Every article that you read on SoundStage! (or anywhere, for that matter), generally starts with a question. “Is this product good?” “Are tubes B.S.?” “What the heck are balanced armatures?” Something like that. The question that led to this article, though, was a bit of a sticky wicket: “Does the country in which your electronic gear is manufactured really matter?”
I have opinions about that, of course. Who doesn’t? But I doubt that any of you care to read the ramblings of a hillbilly socialist from Alabama with regard to anything even tangentially related to geopolitics. Nor should you. So I reached out to someone with a good bit more credibility on the matter.
Dan Laufman, founder and CEO of Emotiva Audio Corporation, has never been shy about the fact that many of his company’s products have historically been built in China. A few years back, though, I called Dan for some quotes for another publication, and he answered the phone not with a hello but with a “Dude, what the hell? It’s 2 a.m.”
He was in Taiwan, discussing moving some assembly there, although at the time he asked me to keep that to myself. Over the past decade, Emotiva has also been moving more and more of its production chain back to Franklin, Tennessee.
Needless to say, Dan has insight into the manufacturing capabilities of a number of countries around the world, and I figured if anyone could give an interesting answer to the question above, he could. So I sent him a Zoom invite, along with a bit of bait that I knew he couldn’t resist. “Hey, let’s talk about China.”
The transcript that follows has been edited for brevity and clarity, but these are definitely all the best bits of our conversation.
Dennis Burger: I was recently asked an interesting question. And of all the people who’ll pick up the phone when I call, you seem uniquely positioned to answer it. The question was: does it really matter where your gear is manufactured?
Dan Laufman: From a purely technical standpoint, no. It doesn’t really matter. You can get world-class manufacturing in the US. You can get it in China. You can get it in Europe, in Indonesia, in Taiwan, in Japan. And you can get poorly built gear from those places, too.
I think it matters from an economic standpoint, though, and a security standpoint—dramatically. And this is probably above my pay grade, but I do believe there are strategic reasons—and I’m not talking about defense; I’m talking economics—why you need to have a vibrant and diverse manufacturing sector in any nation.
When I was growing up in the San Fernando Valley in California, I could take my ten-speed and ride through the area where a lot of aerospace companies were located. There was a big aerospace effort in Canoga Park at Rocketdyne. You could get circuit boards, transformers, sheet metal—anything you could think of, you could get locally. Right there. Most of it produced in the US.
The Rocketdyne Canoga Park facility in 1960
Fast-forward just a few years to when I started manufacturing, probably in the ’70s, although I got serious about it in the ’80s: I could do virtually everything locally. Even component parts were made in the US.
Sure, resistors might come from Taiwan or places like that. But even still, you could get resistors and capacitors made in the US, and you could pretty much build a USA-made product at the time, as late as the ’80s.
And now that’s nearly impossible to do, because all of those industries, with the exception of certain holdouts for very high-end companies, moved overseas. Initially for economic advantage. Nobody ever thought about the fact that there would be a big security and economic liability in doing that.
I think we’re starting to understand the true cost of saving a few bucks in the short term—and the real long-term costs of having given up this capability as a national resource.
DB: I’d love to get your perspective on why manufacturing left the US to begin with.
DL: I used to own a manufacturing company in Southern California. We were an OEM builder. I was building everything from fuel-injection computers and supercharger controllers to pool thermostats and audio gear. And virtually all of my customers, in the course of about 18 months, went overseas.
Mostly to China, because China was flying people over, business class, for free. They were setting them up in five-star hotels and doing all their tooling for free. So all of the people who were buying from guys like me said, “Hey, we like you, Dan. But the Chinese are just making it so easy, and we’re saving so much money that, well, it’s been nice knowing you.”
People like to vilify China, but all China was doing was looking out for its own economic self-interest. I remember guys in these American companies who could not wait to fire all their engineers. Because engineers were expensive. They talked back. They were a little too smart. The companies saved money on the products, and they saved money on the engineering and overhead side.
The Chinese didn’t force anybody to do anything, though. They all did it willingly. Companies like Boeing that complain about having to give up technology to China to build a wing or a fuselage—well, nobody forced them to go there to build these things. They made that decision because of economic self-interest.
DB: So what was your motivation for following suit? Because you’ve never made any secret of the fact that, historically speaking, a lot of Emotiva gear was built in China.
DL: I finally just decided that if you can’t beat ’em, join ’em.
I did that for over a decade, and I got sick of it. Because after you’re there for a while, you realize, “This is just not sustainable. This is not a good way to go.” Because we’re losing all of our basic capabilities in the US.
Go try and get a panel anodized in the US. I mean, you’re starting to be able to get that sort of thing done. It’s coming back. But it’s a challenge because once you give up these facilities and capabilities, it’s really expensive and time-consuming to get them back. But I see it happening, and I’m encouraged by that.
DB: I visited Emotiva for the first time in 2013, I believe. And at that time, you were in the process of bringing it back. I know you told me you were building pro amps in Tennessee then. But let’s talk about the process of moving that kind of manufacturing back home.
DL: We started out with 100 percent of our products made in China, and now about half of our revenue is derived from stuff that’s assembled and made here in the USA. Now, we have to use globally sourced components because most of the parts aren’t made in the US at all. But we’re getting more and more things done here. All of our assembly on our higher-end products, all of our engineering, all of our logistics and support are done here.
I’m working with a guy right now to try to bring speaker cabinets back to North America, because I’m bringing all these containers in, full of air. Shipping air is expensive, man.
An interesting thing that’s happening right now is container pricing. A container that cost me $4000 or $5000 a year ago—I just got a quote this morning of $22,000 for that same container! That’s not tariffs. That’s not duty. That’s not the price of the contents. That’s the cost for the metal box that goes from Asia to here.
All this stuff that’s going on with pricing right now—most of it is gouging. They’re using the excuse of COVID, but a lot of it is just opportunistic profit-taking.
DB: Let’s talk perception for a minute, because perception determines reality for a lot of people. If we just look at Emotiva’s product line, it certainly looks like the offerings that carry the “Assembled in the USA” badge are the higher-end products, and you just alluded to exactly that a minute ago. Do you not see how that plays right into the perception of “Cheap Chinese Crap,” building the cheap stuff there but the good stuff here?
DL: We’re very open about what we build in China, whereas a lot of companies are buying stuff from China and scraping the “Made in China” labels off and trying to pass them off as being made in the USA. I used to love it when I’d get emails from guys who would say, “I’m not going to buy your cheap Chinese crap,” and the signature would read “Sent from my iPhone.”
The iPhone is arguably one of the highest-quality consumer products available in the world today, and it’s of course built in China. But I guess they get a pass because it’s designed by Apple in Cupertino.
As for why our high-end stuff is built here at home: as a rule, the more parts value there is, the less labor impacts the cost of the product. When my shop rate in the US is double or three times what it is in China, there are products I can afford to put the US labor costs into, and there are products that won’t absorb it.
So, like, on our BasX products—which are very competitively priced—an hour of shop labor in the US would price them out of the range we need to be at to be competitive in that slice of the market.
So the big amps, the processors, some new two-channel pieces that I’m not ready to discuss right now, and a new line of amps that aren’t out yet—those will all be done in the US. And again, we buy components and parts and subassemblies where necessary on a worldwide market, but we’re trying to bring as much of the physical cost of the product as we can back to the US.
I think you’re going to see, over the next decade, a big push to revitalize US manufacturing capabilities on all levels. Not just assembly, but core capabilities: sheet metal, extrusion, finishing, things like that.
And, of course, a lot of these things are increasingly automated, so you can be pretty competitive on PC board assembly in the US because it costs as much money to run an auto-inserter machine in China as it does here. Energy isn’t free there.
DB: So is automation the key to bringing manufacturing back to countries that have lost those capabilities?
DL: It’s not just automation; it’s also a lot of careful engineering. We recently did a teardown of a really popular soundbar—one that I own personally. It’s a beautiful soundbar, an engineering tour de force.
But, Dennis, the number of screws that it takes to disassemble this thing is insane. It’s like a hundred screws. And the amount of time that it took just to open it up to look at it—it took me, Nick, and Lonnie about an hour and a half to disassemble it, and we were being so careful because, originally, we foolishly thought that we might be able to reassemble it and save this expensive product. But it’s a one-shot deal. It’s a one-way trip. After it’s assembled, if you ever need to repair it, you’re better off just throwing it away.
Whoever designed this thing didn’t give a bit of thought to the manpower it took to assemble it, nor the fact that it might eventually need to be serviced or supported after sale. It’s basically: you build it, it looks beautiful and well-constructed, but it’s assembled in such a way that it can’t be serviced.
DB: Do you think that plays into planned obsolescence and the current push for Right to Repair?
DL: I think it’s just math. They look at the failure rate per 1000 units over the warranty period, right? And they ask, “Is it cost-effective to make it serviceable? Or is it just cheaper to throw it away and tell the customer it’s out of warranty, and offer them a discount on a new one?” I hate designing products like that. I don’t want to build products where you have to throw away perfectly good material.
DB: You and I are Americans, so of course we’re talking about manufacturing in America. But are you advocating that the US become the new manufacturing powerhouse on the world stage?
DL: No, every developed country should be capable of this sort of manufacturing. And a lot of them are. If you look at the economies that people admire, in western Europe it’s Germany. The Germans have manufacturing, engineering, and production capabilities that are second to none. As they should. As all countries should. France has excellent manufacturing and engineering capabilities, in addition to its energy production.
If you want to have a vibrant, robust economy, it can’t just be a consumer economy. It’s got to be a producing economy. Not everybody can be a barista, man. It’s just not viable.
Hairdressers, grocery store clerks, delivery people—all of these are crucial to the functioning of modern society, and I’m not disparaging any of them. They do essential work. But we also need highly technical people. The world is complex and highly technical, and we must emphasize engineering and the sciences as core curriculum. We’ve got to make it desirable and popular again to get an engineering degree and understand mathematics and the sciences.
Jesus, I sound like a grandfather.
DB: Get off my lawn! Seriously, though, I started off by asking you a simple question, and you gave me a convoluted answer that speaks to the economic and societal and manufacturing points of view. But let me ask again, and this time speak to consumers: does it matter where your gear is manufactured? And keep in mind that SoundStage! has a worldwide audience.
DL: Well, the simplest answer I can give is yes and no.
I mean, the reality is that it’s a global supply chain. So I’m not going to wrap myself in the red, white, and blue and say, “You’ve got to buy American, or you’re a bad American.” And you can extrapolate that to wherever you live.
I believe that it’s a global economy, and some countries do things extremely well and very cost-effectively, and others do other things extremely well and cost-effectively. Every country has strengths and weaknesses.
If I have a viable option that’s made in a free-market economy, in a place where there’s rule of law and human rights are respected, yeah, I’m going to buy there if I can. Just from a moral perspective.
Where things come from, in and of itself, is not right or wrong, or good or bad, and it doesn’t really tell you anything about the quality of the manufacturing. But I try to support businesses that I believe in, in terms of their business practices and their ethical standards.
Look, I don’t want to sound like every time I buy a box of cereal, I scrutinize the company’s stance on this, that, or whatever. But I’m saying that there are companies that are admirable and you want to support them, and there are companies that are too opportunistic and they’ll do whatever they have to do to save a nickel.
But remember, I’m just an ex-hippie from the Valley.
DB: Just trying real hard to adjust?
DL: Yeah, what do I know? I believe there’s a certain responsibility as a human being to conduct yourself in a way that reflects your value system. But I don’t ascribe good or bad to the country of origin of products. I think it’s the people involved in them and the way they do business, and the overall direction of the company that motivates me.
But you’ve just asked an old fart who’s sitting at his desk in Nashville about the global economy, man. I’ll just say this: I have seen a tremendous decrease in our core competency from a manufacturing and engineering standpoint in my lifetime, and it’s very concerning to me. And I’m doing everything I can to encourage people—from every country in the world—to think about reinvigorating these core competencies. Every country needs these capabilities in order to be independent and not be held hostage by other nations when things aren’t so good.
DB: It seems to me you’re saying that you’re more focused on manufacturing in the US because that’s something that you have at least some influence over. It’s not so much flag-waving and apple pie; it’s more, “I have less control over what happens elsewhere, so I’m focusing my energies on encouraging a revitalization of manufacturing capabilities in the US, where I have more influence.”
DL: Yeah, and believe me, it’s not the most economical path for one guy to take. But I think in the long term it will be to the benefit of my company and employees, and I think over the long haul it’s the right decision.
And a lot of my industry buddies—guys like Jason Stoddard over at Schiit, Paul McGowan at PS Audio, Dan D’Agostino—we all have very different politics and life philosophies, but we all see the need to do as much as we can here at home. I think it’s the right thing to do in the long haul.
. . . Dennis Burger