back to article Rising China costs get manufacturers moving

Several key notebook ODMs are apparently reconsidering their plans to locate factories in western China because of rising costs in the region which could hit profits. Digitimes said that, according to industry sources, Quanta Computer, Compal Electronics, Wistron and Inventec among others had already relocated some plants to …

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  1. Turtle_Fan

    Old news

    As a procurement manager purchasing electronics and pcba's from the far east I can tell you that the move inland was news sort of 2-3 ago.

    Since then it's all about moving to indonesia and vietnam; the former due to its proximity to Singapore and the latter due to wages even lower than China's.

    Sure, Donguan et al are still huge but that's mostly due to inertia. Most new products are going elsewhere.

  2. Morg

    Hilarious

    OMG NO THE COSTS ARE GOING UP !!!!

    THE POOR TECH COMPANIES ARE NOW GOING TO PAY $47 instead of $43 for something they sell @ $600 here ... damn that's harsh on them really ;)

  3. annodomini2 Bronze badge
    Thumb Down

    Re: Hilarious

    While I agree with your reasoning, unfortunately that $600 something will become $700 as a result.

  4. Anonymous Coward
    Anonymous Coward

    Re: Hilarious

    "While I agree with your reasoning, unfortunately that $600 something will become $700 as a result."

    Good. Maybe we can stop producing cheap crap that we don't really need and concentrate resources on more beneficial products.

  5. Ken Hagan Gold badge

    Re: Hilarious

    Umm, no they aren't. The point of the article is that the poor tech companies are going to have to find another country to build their factory in.

    My guess is that they'll find one. The world is not short of wretchedly poor places to be born. As soon as the Chinese go all "Korean/Taiwanese" and start demanding a standard of living commensurate with their economic strength, they'll find that they aren't so "competitive" anymore. They may also find they don't have the right kind of government. Nothing is forever.

  6. Morg

    Re: Hilarious

    No . it will sell at the price you are ready to pay, and as the economy goes to shit, that price goes down.

    Their margins will go down too, but that's none of our problem really.

  7. Morg

    Re: Hilarious

    They are not .

    First of all this takes time and it's a multi-step process:

    1) somebody decides to try to outsource to <newlocation>

    2) many fail

    3) one succeeds

    4) success story calls for copycats

    5) everybody starts outsourcing to <newlocation>

    6) shit goes bad (like call centers in India)

    7) <newlocation> starts becoming expensive

    8) everybody outsource to another new location, including the people from <newlocation>

    Second, the world is running out of places where you can outsource. India and China are half the world population and that's done, a lot of Indonesia has been covered, the rest is not *that* poor and Africa belongs to the chinese, where do you want to go ?

    Third of all china will be robotized by the time there's actual massive successful outsourcing elsewhere. and everything will go back there since that's the govt of China objective.

    Maybe they don't have the right kind of government,

    BUT

    Chinese people have had a better life every year for at least 30 years straight.

    Here in Europe, I can tell you it's worse and worse. and we haven't hit the bottom yet. (and let's not talk about the US cuz that's just sad).

  8. James 51 Silver badge

    When the race to the bottom hits rock bottom

    Sooner or later they are going to run out of places to flee from when the costs go up by a smidgen. Of course if the drones in the factory can afford the products they are making then you'd think that the extra sales would be worth paying one or two dollars more for getting it made.

  9. Arctic fox
    Megaphone

    There are a couple of little problems here for the Western companies' "sweatshop hopping".

    1. As James 51 has already pointed out, where are they going to go when they run out of said sweatshops? The capacity to avoid keeping ahead of the game by ingenuity and innovation and rely instead on finding yet another cheap country is, in reality, finite.

    2. What are they going to do about countries like, of course, China who now have some of their own companies (and they will increase in number) producing ever better kit who can still undercut Western producers because their wage rates although rising are still well under those in the West?

    In sum, by only being interested in chasing the bottom line in the short term it is not unlikely that they are now going to find themselves thoroughly out-competed by the new and rising industrial countries.

  10. Turtle_Fan

    Re: There are a couple of little problems here for the Western companies' "sweatshop hopping".

    Well, I'm glad someone raised this topic at last and hopefully we can have an adult conversation on the subject.

    First of all, worry not about the depletion of low wage countries. Even after Vietnam and Indonesia there's deep ex-Russian Asia, Ukraine and of course then comes Africa (just look at Angola).

    Regarding what you guys perceive as price advantage I can tell you it is not. As everyone is in on the game, low cost sourcing is not a differentiator but the absolute minimum. Whoever succeeds still does so on the merits of their product.

    Finally let's look at oft cited argument about slight increases for the sake of the workers. Assuming I won't be summarily fired for mentioning it, what makes you think this will be passed on to the poor workers and not 'confiscated' by the manufacturers' profits?

    The way I see it globalisation is good and ultimately fair. Take the global GDP per person and you'll see that our wages in the western world are the outliers. And while a lot has been written about worker exploitation I see the general population of a formely ultra-poor decrepit country become more wealthy and able to afford hitherto undreamt of things.

    And finally, it's all about the market. Unless a "made at home" tag isn't an adequate differentiator that people will pay for then I have no incentive to even try. Especially while your pension funds ask me for increasing profits each and every quarter. Take for example the various codes of conducts for suppliers' workers rights. Do you think they would be instituted if you guys out there didn't demand it?

    So yeah keep on moralising but occasionally please put your money where your mouth is and don't be an armchair revolutionary of the chattering classes, taking pride for your ideals because you pressed 'Like' on the latest 'cause du jour'.

  11. KAMiKZ

    just curious, does anyone know how to make a lightbulb? seriously, a lightbulb. I'll pay you a meaningful sum of money if you can make but one bulb without using any tutorial material produced after Edison's time. I doubt it will take you less than 5 years. No the Chinese aren't mental invalids, but just because you aren't, doesn't mean you are able to make something. Yet the Chinese are making almost anything you care to name from A to Z, Just how do they "know"? You can't reason away the IP theft. Just take a moment to imagine that you spend 10 years working on something that might make you pretty well off and allows you to do things you've always wanted and bam, the fucking Chinese steal it and make cheaper version (and cheaper not because their produciton method is better than yours). How is that ok?

  12. TomasF
    Facepalm

    Yeah, well...

    ...to keep this relevant to the article, as long as the "innovators" keep handing their "revolutionary" blueprints to the sister company of that plagiarizing-cheap-copy-plant, I'll reserve my tears for those more deserving. It's only so long you can send your designs to the IP theft capital of the world and pretend to be surprised when it's copied over there, and get away with it.

    For those 5 products still produced in the west and that also got copied... I am sorry.

  13. Pascal Monett Silver badge

    Re: the fucking Chinese steal it

    They don't have to, because you're going to ask them to make it and because your IP means nothing to them.

    Right now, I agree that they will make it cheaper, but also crappier. However, as the Chinese industry grows its own experience (and that is happening faster than anyone wants to acknowledge), they will end up not only copying, but improving on the design and quality and STILL sell theirs for less.

    It's time to realize that we need to bring industry fabrication back to our own soil, otherwise our IP will mean nothing.

  14. Morg

    First of all

    IP is wrong.

    It slows the evolution of the human race in its current incarnation . and that's just wrong. god bless the chinese for actually not caring about it (like Intel).

  15. sueme2
    Happy

    light bulb

    take tube add prongs weld tungsten crimp. that makes the filament. other end of the wires are used later.

    weld small tube for gassing

    take bulb weld to the first tube

    suck the guts out of it

    add inert gas. seal small tube

    stomp brass ring. glue to bulb.

    take 2 leads. add contacts. solder

    flow that black goo into the base.

    put in packet.

    sell.

    That should be about it.

  16. Julian Lawton

    Sweatshop Hopping

    Marx pointed out that neat flaw with capitalism too.

    The optimistic view is that once there is nowhere cheaper to relocate factories to, the world will actually be a lot better place.

    Of course, it will be one where the purchasing power of a Western salary will be about the same as the purchasing power of an Eastern one - otherwise it would still be competitive to move.

    At which point, you'll just be competing on talent and infrastructure. Well, competing on talent while still trying to pay off a Western mortgage (due to our lack of housing supply) and Western student loan, and maintaining an ageing infrastructure.

    (Another interesting question is whether disintermediating the supply chain will reduce the impact of rising labour costs - i.e. right now a $4 increase in manufacturing costs has a large impacts on prices, because it's getting multiplied through the chain)

  17. mhenriday
    Boffin

    Good discussion -

    accompanied by fewer comments of the type in which profanity tends to substitute for argument than is the wont for Reg columns. As Morg points out above, manufacturing is not merely a question of the level of wages - the quality of the physical infrastructure and, not least, that of the work force plays a role that is no less, and often more, important. The Chinese, like other societies with a Confucian ethic, are good at organisation, and educational levels are relatively high, which is a plus in this connexion. It won't be easy for countries which lack this tradition or an equivalent to match the Chinese experience....

    As regards so-called IP, that seems to be most often a question of which claimant has the best lawyers or the best, to use a Chinese term, guanxi (关系) - as a case in point, consider certain recent court decisions in Germany which more or less implied that Apple enjoys exclusive rights to certain Platonic solids. Those who believe that the Chinese have no talent for innovation and are merely imitators are sadly ignorant of the history of the major technical innovations (printing with movable type, the compass, gunpowder, etc) on which the modern world was built....

    Henri

  18. James Gibbons
    Devil

    Re: Good discussion -

    Yes, till the Brits started the Opium Wars and then it all went to shit for the Chinese...

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