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Production of software is nearly 100% R&D. Making a million copies of a software product has a trivial cost. There are no assembly line workers in software (and the very word "assembly" means a different thing). A software engineer very often brings in revenue many times their salary. Production of hardware is some R&D, and then actual manufacturing. Production of each physical item costs you. Production of every physical item has a chance to go wrong. Production of each physical item requires a number of humans (often a large number) to do repetitive, high-precision, high-skill work, as fast as practical. You can augment or replace some of them with robots but it also costs you, and you can't replace all the humans with satisfactory results. So, with hardware, the cost of the workforce plays a major role, while with software it does much less. To produce physical things, you need a lot of people who are not well-off, and for whom factory work is an upgrade of their financial and social standing. A "developing country", with huge swaths of population leaving rural life for a better city life and factory work, is best in this regard. Ideally you sell your product to richer folks, maybe outside the country of production. Of course there can be situations where the workers are highly paid, and produce very valuable things through their skilled work. Ford in 1950s famously paid the assembly line workers very well, so that they could buy the cars they produce, and valued their employment. But this does not always occur; people doing work that does not add a lot of resale value also want to live well, especially if the society does not want a flood of immigrants who are willing to work for much less. Check out how much the work of a plumber costs in Switzerland. So only high-precision, high-margin, low-volume manufacturing remains in Switzerland, such as precision optics, precision industrial and medical equipment, or premium mechanical Swiss watches. The US is in a somehow similar situation. |
>So, with hardware, the cost of the workforce plays a major role, while with software it does much less. To produce physical things, you need a lot of people who are not well-off, and for whom factory work is an upgrade of their financial and social standing. A "developing country", with huge swaths of population leaving rural life for a better city life and factory work, is best in this regard. Ideally you sell your product to richer folks, maybe outside the country of production.
You don't need a lot of people who are not well-off. You can automate the entire process. The problem with automation and labor saving technology is that it is capital intensive. The higher the capital investment per job (higher capital intensity), the bigger the chunk of money that flows to capital rather than labor.
This means that the cost of the workforce in a software company plays a bigger role than in a hardware company, where financing costs to pay for labor saving technology play a bigger role.
There are mining companies in Africa, who have nothing but an army of people equipped with shovels digging a small scale open pit mine. There is no way the labor cost here is the biggest constraint. An excavator and wheel loader could accomplish more with less people, but it would mean getting a USD loan to import foreign equipment and then selling for export to pay the foreign debts, rather than local production.