China manufacturer factory blog

“Up to now, Apple has not any details disclosed in San Francisco on the afternoon of January 3, Silicon Valley, Santa Clara University School of Business Operations Management and Head of the Department of Information Systems, Professor Andy A Tsay studies of Apple’s supply chain in an interview with reporters said.

The previous month, Tim Cook, Apple’s chief executive, said in a speech, Apple will resolve to contribute to the U.S. employment issue, plans to invest one billion dollars to Apple’s manufacturing back to the United States. “We have worked on this for some time, is getting closer and closer to this goal, it will occur in 2013, we are proud of.” Cook said.

This U.S. manufacturing reflux another latest cases of large companies. In fact, the entire 2012, General Electric (GE), but also because of the same reason almost unmatched in the depth of the U.S. media reported.

GE headquarters located in Louisville, Kentucky Electric Park, in the last century, 50 years on behalf of the U.S. manufacturing monument Today, small scale complex past glory. However, in February last year, it began to low energy water heater set up a new assembly line for the manufacture of cutting-edge, this kind of work had been responsible for GE China factory; 39 days later, electrical Park to open the second for the manufacture of new high-tech French door refrigerator The new assembly line, it was the work of GE Mexico.

Earlier this year, GE another responsible for a new stainless steel dishwasher production line will be started soon, it also plans to produce the products have never been produced in the United States, the drum washing machine and matching dryer. “Outsourcing is rapidly becoming the GE business model obsolete.” GE CEO Jeff Immelt to talk nonsense, and four years ago he wanted to electrical Park sell, the shot failed because the economic downturn. Immelt still declared in September last year, the GE Electric Appliance Park headquarters to invest $ 800 million, and the newly set up 10,000 jobs.

The Atlantic Monthly: GE appliance manufacturing gradually “home” is not a single case, in fact, is more and more U.S. companies to do so, which is “a kind of a return to give the U.S. economy and industry , has just begun, with the sustainability of exploration.

According to information obtained by reporters, as early as in 2011, the Boston Consulting Group had baked for U.S. manufacturing reflux signs a document called the “revival of U.S. production – why the manufacturing sector will return to the United States,” “Made in American, Again – Why Manufacturing will Return to the US “report, this report up to 19: the trend of turning the financial crisis and the recession has made the United States is becoming a lower cost manufacturing countries.

At the same time, the report recommends that foreign companies should re-evaluate the strategy of China, pointed out that “China should no longer be regarded as the default option. The Boston Consulting Group recently even predicted that there will be as many as 600,000 manufacturing jobs back to the U.S. from China in 2020.

Made in USA on the rise

“First of all, any change about the premise of In recent years, the U.S. economy is bad premise, especially some of the Obama administration’s policy in favor of the manufacturing industry in several countries after globalization, the current start-up companies Globalization Training CEO Leslie Yuen reporters transoceanic connection.

In fact, offshore outsourcing is the U.S. presidential campaign is an important keywords suffering from the recession and unemployment plagued the ordinary people of the United States is widespread resentment of outsourcing, Romney is Obama beat also its policies advocate and occupational background. “Romney was the effectiveness of the private equity investment firm, Bain Capital, Bain Capital reached a lot of trading is outsourcing the work plan of the United States to China.” Leslie said.

Instead, Obama praised the “stimulus package” (Stimula Package), strongly motivate the jobs back to the United States in all respects. Such as support for GE to use American labor to establish a new energy-efficient home appliances under the 2009 Recovery and Reinvestment Act, the U.S. federal government to the implementation of a series of tax breaks and incentives to GE. Shortly thereafter, the Kentucky State Government and the City of Louisville also made a positive tax incentive plan.

According to reporters access to information, GE announced

$ 800 million investment in the electrical Park, it received a total of $ 37 million in state and local incentives, this motivate a large factor in the GE employee plans (providing local jobs), and GE is also the federal government awards a total of 24.8 million dollars in investment tax credits.

Obama in November last year, just re-elected President of the United States and immediately convened 14 business executives at the White House held the theme of “insourcing American jobs” roundtable, urged enterprises to more overseas jobs back to the United States to promote economic growth and reduce unemployment, the “employment package” plan has not yet been disclosed specific details.

ABC News in the United States-led “Made in USA” movement from several states gradually spread to the United States most slowly to “empty talk about” Implemented “level, the impact is not small. However, policy incentives and the public voice of only one aspect, but more importantly I am afraid that the formation of the shock from the economic cycle.

According to the Atlantic Monthly written a lengthy summary of insourcing boom “(The Insourcing Boom) Total U.S. manufacturing caused by a variety of factors reflow phenomenon.

First, oil prices tripled in 2000, the cargo ship’s fuel expensive and long distant outsourcing supply chain will be affected; Secondly, greatly reducing the cost of natural gas in the United States to flourish, while Asian gas cost is American fourfold.

Secondly, wages in China is five times that in 2000, it also will be an annual 18% growth in contrast to this in order to survive, American labor unions are changing their outstanding level option. As the seventies and eighties electrical Park famous “strike the city, motionless like a baby to the company in order to strike, but today, the unions have been willing to accept a distinction tiered salary scheme in 2005, 70% of the trades will be lower remuneration , reward, about $ 13.50 per hour to almost $ 8.00 lower than before.

In other words, the world’s most expensive human resources under the influence of the financial crisis and economic recession a few years, the price requirement lowered a lot, and even the workers’ union of the three major U.S. auto companies agreed to up to 35-45% of the overall pay and benefits concessions lower or comparable to the standards in the United States and Japanese auto workers, a direct result of the overall concessions: U.S. auto ex-factory price is still lower than the same type of Japanese car close to their Japanese counterparts, but the profit margin on.

Mainland China contrast, in addition to rising wages, Foxconn is an extreme typical case. Since “jumping the door”, Foxconn is always faced with allegations of exploitation of employees. Access to information, according to the reporter, Foxconn since 2010 have been gradually adjusted salary levels several times last May, Gou claimed that let mainland employees 2200 salary increase doubled, which means August 2013 Foxconn employees in Mainland wages will reach 4,400 yuan.

Came out in 2011, “the U.S. production revival – why the manufacturing sector will return to the United States” report to do a more thorough comparison, 22% of the labor costs in the United States pointed out that the average cost of Chinese labor in 2005, but in 2010 31 %. At the same time, the wages of the Chinese factories hourly productivity is 8.62 U.S. dollars, the southern U.S. $ 21.25, it is expected that in 2015 China’s Yangtze River Delta coastal areas will reach 15.03 dollars, the southern United States is $ 24.81, the percentage of occurrence of considerable change.

Finally, another important variable caused by reflux of U.S. manufacturing, U.S. labor productivity continued to rise, this also means that the cost of labor has become an increasingly small elements of the overall product cost.

Beat Chinese prices

In addition, the U.S. ability to innovate is gradually penetrate to the daily life of the product to further promote the shrinkage behavior of the U.S. manufacturing sector. “American culture respected innovation, emphasizing profitability through the creation of high value-added products, but this ability now more and more land to the day-to-day (Triggle Down), which also led to related companies care more about the protection of intellectual property rights inviolable. “Leslie told reporters.

A car looked like a computer with four tires, in fact, the high-tech than outside it looks complicated. Innovation both product innovation (Production Innovation) Process Innovation (Process Innovation), and in fact more complex processing innovations. “Andy said, the same is true of the field of home appliances, such as washing machine has been able to Andy home just purchased inside how much clothing automatically recommend the release of water.

“Made in China” latent crisis: outsource production back to the U.S. for

GE water heater GeoSpring is also such a thing, it looks like the “Star Wars” robot R2-D2, just higher and thinner, the mystery is in its head, GE placed it a small heat pump, making it capable of around air to help heat results GeoSpring less than a typical water heater power of 60%, even it can be manipulated through the iPhone.

GE this type of water heater has been in the electrical Park design, production overseas, but the harvest of victory, while GE also found a loophole. They think that because this is an innovative product, start it may be due to outsourcing considerable cost savings, but production in China also means risk, because the GeoSpring element of innovation may be copied, 2009, GE also moved its production back to the local community.

A fairly interesting change happened then: lower material costs, labor costs may still need to improve, but GeoSpring quality rise, even as energy efficiency is also improved. “Do not need to raise prices in the headquarters of manufacturing GeoSpring will be able to generate profits, GE executives said:” So long as we returned to headquarters, and then create the same things you can. ”

In fact, the price after the production of this headquarters even beat Chinese prices. Atlantic Monthly disclosure, the old production system GeoSpring retail price of 1599 dollars, from design to manufacturing system gathered in electrical Park, so that the effects of its new generation of the GeoSpring retail price dropped to 1299 dollars, the price reduction 20%.

Here there are some invisible costs, such as GeoSpring from Chinese factories Store transit time to the United States for up to five weeks, only 30 minutes from the electrical Park factory to the retail store warehouse. “I have always stressed’m going to consider the total cost (Total Cost of ownership).” Andy pointed out that labor costs are only one aspect of a large number of invisible hidden costs in the overseas telephone calls.

These hidden costs include the costs of different time zones lead to the time difference, the language barrier severely affect communication and coordination, the quality of risk (including a lot of money to fly to Asia just why In order to clarify the quality can not be guaranteed), the risk of fraud, intellectual property risks, and by the Intellectual Property risk due to innovation homogenization risk.

“In addition, as a flood, tsunami There earthquake are uncontrollable factors. Fact, the previous year’s earthquake in Japan, floods in Thailand are outsourcing supply chain has been seriously interrupted, and has thus triggered reflections outsourcing and insourcing the rise of the concept. “Andy told reporters the U.S. manufacturing sector in the past due to the Wall Street sake, too much emphasis on short-term cost reduction while ignoring other, because that will determine the company’s stock price and executive pay:” But this is a short-sighted. ”

Surprising, when the U.S. manufacturing reflux, this behavior started to become a trend in the most emphasis on innovation in Silicon Valley. The end of 2012, the San Jose Mercury News, Silicon Valley’s most famous newspaper called “Bay Area manufacturing” (Made in the Bay Area) a huge topic.

“It sounds a little crazy,” the topic lead author Mike Cassidy column self-ridicule: “This is situated Facebook, Google and cloud computing and data on Earth only in your life only to think about how to create the company and wealth can be forgiven place the number of times you have heard that the manufacturing industry in the Bay Area have died? How many times have you heard that Silicon Valley is no longer a production center? but the situation is actually not so. ”

Introduced the topic of “Bay Area manufacturing some plans from the design to the production of all the new computer start-up companies in the United States, also cited some data: 18% of manufacturing jobs in Silicon Valley, and this figure in recent years has been remained stable, the number of Bay Area factory work from two years ago, the 7900 rose to 16.2 million.

Boutique manufacturing operations rely on fewer workers, more computer code and the incredible machine is building the complex components of the electronic world and the earlier update iteration. “Mike Cassidy also pointed out that another state of the U.S. manufacturing recovery from a Silicon Valley perspective : On the one hand the machine to replace the manual so that per capita labor efficiency, on the other hand, the overall size of the U.S. manufacturing sector is therefore growing.

Non-large-scale behavior?

Well, the U.S. manufacturing backflow whether it will become a large-scale behavior? The following conclusion seems premature.

“In fact, the Americans have forgotten production is what’s going on, which also includes GE and the series not suited symptoms, why go to war under the adjustment takes time.” Andy pointed out that Americans forget manufacturing background and sixties of last century The rise of consumer products in the world.

At that time, the the famous theory proposed by Harvard economist Raymond Vernon dominate the political arena, and was again and again to verify. Vernon pointed out: The United States should, with its abundant wealth and strength from the production of new, high value-added products profit, while production from the rich countries to go to low-wage countries, because of fierce competition, the cost will be the main concern point.

“Secondly, personnel training is also a problem.” Andy, whether the United States has enough skilled workers? The fact of the matter is very similar to the phenomenon and the field of IT, IT outsourcing flying to India a few years ago, American students stop pursuing related professional, and even affect the U.S. school subjects established, the education system also needs

Between respond it. ‘

“Many U.S. companies will in fact go to the action of the big companies, and then thinking, I think it’s more of a business cycle phenomenon, outsourcing began to flourish as more than ten years ago.” Leslie pointed out to reporters at the same time, more like a revival of U.S. manufacturing the beginning of a cycle, not one or two days, “may require large companies to explore first, to see if there now is too early to draw any conclusions.

Shanghai Institute of International Studies of long-term concern about globalization researchers Cai Zhicheng also tend to think that these individual phenomenon: doing actual violation of the rules of market economy, and in accordance with the tradition of American liberalism, and anti-globalization periodic callback Cai Zhicheng think back to the U.S. industry shift premature to make a judgment may not be appropriate: “It is more like a reflection of the Western world of globalization, this is a very interesting phenomenon – the West has begun to reflect on globalization China or other emerging markets are actively promoting globalization. ”

For Apple To MAC computer manufacturing back to the U.S., a lot of people to discuss the problems of the United States is a good thing, but the devil is in the details. “Andy said: more details first billion dollar investment plan announced, Apple has yet to disclose the specific reflux MAC computer what type, how Apple will produce assembled in the United States will be to what extent, and how many jobs will involve which.

“One hundred million dollars looks crazy, but Apple has 121 million cash flow lying on the bank, and with Apple this year plans a total capital expenditure of $ 10 billion compared to U.S. $ 100 million is only one percent.” Andy said, followed , taking into account the sales volume of Apple in 2012, Apple sold 1.25 billion iPhone 583 million iPad and 1.8 million Mac computers, Mac computers are not Apple’s star product, so do not expect Apple will bring the number of employment work for the United States. ” .

Tim Bajarin, otherwise Apple’s long-term observers to remind the excitement of the people of the United States, Apple is unlikely to sacrifice profits, Cook is likely to come up with a way, perhaps a crazy innovative approach, with fewer people to do the same job.

Although many experts think that Apple might be able to press speculation, but considering the far Apple has been a computer in the United States to complete assembly, and Cook declared the word “assembly we can do it faster, but we would like to explore some fundamental issues, Andy believes that Apple may also want to take your time, and exploratory work.

Andy pointed out, the company decided where are manufacturing, usually determined by several factors, namely: where customers, where necessary raw materials and service suppliers. “So if Apple has so many customers in China, it is a huge market in China and other Asian markets in China production belong reasonable.” He said: “I’m sure Apple do some standardized products in China, mainly, I think Apple will continue higher amount of labor, relatively low complexity products manufacturing in China, the United States will try some of the relatively high degree of complexity and lower the amount of labor. ”

He also pointed out that the broader U.S. manufacturing reflux: this way is not necessarily the China plant directly off, and then moved back to the United States or elsewhere, and also not to such an extreme way, in fact, likely will be retained factories in China, because China has a large number of consumers, which is not a non-black-white thing, it would be an evacuation and stationed in mixed forms of cooperation. ”

“Europe and Japan, the company will make its own decision in accordance with the same principles.” Andy believes that in the end should be determined where the production of different enterprises have different answers, the answer depends on their location, such as the production brought home, this country must have sufficient local market demand, but also must have sufficient technicians and support system structure.

China Crisis or opportunity?

Changes in Sino-US manufacturing costs may lead manufacturers to rethink production and logistics strategy, but should be moved back to the United States is hard to imagine the production line in China. “Many domestic economists also put forward their point of view:” And even if the U.S. manufacturing industry some reflux is not one-on-one employment transfer, a more likely outcome is that the manufacturing from China’s coastal areas to the transfer of the Midwest and Vietnam, India. ”

“This problem also depends on the type of product, product volume, complexity and labor content.” He is currently being studied for the above point of view, Andy told reporters: “Some product manufacturing may never return to the United States, but in recent years, produced in Mexico is full of temptation for U.S. companies, because it provides a very reasonable nearshore outsourcing solutions for customer service in North America. ”

Manufactured goods in Mexico in a couple of days to reach the United States, and because of the North American Free Trade Agreement (NAFTA), ground transportation can get tax-free. In addition, the level of wages in Mexico he took to achieve the most low-end of the global standards, but much lower than in the United States. In Mexico, there are a wealth of engineers, it speaks multilingual young generation is very attractive to the United States, Mexico seems to become a manufacturing enterprise clusters including aerospace and automotive businesses.

Related industries in China which in the end will have any effect?

Re-allocation of the next five years, global manufacturing will be more obvious, especially when facing the company decided to add capacity where the Boston Consulting Group in its 2011 report that the relatively high labor content and the mass production of products manufacturing may still remain in China.

“Multinational companies in China still the market supply products to China and the Asia-Pacific region, China has many advantages, the fact that many Western countries are already beginning to learn how to do in China business operations.” Andy also pointed out that, but on the other hand, China need to maintain their competitiveness is also true.

On the export market, China will need to find other ways outside of the low-cost to solve the issue of competition. “He said:” This could improve service? More innovative? Course the Chinese part of the solution is to increase domestic goods and consumption, and on this point China has also realized that a long period of time. ”

“In fact, the production is involved in the quality, rapid and cost, but for businesses, it also needs to sell, so manufacturing is only one part of the business, the largest part, or customer market, you have to close to customer markets in order to make a profit.” Leslie also pointed out that some U.S. companies might manufacture moved back to the United States, but in the future it may also go to the production process and tweaked: “My feeling is that the two sides will have a balance, a small amount of the professional degree requirements, products manufactured in the United States have its competitive advantage, but at larger scale on the United States or not, China and the United States has its own advantages in production, they will form a complementary relationship of enterprises. ”

In addition, some economists argue that surging in the United States within the package will create an industry the opportunity to re-shuffle, at the low end of the global outsourcing value chain, implementation experience thin Chinese service outsourcing benefits outweigh harm.

Leslie also reminded reporters, in fact, in 2010, many Chinese mainland companies take advantage of the cost changes in the environment in the United States to go to parts of the United States to open factories in China last year reached U.S. $ 10.5 billion to the U.S. investment in the amount of funds.

“Chinese enterprises can seize the opportunities of globalization, in the years to acquire U.S. businesses or investments to the United States, to get the U.S. science and technology, research and development, and then by globalization to improve their competitiveness in the Chinese mainland.” Leslie said: “This is a good strategy.”