Manufacturing in China, Revisited

Stefen- When looking at it from your perspective only it makes no sense to off-shore. The machines and operators are but a small part that goes into the decision to move overseas. The bigger picture is the fact the "entire" operation gets outsourced....managers, engineers, plant costs, benefits, tax liabilities etc. SMT manufacturing has never been a labor intensive operation. It's all the other costs aside from the machines and operators that adds up.

However things are looking better. I've heard Solectron is moving several lines back from China into the U.S. as well as purchasing some new Fuji lines for their U.S. factory. Good sign. I'm also hearing grumbling on how the Chinese labor force is becoming quite dissatisfied with working conditions in Chinese factories. The workers there live in dorms, eat lousy food etc. and many are getting out of the industry because of it. That will lead to increases in wages to keep these people which in turn will make it less beneficial to go there in the first place.

Give it time...things have a way of evening out in this scenerio. I saw the same thing in the early 80's in the disk drive industry. Everybody left....many came back.

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Stefan,

If I understand your post correctly, I have to make a statement.

It is impossible for 1 operator to manage 4 lines let alone 8. With all due respect, the reports you are getting from Japan are utter B.S. I have been doing this stuff for a long time,trust me there is no way.

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Lets face it guys, its happening and its all related to greedy profit merchants, other companies are simply following suit to stay in business.

For 1 UK worker i can get 3 workers in Italy at the same price. If i choose to outsource to China, i get 6 people for the price of one UK worker, doing the math soon adds up on the savings.

Thats why the UK spends so much on capital equipment and keeps a lower head count than our competitors.

Its all about profits and shareholders, my company is currently going thru the same evolution and im soon after Christmas going to be looking for another job.

Its about time i got out of this industry altogether, the time for retraining in another vocation is here guys!

Simon

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I think forgot one most important thing. SMT is not all. In China, after the SMT process, QC, QA, casting, packing etc. It need lots of labors. I really one worker can handle 4 lines. Nokia still have two bid factory in China, Motorola has two also. Solectron, Philips, Intel.....etc. Hundred of US factories & Japanese factory still love to invest in US. When you come, you will know why. I moved back to Hong Kong & started my own CM factory couple years ago. I can make triple than when I was made in the US.

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Electronics manufacturing moving to China is not about the labor man. You all don�t get it. It�s the material, and not just the electronics material either. Plastics and metal parts costs are lower. Labor costs are the smallest component of a product�s total cost. During the APEX 04 show a study was released to show no real labor savings in China for a board that is 100% SMT, meaning machines do the work. Automation is the key. We needed to get more automated in this country! Not to mention better quality mfg. engineers. I have seen quite a brain drain here over the past few years. Added is the fact that our schools turn out more lawyers and doctors than anything. As manual assembly parts increase on the board, labor savings goes up to do it in China. Also, China put in an export duty. If a product is built in China for export to the USA, the company pays a duty on all the material procured in China, closing the gap on material costs. The Chinese government is getting a taste of tax revenue, and we all know no matter where the government exists, they all have a healthy appetite for tax revenue. Companies are looking to cost reduce because consumers in the USA want things cheap. For example DVD players did not start selling well in the USA until they were less than two hundred dollars. While in Europe and Asia they were selling well at the higher prices. The phone service companies give mobile phones away for free. Cost pressures cause these companies to move where the costs are lower or get beat by the foreign companies that have ops in Vietnam, China, Thailand, etc� Lets face it, the large fifty plus line facilities are pretty much gone in the USA for now and may never come back. Thanks in part to corporate greed and the cheap USA consumer. The markets I service in the industry are not really affected by China and I think they are representative of what the USA market is. There are small to medium sized manufacturers and had no significant loss of companies from our industry�s crash in 2000. The average companies have two to three SMT lines and are building high mix/low volume products and higher value business-to-business products, and to professional consumers, not just household consumer. These products are in high demand too, not just PCs, games, and entertainment electronics for the consumer. I�d start to worry if medical; industrial/commercial products of small qty builds go to China. I think its better to have twenty companies each with two to three lines than have one with fifty lines. I have seen a growth in electronics manufacturing in my market since 2001, in terms of number of SMT lines (and the database I inherited was tracking less lines before 2001), so its not all doom and gloom. In the aforementioned report from APEX 04 they also reported on total number of SMT lines in the USA and compared them to 1999. I�m going to try to locate that report and post the numbers. Its not all Doom and Gloom!!

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