Reposted from Jeff Ferry’s blog: Thoughts on marketing, economics, & technology

My article Global Optical Manufacturing Rebalances is now out in this month’s OPN Magazine. (The full report is here.)

Global Optical Manufacturing Rebalances looks at the migration of virtually the whole of US optical component manufacture to Asia in the last ten years, and the recent steps by a few companies to bring some manufacturing back to the US. But it’s still only small moves back. And meanwhile, R&D activities are moving to Asia, not a good sign for the health of the US industry.

At the OFC show this week, I visited companies from Germany and Sweden that are growing and keeping their manufacturing at home. Why? Well, for them high labor costs don’t matter much because labor cost is a very small part of the total cost of making components. And higher production costs are outweighed by the advantages of having the product engineering and manufacturing capability co-located.  One executive at a larger US components company told me: “In the US, we are driven by Wall Street and once anything reaches significant volume of production, everybody’s first thought is to move it to Asia. Until the industry reaches strong, sustainable levels of profitability, that will continue to be the norm.”

Meanwhile, Asian manufacturers continue to export low profit margins, backed up by government support.

The US industry needs a new approach to the problem. More to come on this in the future….