Where Will Your Next Gadget Be Made? 378
hackingbear writes "The New York Times is warning of the possibility of price inflation for gadgets, cars, and many other items, not from our skyrocketing government debt, but rather the increasing cost of doing business in China. Coastal factories are raising salaries, local governments are hiking minimum wage standards, and if China allows its currency, the renminbi, to appreciate against the US dollar later this year, the cost of manufacturing in China will almost certainly rise. (The report missed the biggest cost factors in China — electric and water utility costs.) 'For a long time, China has been the anchor of global disinflation,' said Dong Tao, an economist at Credit Suisse. 'But this may be the beginning of the end of an era.' The shift was dramatized Sunday, when Foxconn, the maker of the iPhone and everything else, said that within three months it would double the salaries (rather than the rumored 20% increase) of many of its assembly line workers."
"And last week, the Japanese auto maker Honda said it had agreed to give about 1,900 workers at one of its plants in southern China raises of between 24 and 32% in the hopes of ending a two-week-long strike, according to people briefed on the agreement. However, while big and famous manufacturers, like those in the US and Europe, may worry about their PR images and give in to labor demands, it is unclear if thousands of smaller ones will follow. And given the millions of people waiting for work in other countries, from India to Vietnam, the only thing that may have changed is the prevalence of Made in China labels of your gadgets."
Re:Honestly, I hope the US (Score:2, Interesting)
How about South America?
1. Cheap labor to be found (the capitalists love the idea)
2. They're our neighbors (free trade pitbulls will love it)
3. Shorter trip to get those cool "akihabara" gadgets (Geeks will love it)
4. Easier for our government to strongarm environmental guidelines (greenies will love it)
5. Brings jobs to South America (some people in South America will love it)
seems pretty logical.
China Wins Big no matter what (Score:5, Interesting)
The Chinese are in a wonderful and unique position to take over as the number one superpower and number one consumer of goods, turning the USA into a number 2 or 3 within a few years. Let's start off with the fact that China now has a "middle class" of fairly affluent working class people that is over 300 million strong.
Let me repeat that in case you missed it: Their middle class is as large (or larger) than the entire population of the USA. This middle class is buying. China can now self-sustain. In other words, there are enough people now in China with the money to buy stuff made in China.
So, we, the USA, need the Chinese more than than China needs the USA. Furthermore, the Chinese are smart enough to both "outsource" to cheaper countries than themselves, while acting as middle-men to their USA 'bosses', and while we will eventually get around to cutting them out (as we did to Japan), it will be too late by then, China will be selling in the USA directly (as the Japanese do, with established brands), and, as I said, they can self-sustain.
China, however, may "import" slave-labor (or nearly so, within boundaries of international law), allowing the Chinese a more relaxed lifestyle while imported workers do the grunt work for low wages. This will allow them to keep prices low and maintain their existing infrastructure of factories.
We just need to be careful though that *we* aren't the slave labor they decide to import.
Re:Honestly, I hope the US (Score:5, Interesting)
It's tough to make gadgets in the US because it is hard to scale regional supply chains to the size you'd need for a popular gadget. In parts of China or Taiwan there are hundreds of companies available to select as component suppliers. They can put crates on a truck and have more available within the hour. There are lots of places to go for large scale PCB manufacture in these regions as well. Even in silicon valley we have trouble with companies if we want to scale past about 10k units. For enterprise equipment those volumes are acceptable, and there are a few companies that make expensive equipment in the US. There are also lots of places that do final assembly in the USA (Dell), or some components in the USA (Intel).
It is possible to build up partners to get all the components you need. You can find everything (or nearly so) manufactured in some quantity in the US. And if there is money to be had, those businesses will scale up to meet your demands, eventually.
Re:In another hell-hole of a country? (Score:5, Interesting)
Yep, another hell-hole almost definitely. But, is that really a bad thing? It seems to me that outsourcing menial labor is the one international aid package that has a long term history of success. There's a lot of countries that are prosperous, developed nations today that were poor, developing nations when we started sending jobs there.
I'm betting that the next manufacturing center will be Africa, maybe even Somalia (no taxes! (Only joking obviously)). Guess what, anywhere that people can work for pennies on the dollar compared to the competition is going to be a tempting target for industry. And generally anywhere that people are willing for so little is by definition a place where very little is better than what they have now. Eventually, after enough money gets dropped into their economy pennies isn't enough anymore and we move on, but the factories, businesses, and trained workers remain and their economy is much better for it.
I'd love to see manufacturing jobs return to the US, but that isn't going to happen until automation is cheaper than developing nation manual labor. And when that does happen it's going to put the brakes on every developing country who relies on rich countries outsources to them for cheap labor.
Re:The next chinese will be robots (Score:4, Interesting)
Re:Honestly, I hope the US (Score:4, Interesting)
Corporations don't have any such preferations. They'll certainly not come back. They'll just swarm to the next flavour of the month outsourcing country.
Actually, as oil prices increase, it'll eventually be cheaper to manufacture low margin goods here than to do it overseas and pay for shipping.
Bigger picture (Score:3, Interesting)
My boss would have a field day with the summary.
As he likes to say, percentages mean nothing without harder numbers. Let's use one of the original articles [marketwatch.com] for number basis:
Wage hike: $84 million per quarter over entire company (with a raise of 20%)
Workers: 300,000 at one plant.
Assume 300,000 workers are 1/4 of entire workforce
$84 million * (100%/20%) = $420 million
$420 million / 1.2 million workers = $350 per worker per quarter.
Assume 1 quarter is 13 weeks, with each week being 40 hours
$350 / (13*40) = $0.6731 per hour.
Assume that it takes 2 man-hours to build a motherboard
Assume $100 motherboard is marked up 70%
Motherboard Cost: $30
Percentage increase: (2*$0.6731)/$30=4.49% increase in costs
Assume price increase carried through the entire pricing package, The former $100 motherboard is $104.49 now. Not a world class problem.
Re:The next chinese will be robots (Score:4, Interesting)
Re:Honestly, I hope the US (Score:2, Interesting)
Here's the thing about saying that 49/50 of the states are insolvent... sure California is insolvent, but if we were our own nation state, we'd be fine. CA pays out WAY more to the Fed than it gets back... if we could keep all that money locally, we'd have no problem being solvent.
Bullshit (Score:5, Interesting)
There are two commonly held misconceptions in your post:
1) the US manufacturing sector is in decline
The US export per GDP is now #179 in the world. That sounds pretty bad to me. Now, we have such a large economy that the raw numbers look great, but saying the US manufacturing sector isn't in a decline is pure nonsense. If I remember correctly, we're on the same performance level as Burma.
The US economy will cease to exist as you know it within your natural lifetime. I say "natural" lifetime because with the pending socio-political-economic collapse, many people will probably come to unnatural ends much sooner than they expect... ...The United States Federal government, as well as the governments of 49 of the 50 states, are legally insolvent. Not only is the federal government out of money, but the largest area of spending growth is debt servicing...
And more bullshit. Our external debt level is not even at an all time high (which was 120% after WWII). People are flocking from the Euro to the Dollar as we speak. No, really:
Global investors flock to US debt at record speed [telegraph.co.uk]
Gregory Daco, economist at HIS Global Insight, said the investment trends were clear evidence of trust in the US. "As the sovereign debt crisis in Greece intensified in March, foreign investors mostly sought refuge in the safe-haven US Treasury bonds and notes," he said.
"Nonetheless, government agency securities and corporate debt provided very attractive alternatives for investment – an encouraging sign that investors have faith in the US recovery."
Re:Honestly, I hope the US (Score:5, Interesting)
You mean the end-of-May jobs numbers that caused the market to crash when they were released?
The one that said the only real job growth was the 400,000 temporary census workers?
Take the minority of Americans who pay taxes [guess what: over half of AMericans are no longer net tax payers], and tax them at _100%_. Do it. Do the math.
If you taxed all current tax payers at 100%, you could not raise enough revenue to cover us.
It is a spending problem -- and only a spending problem.
Re:Honestly, I hope the US (Score:3, Interesting)
Depends on how many man-hours it takes to assemble the gadget. If an iPad takes 4-5 hours assembly time (remember that assembly lines dramatically cut down on total assembly time, so a few hours isn't stretching it at all - it's probably lenient) then I certainly wouldn't mind another $50 in cost added to the device for domestic manufacture. When you factor in the savings in shipping, then it'll be an even better deal.
There is the minor problem though: $8 an hour for a manufacturing job here might be fair, but many unions won't allow it to happen. Too many unionists pulling $20 per hour for that job that they only should have been making $8/hr for is half of what got us into this mess.
Re:Honestly, I hope the US (Score:3, Interesting)
Without agreeing or disagreeing with you on the specific case of California, states don't really have the freedom to try alternative levels of public spending and public revnue generation, because the federal government takes from the individuals first, and gives some of it back to the states.
Ask yourself why the lionsshare of your tax bill is to the federal government, when the majority of the services you need are provided locally?
Even though the federal government may not have the legal power to assert certain authorities over states and state lawmaking, by controlling the purse strings, and withholding money from states, the Feds in effect have backdoor control over all kinds of things that should be purely state matters.
I think your assertion regarding california is probably incorrect -- the policies of california are probably economic suicide, even without the tremendous federal outflow of money -- but i'd be happy to restructure the state/federal funding relationship so that californians can try that experiment for themselves.
The group of founders who opposed a strong national government had indicated their desire for each state to be a mini-experiment in governance and society.. where states differed tremendously based on local preferences. I think that's a great idea.
Re:Honestly, I hope the US (Score:4, Interesting)
Re:Honestly, I hope the US (Score:4, Interesting)
Depends. If it'll last three times as long I'd certainly consider it.
I hate cheap disposable shit and the attitudes that go with it.
Re:Honestly, I hope the US (Score:5, Interesting)
I have some bad news for you. America is already "a bunch of corporatists". Ironically, Ron Paul is probably one of the only legitimate critics of that policy, and is so "right wing" that the republican party does everything it can to suppress and exclude him.
It's really frustrating to try and talk politics in this country when people think of things only in terms of "i am on my team, and you are on your team, and your team is always wrong about everything".
There are no teams; we're _all_ going to lose big.
Some people may, but I am not "hoping for a terrible end". I have 2 babies in the NICU right now, and nothing will make you feel helplessly vulnerable and dependant on an advanced modern society like that does.
I'm saying unpopular things here [and elsewhere] to provoke discussion, and if there is any merit to the notion of our impending financial collapse, to do two things:
- to help people prepare to ride-out the impending storm
- to help people convince voters to vote-in people who will attempt to control the crash instead of letting the country go blindly over a cliff, saying "it won't happen" all the way down..
I keep showing up to work ever day, so I beleive that the US economy isn't a lost cause. I'm doing my part to keep the ship from sinking.
But I'm doing some other stuff on the side to hedge my bets.
Re:Honestly, I hope the US (Score:1, Interesting)
I know it's tough to read beyond the headlines but you should give it a shot. If you actually read the report (which you claim to have done), you'd notice that the majority of jobs were census, temporary, or created out of thin air by a computer model (birth-death adjustments).
It's funny. A group of mathetically inclinded people on Slashdot are totally unable to look beyond deeply ingrained politcal beliefs.
http://www.zerohedge.com/article/non-farm-payrolls-come-226k-after-census-411k-temporary-31k-and-birth-death-adjustment-215k/ [zerohedge.com].
Re:Honestly, I hope the US (Score:2, Interesting)
Re:Honestly, I hope the US (Score:3, Interesting)
More recent information has china and the us at near parity with china passing us in 2011 or 2012.
Which is reasonable since the country has 3x the population.
Re:Honestly, I hope the US (Score:3, Interesting)
What you say is true. But something that takes 1 man hour to assemble in the US may take 4 or 5 to assemble in China. The reason is simple, when labor is cheep you fix problems by throwing hours at it. In the US one operator can frequently run an automated line several times faster than out-sourced labor can. This of course means a larger capital outlay - but that's how the economy grows.
Re:Honestly, I hope the US (Score:3, Interesting)
Hell yes.
I'm Canadian, and my preference for goods are those manufactured in Canada. My money stays here. Made in the USA is a close second; I consider that to be almost as good. It's less likely to be made by slave labour. I will actually pay MORE for a good if it is made in Canada.
The only reason most manufacturers use people at all is because Chinese workers are cheaper than NA robots. If your iPod could be built by a robot here for cheaper, we'd never see "Made in PRC" again.
Re:Bring Manufacturing Back To America (Score:2, Interesting)
I bought an IBM ThinkPad in 1993, and it still works beautifully!!! I bought a Gateway in 2005 and the flimsy piece of shit is falling apart. It works, but I have to jiggle the monitor, fuck with the keys on the mouse as they're just about falling out.
Chrysler made solid automobiles. I own a GM (Camaro to be specific) It works great...150,000+ miles and still going strong(minimal repairs), and get this...the FUCKING BRAKES WORK!!!
I suppose it depends on your personal experience, but in my case I would way prefer "Made in the USA"
Re:not sure of "out of the woods" vs. something el (Score:1, Interesting)
As for respecting China's culture... sure, I'll get right on that. My first cultural taboo to learn to respect is child labor. After I've gotten over that, I'll work on violent persecution of belief systems I don't agree with (Christianity, Islam, etc.). Then I'll work on agreeing with overt state-controlled censorship, and finally, the wanton destruction of the ecosystem and disregard for dumping toxic waste. In fact,
You act as if that's anything strange with a randomly chosen culture. Our standards (no child labor, no child marriages, slavery, freedom of opinion, free economy, ...) are all 1-on-1 copies from an ideological belief system - halfway between catholic and protestant christianity - and then people act totally surprised when other belief systems (or even slight variations on our belief system) don't allow them.
Freedom of conscience (ie. no violent persecution based on religion) - exists in Christianity and Bushido - most notably absent from Judaism and Islam. But the big exception here is Christianity and Bushido. Today, most notably muslims do not have freedom of conscience, there are even questions if it even exists among american muslims - e.g. honor killings. But islam is nothing special here, most belief systems do not tolerate freedom of conscience and do not see it as a value. Even most atheist belief systems -like communism, nazism or simply the atheist society of ancient Athena- do not allow freedom of conscience. And quite frankly, having read Christopher Hitchens, I seriously doubt he's a fan of freedom of conscience laws.
Free economy - exists in protestand Christianity, in a (much) lesser measure in catholic christianity and it exists in Islam, does not exist almost anywhere else, but most obviously does not exist in Hinduism, nor in Buddhism. Every action in the large majority of ideologies is for the exclusive benefit of the system.
Slavery, or permanent forms of forced labor - does not exist in Catholic christianity and doesn't exist in Judaism. Part and parcel of just about every other system, like islam, hinduism and Buddhism
Equality - does not exist in practice, not even in most forms of Christianity, or it is only paid lip service. But nevertheless, in Christianity and Judaism, the life of any one Christian or Jew is the exact same worth as that of any other Christian or Jew - man or woman, man or child, shoe polisher or pope. The distinction between Judaism and Christianity being that christians are supposed to look on members of other faiths as people of equal value, while Jews see themselves (in the scriptures) as better (by birth), even if they're supposed to show this in various positive ways. Of course, in practice there are serious questions to be raised. However, even if perfect equality obviously didn't exist, you'll never see the social apartheid that exists in just about any other system. In most other religions, the inequality is much more explicit : islam has the legal distinction between slaves and free men (women are never free, at best they can own some limited property, they are, however, never free to choose their own life). The life of a free muslim is worth twice (literally, in dollars, or whatever currency) that of a free christian male or a muslim woman (except in the case of murder), which is worth 8 times what the life of a free non-muslim women or generally anyone else. Quite frankly, muslim women are already rather cheap to kill : about 10000 dollars [wikipedia.org]. Hinduism has the caste system, Brahmins are worth the most, men or women, just by their surname the "least" job they can occupy is officer in the army. Below that you have 3 other castes, the least of which - and the most numerous - are the dalits - basically slaves.
child marriages, or marriage contracts not made between marriage partners, but enforced by the state nonetheless - exist in islam, judaism, (part of) hinduism and Buddhism. It even exists in just below a majorit
Re:Honestly, I hope the US (Score:3, Interesting)
We moved our manufacturing back to the US. Equipment is cheap and the high tech parts were not available in china legally. We no longer have 20 percent or more of the parts we shipped to the assembler end up swapped for fakes, we can tailor our manufacturing more tightly since travel time is minutes not a month. We can more easily fix problems by inspecting small lots rather than have 3000 units come in that need reworked. The tipping point for us was transportation costs including bribes which convince management to move production back to the US. We still buy the stuff you can't make here because of environmental regulations but the core technology items are coming back here.