Newsletter #15, March, 2004
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Guitar manufacturing on the Pacific Rim
Most of the guitars, banjos and mandolins my customers use and collect have been made by major manufacturers such as Martin, Gibson and Fender or a few superb handcrafters such as D'Angelico and Stromberg, but over the years, by far the greatest number of instruments purchased in the USA and worldwide have been lower-priced student models. Prior to 1970 most student grade instruments sold in the USA were made here by companies such as Kay, Harmony and Regal in Chicago or Oscar Schmidt of Jersey City, New Jersey, and Danelectro of Neptune, New Jersey. When I started out playing and collecting guitars in the mid 1960s, brands such as Harmony, Kay, Stella, Silvertone and Danelectro were the standards for student use. We saw very few Oriental imports.
The old Harmony and Kay guitars were notably inferior in playability and sound to professional-grade instruments by Martin, Gibson and Fender. Typically the necks on the student grade instruments were clumsy in contour compared to a professional-grade instrument, and generally the action was much higher. Neckset angles on student-grade acoustics were often quite poor on Day One such that they were physically hard to play when new. By the time they were ten years old, the neckset angles had often shifted so much that they were virtually unplayable. While today many craftsmen are very adept at resetting necks, in the mid 1960s no one I knew had mastered techniques for doing this. Even companies such as Martin and Gibson did not reset necks if guitars were sent back to them for warranty service. Martin's typical approach at that time was to plane the fingerboard, such that it was virtually paper thin by the nut and full thickness by the body joint, and then refret. Gibson would frequently tackle such a problem by sawing the neck off at the heel joint, chopping the remainder out from the dovetail with a chisel, and installing a new neck. Student-grade instruments with poor necksets frequently were simply thrown away. Truss rods in student grade guitars usually were little more than window dressing. Although many of these guitars bore labels reading "steel reinforced neck" or actually had a truss rod in the neck, these rods usually were not functional. Martin had a steel T-bar in the neck from late 1934 through the 1960s, and Gibson and Fender both had highly functional truss rods, but Harmony, Kay and other makers of student guitars usually installed rods so poorly that any attempt to adjust the rod was simply an exercise in frustration and futility. While Harmony and Kay as well as some other makers turned out many hundreds of thousands of guitars and greatly exceeded the number of instruments produced by Martin, Fender and Gibson combined in those days, a surprisingly small percentage of those instruments have survived over the years, such that good condition original examples are remarkably scarce today. Some of these instruments have become quite collectible and now bring prices exceeding $1,000. Kay hollowbody electrics with the so-called "Kelvinator" peghead, especially the early Barney Kessel models, are now considered to have a considerable "cool factor." Likewise, original Danelectro "longhorn" guitars and basses have a visual flare as well as a funky distinctive sound of their own.
While most instruments made by Harmony and Kay were much cheaper than Martins, Gibsons or Fenders, the upper-level, more elaborate ones actually cost more money than some lower-end and even mid-priced Gibsons and Martins. A top-of-the-line Harmony, Kay or Silvertone made by Harmony featured inlay, binding and multiple pickups, switches and knobs, and cost more than a Les Paul Junior or Special and in some cases fully as much as a Les Paul Standard. While one of these instruments in near-perfect condition today might fetch $1,000 or more, it certainly would not have been nearly as good an investment as spending less to buy a Les Paul Junior and sure enough not as good an investment as spending an equal amount to buy an original 1959 sunburst Les Paul Standard.
Regardless of their investment potential or merit compared to Martins, Fenders and Gibsons, the fact remains that clean original Harmony and Kay guitars as well as some of the other interesting student-grade instruments of the 1960s and earlier are quite rare today. Since they were prone to structural problems, many were simply thrown away rather than being repaired. Due to the lack of good repairmen prior to the mid 1970s, attempts to repair such instruments were often as bad or worse than the original problems, further adding to the destruction. Since most of these instruments cost much less than a Martin, Gibson or Fender when new, owners often felt much less of an incentive to take good care of them. Back in the mid 1960s when I was starting out, I saw far more people playing Harmonys, Kays and Danelectos than Martins, Fenders and Gibsons, but for a variety of reasons most of these student instruments have not survived, so that today it is actually a rare occurrence for me to find an original Harmony Sovereign or a good Kay archtop in playable or good cosmetic and structural condition.
Although we encountered Japanese guitars from the early 1960s onward, the few Teisco brand and other Japanese instruments of that time did not capture nearly as large a market share in the USA as Harmony, Kay and Danelectro. Japanese guitars of the 1960s were generally very crudely made and did not at that time present any great threat to the market dominance of American-made student models.
By 1970, however, market conditions were changing rapidly. Japanese manufacturers had greatly improved their quality as well as their range of product offerings. Japanese labor at the time was much cheaper than American, and the imported guitars offered more "bang for the buck" than American ones. In a relatively short time, brands such as Yamaha and Ibanez were outselling Harmonies and Kays. The Japanese guitars had more comfortable neck contours and had truss rods that actually worked. The Japanese rapidly improved the quality of their instruments as well as the variety of their offerings such that by the mid 1970s, Harmony, Kay and Danelectro had all ceased operations, and Martin, Fender and Gibson had eliminated most of the low-end student models from their lines to concentrate on a price range well above any of the Japanese imports. I went to Japan in 1974 and attended a music trade show there as well as visited numerous factories and music stores. I was absolutely astonished at the variety of offerings available. Whereas in 1970 most Japanese guitars were low-end student models which often copied currently available new American products, by 1974 the more progressive Japanese manufacturers were well aware that many vintage American instruments were far superior to the new ones of that time. As a result some of these Japanese manufacturers stared to concentrate on studying vintage American originals. Fuji Gen Gakki and Tokai started producing extremely detailed copies of old Les Pauls, Stratocasters, Mastertone banjos and other vintage American acoustic and electric guitars and mandolins.
Even by the mid 1970s costs to manufacture instruments in Japan were rapidly rising. Labor was still cheaper than in the USA (it isn't anymore), but real estate, raw material, fuel, transportation costs and virtually all other manufacturing costs were fully as much if not more in Japan as in the USA. The Japanese were able to compete in the international market due not only to low labor costs at that time but also due to highly efficient manufacturing techniques and the fact that their low-cost workers were skilled and highly motivated.
Many of the best guitars I saw in my trip to Japan were models made for their own domestic consumption. After World War II, U.S. Armed Forces Radio blanketed Japan with American music. As a direct result, rock and roll, country, bluegrass and American popular music all took strong root in Japan creating a vibrant market for good guitars. Although Japanese players would have preferred to be able to buy genuine American Martins, Fenders and Gibsons, the supply of such instruments in Japan was extremely limited and prices were simply beyond the budget of most of the Japanese population. Japanese manufacturers produced a very wide range of instruments from low-priced student models on up to remarkably sophisticated professional-grade instruments, some of which were better reproductions of vintage American instruments than any of the American manufacturers were doing at the time. These high-end instruments are seldom encountered in the USA because they were priced high enough that wholesalers in the USA did not find them economical to import. Regardless of how good a Japanese guitar of that time might have been, if it cost anywhere near the amount of a new Martin, Fender or Gibson in the USA, there would have been no point in bringing it into this country. For example Tak Inoue, the export director of the Morris Company of Matsumoto, Japan, told me at that time that he had approached Fender to offer them Japanese-made versions of the Telecaster and Stratocaster which he proposed they could import and sell at a lower price that the standard American-made models. He told me that he gave them what he considered to be a very competitive price only to be told that Fender would not be interested since their cost at that time to make a genuine American made Telecaster or Stratocaster in their Fullerton, California, factory was actually lower than the amount quoted by Mr. Inoue. Needless to say, it would appear that CBS, the owner of Fender, had a very good profit margin at the time.
The better-quality Japanese guitars of the mid 1970s to the present have rivaled the quality of many new American guitars of the same time period. It is worth considering, however, that the 1970s were almost without a doubt the worst period in the history of American-made guitars as well as numerous other American manufactured products. I am firmly of the opinion that no Japanese maker has equaled the quality of pre-World War II Gibson and Martin acoustic instruments or electric guitars by Gibson and Fender of the 1950s through the mid 1960s, but I would be quick to agree that a Tokai or Fuji Gen Gakki top-line instrument of the mid 1970s would be in many cases every bit as good and in some cases superior to Norlin-era Gibson and CBS-period Fender guitars. While "Made In Japan" had a connotation of cheap and mediocre quality in the 1960s through the early 1970s, by the end of the 1970s "Made In Japan" was often viewed by consumers of guitars and other products such as automobiles as being as good as if not superior to American. Some of the Japanese instruments have gone on to be viewed not only as being of fine quality but worthy of consideration by collectors. While I personally do not collect Japanese made guitars and do not deal large numbers of these instruments, I would certainly agree that many of them are of excellent quality and provide good value.
By the late 1970s, costs of manufacture in Japan had risen to such an extent that it was difficult to make student-grade guitars over there. It was far less expensive to manufacture instruments in Korea. Numerous factories were built, and existing facilities in Korea were expanded. Samick built a factory capable of producing one million instruments a year. Japanese companies invested heavily in Korea so that they would be able to produce their low-end models in Korea and high-end models under the same brand names in Japan. The early Korean-made instruments were not as good as the Japanese ones, but it did not take nearly as long for Korean quality to improve as it did for the Japanese to go from making crude low-end models to sophisticated instruments suitable for professional use. The Koreas had the benefit of all of the Japanese experience especially in the cases of factories with Japanese ownership or management.
Once CNC (computer numeric control) equipment was introduced into guitar factories starting in the late 1980s and continuing on into the 1990s, it became far less of an issue where a guitar was made. Many of the CNC machines were made in Japan. In some cases the difference between an American-made guitar versus a Japanese-made guitar versus a Korean-made guitar was little more than where the machine was located. To make a guitar in the USA involved putting a Japanese-made CNC machine on a boat and sending it to the US whereupon it could be programmed in the USA and then American or other wood could be fed into the machine, which would spit out components made to tolerances within a few thousandths of an inch of the programming. By contrast a Japanese-made guitar would be produced by leaving the CNC machine in Japan, programming it with a disc done in the USA, and then importing wood to be put into the machine which would spit out components to the same specifications as those which would be made by a similar machine in the USA. A Korean-made guitar could be remarkably similar since the Japanese-made CNC machine could be sent to Korea whereupon the same process could be done there. By 1990 the quantity of guitars made in Japan was nowhere near what it had been earlier, but Korean production was in high gear. While some Japanese instruments have come to be viewed as quite desirable and collectible, I have seen little evidence of such activity with respect to Korean instruments, but the fact remains that the better-quality Korean guitars are remarkably good and most certainly are suitable for use on stage or in the studio.
By the mid 1990s Korean instruments were rising in price as Korean labor rates and other costs went up. Many Korean and Japanese companies set up factories in Indonesia to take advantage of reduced costs there and Fender set up their Mexican factory to take advantage of reduced labor rates in a setting very close to their USA factory. With modern CNC equipment and Korean and Japanese ownership and management, it was possible for Indonesian factories to very quickly turn out good student- and intermediate-grade instruments. In my experience, however, none of the Indonesian products rival the quality of the better Japanese or Korean guitars. The new Mexican Fender guitars give excellent "bang for the buck" and in many cases play and sound better than the later CBS-made American Fenders.
The really important player on the scene today in the low end and intermediate price bracket is Mainland China. Whereas Yamaha and other makers have produced guitars in Taiwan for quite some time, Mainland Chinese guitars were always noted as being of extremely low quality. In the past few years, however, that situation has changed dramatically. In the past ten years, China has moved rapidly toward entrepreneurial private ownership of business. The new leadership has pushed this process quickly. China now permits foreign ownership of factories and businesses as well as encouraging Chinese citizens both from Mainland China and Taiwan to set up their own ventures. Just as the Koreans were able to progress from very low-end student models with crude workmanship to remarkably sophisticated guitars more quickly than the Japanese had, the Chinese now have all the advantages of the prior experience of Americans, Japanese, Korean and Indonesian ventures. In addition it should be noted that while Chinese labor is remarkably inexpensive, with an average annual income in China today of under $1,000, Chinese labor is by no means unskilled. China has a very high literacy rate and its workers are skilled and motivated. In the past the world has had areas with cheap labor and other areas with skilled labor. China is a major force to reckon with because it offers cheap skilled labor. The Chinese today are producing instruments in many different settings, ranging from small workshops specializing in handcrafted instruments on up to huge industrial complexes with the latest automated technology. Only ten years ago Chinese-made violins were viewed as almost a joke. They were violin-shaped objects but certainly did not play or sound like one. Today we at Gruhn Guitars are selling beautifully crafted Chinese violins made with excellent wood and superb craftsmanship at very reasonable prices. Some of these instruments compare very favorably with European and American violins costing thousands of dollars. Gibson has set up a factory in China to produce Epiphone guitars and numerous American makers, both large and small, are having guitars, banjos and mandolins made there. Whereas it would be prohibitively expensive to make guitars or other instruments in Japan today using techniques similar to those employed by Martin and Gibson in the 1930s with assembly line production but still featuring a high degree of hand craftsmanship and human judgment, in China today it is economically emminently feasible to do so. The violins we import are beautifully crafted and even feature genuine varnish finish for a very small fraction of the cost that companies such as Gibson charge simply for the option of a varnish finish on one of their standard models. The Chinese are very rapidly taking over the student- and intermediate-grade markets. Not only do they produce fretted instruments, but they have taken over a large segment of the piano market as well as producing wind instruments. I have seen and played prototype acoustic Chinese instruments which rival American-made guitars by some of the same American manufacturers bringing in these imports. It will be most interesting to see how this develops.
The fretted instrument market is in many ways an excellent leading edge indicator of world economic conditions as a whole. China is not only rapidly advancing in the fretted instrument market but in all areas of manufacturing. Furniture factories in North Carolina are closing due to competition with imported Chinese products of equal quality for far less money. Numerous other industries are moving offshore. As you have all noticed the price of gasoline has risen dramatically in recent months. It should be noted that China now consumes approximately an equal amount of petroleum to Japan. This was certainly not the case five years ago. If OPEC and other producers pump the same amount of oil as they used to, but China emerges as a new player consuming this much fuel, it should come as no surprise that prices will go up. China now is a major importer of fuel, wood and agricultural products. Commodity prices in general are rapidly rising. China is not only becoming a world leader in manufacturing but it is becoming one of the world's leading consumers of all sorts of raw materials and commodities. While the per capita income in China and the per capita consumption of fuel is much lower than in the USA, their population is well over a billion people. At the rate they are going it will not be long before they consume fully as much fuel and other raw material as we do and have an economy which could rival the annual GNP of the USA. Not only are they an economic and manufacturing powerhouse, but they have a huge army. As their manufacturing capability increases not only quantitatively but qualitatively they become more and more of a super power. While the USA may have won the cold war with Russia, at the rate things are going as much as American consumers may benefit from inexpensive but high quality-guitars, furniture and other products from China, we may find ourselves in the uncomfortable position of no longer being the only world super power.