The Loss of Tech Know-How

What do compact fluorescent lights (CFLs), LCD screens, rechargeable batteries, solar cells and integrated circuit packaging all have in common? They’re all technologies that the USA can no longer produce within the country itself and must rely on companies in Asia, such as Taiwan and China to manufacturer. The technology has effectively been lost to the US, having migrated from West to East as part of major purchasing deals.

These deals might be considered as best business practice too. The way it often works is that a US-based company develops a technology and a product, but a small part is subcontracted out to foreign 3rd party. Say a little daughter board. Time passes and the 3rd party comes back to the US company and offers to build not only the daughter board, but also the motherboard, and more cheaply too. The deal happens, it’s a success and profits are up all round. Time passes and the 3rd party comes back and offers to build not only the motherboard but the whole product and more cheaply too. The deal happens, it’s a success and profits are up all round. It’s all good.

What happens next? The once 3rd party contractor goes to a US-based major distributor or retail chain and offers to make them an own-brand version of the product more cheaply than the market leader, now having access to all the technology required to make the product without any assistance. Surprised? Don’t be; this is what happened between Dell and ASUSTeK but it’s a pattern that has been repeated in many industries and continues to be repeated.

If you want to know more, Forbes are running a series of articles by Steve Denning, starting with Why Amazon Can’t Make a Kindle in the USA, on the loss of technological expertise from the USA. I think they’re an excellent read that explains much of the world today, even if you don’t necessarily see the loss of know-how from the US as a bad thing. It’s also worth browsing some of the comments to see other people’s thoughts on the articles, especially those from other countries.