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America can still be competitive

“Why can’t Microsoft get its act together in the consumer products category?” is one of those high-tech industry perennials.

It’s much the same as “Why can’t the banking industry get its act together?” and “Why can’t the Mariners get their act together?”

So, you might have seen that Microsoft recently had a shake-up in its entertainment and devices division. That’s the part of the company responsible for product and technology lines such as Xbox, Zune and – until the latest reorganization – software for mobile devices.

The news restoked fiery discussions about why Microsoft seems to be watching the taillights of Apple and Google disappear in the distance of the consumer-electronics highway, and whether the company’s executive leadership and corporate culture are equal to the task of catching up.

We’ll leave the task of ruminating on “What This Means” for the company to Microsoftologists. Those are the folks who track every move at the company and decipher their implications the way Kremlinologists used to examine photos of the Politburo at the May Day parades for clues to power shifts.

There is, however, an intriguing but overlooked big-picture subject that the latest doings in Redmond only hint at.

The remarkable thing is not that one American company is ahead of another in the battle to win the eyes, ears and dollars of the consumer-electronics marketplace.

It’s that any American company, let alone several, is a significant player in that space.

The standard-setter for the powerful, portable and multi-purpose devices that consumers currently lust for is Apple.

Rival Google, meanwhile, is not only pushing its own software platform (Android) for use in mobile devices (what we used to quaintly call cell phones) manufactured by others. It is rumored to be thinking of launching its own line of devices.

In the meantime, Microsoft has battled with Apple on phones and music players, and with Sony and Nintendo on game consoles with other capabilities such as streaming movies from on-demand services.

You could well throw into the discussion one other locally based company. While Amazon made its name as an online retailer, it, too, has been getting into the consumer electronics gadget business with its own e-book reader, the Kindle.

Who wins in which market is less important than the fact that American companies are viable players. That’s quite a change from the days not long ago when the consumer electronics industry, defined as stereo equipment, televisions, VCRs and cameras, had been ceded to Japanese companies.

To the extent American companies were players at all, it was as producers for high-end and small niche products. For mass-market consumer products, however, Sony was the 1980s equivalent of Apple today, the company with a seemingly invincible position and an unrivaled touch at developing the innovative gadgets people wanted.

What happened? Dominance is rarely permanent in business, but American companies seemed so completely out of the picture as to be irrelevant to any discussion about the future of the consumer products segment.

Two important factors changed the game. One was that American companies did not cede territory in what was thought of as an unrelated field, the personal computer. Even in the bleakest period for American competitiveness in consumer electronics, American names such as Apple, Dell and Hewlett-Packard still figured prominently. And it’s the PC, not the TV or the stereo (do people still buy stereo systems the way they used to?), that led to the current generation of mobile devices so prized by consumers.

The other factor is the remarkable run of product innovation and marketing displayed by Apple since Steve Jobs’ return. Credit it to skill, luck, great timing, or all of the above, but Apple transformed itself from an also-ran in the PC business to a world leader in consumer electronics.

That sort of run is also not guaranteed as permanent. But the fact that Apple pulled it off should provide at least some hope to other companies and other industries.

What is the larger lesson to be drawn from the experience in the consumer-electronics sector?

The fear has been that once the decline starts for American presence in a particular industry – textiles and apparel, steel and autos being some prime examples – and foreign competitors rise to prominence, the downward slide is irreversible.

We’ve had a good bit of fretting in these parts about the future of Boeing’s leadership in commercial aviation as the Canadians, Brazilians, Japanese, Chinese and Russians all introduce planes to compete with parts of Boeing’s portfolio.

That fretting has been fueled by Boeing’s own moves to send work abroad, which could help the development of those very competitors.

Those worries aren’t groundless. American companies are resurgent in consumer electronics, but we haven’t recaptured the actual manufacturing of those products, and there are lots of companies around the world that are just as adept at design and marketing, the functions we still have ... as we are. Furthermore fortunes can change incredibly rapidly in a business like consumer electronics, and a decade from now we could be back to “whatever happened to Apple?” stories.

Still, we should be encouraged that American companies are re-establishing a competitive presence in industry sectors once given up as permanently lost.

No one will hand it back to us. We’ve got to grab it ourselves. As Apple has demonstrated and Microsoft hopes to emulate, such grasping is not impossibly beyond our reach.

Bill Virgin’s column on business and economics appears Sunday in The News Tribune. He is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at bill.virgin@yahoo.com.

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