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Newsletter #8, July 24, 2003

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This past weekend, Friday July 18 through Sunday, July 20, Nashville played the role of host to the Summer NAMM (National Association of Music Merchants) show at the Nashville Convention Center located one block from Gruhn Guitars. Exhibitor setup days were Wednesday and Thursday so we at Gruhn Guitars saw literally thousands of exhibitors and dealers not only at the show but in our shop. The show presents an ideal opportunity not only to view new product offerings but also to talk to manufacturers, wholesalers, and dealers from around the world.

I always make a point of asking as many knowledgeable people as possible what products and trends they feel are important and what, if any, instruments or other product offerings they feel I should be looking at as trend setters or as items I should be stocking in my shop. I have always been amazed that the vast majority of people I ask claim to have seen nothing exciting. The most common response seems to be "there is nothing really new." While I am personally of the opinion that the industry is getting increasingly more and more competitive and dealer margins are being squeezed such that it is not easy to find new products which can be sold at a good profit margin, I do not share the opinion that there is nothing new or that our industry is stagnant. If somehow we could take the offerings at this past NAMM show and place them in a time machine to take them back five, ten or even fifteen years, they would be viewed with total astonishment. Major manufacturers such as Martin, Gibson, Fender, and Taylor not only make far more instruments per year today than they did ten or fifteen years ago, but they have much more comprehensive lines with many more models.

Fifteen years ago Martin produced one standard line of guitars consisting of models ranging from their Style 18 on upward to their model 45. Today Martin produces X Series instruments with synthetic back and side material, Technology Series guitars with bolt-on necks and special design bracing, standard line models, vintage series instruments and Golden Era vintage replicas as well as numerous limited edition special models. Each of these series of guitars are virtually separate lines. As a result Martin today is offering a vastly larger selection designed to appeal to a much broader market than they did ten or fifteen years ago. The Technology series instruments offer remarkably fine tone and playability at a lower price point than the standard line Martins of the past, while the vintage and Golden Era series models offer pre World War II type specifications designed to appeal to sophisticated buyers who want a more upscale instrument than virtually anything offered by Martin ten or fifteen years ago. Martin is now in a position to compete with virtually everyone from Oriental manufacturers to individual luthiers producing fine hand made instruments.

The same can be said for Taylor which now offers models ranging from their 100 series on up to the 900 models. Fender now offers everything from low priced Oriental and Mexican imports on upward through American made standard line models, Custom Shop models, and the hand made Master series models signed by individual Fender luthiers. In addition, Fender now owns the Jackson name as well as Guild and Gretsch. There are more guitars being produced in the USA today than ever before in the history of the instrument, but it is not simply a matter of manufacturers just cranking out more of the same. They are turning out a vastly greater assortment of different models ranging from very moderately priced student grade instruments offering remarkable quality for the price on upward to master grade instruments of far superior quality to almost any offerings of fifteen years ago. In the mid 1980s the future of American manufacturers appeared to be clouded by an onslaught of imports, whereas today it is clear that major American manufacturers are able to compete effectively in a wide variety of market niches ranging from some very affordable instruments offering a remarkable amount of "bang for the buck" on upward to the highest quality professional grade instruments.

Imported instruments still remain a potent force in the marketplace especially in the low- and mid-priced market segments. However, the emphasis has shifted to a large extent away from Japan toward Korea, Indonesia, and more recently to China. During the 1970s Japanese-made instruments dominated the imported guitar market in the USA. Japanese labor was very cheap at that time compared to American. As time went on, however, the Japanese lost this competitive advantage. Virtually everything about guitar production in Japan is now more expensive than in the USA. In Japan the cost of real estate, raw materials, fuel, transportation to get product to the market, and taxes are more than in the USA, while Japanese labor now costs fully as much as in the USA. As prices for Japanese products rose, production of student grade and mid-priced instruments shifted from Japan to Korea and Taiwan and later to Indonesia. While mainland China had cheap labor, the political and economic climate there was not conducive to setting up guitar factories, and the few Chinese instruments that were in production were of extremely poor quality. In the past few years that situation has changed dramatically. The Chinese continue to have cheap labor by world standards, but the quality of instruments now being produced in China has advanced at an absolutely astonishing pace.

The Chinese have been producing violins in Beijing, Shanghai, and Hong Kong for some time. They have a strong domestic interest in classical music and violins such that much of this production is designed for their own domestic consumption, but the Chinese are exporting an increasing number of remarkably fine violins. China has good sources of spruce and maple domestically. It is possible today to purchase great sounding Chinese violins with beautiful wood and fine craftsmanship for prices far lower than anything available to us of similar quality ten years ago. The better grade Chinese violins are produced in relatively small factories with a very low tech approach. While they have assembly lines, production is primarily centered on hand work utilizing technology not especially unlike German manufacturing facilities of one hundred years ago or production techniques similar to that used by American guitar manufacturers such as Martin at that same time. By contrast Chinese guitar factories today are utilizing numerically controlled routing systems and other high tech approaches similar to those used in factories elsewhere around the world. The advent of CNC routing equipment has not only permitted instruments to be produced in quantity with precision engineering, but it has made it possible to do this work virtually anywhere in the world. Once a CNC program is written, the actual execution of the work can be done on a machine located anywhere. If one has such a machine properly programmed, it does not matter if the wood is fed into it in the USA, Japan, Germany, Korea, Taiwan, Indonesia or mainland China. It is just as easy for a CNC machine to spit out necks with superb dimensions as it is to make absolute clunkers. In the past inexpensive student models typically were physically far less comfortable to play than higher grade instruments due in large part to poor dimensions and poorly fitted component parts. Today with CNC equipment even low priced student grade guitars offer well proportioned comfortable necks which fit precisely ensuring playability nearly equal to that of much more expensive instruments. Not only are student grade instruments being made with far greater precision and better dimensions than in the past, but the material selection has improved as well, whereas even five years ago most Oriental import acoustic guitars features only laminated wood, today far more have solid spruce tops. The vast majority of Korean and Indonesian guitars today still feature laminated backs and sides, but some Korean instruments now offer solid back and sides, and the Chinese are starting to manufacture a considerable number of instruments with solid wood construction throughout. As little as five years ago Indonesia appeared to be the place with some of the greatest potential for manufacturing low end student model guitars, but today it is becoming increasingly evident that the Indonesians are having difficulty competing with the Chinese who can manufacture in a drier climate conducive to production of solid wood as well as laminated instruments. The Chinese in addition have the advantage of a very well educated and highly motivated but low priced labor force. Whereas it took the Japanese many years to learn the craft of fretted instrument manufacturing, the Koreans picked it up in far less time largely due to being able to benefit from investment and training from Japanese companies. Indonesian manufacturing facilities set up by the Japanese were able to get into production even more quickly. Today the Chinese have the benefit of the cumulative experience of American, Japanese, and Indonesian manufacturers as well as CNC equipment with proper programming. I have no doubt that as time goes by we will see more and more Chinese fretted instruments of increasingly fine quality.

While technology has facilitated production of remarkably moderately priced instruments with better quality than ever before, human judgment and hand craftsmanship continues to play a major role in guitar manufacture. There are many operations such as binding and finishing which resist automation. It is virtually impossible to make really fine instruments unless the supervisors in the factories have a good understanding of how these guitars, banjos and mandolins are really supposed to look, feel and sound. In the USA and in Japan there is a strong domestic market for these instruments such that there are people at the factories who know how to play, thereby being able to ensure that their products are going to appeal to customers. By contrast, at least until very recently the Koreans had a strong domestic market for classical music such that they made good pianos and violins, but they had virtually no domestic market for guitars, banjos, or mandolins and all to often their instruments felt and sounded like stage props. Similarly there is no significant domestic market in Indonesia for fretted instruments and consequently factories there have very few people who really appreciate how these instruments are supposed to feel and sound. The Chinese have a strong domestic market for violins and consequently produce some remarkably fine bowed instruments but have less experience with fretted instruments. It should be noted, however, that the Koreans have in recent years made remarkable strides in improving the sound and playability of their fretted instruments and more recently the Chinese are showing that they too are extremely capable of rapid learning in this area.

While CNC equipment has been one of the major factors in changing large scale manufacturing operations (as little as twenty years ago Martin was still shaping necks by hand with a draw knife in the same manner they would have done in the 1800s), this same type of equipment is now being utilized even by individual hand builders to not only speed production but to improve precision. Operations such as cutting dovetail joints, routing for binding, and other repetitive tasks can be done not only more quickly but with far greater precision by CNC equipment than by hand. Even small one-man shops specializing in custom handbuilt instruments are making increasing use of small CNC machines which are now available at far more affordable prices than in the past. The use of such equipment permits a luthier to concentrate far more of his time on those operations which must be done by hand such as fine tuning the tap tones of tops and backs or applying fine French polish or varnish finishes. While most of the exhibitors at the NAMM shows have large to medium size factories, there are also exhibitors at the show with very small facilities set up to produce limited quantities of very high grade premium instruments.

While the majority of the folks I asked at NAMM told me that they can't seem to find anything excitingly new or potentially profitable, I personally find it very difficult to cover the show in the only three days that it is open. For me it is a matter of sensory overload. There is just so much to see and do and so many people to talk to that it is virtually impossible to process all of it. The market is incredibly competitive and profit margins are squeezed such that it is indeed a struggle for many dealers, but there is no lack of interesting product offerings and the pace of change is remarkably rapid. On the other hand, it should be noted that while there are some remarkable new products such as the new CA (Composite Acoustic) carbon graphite X model guitar with contours unlike any that can be achieved on a wood body acoustic guitar but still offering a great acoustic sound, the general pace of evolution of fretted instruments is not proceeding as rapidly as at some times in the past. During the late 1920s through the 1930s acoustic steel-string flat top and arch top guitars as we know them today evolved from their earliest incarnations onward to their modern form. Almost all the important styles of electric guitars popular today evolved during the 1950s. By contrast many of the trends I see at the NAMM shows today involve expanded product lines offering a wide variety of models from student grade on up to presentation grade instruments, new manufacturing techniques, and a globalization of the market. While it is my opinion that the actual evolution of the guitar as an instrument is not proceeding as rapidly today as it did for acoustics during the 1930s or electrics during the 1950's, there is no doubt in my mind that the business of manufacturing and marketing guitars has changed radically in the past ten years. My crystal ball is too cloudy for me to look into the future and know for sure what is coming. I cannot say to what extent new electronic modeling systems or the new Gibson digital guitar will impact the market, but I am certain that we live in changing and interesting times.

Sincerely,
George Gruhn