There will most definitely be Demand 10 years from today(from China or whoever is manufacturing those products then).
The more important question is can the Chinese afford to hold on(in case Demand falls off as suddenly as in 2008 again???).My bet is they won't ;leading to a great deal of social instability in China.So maybe that factor(alongwith China's unbelieveable trackrecord of stealing IP) could prod manufacturers to think twice about moving more production there(rather moving more to regions which actually are happy& hungry for those jobs)-Like Mexico or Southern Europe.
Fair points. The original argument the Wharton item made was that China was becoming less dependent on US and EU markets. It's arguable how big China's domestic market will be in 15 years, but it's probably reasonable to assume it will be larger than it is today. Similar predictions seems fair for other Asian countries with rising middle classes and large populations: Indonesia and India, most obviously. It's fair to say, I think, that all this will have implications for how electronics are produced and moved. If you're arguing that China won't have customers in 10 years, I think that's a tough argument to prove. If you're arguing that there won't be enough customers to create new supply patterns, that's a bet I'd take. Winner gets a 2030 model-year iPad manufactured in Ulaan Batar and shipped via Lusaka.
Sorry to interrupt you again on this issue;but the problem is that you are not understanding the situation. The problem is not one of Supply,Its of Demand.
Whether the products are manufactured in China/Vietnam/Europe or America is completely immaterial.The much more important question is who is going to Buy those products???
There is no doubt that the Chinese are doing much more than the Japanese or anyone else before them to ensure their continued Dominance of the Manufacturing Supply Chain(by locking in Resource inputs in long-term contracts as you so rightly suggest).
But who is going to Buy all those products churned out by these factories???
As two of the latest articles on the EBN rightly suggest,there is a massive wave of scepticism regarding the latest newly fangled Gadgets in the Tech-space.
Spare me the 3D is rapidly becoming one of the most popular blog-posts ever on EBN..
In particular read the comments here from Anna Young,Prabhakar and Saryantil.
Whether we like it or not America has worked very hard to develop a Financial System (based on Credit)that has supported the Consumer based economy for a long-time.
What happens if this demand vanishes(as is now being observed as more and more Americans start saving and also we see State Govts cutback on Salaries and Pensions-A trend which is soon going to be observed at the Federal level as well).Europe is already on this path of austerity.So Demand has fallen of a cliff(its undisputed) and Inventory is just piling up everywhere.
The Consumers from the BRIIC and N-11 countries(Goldman coined terminilogy),Do not have the Purchasing power yet to purchase all these newly fangled gadgets(atleast in the numbers required to offset the fall in American/European Demand).
Which is the bigger worry right now.
The Chinese is particular face a Catch-22.If they do open their economy further(by making it more consumer oriented),their citizens will start demanding openess everywhere(incl.on the Political front) .If they do loosen control,then that will eventually end up leading to a complete overthrow of their Communist Party and their princelings..And as they say Power is very-very addictive.
Once you grab hold you don't wanna let go.
Interesting times for sure.
Lets watch how things turn out....
On the Resource front heres some more interesting stuff that happened recently.
I defintely agree with the changes you have statedis happening in China and your forecast is also very likely. All these combined puts China in a position to dictate the tune of the music!
Well. It seems we have a few opinions about this. Personally, I agree with Bolaji more than I do with the Wharton scholars cited in the article: we're talking about decades of industrial policy putting China where it is. A shift in currency or a trend of a few years one way or another isn't going to deconstruct all that in a few months. At the same time, it's hard not to notice the investment flowing elsewhere, in ways it never has before. For that reason, it seems to me worth thinking about China not just in terms of its growth or its capacity to produce more electronics, but to also think about how its production practices are evolving, and what that means for the supply chain. It's not that China will lose business to, say, Vietnam. It's that it will knowlingly abandon certain parts of the supply chain that it previously occupied, and move on to other parts. We know China is doing much more of its own R&D than in the past, for example. That has implications for what kind of factories it builds, and by extension, the destination of the products coming out of those factories. It certainly seems that Made in China is on a path to be Designed in China, Fabbed in China, Assembled in HCM City. Which is a change.
The first question you have to answer is - How willing are these loaded Corporations to off-load their surplus in another far away off shore place or to even move back their production?
Financial Crisis are cyclical and vey good strategists pay attention to the long haul!
It might seem "Grandiose" at this time to hear and heed my statement of China redefining the Supply Chain. Yes, Japan failed in the 80's but the economic realities of Japan is different from China's circumstance now. Have you paid attention to China being in almost all the developing countires of Africa. They are at the fore front in mining of Rare Earth Metals and other minreal resources in these places which helps them to diversify their financial base from just manufacturing- something diffent to the japan of the 80s.
" We lack the surplus funds that we had in the past 2 decades to shift manufacturing to smaller Asian countries. This also blocks the West and Europe from leaving China."
We as in the Govt,lacks funds to make Capital Investments but Corporations (most of whom are loaded with surplus cash);Don't lack cash.As for blocking the West/Europe from leaving China,all it takes is a bout of serious protectionism or a crash in the value of Euro(vs USD/Yuan) and some more incentives for moving production back to Southern Europe(Spain/Greece/Portugal) which is facing double-digit unemployment and could easily do with a few hundred thousand manufacturing jobs.Even in America ,Southern States are making big strides to lure manufacturing jobs back from China.What remains to be seen is whether the Federal Govt supports their policies.Policy-makers can improve the situation in the West.The question is do they have the Will???
As for your comments-China will redefine the Supply Chain.I remember similar Grandiose things being said about Japan in the 1980s,Then the Bubble collapsed and politicians chose the wrong policy look where Japan is today...
Frankly speaking they have the most to lose if the current system breaks down again decisively like it did in 2008-9.
The rebalancing(away from Export demand to Domestic Demand in China) will take time(atleast another 7-10 years).Till then China is very-very dependent on the West for Growth.
The Central Planning system in place in China is throwing up amazing asset bubbles across various sectors of the Economy.
Why do we see these bubbles in Real Estate??? Because the Princelings/ruling elite benefit the most from these bubbles.
What would be a better/more sustainable way for China to grow?
Provide Full Medical Insurance coverage to every Chinese citizen and build up the Hospitals/Other related infrastructure to match up with that.
By not having to save any more for Medical expenses,the Chinese consumers(even the poorest ones) will feel more and more confident to spend on items beyond day to day neccessities,thereby triggering a massive Demand for all manufactured products (within China itself).
Will this happen? Well it all boils down to Self-Interest of the Political Elite in China.So Frankly speaking it won't happen atleast for next 10 years or so.
Frankly speaking if you ask me,we are point the past of no-return as far the US Dollar and Deficits are concerned.There is no way America is going to be able to pay back all its Debts in Sound Money.
This trend will continue until the market finally decides,enough is enough and we won't lend the US Govt cash at Interest rates below 10% (for 30 Year Treasuries).At which point the US Govt will first make a belated attempt to tighten the purse strings(by doing Austerity ala Europe) ,while simultaneously getting the US Federal Reserve to Print more and more Money to Finance the Deficit.After a while even that won't be possible ,which will lead the US Govt to one fine day wake up and say-
HELLO PEOPLE,WE ARE "RESTRUCTURING" ALL OUR DEBTS.ALL OUR EXISTING DEBTHOLDERS WILL BE PAID BACK WITH NEW TREASURY BONDS AT A 50% DISCOUNT(or maybe even more) TO EXISTING DEBT.
When this happens the US Dollar will no longer be considered the Reserve Currency of the World.Most probably Gold will take back its rightful place.
The same thing has happened again and again all over the World.In fact even America has done it twice before(one when FDR devalued the US Dollar and later on when Nixon closed the Gold Window).
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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