Google Tries Something Retro: Made in the U.S.A.

via The New York Times

SAN JOSE, Calif. — Etched into the base of Google’s new wireless home media player that was introduced on Wednesday, is its most intriguing feature. On the underside there is a simple laser-etched inscription: “Designed and Manufactured in the U.S.A.”

The Google executives and engineers who decided to build the player, the Nexus Q, here are engaged in an experiment in American manufacturing. “We’ve been absent for so long, we decided why don’t we try it and see what happens?” said Andy Rubin, the Google executive who leads the company’s Android mobile business.

Google is not saying a lot about its domestic manufacturing, declining even to disclose publicly where the factory is in Silicon Valley. It also is not saying much about the source of many of its parts in the United States. And Mr. Rubin said the company was not engaged in a crusade

Still, the project will be closely watched by other electronics companies. It has become accepted wisdom that consumer electronics products can no longer be made in the United States. During the last decade, low-cost Chinese labor and looser environmental regulations have virtually erased what was once a vibrant American industry.

Since the 1990s, one American company after another, including Hewlett-Packard, Dell and Apple, has become a design and marketing shell, with huge work forces deployed at contract manufacturers in Shenzhen and elsewhere in China.

Now that trend is showing early signs of reversing.

It’s a trickle, but American companies are again making products in the United States. While many of those companies have been small, like ET Water Systems, there have also been some highly visible moves by America’s largest consumer and industrial manufacturers. General Electric and Caterpillar, for example, have moved assembly operations back to the United States in the last year. Analysts have speculated that Apple may be planning to follow suit, but a company spokesman denied the rumors.

There is no single reason for the return. Rising labor and energy costs have made manufacturing in China significantly more expensive; transportation costs have risen; companies have become increasingly aware of the risks of the theft of intellectual property when products are made in China; and in a business where time-to-market is a competitive advantage, it is easier for engineers to drive 10 minutes on the freeway to the factory than to fly for 16 hours.

That was true for ET Water Systems, a California company. “You need a collaboration that is real time,” said Pat McIntyre, chief executive of the maker of irrigation management systems that recently moved its manufacturing operation from Dalian, China, to Silicon Valley. “We prefer local, frankly, because sending one of our people to China for two weeks at a time is challenging.”

Harold L. Sirkin, a managing director at Boston Consulting Group, said, “At 58 cents an hour, bringing manufacturing back was impossible, but at $3 to $6 an hour, where wages are today in coastal China, all of a sudden the equation changes.”

The firm reported in April that one-third of American companies with revenue greater than $1 billion were either planning or considering to move manufacturing back to the United States. Boston Consulting predicted that the reversal could bring two million to three million jobs back to this country.

“The companies who are investing in technology in the U.S.A. are more imble and agile,” said Drew Greenblatt, president and owner of Marlin Steel Wire Products in Baltimore, which continues to manufacture in the United States by relying on automation technologies. “Parts are made quicker, and the quality is better.”

Other factors are playing a role as well, said Mitch Free, chief executive and founder ofMfg.com, an electronic marketplace for manufacturing firms. He pointed to trends including distributed manufacturing and customization as playing an important role in the “reshoring” of manufacturing to the United States.

The biggest challenge in bringing manufacturing home has been finding component suppliers nearby. Industry executives note that the decision to stay in China is often determined by the web of parts suppliers that surround giant assembly operations, like the one that Foxconn, the manufacturing partner of Apple and many other big electronics companies, operates in Shenzhen. The advantages can be striking. A design change made in a product might be executed in a few hours.

The Nexus Q, which links a TV or home sound system to the Internet cloud to play downloaded video and audio content, contains almost all American-made parts. The engineers who led the effort to build the device, which is based on the same microprocessor used in Android smartphones and which contains seven printed circuit boards, found the maker of the zinc metal base in the Midwest and a supplier for the molded plastic components in Southern California.

Semiconductor chips are more of a challenge. In some cases, the chips are made in the United States and shipped to Asia to be packaged with other electronic components.

Google did not take the easy route and encase the Q in a black box. The dome of the Magic-8-ball-shaped case is the volume control — the user twists it — a feature that required painstaking engineering and a prolonged hunt for just the right bearing, said Matt Hershenson, an engineer, who is a member of a small team of consumer product designers. They have worked together at companies like Apple, General Magic, Philips, WebTV and now Google.

At $299, the device costs significantly more than competing systems from companies like Apple and Roku. Google says the price is in part because of the higher costs of manufacturing in the United States, but the company expects to bring the price down as it increases volume. The company is hoping that consumers will be willing to pay more, though it is unlikely that the “Made in America” lineage will be part of any marketing campaign.

Google uses a contract manufacturer to make the Q. Last week it was being assembled in a large factory 15 minutes from Google headquarters. The company declined to say how many people were employed at the plant, which can run as many as three shifts each day. However, during a brief tour, made with the understanding that the exact location would not be disclosed, it was clear that hundreds of workers were involved in making the Q.

It’s the kind of building that was once common across Silicon Valley during the 1980s and even the 1990s. More recently, former semiconductor fabrication and assembly factories have given way to large office campuses that house the programmers who design software and support Internet Web sites. Google’s engineers repeatedly stressed that it was a significant advantage to have design close to manufacturing.

“For us it’s really great that we can be at our desk in the morning, have meetings with hardware and software people and then a subset of that team can be in the factory in the afternoon,” Mr. Hershenson said. “The time it takes from being in the assembly process to being in the living room of a product tester we can measure in hours and not days.”

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