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Demand in China Continues; Manufacturers Respond

Despite increasing skepticism about the advantages of manufacturing in China, electronics companies are continuing to expand there. In October, Texas Instruments Inc. announced it was opening its first wafer fab in China in the Chengdu High-Tech Zone, which is considered by many to be China’s next major technology hub, and this week, Neenah, WI-based EMS provider {complink 4345|Plexus Corp.} announced it plans to build a third manufacturing facility in Xiamen, Xiangyu China.

Demand in China remains strong, according to YJ Lim, regional president-Plexus Asia Pacific. “This facility investment is the result of strong organic growth for Plexus in the Asia Pacific region and continues our strategy of investing in close proximity to current locations to leverage our strong operations teams. With the support of our local supply chain partners, our manufacturing capabilities offer a significant advantage for companies that are seeking mid-to-low volume, higher complexity product realization value stream solutions in China.”

Obviously, it's impractical for US businesses to ignore China, particularly when so much has already been invested in facilities there. Rather than decreasing, reports indicate manufacturing in China is actually shifting toward central China. Some of China's fastest growing cities are located in its heartland and offer manufacturers a steady supply of low-cost workers and centralized locations to transport goods to the east and the west. According to published reports, {complink 2125|Foxconn Electronics Inc.}plans to recruit 200,000 employees to work in its new factory in Zhengzhou.

Plexus' new facility will operate under the existing management team and will add approximately 180,000 square feet of manufacturing capacity. Construction is expected to begin in March 2011 with production to commence in the second half of calendar 2012. In addition, Plexus’ current Xiamen, China manufacturing facility has received State Food and Drug Administration, P.R. China (SFDA) certification to support customers in the medical industries. This certification allows Plexus to manufacture finished Class I and II medical devices for customers that sell into China end-markets.

“The SFDA certification in our Xiamen facility will allow us to further enhance our medical service offerings to global customers seeking end-market fulfillment of medical products into China,” says Lim. “We are excited about the opportunity this provides for us to expand our reach in the People’s Republic of China, a growing medical device market.”

The expanded Xiamen facility will continue to focus on the medical, industrial/commercial and wireline/networking market sectors.

Do you think your company will establish additional faciltiies in China?

7 comments on “Demand in China Continues; Manufacturers Respond

  1. DBertke
    December 10, 2010

    Barbara, you bring up an interesting issue.  Working with China is a risk, but it has so much potential that they may be worth the risk. 

    For a technology company, you have to know that you are giving the Chinese your processes and the likely prospect of having your products copied and sold by another Chinese company.  That is the risk.

    I think we all have to credit Richard Nixon for having the foresight to see China as a tremendous opportunity and not as a threat.  The Chinese are going through a period akin to the old American Wild West.  Change is the norm.  If you ignore the fact that the country is controlled by a few, opportunity for those people who are willing to work withing the bounds of the society is unbounded.  There are very few countries in the world that can truely say they really opperate differently.

    My old company invested in China and Indonesia in the 1990's, because they saw the tremendous potential lurking in the area.  There were interesting times to be sure, but they stuck it out and as I said in my last post, the company stock is up about 700% since then.

    Whether China wants to admit it or not, we all prosper or starve together.  The world needs China to manufacture inexpensive products for the developed countries.  The flow of money and material is desperately needed to keep China going.  It only takes one bad crop year to put China in a world of disaster.  They know it, but they are banking on the fact that the world needs them enough to come to their aid if needed.

    So if you are an international company with goods and services to sell, the best way to enter china is partnered with an indiginous Chinese company.  They know how to get things done and can pave the way for you to prosper.  If you think you can take on the Chinese government to bypass their way of business, you will end up like Google, stuck on the outside looking in while someone more flexible rakes in the profits you could have had if you just paid the Chinese the respect they deserve.

    Thanks

    DAB

     

  2. Barbara Jorgensen
    December 10, 2010

    Yes, DAB, despite the pitfalls, you'd have to be shortsighted not to have some kind of presence in China. Most of the success stories I hear about are the kind of partnerships you mention. If you look at the financial results that have come out lately, Asia-Pac/China continues to be the largest growth area for most electronics companies.

     

  3. hwong
    December 11, 2010

    Despite of the hype of doing business in China, one must understand the political climate in order to thrive there. If a  U.S. company wants to get into the China market, it first needs to establish relationships or “Quan Xi” with the officials of the Chinese government. Building relationships means investing time, money and resources to the key personnel. Then continue to  do the same thing to pave ways with more business partners. Once those things are done, then it's up to the business strategy and operation to determine its success

  4. kumar1863
    December 11, 2010

    Investors are interested and moving towards china because of 1. low cost, highly skilled, and hardworking labor. 2. geographically it will reduce the supply provision time. But in the long run this movement will develop unemployment around the globe so it is suggestible to distribute the investments.

  5. Parser
    December 11, 2010

    I am unemployed, but my previous employer will not move manufacturing to China.

    I have been applying for jobs locally and found that Taiwanese companies are hiring here in theirs US facilities. I am curies how is this economically possible or what kind of advantages they have? I am glad to see that opposite trend. 

  6. stochastic excursion
    December 13, 2010

    Another risk to address is the one that led to significant brow-beating by the financial community on a major player: Google. We should remember that PRC has a social agenda that is at variance with the goals of America and its allies. The benefits of doing business in China might go away if irreconcilable policies are implemented, or other more concrete moves are made by the nation.

  7. elctrnx_lyf
    December 14, 2010

    Given an opportunity with the high volume production required and the amount of the products that has to be distributed in Asia pacific region any company will grab it. When it comes to the IT services all the companies are outsourcing many of their projects to India an in the electronic manufacturing segment china is doing a real good job. The industries in china have a very good government support and what we see in the future is much more than this.

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