Let China rule commodities: Nanolumens' lesson for US companies

The United States will never return to its former glory as a manufacturing powerhouse, but there are still areas in which it can distinguish itself -- such as a supplier of extremely high-end, high-margin goods.

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Curved Nanolumens display installation at Telsra Customer Insight Centre in Sydney, Australia.

In my introduction to our just-launched "Made in China" series, I talked about the phenomenon of commoditization, which is applying tremendous pressure on the technology industry's ability to compete and drive revenue.

The countries hardest hit by China's growth in the high-tech manufacturing sector will be Korea and Japan, as those are the current industry leaders in manufacturing premium electronic goods.

However, it's also worth mentioning that thanks to the commoditization phenomenon, the manufacturing leader of yesteryear, the United States, is also going to continue to decline in influence.

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The issue has even come up in the current presidential election cycle in the United States, where our capability to produce high-tech manufactured goods is on the forefront of our political candidates' platforms as well.

The problem is not just an issue of manufacturing products cheaply with cheap labor -- it's linked to a scarcity of skilled labor and actual innovation in this country -- something that needs to be addressed in our educational system.

It's a complex problem that is going to require substantial efforts over multiple presidential administrations, successful policy executions, and changes in Congress and also at the state legislative level.

The United States will almost certainly never return to its former glory as a manufacturing powerhouse, but there are still areas in which it can distinguish itself -- such as a supplier of extremely high-end, high-margin goods.

A good example of an American company doing interesting and innovative things in high-end manufacturing is Tesla Motors.

Tesla is a household name I think many can relate to and gives us a strong feeling of pride of what a US-based company with local manufacturing capability can do, even though it sources components from overseas. The same can be said for Elon Musk's other company, SpaceX.

Apple also has in a very limited way and in recent years started manufacturing the Mac Pro in the United States. Again, materials are sourced outside the country, but final assembly happens here.

But the average citizen doesn't get to play with a Mac Pro or experience a Tesla. One company that has produced products that many Americans get to experience on a daily basis is Nanolumens, based in the Atlanta suburbs of Norcross, Georgia.

You may never have heard of them, but if you've attended an event at a public sports venue, or gone to a large retail shopping center, or visited any number of corporate headquarters there's a good chance you have seen their products in a very big way. Literally.

Nanolumens manufactures large-scale super high resolution LED display units, which are typically installed in large public spaces, It is an American company that designs at the component level rather than just sourcing pre-designed components from overseas.

This is a bit different from a US-based company like Apple, which does some of its own component design (such as for its A-series microprocessors) but has the majority of its components sourced/manufactured and the end products contract manufactured overseas.

In many cases the end-product all comes together at a singular factory in places like Shenzhen, China, regardless of where the actual components originate from.

While Apple is a highly skilled, extremely envied manipulator of supply chains, Nanolumens does this differently, with an almost unheard of level of coordination and specialization that rivals that of a military contractor or aerospace firm.

It globally sources components that it has for the most part, designed itself from the ground up, from a host of countries -- China, Taiwan, Mexico, Canada, the United States, Europe, and Japan.

Because of the performance needed, Nanolumens had to design its own components, such as its proprietary "Nixel," which can be used to create displays that curve and bend according to the needs of the end-customer.

These are very different from mass-produced consumer display technology components, such as those made by Samsung Display or Sharp for use in TV sets, tablets, and smartphones.

They also need to be manufactured to much higher tolerances, because in many cases they may have to work outside, in the elements, twenty-four hours a day and seven days a week.

The company also does not own its manufacturing plants -- in essence, it is "fabless". This makes for an agile process that provides quality and value to their end customers. And because these are public installations most of the final assembly has to occur on-site.

Additionally, the global sourcing strategy puts the company in a unique position because no individual component manufacturer possesses the "secret sauce" to replicate Nanolumens' products.

Obviously, because of the highly specialized/customized, relatively low volume of shipments, Nanolumens' products are expensive -- a typical install, depending on the type of display and the resolution of the components may go into the millions of dollars.

But unlike a commodity display unit that goes into a consumer product -- which has to be made and sold as cheaply as possible with very high volume -- a Nanolumens display generates substantial income for its end-customers by drawing paying customers into these public spaces.

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XFINITY East Plaza at American Airlines Arena in Miami, featuring outdoor Nanolumens display units.

For example, a few weeks ago I attended an event at the Miami Heat's American Airlines Arena in Florida, where Nanolumens has installed a series of large outdoor displays for the recently-opened XFINITY East Plaza.

This outdoor covered area is dotted with vendors selling food, alcoholic beverages and branded Miami Heat merchandise and has permanent marketing kiosks for Comcast's XFINITY service.

It features a stage with a huge Nanolumens rectangular display unit in addition to multiple curved display columns.

There's nothing else like this in South Florida. The Miami Heat plans to use this for half-time shows and concert series, as well as for special private and corporate events. I seriously doubt they and Comcast balked at the multi-million dollar price tag for the display units given the revenue potential of the venue itself.

This ability to sell at such a high margin not only allows Nanolumens to use the most advanced technology possible (stuff that is probably ten years more advanced than what can go into a consumer display) and absorb the costs of R&D, but it also allows the company to upgrade the technology infrastructure for each major install every six years.

Which is absolutely unheard of in the consumer space.

Nanolumens' story is inspiring and one that gives hope for innovation coming out of the high-tech manufacturing sector in the United States. But it is not a commodity business -- which is a message that needs to resonate with all American companies looking to distinguish themselves in the technology space.

Should more US-based companies be like Nanolumens? Talk Back and Let Me Know.

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