Wal-Mart Stores Inc. has its corporate office in Bentonville, Arkansas, but the $405 billion revenue company's chief procurement officer is based in Shenzhen, China.
For most high-tech procurement professionals the road to plum career job nowadays runs right through China and, in many cases, will terminate in China. The shift of procurement functions to China began more than a decade ago but it has accelerated in recent years to the point where most major Western electronic manufacturers now have their key operatives living and working in south East Asia. Favored locations, aside from Shenzhen, include Beijing, Hong Kong, Singapore and even Kuala Lumpur.
This is part of a trend in the electronics supply chain and there are significant implications for all players in the industry. While I focus in this blog on procurement employees, other elements of the supply chain have followed manufacturing -- the first major part of the electronics industry to shift to southeast Asia starting in the 1980s. Component distributors and semiconductor vendors have raised their investment in the region with Arrow Electronics Inc. (NYSE: ARW) and Avnet Inc. (NYSE: AVT) now growing faster in Asia than anywhere else.
Arrow and Avnet are leaders in the North American and European distribution markets but the No. 1 player in their sector in Asia is Taiwan-based WPG Holdings (Taiwan: 3702). In a development symptomatic of events in the industry, WPG is poised in 2011 to become the world's biggest electronic component distributor, according to iSuppli Corp. . More of such firsts are on the way for Asian companies, especially those in China.
Ages ago, then Milpitas, Calif.-based Solectron Corp. (NYSE: SLR) was the world's biggest EMS provider before it was first overtaken and then acquired by Singapore's Flextronics Corp. (Nasdaq: FLEX). In turn, Flextronics has been dwarfed now by Foxconn Electronics Inc. , which now accounts for more than 50 percent of the EMS market, and while supposedly based in Taiwan, employs more people in China than most of its rivals combined.
To put it bluntly, the future of the electronics supply chain as it is currently structured isn't in the West but in China. This can change but I don't see any movement in that direction.
As the process of supply chain redistricting and adjustment has intensified, however, other regional locations and professions have been hollowed out. The last holdout, product design, is caving in and within the next 10 years -- my unscientific forecast -- Asia will employ more engineers who focus on design than Europe, North America and Japan combined. OEMs and other players in the Western electronic supply chain will dispute this assessment but that is to be expected; murmurings against outsourcing have turned into loud grumbling sounds.
It's not difficult to see why companies continue to ignore Western workers' protests about the shift of production and ancillary services to Asia. China is no longer just the world's manufacturing location but also a fast-growing market. In a report, the Economist said: "For American firms setting up in China, the chief attraction these days is not its cheap labor but its increasingly affluent consumers. In a recent survey of American firms in China by the American Chamber of Commerce there, 63% said they were there to sell to locals, whereas only 9% said they were there to sell things back to America."
What this means is that the electronics supply chain is in the throes of a monumental change; manufacturing moved, support services followed, design is on the way, the consuming market is racing to catch up and employees of all stripes and expertise are not too far behind, all heading to China and other parts of Asia. Not only does the sun rise in the East, it's also beginning to set there as well.
What position does your company occupy in this changing environment?