Is China Still the Best Place to Manufacture Electronic Products These Days?

Manufacture

You’ll not believe how often I have asked this question. Before getting ahead of yourself, first consider if China will be your ideal choice to start with. Companies outsource manufacturing or product development to China to lower cost; nevertheless,”moving to China” only makes sense if the following criteria are all met:

Quantity
Volume is king in China, and lot size is the first how to manufacture a product in china thing most factories may wish to know. In general, out sourcing just makes sense once the arrangement is worth at US$10,000; anything below that makes management and transport overheads too significant.

Labor intensity
Injection Molds
Savings on injection molds often amount to 50 percent, therefore if molds make up a significant part of your entire project budget afterward China becomes far more interesting.

Electronic components
70% of the entire world’s electronic equipment are currently made in Asia, because of the extremely rich cluster of suppliers of electronic components. If your merchandise is currently assembled with Brand-Ed Western components, you can save a great deal of money by using Asian equivalents.

Product Development
Here again the savings can be tremendous. Ofcourse it makes no sense to compare the salary of a fair engineer somewhere inside the sticks in China together with all the price of an ace engineer in Silicon Valley. A ton more job direction is needed as an example to make sure that everybody understands what your product must do. But all said and done you still can expect to save at least 50%, and the more complicated your product to design, the more you’ll save.

More over, because so many electronic services and products now are completely manufactured in Asia, the knowledge base is often a lot more rigorous there, to this point at which it has come to be practically impossible to create a notebook beyond Asia.

Thus, in a sense, if your product doesn’t meet volume requirements and also uses marginally complex electronic elements and programming, then, no, China may not be for you. In such a situation, I’d probably opt for Taiwan, and that’s where we perform the majority of our electronic solution development work. Taiwan may be a little more costly than China, however the engineers are inclined to be a good deal more experienced, making you to market faster. To get a new, unproven product we recommend developing it in Taiwan, do a bit pilot production runs there, and once the product proves successful, to proceed production over to China to help you save cost. Taiwan may well not be as cheap as China, however developing an unproven product in Taiwan in smaller quantities will be prudent and moving every time a manufacturing ramp up is required.

But I digress. . .back into China.

Paradise Lost?
Recently, Beijing has increased minimum wage by 20 percent; other cities are expected to check out along with The main reason for wage climbs? While that is excellent news for the typical mill employee, it’s just a nightmare for its mill owners that need to pass the growth in manufacturing costs with their customers; all this at an already competitive atmosphere. As a result, many Western companies are seriously considering venturing out of China in search of more economical frontiers.

But to Next?
There’s quite a little discussion about moving production farther to more remote, less-developed areas of the Chinese interior; however, lack of skilled labor and logistical issues are likely to be impediments. So, in short, don’t hold your breath. Recently, Vietnam, India, and Indonesia are on the radar as prime candidates for carrying away production from China. But these states work great for services and products with rather significant labor content such as shoes and garments. However, also for electronics, a intricate infrastructure is needed that only super sized integrated factories like Foxconn (who makes the iPhone) dare to get this to move. Yet another impeding factor is bureaucracy and rampant corruption — not these don’t exist in China, mind you, however Chinese factories tend to be so very good at dealing with such conditions that they seldom cause issues for you personally as being a Western buyer.

Additional Problems
Power . A number of the above mentioned countries have unstable power source due to prevailing climate conditions or source (hydropower when it comes to Vietnam). This may create barriers given the high energy consumption requirement associated with manufacturing.

Intellectual Property. Protection of IP can be considered feeble throughout Asia. Naturally, this can happen in China, but it’s much easier to stop (for us anyway). As an example, we were recently asked to build up a biometric scanner for use at high security centers such as Swiss airports and banks. IP security had the essence for our clients. To guarantee this, we purchased electronics from several regional vendors, did the home at the same center, and had the whole unit constructed at an vague keyboard factory in Taiwan that knew nothing about biometric security techniques. Read more on the topic of IP.

Shipping.
Transport system in these countries is usually in relatively weak state with less than 45 percent of its own roads paved.

Telecommunications.
Poor telecommunications infrastructure means becoming through may on occasion be considered a struggle.

Providers. Unlike China or Taiwan, you’d be hard-pressed to locate local suppliers of components that are competitively priced.

So there you have it. Despite recent struggles, it doesn’t look like China will undoubtedly be going away anytime in the future. Although salaries have risen, at $145 a month, it’s still considerably less expensive than most places. Oh yeah, in addition, inflation within China and the projected increase in the Yuan are likely to drive up the cost of exports. China has been under great pressure from its primary trading partners to permit the renminbi to appreciate against the US dollar. In accordance with the Economist,”The Chinese government is very likely to remain very cautious in the performance of its exchange-rate policy, and also is not likely to bow to US pressure to get a large scale revaluation. Nevertheless, the government will enable the renminbi to restart a slow yet steady rise against the USDollar round the middle of 2010, probably in July, as part of a slow tightening procedure.”

So perhaps you should be more”going to China” sooner rather than before it becomes economically unfeasible to accomplish that.

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