Amazon keeps sales numbers for its Kindle close to the vest, but ABC is reporting that November was the biggest month yet for sales of the e-reader.  And analyst Sandeep Aggarwal of Collins Stewart is estimating total sales of the Kindle to reach 550,000 by the end of 2009.  Good numbers for Amazon just as the e-reader market begins to heat up, with Sony upping the advertising for its e-reader and Barnes and Noble now taking pre-orders for its Nook e-reader.  

Whatever Kindle's future, it stands as one of the more recent innovative success stories in US consumer technology.  And its real breakthrough is the display, which is also its most expensive component to build. Willy Shih, professor of Management Practice at Harvard Business School, is concerned that the display depends on overseas manufacturing, and not so much because that will contribute to the trade deficit.  Rather, Shih argues that "when innovations can't be manufactured in the U.S., the locus of innovation in that area frequently shifts to the countries that can manufacture them."

The more worrying thing to me, though, is the likelihood that by not manufacturing the electrophoretic display, the U.S. will miss out on the future industries that spring from it — things like large flexible displays, future generations of electronic signage, and plastic electronics. Those technologies could, in turn, spawn other innovations and new industries.

Years ago the U.S. lost the vast majority of its infrastructure, or "commons," in precision optics to Japan. The Japanese used those capabilities to grab the lead in producing lithography tools for semiconductor manufacturing, which, in turn, drove most American semiconductor manufacturers out of the DRAM business. The Japanese also employed those capabilities to expand into lithographic tools needed to manufacture flat panel displays. This same story has played out in high tech industry after high tech industry.

The lesson: Sometimes when you let your capabilities get away, you give up not only one industry but all its progeny.

Read The U.S. Can't Manufacture the Kindle and That's a Problem here.