polarized country of rich and poor, Nash-Hoff said. "Manufacturing is the foundation of the middle class in the United States."
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