The Industry

Manufacturing Returning to the U.S.

The other day I watched an online announcement by Nokia of a partnership with Sanmina in Pleasant Prairie, Wisconsin to rehab and expand an existing factory. The factory will create over two hundred new jobs and will manufacture fiber electronics like OLTs and ONTs that are used for fiber-to-the-premise. Vice President Kamala Harris was on hand for the announcement since the impetus to build a factory in the country was partially driven by Buy America provisions in the upcoming BEAD grants.

Nokia is not the only fiber-related manufacturer to expand production in the U.S. Corning announced the construction of a new fiber optic cable plant near Hickory, North Carolina. CommScope is building a new factory in Catawba, North Carolina.  Prysmian announced the conversion of a factory in Jackson, Tennessee from building copper cables to fiber cables.

A recent press release from the U.S. Department of the Treasury documents the big burst of investments in new factories. This is being funded, at least in part by infrastructure spending that came from the Infrastructure Investment and Jobs Act (IIJA), the Inflation Reduction Act (IRA), and the CHIPS Act.

The following chart comes from that Treasury press release and shows how 2023 spending for manufacturing facilities has doubled the average spending for 2005 – 2022. Most of the new spending is on computers, electrical, and electronic factories. The Treasury press release notes that 18 new chipmaking factories were started in the country in 2021 and 2022. But since the announcement of the CHIPs Act there are over 50 new chipmaking facilities underway.

This can only be good news for the broadband industry. First, it increases the chance to buy American electronics as part of fulfilling grants. But the real benefit is over the longer run. This means that a lot of U.S. electronics manufacturing will be able to rely on U.S. factories manned by U.S. employees.

I’m sure many of you join me in being dismayed for decades as U.S. manufacturing jobs were shifted overseas. We’ve seen a steady erosion of good-paying factory jobs and a decrease in households in the middle class.

Many of these new and repurposed factories don’t require as many new workers as older factories due to automation. But every new U.S. manufacturing job created is a win for the economy. This is a needed shot in the arm for the economy. We can’t run an economy where everybody is doing service jobs – although it looked at one time like that is where we were headed.


Generation Z as Customers

There has been a lot written about how Millennials are not buying telecom products at nearly the same rate as old generations. A large percentage of new Millennial homes reject both traditional cable TV and telephone service. They seem to be buying home broadband at about the same rate as those in Gen X. I remember seeing a study a few years back that suggests that people’s telecom buying habits are heavily influenced by what they did as teenagers, and the buying habits of the Millennials seems to bear that out.

But now we’re starting to see studies of the next generation – Generation Z, born between 1995 and 2012. This is the first generation that was handed smartphones at an early age and it can be argued that this makes them the first generation that has been immersed in computer technology for their whole life.

CommScope has been doing an annual report of the technology behavior of Generation Z, and this year’s report can be downloaded here. The study is not for the whole generation, just those 13 and older. It’s fascinating and takes an in-depth look at how this young generation uses technology. Some of the more interesting takeaways of this year’s study include:

  • First, this is a large generation. In 2015 they were 26% of worldwide population, which will increase to 33% by 2020.
  • Already today this generation accounts for 25% of consumer spending which is expected to increase to 40% in ten years.
  • 96% of Generation Z in advanced countries own smartphones.
  • This generation is nearly always online and spend 74% of their time online outside of school and work. According to the report this is the “first generation that appears to live equally in the digital world and the real world”.
  • 60% of Generation Z will not use an app or website that is too slow.
  • 2/3 of Generation Z are interested in buying things directly from social media sites.
  • The generation’s use of technology is increasing year-over-year. 80% say they are using their smart phone more than last year. Plus there is an increase of 42% for usage of laptops/desktops, 24% for tablets, 10% for smart watches.
  • 44% of the generation expect to buy a new smartphone every two years.
  • Their most popular apps are YouTube (56%), WhatsApp (47%), Facebook (38%), Instagram (30%), Twitter (22%), Snapchat (20%) and Google Apps (19%).
  • The generation expects performance from devices and services. They want fast bandwidth, long-lasting batteries, efficient and easy-to-use apps. They are likely to be demanding consumers.
  • 70% of the generation are satisfied with their bandwidth at home, and far less satisfied with bandwidth elsewhere like school (41%), shopping (38%), or outdoor public spaces (36%).
  • I don’t know how this compares with older generations, but a lot of Generation Z is interested in new technologies – virtual reality (44%), AI (41%), driverless cars (39%).
  • This generation is the first where more than half are content creators. 52% share content they have created with others. 43% create content weekly.
  • 2/3 of Generation Z agree with the sentiment that the age of personal privacy is over.
  • The generation is split on cellphone choice with 51% preferring Android to 49% for iOS.
  • 63% of Generation Z say that they would be lost without their smartphone.

What does all of this mean for an ISP? I think there are a few key takeaways.

  • This generation values high speed broadband. They also value mobility more than anything else. They are likely buyers of home broadband products unless future cellphone data products get fast and affordable enough to be a reasonable substitute.
  • Generation Z will be even less likely than Millennials to buy traditional cable TV, and practically none will buy landline telephones. This generation is not going to be buying the bundle.
  • This generation grew up with the small cellphone screen and will be happy with that format for much that they do.
  • Generation Z is going to be more demanding than past generations in terms of bandwidth and product performance and will quickly bail on providers that don’t live up to their expectations. This is not going to be a generation of loyal customers, but one that will switch to something better.
  • They are far more likely to be early technology adapters, particularly for technologies that will save them time, like driverless cars.
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