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

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You’ll not believe how often I get asked this specific question. Before becoming ahead of yourself, first consider if China will be the very best choice to begin with. Organizations outsource product or manufacturing development to China to reduce price; however,”going to China” only makes sense if the following standards are fulfilled:

Quantity
Volume is king at China, and lot size is how to manufacture a product in china the first thing most factories will want to understand. In general, out sourcing only makes sense once the arrangement will probably be worth at least US$10,000; whatever below that makes transport and management overheads too large.

Labor intensity
The more work involved in building and packaging the product the more money you save.

Injection Molds
Savings on injection molds regularly amount to 50%, therefore if molds constitute a significant part of your overall project budget then China becomes far more interesting.

Electronic components
70% of the planet’s electronic equipment are currently made in Asia, due to its exceptionally rich cluster of suppliers of electronic components. If your product is currently built 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 mediocre engineer somewhere in the rods in China using all the price of a professional engineer in Silicon Valley. A ton more project direction is required as an example to be certain that everybody knows exactly what your product needs to do. But all said and done you still can get to save at least 50%, and the more complex your product to design, the more you save.

Moreover, because so many electronic products now are completely manufactured in Asia, the knowledge base is often a whole lot more rigorous there, to this point at which it’s become practically impossible to design a laptop beyond Asia.

Thus, in a sense, should your product doesn’t meet volume requirements and also uses marginally sophisticated electronic components and programming, then, no, China may not be for you. In such a circumstance, I’d probably choose Taiwan, which is where we do most of our electronic solution development work. Taiwan may be a bit more expensive than China, however the engineers are inclined to become a good deal more knowledgeable, getting you to market faster. To get a new, unproven product we recommend developing it in Taiwan, do some pilot production runs there, as soon as the product proves successful, to move production over to China to save money. Taiwan might well not be as economical as China, however developing an unproven product in Taiwan in smaller numbers is sensible and then moving every time a manufacturing rampup is demanded.

But I digress. . .back into China.

Paradise Lost?
Recently, Beijing has increased minimum wage by 20 percent; other cities have been required to check out . The reason behind wage climbs? State authorities insisting on higher standards, and also the nationwide energy to close the gap between rich and poor. While this is good news for the average mill employee, it’s actually a nightmare for its factory owners that need to pass on the rise in manufacturing costs with their customers; all this at a competitive environment. As a result, many Western businesses are seriously considering venturing out of China in search of cheaper frontiers.

But Where to Next?
There is quite a bit of discussion about moving production farther to more remote, less-developed areas of the Chinese interior; however, absence of skilled labor and logistical problems are likely to be more impediments. So, in short, don’t hold your breath. Recently, Vietnam, India, and Indonesia have been around the radar as prime candidates for taking production away from China. But these states work best for services and products with very significant labor content such as shoes and clothes. However, also for electronics, a intricate infrastructure is needed that just super sized incorporated factories like Foxconn (who makes the iPhone) dare to make this move. Still another impeding factor is bureaucracy and rampant corruption — not that these do not exist in China, mind you, however Chinese factories tend to be so very good at handling these kinds of issues they seldom cause problems for you as being a Western buyer.

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

Intellectual Property. Protection of IP can be viewed weak around Asia. Naturally, this can happen in China, but it’s a lot easier to stop (for us anyway). By way of instance, we were recently asked to develop a biometric scanner to be used at high security facilities like Swiss banks and airports. IP protection had the essence for our clients. To ensure this, we purchased electronic components from several regional vendors, did the home at the same centre, and had the whole unit constructed at an obscure keyboard mill in Taiwan that knew nothing about biometric security methods. Read More about the topic of Internet Protocol Address.

Shipping.
Transportation system in these states is usually in relatively poor state with less than 45 percent of its own roads paved.

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

Suppliers. Unlike China or Taiwan, you would be hard-pressed to locate local providers of components that are competitively priced.

So there you have it. Despite recent struggles, it doesn’t appear to be China will undoubtedly be going away any time soon. Although salaries have increased, at $145 per month, it’s still considerably less expensive than most places. Oh yeah, in addition, inflation within China and the estimated growth in the Yuan are likely to push the purchase price of exports. Based on the Economist,”The Chinese government is likely to remain very wary at the operation of its exchange rate policy, and is not likely to bow to US pressure for a large-scale revaluation. However, the federal government will allow the renminbi to restart a slow yet steady increase against the USDollar across the centre of 2010, probably in July, as a member of a gradual tightening process.”

So perhaps you ought to be more”going to China” sooner rather than before it will become economically unfeasible to achieve this.

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