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Offsetting the ‘Made in China’ Label

Nothing sets off a debate like the “Made in China” label. My colleague Bolaji Ojo's blog, The Real Truth About ‘Made in China’, kicked off a stream of comments from both pro- and anti-China factions. China has been made a target for most of the world's ills, including the global debt crisis and the loss of US manufacturing jobs. Nowhere is the debate more evident than in the consumer electronics field.

In my daily browsing of high-tech coverage, I found evidence that consumers might be paying more attention than we think about what's inside the products they buy. According to a recent Underwriters Laboratories consumer study: “Consumers are aware of an increasingly complex, global supply chain and have a growing interest in the traceability of products and product parts. This may be why 69 percent of manufacturers agree consumers are becoming more aware and better educated about products in general.”

This is good news for the supply chain. Although the vast majority of semiconductors and other components are consumed in the Far East, they are designed and manufactured elsewhere. Data from companies such as IHS iSuppli supports this. (See: Is Design Dominance Good Enough?.) The UL study stops short of suggesting that consumers are purchasing goods based on what's inside the end-product, but it raises some interesting possibilities. What if more chipmakers adopted an “Intel Inside”-type branding campaign? What if Foxconn's alleged abuses of workers' rights really cause a boycott? What if electronics goods carried content labels similar to food products? Would it make a difference?

It has in the past. US consumers shunned Japanese cars when the US auto industry faltered. For decades, the electronics distribution industry maintained an unspoken practice of not selling US and Japanese chips side-by-side. Reports of lead in paint caused a massive disruption of children's toys manufactured in China. Exxon lost share after its Alaska oil spill. The list goes on.

I'm not suggesting the buying public should lapse into xenophobia. There's an aspect to this that's unique to electronics. It's called the traceability issue. Electronics distributors and electronics OEMs already track the origin and consumption of electronics components for a number of reasons I won't go into here. Turning traceability into a competitive advantage would be huge in the electronics supply chain.

A New York Times article on the report acknowledges this would be very difficult:

    The report doesn't really say how that information — “traceability,” U.L. calls it — would actually affect consumer buying decisions. It could be complicated. Manufacturing companies on average, the report says, rely on more than 35 contract suppliers around the world to create a single product. That number would be higher for a smartphone or laptop. But maybe some sort of supply-chain labeling, like a tiny color-coded map of the world, showing where parts come from in a product?

Sillier things have happened. I also think the visibility of the earthquake/tsunami in Japan, human rights abuses, and measures like the Dodd-Frank Act have all heightened consumers' awareness of the supply chain. Maybe that can be put to work.

Or maybe we'll see labels that say “Assembled in China.”

36 comments on “Offsetting the ‘Made in China’ Label

  1. Nemos
    December 14, 2011

    If we stop being just consumers and try to act with knowledge and critical thinking when we buy things, that will lead us to have a better market. I believe also that customers must be provided with a lot of details about the product.

  2. Clairvoyant
    December 14, 2011

    Agreed, Nemos. I also agree with Barbara in the article that consumers are becoming more aware of where products are manufactured and having that impact their buying habits.

  3. Ariella
    December 14, 2011

    It can be quite complicated to trace the country of origin for products made of components imported from different places. The FTC runs through some example of products that want to claim the label of American made and how they have to not make a greater claim for American production than they are entitled to, but it doesn't go through a complete breakdown of a product that would have to credit multiple countries. 

  4. chipmonk
    December 14, 2011

    the statement :

     ” Although the vast majority of semiconductors and other components are consumed in the Far East, “

    made in the blog is MISLEADING.

    The reason why a large volume of chips cycle through China is NOT because the end – users are located there BUT because much of the consumer electronics used by the rest of the world are ASSEMBLED in China using components manufactured elsewhere.

    So it is downright disingenuous to conflate this volume as a justification for xferring design & advanced manufacturing ( e,g. Fabs ) capabilities to China.

    The main reason why MNCs are forced to set up Fabs etc. in China is the high tariff that the Govt. of China imposes on components imported into China for assembly of systems meant for re-export.

    By that token the real cost of manufacturing in China is higher than what it seems to be.

    MNCs have been BULLiED by China for at least the last 6 – 7 years. Tough co.s like Intel have set up shop in Vietnam, more will follow.

     

  5. prabhakar_deosthali
    December 15, 2011

    This “Made in China” phobia seems to be more of the conflict between the business community and the “technocrats”. While the Global business community is attracted towards China to save on the net product costs ( including manufacturing, supply chain, logistics, taxes and so on) to increase the profit margins, the technocrats community from the same countries  is “crying wolf ” over loosing the original nationality and pride of their homeland products.

    Among the business community and the techniocrats who is the ultimate winner? Only time will tell.

    For time beimg it looks like China is the winner and is eating all that cream from the overseas businesses churning out products from its land.

    When I was in US in early 80's, I observed a similar sentiment about the Japanese products ( Cars and  all kind of electronic gadgets, Ics and electronic components ) invading the US markets.

  6. Daniel
    December 15, 2011

    “China has been made a target for most of the world's ills, including the global debt crisis and the loss of US manufacturing jobs”

    Barbara, how can you said like that. It’s the capability of Chinese government for attracting foreign investment and creating job opportunities to their citizens. That does not mean that they are against the world or anybody and its only based on economic growth and well fare of their citizens. The other countries have to follow the same way or have to do something to compete with it. Blaming is like an excuse and its not the right way.

  7. Clairvoyant
    December 15, 2011

    Jacob, I believe Barbara may be saying that China has been used as a scapegoat for these issues, not necessarily that they are the proper country to blame for these issues.

  8. Jay_Bond
    December 15, 2011

    I personally don't have the concerns others do when it comes to where my products are made. I am more concerned with the quality of the product and the overall cost. There are plenty of products that have a “made in” stamp that are using parts from other countries.

  9. Barbara Jorgensen
    December 15, 2011

    @Jacob–Clairvoyant is correct–China is being made a scapegoat for problems that originated in other parts of the world. The US brought on its own debt crisis and US manufacturers voluntarily moved offshore. However, China's success in the global economy has made it a target for criticism. There is reason to criticize China, but not for the items I mention above.

  10. Mr. Roques
    December 15, 2011

    I agree with you, although probably with consumer electronics or non critical equipment. When it comes to something critical to business, for non-economical reasons, people tend to go with the big US brand, etc.

  11. mcridge
    December 15, 2011

    Ms. Jorgenson, 

    You do not mention that China uses slave labor in many of it's production facilities.  All that a company needs to do to “offset the made in China label” is to be responsible about the types of Chinese faciltiies where it purchases its products.  The company should attest that slave labor is not used in production of the products it is purchasing and reselling and that it is being responsible to ensure that its Chinese suppliers use safe and healthy ingredients.  I wouldn't want the job, but they need inspectors to ensure that this is true.  Sadly, none of your commenters seem aware of this!

    I include such U.S. marketing giants as WalMart in this.  Just do it!

     

  12. SunitaT
    December 16, 2011

    There is reason to criticize China, but not for the items I mention above.

    @Barbara, true. I agree with you. But its also important to note that China is not a developing nation anymore. Its a developed nation and is directly competing with US to grab the top spot. So china would do everything to take advantage of it being the destination hub for outsourcing. Already  US lawmakers have sought  'legislative solution' to ban Huawei.

     

  13. bolaji ojo
    December 16, 2011

    Mcridge, I think it's important that as you pointed out these companies do the monitoring themselves because the Chinese suppliers may not always be honest.

    Aside from this, I also believe it's important that Western manufacturers maintain Western standards in China. Currently, there's a Chinese standard and there's a Western standard and, of course, we know one is far better than the other. (Western workers don't live in dormitories but they do in China.) Companies that manufacture in China for Western consumption already know they are stepping into a murky situation. The least they can do is enforce standards that are acceptable in their home countries rather than simply the ones China sets for them.

  14. Barbara Jorgensen
    December 16, 2011

    mcridge–I'd also add that California is enacting a bill that will require due diligence on behalf of Asian companies to demonstrate they are not abusing labor practices. As Bolaji points out, it will be up to CA to monitor compliance, but a number of organizations in the industry belive such measures will start to hold companies accountable for their labor practices.

  15. FLYINGSCOT
    December 16, 2011

    Watching people shop and try out the newest gadgets I find it hard to believe they give the origin of the high tech product's manufacture a second thought.  I agree people are becoming more aware of labor practises etc. but those folk must be in the small minority.  

  16. Adeniji Kayode
    December 17, 2011

    @ FLYINGSCOT

    I don,t really with you on that, right now consumers are so concerned about where their products come from as muchas what is inside too.They are also more curious what brand makes what.

  17. Adeniji Kayode
    December 17, 2011

    I agree with you on that Jay_bond but then don,t you think some times the quality of a product sometimes has to do with where it comes from too.

    In my location, most of the consumer goods that gives problem the most especially eletronics are labelled “Made In China” so you will see comsumers looking for a particular product made from any where like Japan ,Korea, Malasia other than China to buy. There must have been a reason for this in time past.

  18. Adeniji Kayode
    December 17, 2011

    I agreewith you on that Nemos, It just that such details will definately be helpful but affect a lot of sales for products from a different source the consumers does not believe in.

  19. Adeniji Kayode
    December 17, 2011

    I agreewith you on that Nemos, It just that such details will definately be helpful but affect a lot of sales for products from a different source the consumers does not believe in.

  20. itguyphil
    December 17, 2011

    I would agree with that. Especially now with all of the opportunities to bargain shop and compare brands. There is a sub-culture that spends all day doing such research.

  21. Taimoor Zubar
    December 17, 2011

    I think there are certain issues like animal cruelty, child-labor, mistreatment of workers that may be linked with manufacturing in countries like China. There are ways consumers are getting informed about these. For example, there are mobile apps which consumers can use within supermarkets to scan a barcode and find out if the manufacturer of the product is charged with any human or animal rights issue or anything related to environmental degradation. For socially proactive customers, this is an important step.

  22. stochastic excursion
    December 17, 2011

    I heard Foxconn replaced much of their workforce with 100,000 robots.  One more cue Chinese companies are taking from the West on how to counter rising labor costs.  China shows it is willing to “race to the bottom” wage-wise, along with other countries where workers have earned a better deal.

  23. Wale Bakare
    December 18, 2011

    FLYINGSCOT you raised a valid point.

  24. itguyphil
    December 18, 2011

    Wow, it's amazing what the web + developer cretivity can create. Imagine the potential for the future innovations…

  25. Ariella
    December 20, 2011

    @TaimoorZ Yes, I've heard that you can look into which products are manufactured under the conditions you'd prefer. It does take real commitment, though, for consumers to willingly pay more for these products. I'd imagine many people are content not to look into it in accordance with “ignorance is bliss.”

  26. Houngbo_Hospice
    December 20, 2011

    “I heard Foxconn replaced much of their workforce with 100,000 robots.”

    WOW! It is about time emotional humans went to rest as robots are working in our place. I think that there should be law to stop that nonsense. 


  27. Houngbo_Hospice
    December 20, 2011

    @stochastic excursion:

    China cannot succeed in fighting against rising labour cost. The country is going through social change that will reflect on every part of the society. Chinese authorities know well that when they open the country to western investsment, the people will come in contact with western values that they would like to emulate. 

  28. Ashu001
    December 20, 2011

    Houngbo,

    On second thoughts put yourself in the shoes of a Employer.

    A Robot does'nt need Coffee Breaks,Toilet Breaks,Lunch Breaks and neither does a Robot get bored or tired with doing the same kinds of repetitive tasks over and over and over again.

    A Robot does not complain/crib if the weather is awful or does'nt feel like going to work or for that matter that the Cost of Living has escalated so much that the salary available is not good enough.

    Whats not to like about using a Robot then?

    Regards

    Ashish.

     

  29. Ashu001
    December 20, 2011

    Houngbo,

    The Chinese actually can.

    All they need to do is devalue the Chinese Yuan by 30% and Voila!

    You can give the Chinese citizens a lower standard of living automatically.

    Think about it..

    Ashish.

  30. stochastic excursion
    December 21, 2011

    People would like it if robots did all their work for them.  Then life would be one long coffee break!  The trouble is that present-day robots can only do exactly what you tell them to. 

    My take is that companies that rely heavily on robots don't fare well in the long run–take GM.  Foxconn will probably discover what the Japanese have known for a long time, that nothing can replace a loyal, motivated, and retrainable workforce. 

  31. Ashu001
    December 21, 2011

    Stochastic,

    Is that so?

    If that is the case then why is it that Japanese no longer believe in the system of Lifetime employment(with constant retraining) for its young employees? Everyone under the age of 35 is now on Annual contracts.

    Also,why is that Japan continues to be so Anti-immigration even though it has the worst demographics in the Developed world?

    The Japanese know they need thousands and thousands of people for various jobs today.But they continue to with their stance of being Anti-immigrant and for the most part it continues to be the Most closed society on the planet today.

    Its easier for them to build newer and newer robots than train immigrants.

    Food for thought huh?

    Ashish.

  32. stochastic excursion
    December 21, 2011

    Wasn't aware that the terms were less favorable for younger employees.  Maybe they're thinking it's better to jump around early in your career, even from kairetsu to kairetsu.  Still the world has and can still learn a lot from what Japan has accomplished in making the most of its workforce.

    We can give Japan a little slack for having a restrictive immigration policy.  Being insular geographically and culturally, immigration is not part of its tradition as it is in the United States and elsewhere.  As far as I know its dense population creates challenges for keeping its own people productive, and financial and other crises in recent decades have contributed to these challenges.

  33. Ashu001
    December 21, 2011

    Stochastic,

    That is most certainly the case-Younger workers would definitely prefer the security which Older workers take for granted through lifetime employment guarantees.

    This is just the way Companies have managed to shed their social obligations to society.In return this has made the Young very unsure and unconfident about their future and made it tough for them to plan for the future-Which is also the reason why they are putting off having kids atleast until they feel reasonably well settled in life(which usually results in just one kid).Cue-the rapidly declining Population that Japan has today.

    There are huge swathes of the country where there is nobody(especially the rural countryside).Its just that the Tokyo-Yokohama belt that is dense.But even that will change-Just give it some more time.

    Regards

    Ashish.

  34. Anne
    December 27, 2011

    @Nemos,

    You have a point, most of us are consumers with no interest or awareness of details about the products.

  35. _hm
    December 27, 2011

    It is good topic to debate. But here more focus is on consumer. How about corporate responsibiltiy? They start it by taking all kind of work to off-shore  and knowingly hearting economy and people in their own society.

     

  36. mario8a
    December 30, 2011

    I'll like to read more about foxconn implementing more than 100K robots, does anyone has the article? In regards to the label made in china I've seen investors from Europe and North America looking to put that label in their products, China has develop tremendously in the last 20 years and in the next 5-8 years it might be 1-1 with the US dollar.

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