Technology production in terms of the global economy and individual country development

China, India, Technology, USA -

Technology production in terms of the global economy and individual country development

With all of the technology-related production facilities located mostly in Asian countries, it is beneficial to know how it all inter-relates with the US economy and how it forms a global economical infrastructure in general. 

To begin with, the earliest forms of production outsourcing date as far back as the railroads. This invention allowed US companies to move their production to states with lower labor costs and cheap raw materials. In addition, it was the start of manufacturers being able to produce the same goods for multiple companies. Which, in turn, was the first divide between manufacturer, distributor, and brand. All of that was coupled with the invention of the telegraph, allowing fast communication across the country. In the later stages of development, US companies were able to move their manufacturing to Europe and eventually to Asia.

In the 70s it has become most common to have manufacturing in the East, during the time when first consumer electronics became available. With lower labor costs and fewer production requirements to focus on companies could instead redirect their efforts to developing their brand and providing better customer service. By now most of Fortune 500 companies are pretty much R&D with a brand attached to it. Thus, we can see a certain divide in technological development. In China, Taiwan, Vietnam, and other countries, where most of the production is located, the focus is on production optimization and product enhancement. While in US the focus is on services brand and software development.

What is the current stage of global technological production and development? To answer this let's start with one of the two main production hubs - China. Since the beginning of Xi Jinping’s reign, China has greatly shifted its focus from economic growth to technological development. Quite a few interesting things are actually commonplace in China. First, there is a difference in the most popular payment systems, instead of banks most of the transactions are done by tech companies. They go through online payment systems, like Alipay. Credit cards and even cash registers are replaced by QR codes. Second, the abundance of local manufacturers and brands dominates the local market to a degree where such companies like amazon would not even have a chance of being successful on the market. There is a large proportion of consumer electronic brands that do not even go beyond China and are entirely made for a local consumer. Third, China is successfully implementing energy-saving technologies as well as modern urban planning and architecture. With Shenzhen (were a lot of tech companies are located) and other cities booming due to high investments in the construction sector and a greater focus on technological development. Some of the main Chinese exports are technology-related, from computers to broadcasting equipment; with US accounting for 20% of its exports.

What about India? It is the world’s largest exporter of IT. Exports are near 80% of India’s total IT industry. On top of that, it is India’s government's goal to digitalize and develop e-commerce in India in order to facilitate its economic growth. It’s IT industry is divided into Software products, ICT (Information and communications technology) services and ICT enabled services – ITES. On top of that, the Cloud services market is growing rapidly in India with Cloud spending being above $2.12 billion, greatly incentivized by the government as well. Indian IT companies work closely with Yahoo!, Google, HP, Accenture, Genpact and others. It is heavily interlinked with US corporations and greatly relies on them.

Thus, as can be seen, both India and China are considerably connected to US and rely on them for their exports, whether in hardware or software. Therefore, it is important to look at those connections when looking at both India, China, and US, as well as other countries, such as Vietnam and Taiwan. Even though they might be self-sufficient in some aspects they still are connected through a lot of business channels and sifnificantly rely on each other. Would it then be possible for one country to technologically out phase another? Yes and no, since due to their interdependence development of one will lead to the development of another, directly or not. The main factors for cooperation are still labor costs and material costs. It is possible that some factories may relocate to other countries as the countries where they were previously located get higher living standards and higher wages. But in such cases, it might be the incentive of manufacturers, not the brand owners. Is it economically feasible to completely relocate all of the manufacturing to different countries? Only on a large scale, due to humongous initial expenses of setting up the production facilities and necessary infrastructure to maintain them. As things stand right now it is unlikely that we will see any dramatic shifts in economic priorities of any of the mentioned countries, with one of them drastically changing their roles from the main manufacturing hub to the main brand owner center. Even though it is plausible to predict that this may happen in the future, it is rather in the far future. 

 

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