Charlie Barnhart & Associates has been reporting for several years on the trend toward regionalization -- building products in the same region as the end market -- in electronics manufacturing. What began as a trickle has become more like a torrent. OEMs in Western Europe are moving to Eastern Europe. Those in the US and Canada are moving to Mexico, and some projects are moving from China to other Asian countries. There are several reasons for these decisions.
Rising cost is a primary driver. The costs of Chinese labor, fuel, and transportation are all increasing faster than most expected. A total cost of outsourcing analysis puts China and Mexico near parity, according to a recent ONC Special Report comparing the two places.
But there's another driver. CBA is finding the level of satisfaction among midmarket OEMs with their EMS supply solutions at an all-time low. At the same time, expectations have never been higher. Combine these two perceptions, and many midmarket OEMs are abandoning their cross-hemispheric global supply chains and opting for one that involves fewer time zones. It's like consumers getting fed up with Wal-Mart and deciding to pay a little more for a neighborhood shop, or those who want local food sources and are willing to pay more for community-supported agriculture.
Customer service, reliability, and freedom from global risk are premium factors that midmarket OEMs increasingly value. Regional EMS companies are the winners in this analysis. These companies are able to get better margins than their larger peers, and they focus on narrower niches that enable higher levels of customer satisfaction. Watch for major shifts in the EMS industry's core value proposition in 2012.
As for American cars, I was refering to American brands and all of the talk about losing jobs because you're driving a Honda or Toyota instead of a Chevrolet or Ford.
Table 6: China's Top Imports, 2010 ($ billion)
*Calculated by USCBC Source: PRC General Administration of Customs, China's Customs Statistics
jbond, your right! But CHINA wants to control all the free worlds manufacturing, not there fair share. All the free world country's have lose of job's. What imports does CHINA let into there country? Your comment about American cars is interesting, what car is an American car? Japan, Germany build cars in the US, but they don't use US parts! The US builds cars in other county's, but don't use all US parts? Do you see the big picture?
Saying people won't buy products made in China because people want to keep their jobs is being closed minded and not looking at the big world picture. The United States is not only one of the largest importers of goods, we are also the largest exporter of goods. If the rest of the worlds population said they weren't buying anything from any other country, the U.S. included, then nobody would be importing or exporting. In fact, just because you bought an "American Car", doesn't mean all of the parts are manufactured in the U.S.
You want a prime example, the U.S. is the worlds largest wheat exporter. People talk about how bad the farmers have it, if they couldn't export their crops, this country would have even more financial issues.
Flyingscot, What type work do you do? Detail cars, Sport Authority,Game Boy, Game Stop Game Dude. I know people who won't buy products made in CHINA because they want to keep job's in there country.
There's no shortage of small to midsize EMS companies willing to bring offshore business "back home." It won't require building a massive infrastructure either. China has benefited from the influx of manufacturing and will continue to add to its infrastructure. We already have it. Regionalization should be pretty seamless in most areas of the Americas and the EU.
@FLYINGSCOT, well, yes and no. But I do agree that I think with consumer electronics specifically, consumers do indeed care very little.
Obviously there are "issues" with how Apple's products are produced in China, but even despite the fact that a good chunk of Apple users are likely to care about such things... it's not as if there is widespread outrage and Apple certainly isn't likely to move operations to America.
But outside of consumer electronics, yes, of course consumers care where their product is from. I personally realized something I had been eating was made in China, and no longer purchase it. Obviously, it DOES matter where the product came from in some cases.
I cannot believe end consumers care where their product is built as long as it is cool, cheap, available, easy to use and reliable. I am not sure how any of this is affected by local sourcing.
The US is reported to be the world's largest importer, giving it the status of being the world's largest end market. Does this mean the trend will bring significant electronics industry onshoring?
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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