Category Archives: policy

Cleantech is no new PC Industry

I wrote this last night, before the Solyndra Chapter 11 bomb dropped, which just reinforces the point: any industry that is reliant on “government push” rather than customer pull can hardly be considered the next PC industry.

In the last two days I read two posts equating clean energy products and industry to the early PC industry:

I have to disagree.  I’m not saying money can’t be made.  But while computers/software will march on and regularly produce billion-dollar companies like Facebook, Groupon, DropBox, etc. (computing is hardly “solved”), clean energy will be a tough, hard road.  A few missing buoying factors:
  1. Consumer demand.  What made PCs great was insatiable demand from consumers and companies for new capabilities at less cost.  Face it: electricity is too cheap for most people to care about it.  A recent New York Times story on green jobs noted the difficulty of getting consumers to care enough about home energy efficiency to spend federal stimulus money.  Corporate customers can make the investment, of course– that’s where LEDs and similar technologies will catch on first.  But when we liken things to the exciting PC revolution and Steve Jobs, we’re not talking about corporations doing 20-year ROIs.
  2. Enabling platform.  Electrons from a wind turbine or solar panel have no magical properties.  The Apple ][ opened an entirely new world for me and millions of others.  I don’t see my kids having a life-transforming moment when I buy LED lightbulbs.
  3. Technology and cost curve.  Every new technology that comes along tries to claim “Moore’s Law” type properties.  With fragmented energy technologies, that is clearly false.  No, having microprocessors in your smart meter doesn’t mean you will ride Moore’s Law.  The truth is very few technologies will have a curve like CMOS– and provide such an incredible platform for so many different components and applications.  I don’t see that in energy.
I also don’t buy into the fantasy that social networks, apps and gameification will be our salvation in energy.  That is a way VCs say they are out of money/scared of real energy projects.  There will be money made in clean tech, but it will be by damn hard, persistent manufacturing work— like the Chinese entrepreneurs who are winning in solar.  There’s no shortcut, and no rocket to jump onto like the 1980s PC industry.
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Chinese Manufacturing – All It’s Cracked Up to Be?

This weekend a friend of mine posted a link to a blog post by Helen Wang entitled “Myth of China’s Manufacturing Prowess.”  The article points out the fact that US manufacturing output is still larger than China’s — which surprises some — and makes a number of claims regarding Chinese manufacturing.

I have always been a skeptic of claims that China is on an infinite exponential growth path that will surpass the US in all aspects within a few decades.  When I was in college in the late 80’s/early 90’s Japan was going to do the same — and I went to a job as a production engineer in Osaka to learn from the best (Panasonic), and help bring some of the knowledge back to the US.  We all know how that exponential projection went.

That said, some of the statements in Wang’s article seem to run contrary to much of the data.

Cheap Labor vs Building a Middle Class
First, if one looks at the historical emergence of manufacturing in the US, I would argue that it didn’t immediately result in a strong middle class.  Look at the textile mills around Boston (Lowell, Lawrence, etc) — were those employed there enjoying a great middle class life?  Not until they fought for it.  All that said, every figure I have seen says that a large middle class is being created in China — just look at demand for cars!

Cheap Manufacturing vs Innovation
China is not going to just manufacture things designed and sold by Americans forever.  Neither did the Japanese, Koreans or Taiwanese.  Though it may take a while, eventually companies learn design and marketing (or hire the talent).

Just 10 years ago I was working in telecom equipment and everyone was ridiculing cheap little components from China and talking about our revolutionary new MIT and Caltech optics technologies which were going to enable the equivalent of Moore’s Law in optics.  The cheap Chinese components largely won.  And Huawei, which at the time was seen as fit for developing countries that couldn’t get our good stuff, is a market leader.

Wafer-Thin Profit Margins?
As for the “wafer-thin profit margins,” tell that to the 27 Chinese who just moved into the billionaire club last year.  Yes — part of that is a result of speculation.  But you don’t build up dollar reserves at that rate without profits.

US Manufacturing
The US still has great manufacturing capability.  We need to give it a chance, and work to strengthen it.  Don’t let every investor have the knee-jerk reaction that anything involving actually building things must be moved to the latest fashionable country (I have seen that, from early ventures to big companies).  As I’m discovering with a new venture we are incubating, there’s still a big gap when you are designing and engineering in one place, and manufacturing in another.