There has been a lot written about the hazards of outsourcing, I even covered it in Software Craftsmanship, but it is nice to see that others are thinking about the long term implications of outsourcing manufacturing. Andy Grove has noticed that scaling is hard, and outsourcing scaling means a loss of expertise and jobs.
A new industry needs an effective ecosystem in which technology knowhow accumulates, experience builds on experience, and close relationships develop between supplier and customer. The U.S. lost its lead in batteries 30 years ago when it stopped making consumer electronics devices. Whoever made batteries then gained the exposure and relationships needed to learn to supply batteries for the more demanding laptop PC market, and after that, for the even more demanding automobile market. U.S. companies did not participate in the first phase and consequently were not in the running for all that followed.
An addition from the US viewpoint Harold Meyerson in the Washington Post points out that the outsourcing was not necessary since Germany has managed to prosper in high tech manufacturing at the same time that the US shuttered factories:
So even as Germany and China have been busily building, and selling us, high-speed trains, photovoltaic cells and lithium-ion batteries, we’ve spent the past decade, at the direction of our CEOs and bankers, shuttering 50,000 factories and springing credit-default swaps on an unsuspecting world.