[March 13, 2006]
Sacramento Day - Who Really Cares and Why Should They?
Obviously not too many companies care about the laws and regulations affecting their businesses here in California. That’s not fair. They do, but just don’t want to do anything about it or, maybe, since they pay association dues (and, less than half do), they feel that’s enough to get the job done.
Fabfile Online’s database lists 156 PCB Fabricators in California. Out of that 156 only Hunter Technology, Hallmark Circuits and Sprig Circuits were in attendance. Oh, and there were a couple Assemblers, Electronic Source Company and Twin Industries. So out of 300 or so companies (PCB and Assembly), 5 showed up (not counting the suppliers). Hmmm…
Where were the big guys?
Others have asked, “Where were the Sanminas and Solectrons of the world? Why weren’t they in Sacramento protecting their interests?” Well, probably because their interests are in China, not California. They’ve been moving out of California for years. Most of their factories are somewhere else. They most certainly are not expanding here, so there is no need to invest in these types of efforts.
With global footprints, it’s probably not in the best interest of these multi-billion dollar electronics manufacturing companies to help the IPC fight currency issues or unfair trade practices in China, for instance, since it would be like shooting themselves in the foot. No, leave them out of the planning. Efforts in Washington and Sacramento are strictly for the small guys who call California (or the US) home.
Barking up the wrong tree
Although all in attendance made their rounds to visit their State Representatives, Small Businesses’ friends, the Republicans, were more than candid, saying we were ‘preaching to the choir.’ Heck, they like and support small businesses. Manufacturing jobs pay, on average $58,000 per year, as opposed to service jobs, which pay about $35,000 per year. They went on to say that nothing can be accomplished in this political environment and that we should be trying to convince the Democratic leadership, not the Republicans. They point out that 60% of California voters belong to the Democratic Party, and the Democratic Party controls the Legislature by a good margin. Today, the only power the Republicans have is the Governator’s veto power. That’s it.
A New Strategy
To be effective with the Democrats, we need a grassroots effort. Going to Sacramento is good, but we need a clear, long-term agenda for our industry in alliance with other small manufacturing groups. I think we need a 1-year (to put out fires), 5-year and 10-year plan for our industry on a local and national level. Then, we can rally the troops around efforts to educate our representatives with plant visits, letter-writing campaigns and Sac/DC Days.
Let’s poll the industry. What do they want? What’s important to them and how do they want to participate? Would they be willing to write a letter or invite their reps to their factories? That’s the real power: getting to know our Representatives. Getting them in touch with the industry on a factory-by-factory basis where they can meet the people who vote for them and whose jobs are at stake. Even the Democrats will respond to these types of efforts. Once they know who we are and what’s at stake, they will listen when we come to Sacramento or Washington D.C.
Having been involved in these types of efforts at the State and National level for almost 20 years, it’s not rocket science. It’s a process. And, if we’re focused and diligent, we will be able to improve the environment for small manufacturers in California and in the U.S.
Keep in mind that the biggest problem with grassroots efforts is the grassroots. It’s really hard to get companies to come through when you need them. I just don’t think these companies are aware of how much influence they can actually have. They have more political power then most large companies. We’ve found in the past, lobbyists for large industries letting the PCB companies take the lead on some of the common issues because our representatives would listen to us. Small business really has a lot of clout and organized small business can make things happen
Keep in mind, that most of our representatives don’t know what we do and what our issues are. They can all get behind higher paying jobs for their constituents and vote for a better manufacturing environment in the State and the Country. Someone has to take the time to explain things, though. If we don’t teach them about our industry, they’ll never know. If they’re receiving letters, invitations to visit our factories as well as visits to their district offices, they’re going to know us as well as the issues we face when we get to Sacramento or D.C.
The Bay Area Economic Forum has produced a report entitled, “One Million Jobs at Risk: The Future of Manufacturing in California.” If you’re doing business in California, this report is worth your time and will give you some information to share with your State or Federal Representatives. I’ve included the Introduction at the end of this article. If you’d like to download the entire report click here.
Term limits causing problems
Although I voted for term limits (“kick the career politicians out of office”), it’s now coming back to bite me. Since the California legislature turns over every eight years or sooner, now, we’re going to have to constantly educate new arrivals in Sacramento. We’re going to need a concerted, full-time effort to make sure our representatives know what we do and how important we are to California’s economy. The good thing about this is: we’re going to have to be really good at getting our message out. More companies are going to have to get involved in the process if we’re going to be successful. That will be the only way. If we choose to half-ass it, then we don’t need a Sacramento Day or Capitol Hill Day, either, for that matter.
Forget China
The cost of manufacturing printed circuit boards in California is about 30% higher than in some other U.S. states. Understanding that that was an impossible number to address at this year’s meetings, most of us, instead, talked about manufacturing in general and how it creates much better paying jobs. Issues about the cost of manufacturing in China were not even addressed. That would have been off the charts. It’s something California gave up on years ago. The State has no intention of trying to compete head-to-head with Alabama, Kentucky or Tennessee--let alone China--for manufacturing jobs. They’re just not that interested.
Conclusion
If you are in business in California, you should consider supporting the IPC/CCA’s local and national efforts to improve the business environment for manufacturers. Even at the national level, these efforts are mostly about the little guy since those bigger companies with a global footprint will just shift work where it’s more economical to produce, while the smaller company has to make do with whatever comes along from the local, State, or Federal governments. I encourage you to get involved. In some cases, all you have to do is write a letter. If everyone did just that one thing, it would smooth the way for efforts in California and in D.C.
Thanks to the sponsors
The sponsors for this event helped defray the costs. They were: Tapco Circuit Supply; Fein-Line Associates Inc.; Sprig Circuits; Christopher Associates; SolderMask Inc.; and Burkle North America & The Fab Four.
Check out the PCB007 coverage of this event at: http://www.pcb007.com/sacday.html
Ray Rasmussen
ray@pcb007.com
916-941-1133
Bay Area Economic Forum
“One Million Jobs at Risk: The Future of Manufacturing in California”
Introduction
California’s manufacturing economy is at a crossroads. It is mature and diverse, yet in many ways it is a poster child for manufacturing in high-cost countries. California leads the nation in manufacturing jobs, and its base ranges from metals to beverage production to high tech. However, manufacturers face extreme cost-related pressures, with high wage and benefits rates, as well as high input costs such as electricity. They must also deal with regulatory challenges that are greater than in other states and are absent from many developing, low-cost countries. Hence many California manufacturers find the prospect of offshoring or moving production to other states attractive.
Many commentators believe that in the future most global production will be clustered in Asia because of its low labor costs. This report takes a contrarian view—that in the future, most global production will be located close to final demand (i.e., the point of sale). Production in low-cost countries, such as China, will increase, and a good portion of current production in high-cost countries will migrate toward locations where labor and tax rates are lower. Growing capabilities abroad for sophisticated manufacturing with good quality control will accelerate this process.
However, to date a sizable portion of this increased Asian production capacity has been installed to sell products into Asian markets (not just to produce goods that will be exported back into high-cost countries). As global manufacturers continue to meet customer demands for not only lower prices but also more customized and rapidly delivered products, a substantial amount of global production will remain in high-cost countries, so long as the benefits to customers of rapid delivery and customization outweigh the benefits of lower cost. Fundamentally, the authors of this report believe that the proportion of products for which the benefits of local production outweigh the savings from offshore production is far higher than might appear at first glance.
Furthermore, most early-stage, low-volume and high-end production is likely to remain in advanced economies, so long as their research and innovation capabilities are differentiated and superior. Similarly, production of goods that involves sensitive intellectual property, or that requires a high level of adaptability to respond to fast-changing demand and customer service needs, will be located close to local markets, often in higher-cost locations such as California. Thus, the global manufacturing footprint of the future, even for a single company, likely will involve a mix of locations, with “basic,” high-volume production offshore and “customized” production maintained domestically.
If this forecast is correct, California can remain a major manufacturing center—producing an evolving mix of both traditional and innovative products, but only if it can develop a clear-cut strategy to meet growing competitive challenges, both at home and overseas.
The stakes are high. Today, manufacturers employ over 1.5 million Californians, while another 3 million jobs have direct links to manufacturing. Decisions by companies to leave California eliminate not only front-line production workers, but also put at risk related jobs in product design and applied research, as well as large number of jobs in the state that are indirectly supported by manufacturing activity. They may also lower the standard of living for many, as good-paying manufacturing jobs are often replaced by lower-paying, lower value-added service jobs.
Competition from overseas and from other states is intense. While not all jobs are at risk of moving (some, in food processing or defense, for example, are either linked to specific geography or can’t move offshore), approximately 1 million California manufacturing jobs are “up for grabs.” Here, manufacturers’ decisions to stay or leave are not clear-cut, and action by both companies and government can help to keep them here and secure the future of California manufacturing. For many companies, the cost pressures to move production offshore are compelling, but for many others manufacturing in California can and should be a viable option.
