Manufacturing trending away from China

[mattster]

Here is the Link : Manufacturing trending away from China - 10/13/2009 - Electronic Business

This is a very interesting article. Quite a few of those thousands of US companies that outsourced manufacturing jobs to China are now starting to get heartburn.

The costs have gone up, and the quality is suspect, and the reward/risk tradeoff is starting to raise eyebrows. Adding to that, is the fact that IP theft and counterfeiting is rampant.

Its looks like the party is coming to an end !!!

Personally, I feel that most of these companies deserve it for laying off thousands of workers in US to shift to China and even India.

 

[IBRIS]

Economically, China is actually more dependent on the US than the US is on China. US-China trade and business interactions compose a larger percentage of China's total GDP than it does for the US GDP.
Without the US, China would never have grown into the powerhouse it is today. In the absence of the US, China would cease to be a powerhouse, doing that would cut china off all their own income. It would isolate us and turn us into a self producing nation, the amount of jobs would be gained would be astronomical... our economy will sag for a week and sky rocket to 1950's proportions.

The Chinese need the US dollar to remain strong against the Yuan but what we'r forgetting is that although China may hold a small stake in the generation of Americans GDP directly, it also produces and manufactures more basic material which is shipped out to other countries than any other in world. Meaning when products are bought non-directly from China but from say Germany, Uk, France the products sold contains parts from China, including raw materials.

China saves money while the rest of the world borrows/spends. That is the main reason why in economical terms China is in a prime position and will control the market.

 

[Koji]

So you're telling me that shifting production back to the US will help US consumer? I don't think having families spend nearly 30-50% more on every day items is going to help them out of the recession.

There is a reason why manufacturing went to China. It's because consumers bought the product at the lower price!

 

[mattster]

Economically, China is actually more dependent on the US than the US is on China. US-China trade and business interactions compose a larger percentage of China's total GDP than it does for the US GDP.
Without the US, China would never have grown into the powerhouse it is today. In the absence of the US, China would cease to be a powerhouse, doing that would cut china off all their own income. It would isolate us and turn us into a self producing nation, the amount of jobs would be gained would be astronomical... our economy will sag for a week and sky rocket to 1950's proportions.

The Chinese need the US dollar to remain strong against the Yuan but what we'r forgetting is that although China may hold a small stake in the generation of Americans GDP directly, it also produces and manufactures more basic material which is shipped out to other countries than any other in world. Meaning when products are bought non-directly from China but from say Germany, Uk, France the products sold contains parts from China, including raw materials.

China saves money while the rest of the world borrows/spends. That is the main reason why in economical terms China is in a prime position and will control the market.

I disagree with the last part of your assessment. China's export driven economy is mainly driven by assembled manufactured goods not raw parts.

Raw parts are there like semiconductor ICs, electronic components, etc, but they are not the huge revenue base like the manufacturing of appliances, and finished consumer electronics products like Iphones, Playstation, etc.

China has to gradually move up the manufacturing ladder to higher value products as they will eventually not be competitive in Mass consumer products because of cost.

But here is the problem: they have a huge population and they still need that low-margin high volume low-tech manufacturing to keep millions of peasants from the countryside employed.

 

[Koji]

From your source:

"Even with the problems associated with manufacturing in China, some manufacturers have captured the benefits and swear by China’s advantages. “Some OEMs are still pounding the table about the benefits of China,” said Pick. “They say, ‘Yes it was hard, but the result was astounding.’” China works if the manufacturing is high volume and the bugs are worked out in the manufacturing process."

It highlights the point that a huge proportion of manufacturing is staying in China. Movement to outside countries are small in comparison.

 

[mattster]

So you're telling me that shifting production back to the US will help US consumer? I don't think having families spend nearly 30-50% more on every day items is going to help them out of the recession.

There is a reason why manufacturing went to China. It's because consumers bought the product at the lower price!

Koji...did you read the article ??

A lot of OEM vendors are saying that the cost savings that they were planning on, when they moved to China, did not materialize for a variety of reasons.

That's why they are moving to places like Mexico and other places close to their target market. They can do it cheaper with better quality and control in places like Mexico.

I myself have seen this in action. When you have to fly over a team of engineers to China for a couple of weeks to fix a quality issue....it can really add up real fast.

 

[IBRIS]

Many, and probably most of the products I have were physically manufactured in China. They were not developed in China though. China is not an innovator or designer, they are an imitator and a manufacturer. China has hordes of expendable peasants to man factories and pump out products for other people. They rarely design those products, and usually they don't even own the rights to them. They also don't have the domestic demand and consumption to replace trade partners. China depends more on exporting than the US does on importing. Western, usually American, companies simply hire Chinese workers to build shit for us because they can do it more cheaply that way. China is profitable for western companies' profits and good for western consumers that want cheap stuff to buy at Wal-Mart, that is their role in the world.

The US is the world's R&D department, China is the world's factory. China may overtake the US in GDP but they will not become independent of the US or become the kind of unrivaled hyperpower the US was 15 years ago. Look at the internet and personal computing today, it's positively dominated by the US. Apple, Microsoft, Yahoo, Google, IBM etc... hard to imagine China ever being able to produce companies that could compete with them.

 

[IBRIS]

So you're telling me that shifting production back to the US will help US consumer? I don't think having families spend nearly 30-50% more on every day items is going to help them out of the recession.

There is a reason why manufacturing went to China. It's because consumers bought the product at the lower price!

Its like any new business, when its successful and growing then you keep on regenerating the funds to expand. Once the company has expanded so much that by taking a cut out of it wont affect the overall economics, then you can start diverting money into other forms of research/channels.:twizt:

 

[Koji]

It's symbiotic relationship, you can't say one is dependent on the other exclusively. Neither can survive on their own.

@ mattser: the article states that one of the reasons for the Mexico shift was shipping costs (tied to energy prices).


Expendable peasants might be a bit harsh, since there is a labor shortage on the coast of China.

 

[Koji]

Traditional manufacturing may be losing ground, but it's replaced by new businesses.

China Number One Destination In Asia For Pharmaceutical Outsourcing | TRENDSnIFF

Here is a link stating that China is now the top destination for pharmaceutical out-sourcing, a position it has lagged behind in the past.

 

[Vladimir79]

It would isolate us and turn us into a self producing nation, the amount of jobs would be gained would be astronomical... our economy will sag for a week and sky rocket to 1950's proportions.

Not exactly, US multinationals would not set up shop in Amerika if they shut down China operations. They would just go to Vietnam, Afrika, and poverty stricken regions of India. Anywhere they can get a decent infrastructure and low wages.

The Chinese need the US dollar to remain strong against the Yuan but what we'r forgetting is that although China may hold a small stake in the generation of Americans GDP directly, it also produces and manufactures more basic material which is shipped out to other countries than any other in world. Meaning when products are bought non-directly from China but from say Germany, Uk, France the products sold contains parts from China, including raw materials.

China saves money while the rest of the world borrows/spends. That is the main reason why in economical terms China is in a prime position and will control the market.

Problem with China is, they aren't saving as much money as you think. Their operations are so innefficient many operate at a loss, when they belly up they sweep them under the rug and hope their growth will cover it up. The economic model of China is one of economic exploitation, people work for bottom wages in horrid conditions while fat cats get richer. They hoard the wealth and hide the losses while the domestic economy remains underdeveloped. You can find this in many developing countries, but none so extreme as China.

 

[Vladimir79]

Expendable peasants might be a bit harsh, since there is a labor shortage on the coast of China.

The labour shortage is caused by the demographic catastrophe that is now going to plague China with the one-child policy. All those fresh young bodies coming from the countryside are drying up because the average age of workers are increasing. Guangdong has seen a 30% decrease in migrant workers and has had to close tens of thousands of factories. There are no more young workers to fuel the growth of sweatshops so wages and conditions have to be improved to attract more workers. People are just getting too old to make the migration trip to live in dormitories and fight for witheld wages. When pressed, Chinese officials are quick to say that there is no overall shortage of labor — rather, there is a shortage of young workers willing to accept the low wages that prevailed in the 1990s.