A few days ago, our blog gave the good news that BMW and Mercedes were expanding their manufacturing in the US. For our nation’s standard of living to rise, we indeed need to make things. And such jobs pay well and provide a path for middle class success.
But the New York Times headline (Oct.13,2010), “In the Future, Already Behind” brought me back to reality with a thud. The story is about Silicon Valley and its commitment to transforming the economics of solar panel production. Firms like Solyndra, Nanasolar, and MiaSole bet the farm that their “thin film” technology would make them the Intels and Apples of the exploding global solar industry.
But just as Solyndra flipped the switch on its new $733 million California factory last month, everything changed. The Chinese, using vast economies of scale and government subsidies, sent the price of panels plunging 40% and grabbed 40% of the vast California market. They also took the bulk of the European market. What looked like a chance for US manufacturing to dominate a critical growing market has crumbled to the realities of globalization.
“How do you fight against enormous subsidies, low-interest loans, cheap labor and scale, and a government strategy to make you no.1 in solar?”, asks an American CEO.
Discussion questions:
1. What are the dangers of ceding this industry to the Chinese?
2. How can the US firms counter this threat (see Ch.2 for a strategy discussion)?
3. Should the US provide the same benefits that China does to new companies?