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Subcontacting to China Doesn't Always Make Sense

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  • Indium Corporation
  • I see in recent articles that manufacturers are not immediately thinking of China as the lowest cost producer. Some of the reasons why are:

    1. The product takes a week to get to markets in the US or Europe if manufactured in China. This may cancel out benefits of China's lower wages, especially as these wages increase. So manufacturing in the US or Mexico may be better for US markets or manufacturing in Eastern Europe may be better for European markets.
    2. If electronics is a small part of the end product cost (say in a plasma cutting machine), the small potential savings isn't worth the distance/langages difficulties of China vis-vis a local assembly shop. Most subcontract assemblers in New England (my neck of the woods) fit into this mold and many of these organizations have had brisk business even through the downturns of recent years.
    3. The risk to intellectual property loss is high in China.

    And even if a lot of business does continue to go to China, I'm an optimist. It can't be bad to have 1 billion people that used to be poor now have money to spend!

    Dr. Ron