Another Parable of American Decline?

Recently I reviewed why Amazon’s best-selling Kindle e-reader is actually an emblem of American decline. My point was that because neither Amazon nor another American company could manufacture the device, future related product development and production has potentially shifted abroad. The moral of the story was that once you let your capabilities get away, you can lose whole industries, and then their progeny, and so on and so on.

Now, a great A1 story by Keith Bradsher in The New York Times provides an even scarier parable about American drift and the perils of ceding leadership in product manufacturing and deployment.

This time, the arena isn’t just consumer electronics but the next big thing of solar power, and it involves not just the loss of some manufacturing value-add but the emigration of high-end innovation talent to China to follow production that itself has shifted to China given its size and aggressiveness

Here’s the deal: According to the Times, Mark R. Pinto—the chief technology officer of the technology giant Applied Materials—will soon become the first chief technologist of a major American tech company to move to China. That Pinto’s move reverses the historical narrative of China’s best and brightest heading for the U.S., where high-tech industry was more cutting-edge, is bad enough, but this is one story where the more you read, the more troubling it becomes.

In this case, it’s not just that Mark Pinto is departing American shores to run a major Applied Materials research center in Xi’an—a city about 600 miles southwest of Beijing—that sticks in the craw. Instead, it’s the whole back story to Pinto’s move that prompts the willies, because it turns out Pinto’s move to Xi’an with his wife and two children reflects the deep geographical imperatives of 21st century technology build-out and the critical interconnectedness of deployment and innovation in a globalizing production system. In this respect, Applied Materials’ chief technology officer is going to China because, first, Applied Materials has set up its latest solar research and production test-lab there because it estimates that China will be producing two-thirds of the world’s solar panels by the end of this year and second, because Applied Materials believes that that production is going to require the on-site expertise of its brightest design and research talent to make its high-tech production process work on the shop floor.

At the center of all of this, meanwhile, is not just another typical R&D lab such as Google and Microsoft keep building in Asia to scarf up China’s huge reservoirs of cheap, highly skilled engineers but a unique new facility that Applied Materials is building with Chinese help that will be the only research center in the world that can encompass an entire solar panel assembly line. So you get the drift. With China moving aggressively to embrace solar, production is gravitating there, and with production work accumulating there so is coming higher-order process engineering, system integration, and all sorts of other “shop-floor related design and development and engineering. In short, because China is the leading site for production now so too are they becoming a key center of more advanced activities.

In short, the story of Mark Pinto’s out-migration to China is extremely troubling because it suggests–at a time of American drift–the impending lock-in of a powerful feedback loop of market-creation, production, and innovation. In this respect, Mark Pinto’s move to China shows that it’s important to seize first mover status on large-scale market-creation and then move aggressively to manufacture and deploy. In this case, because China is moving aggressively to deploy solar systems, it has surged ahead on manufacturing them, and likewise, because it is commencing large-scale manufacturing, it is beginning to capture higher-order research, design, and process-engineering–one of the crucial sources of practical innovations in the future. The bottom line: Thanks to U.S. dithering on energy matters and renewables over 20 years, America is likely forfeiting significant production in those sectors with the downstream industrial consequences likely grave and as-yet-unknown.