Monthly Archives: January 2012

More links: iPhones and airports

CC image from caribb

Following up on yesterday’s link post regarding airports, air freight, supply chains, and manufacturing jobs: two posts from Ryan Avent at The Economist.

First, on industrial agglomerations, the impacts on jobs, and how we got to this point:

Unquestionably, Asian governments aggressively pursued manufacturing and subsidised it heavily, both directly and through advantageous exchange rates. As the story points out, Asia has capitalised on other advantages, as well. Cheap labour is one. More flexible land-use, labour, and environmental rules are another; China can erect a massive operation in no time at all, staffed with compliant labour and with little concern about the impact of the factory on watersheds, air quality, and traffic. Skill supply seems to matter as well. China is churning out engineers with basic technical competence (but less, it appears, than a bachelor’s degree) by the hundreds of thousands. It would be incorrect to point to any one of these characteristics as the driving force behind the global shift. Rather, these are self-reinforcing factors within a global economy that has multiple stable equilibria. After some level of Asian development and integration, it became more attractive for manufacturers to locate there as more manufacturers located there.

Clearly, this manufacturing agglomeration is an impressive part of the global trade network.  But it’s not the only agglomeration involved in the creation of the iPhone – the design, software, and other high-value elements of the product come from Silicon Valley.  More Avent:

What actually seems to have occurred is a bit more interesting. Supply chains have indeed continued fracturing, but distance has reasserted itself in two important ways. First, in the advanced world, agglomerations of the talented individuals who design these products have become increasingly important. And secondly, information technology, which allows for better coordination of production processes, has once again made proximity a relevant concern in manufacturing. It’s possible to coordinate a supply chain that’s draped across an archpelago of Asian economies. To maximise the return to this chain, however, it’s still necessary to keep plants reasonably close together. A plant located in America is too distant from Asia to make much economic sense; transit time to the rest of the supply chain in Asia is sufficiently long, in most cases, as to erode the gains to just-in-time production, or unexpected changes in designs or orders. Changing transportation and communication technologies facilitated a shift in manufacturing to Asia, then reinforced its presence there.

“Agglomerations of the talented individuals” are cities, more or less. At least, they are cities at the labor market level. As to employment, the different parts of the manufacture of the iPhone involve different value propositions, and require different levels of labor to scale up production:

Apple, it’s worth pointing out, continues to capture most of the value added in its products. The most valuable aspects of an iPhone, for instance, are its initial design and engineering, which are done in America. Now, one problem with this dynamic is that as one scales up production of Apple products, there are vastly different employment needs across the supply chain. So, it doesn’t take lots more designers and programmers to sell 50m iPhones than it does to sell 10m. You have roughly the same number of brains involved, and much more profit per brain. On the manufacturing side, by contrast, employment soars as scale grows. So as the iPhone becomes more popular, you get huge returns to the ideas produced in Cupertino, and small returns but hundreds of thousands of jobs in China.

Second, Avent looks at trade and the value of time.  Distance still matters, and time is precious, as seen in the increasing usage of air cargo for shipping high value goods. Avent concludes:

The lesson, I think, is simply that there is a limit to which one can or should want to raise manufacturing employment. Having lots of well-paid manufacturing workers isn’t the way one grows rich; replacing lots of those workers with massively productivity enhancing machines is.

This is more or less the same conclusion that Greg Lindsay notes in Aerotropolis – that this agglomeration, while impressive, still isn’t the true engine of creativity and value.  Nevertheless, each is an example of agglomeration shaping urban form and urban economies.

 

Links: iPhones and airports

CC image from Yutaka Tsutano

Rail to Dulles: MWAA Board member Robert Brown suggests eliminating the Dulles Airport rail station and replacing it with a people mover to connect to the Route 28 station as a means to save costs.  Yonah Freemark finds the concept intriguing, offering some operational considerations that could make it work.

However, the notion that building an entirely new landside people mover system will save money is ludicrous (IAD’s AeroTrain just clocked in at $1.4 billion). Likewise, while the concept would be an interesting solution to connecting an existing airport to an existing rail link (such as between BWI and the BWI rail station), the fact that the rail line has not yet built is a perfect opportunity to ensure that the airport itself is ‘on the way,’ to borrow Jarrett Walker’s terminology.

Freemark notes that one benefit of this concept would be to reduce travel time to the core and/or Tysons, but several other concepts considered by Metro would probably provide more utility to larger areas of service.

Meanwhile, Dulles offers a connection to the world via it’s ‘accidental aerotropolis.’

iPhones and agglomerations:  When I last touched on the Aerotropolis, I noted Aaron Renn’s observation that the book isn’t so much about airports and cities as it is about globalization.  One such element is the extensive description of the extraordinary agglomeration of manufacturing infrastructure and firms in Shenzhen.

This weekend’s New York Times contains a lengthy article on why the iPhone and other similar devices are not manufactured in the United States.  In his blog, Paul Krugman sums up that article in one word: agglomeration. Some key snippets from the article:

But by 2004, Apple had largely turned to foreign manufacturing. Guiding that decision was Apple’s operations expert, Timothy D. Cook, who replaced Mr. Jobs as chief executive last August, six weeks before Mr. Jobs’s death. Most other American electronics companies had already gone abroad, and Apple, which at the time was struggling, felt it had to grasp every advantage.

In part, Asia was attractive because the semiskilled workers there were cheaper. But that wasn’t driving Apple. For technology companies, the cost of labor is minimal compared with the expense of buying parts and managing supply chains that bring together components and services from hundreds of companies.

For Mr. Cook, the focus on Asia “came down to two things,” said one former high-ranking Apple executive. Factories in Asia “can scale up and down faster” and “Asian supply chains have surpassed what’s in the U.S.” The result is that “we can’t compete at this point,” the executive said.

Since we’re talking about iPhones and not cheap Christmas ornaments, the availability of materials and the skill of the labor is more important than the cost of that labor – all benefits of the large agglomeration of technology firms in Shenzhen.

For years, cellphone makers had avoided using glass because it required precision in cutting and grinding that was extremely difficult to achieve. Apple had already selected an American company, Corning Inc., to manufacture large panes of strengthened glass. But figuring out how to cut those panes into millions of iPhone screens required finding an empty cutting plant, hundreds of pieces of glass to use in experiments and an army of midlevel engineers. It would cost a fortune simply to prepare.

Then a bid for the work arrived from a Chinese factory.

When an Apple team visited, the Chinese plant’s owners were already constructing a new wing. “This is in case you give us the contract,” the manager said, according to a former Apple executive. The Chinese government had agreed to underwrite costs for numerous industries, and those subsidies had trickled down to the glass-cutting factory. It had a warehouse filled with glass samples available to Apple, free of charge. The owners made engineers available at almost no cost. They had built on-site dormitories so employees would be available 24 hours a day.

The Chinese plant got the job.

“The entire supply chain is in China now,” said another former high-ranking Apple executive. “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.”

More thoughts on iPhones, agglomerations, and jobs from Matt Yglesias and Tyler Cowen.

Likewise, an interesting set of charts looking at market share for various computing platforms – starting from more traditional personal computers, but eventually adding in smartphones and tablets.  While smartphones and tablets aren’t yet substitutes for a personal computer, they’re getting closer.

Station Domination: via Tyler Cowen, an interesting post from Matt Glassman on the cost of Metro station advertising and the linkages between national politics and the local transit system.

In need of a good decongestant:  Housing Complex takes a look at slight optimism from COG staffers on de-congestion pricing, and makes note of a lengthy Washingtonian piece on the subject.

On density and design tradeoffs

Bethesda Row - note that you don't even see how tall the buildings are - CC image from faceless b

Kaid Benfield’s excellent blog had a post last week on the need for better urban design and management of the public realm in our new, dense infill development. And while I certainly agree with the need for better urban design, I take issue with Kaid’s implication of an explicit trade-off between density and design – that is, the more density you get, the less human-scaled the street will feel as if this were some correlation of a natural law.

Kaid’s post shows several comparison photographs taken from Google streetview, many from the DC area.  What’s missing is an actual accounting for the density embodied in those pictures (such as the visual survey posted here). Additionally, some of the photos Kaid compares are not similar photos – one example involves a view down the axis of a street, while the other is a view of a building’s first floor and the accompanying sidewalk.

For me, it’s a completely different feel.  The second development, part of Bethesda, Maryland’s terrific Bethesda Row area, is not just more inviting but also a bit smaller in scale, at five or six stories tops.  But that’s part of it, in my opinion.  To increase density enough to make a difference, we don’t always need to maximize it.  Much of the time a moderate amount of human-scaled urbanism will be far more appropriate than a high-rise.  This isn’t, or shouldn’t be, just about calculations of units per acre or square footage.  It’s also about what feels right to people.

The sentiment that “we don’t always need to maximize” density implies a tradeoff between human-scaled design and density that I don’t think is absolute.  To a great degree, the influence of design – at the street level in particular – is the key element of a human scale.  In the comments, Payton (assuming this is from Payton Chung) adds this:

I’d agree that it’s almost all about design. The low- and mid-rise floors are most important, to be sure, since humans’ peripheral vision is weakest when looking up. However, there are plenty of historic skyscraper districts that maintain a great sense of place and small scale at the street level (Broadway in Los Angeles is a thrill to walk down), and even some which maintain good sunlight at street level (just was at Rockefeller Center for the first time in a while and reminded of that crucial detail).

Encouraging both smaller parcel sizes — for exactly that granularity, and to ensure greater diversity — and mid-rise heights both ask huge concessions from our current bigger-is-better development paradigm. Of course a developer will build out to whatever envelope the regulations will allow to recoup their costs, will charge high initial rents that only the most reliably profitable (i.e., bland) retailers can afford, and often won’t spend a premium on the sort of pedestrian-scale details that really create a great sidewalk environment. Yet other factors also result in these squat, boring buildings. Occupants will pay a premium for “ground-related” space or for high-rise space with a view, but not for the mid-rise floors. (Compare that to the 18th and 19th centuries, when the 2nd floor commanded the highest rent as it were above street dust but not a long walk up.) High-rise life safety and structural requirements make a 6-story building almost as expensive as a 12-story building. Requirements for exit stairs (like restricting scissor stairs), and tenants’ desire for reconfigurable spaces, both fatten floorplates. Municipalities set build-to lines for bases (correct) and, fearful of oddly height-obsessed NIMBYs, set unrealistically low height limits.

For things like sunlight at street level, the more important considerations would be the orientation of buildings on the site and the setbacks rather than absolute height – issues of design of a different sort than the street level scale.