Manufacturing in the US Good for China

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While this is good news for American manufacturing jobs, in decline for decades, the Chinese are not (and should not be) afraid of these moves, even if they are taking away some jobs in the high-tech manufacturing sector. The fact is that the Chinese are struggling to keep up with the demand for mobile devices and consumer electronic products, so seeing some larger devices being manufactured somewhere else leaves them with the more profitable smartphone and tablet markets. Many experts agree that moving some of the final assembly to the US is good both for the American brands and Chinese manufacturers.

The Chinese have been frequently in the news because of working conditions. Foxconn, China's largest manufacturer, has been dealing with bad publicity because of accusations of long working hours, minimum wages, and operating some of its “manufacturing campuses” as something similar to concentration camps. But Foxconn has been expanding its manufacturing in other countries; now it operates factories in India, Japan, Brazil, Mexico, Hungary, Slovakia, and the Czech Republic.

Today, high-tech manufacturing is no longer merely about labor cost. It is about speed to market and flexibility. It makes sense to move manufacturing closer to the customer’s markets.

What will OEMs do? I believe most companies will start creating final assembly kits in Asia and then ship them to a final assembly facility in the final delivery market. This way, manufacturers can claim something like “Designed and Assembled in the US,” while the real production of most components still happens in Asia.

Dell is an OEM that has been assembling computers for the EMEA market within the European Union since 1991, first in Limerick, Ireland, and now in Łódź, Poland, as part of its European strategy of having production and logistics closer to customers. It also operates factories in Brazil and other non-Asian countries.

I don’t believe that moving some manufacturing back to the West will pose a threat to the Chinese dominance in high-tech manufacturing. I do believe it will help OEMs concentrate on more labor-oriented jobs; achieve higher volume of small, expensive devices; and strengthen their hold on the manufacturing of components and control of the supply chain, especially if the foreign manufacturing is done by Chinese companies using Chinese managing approach.

That's good news all around because moving assembly closer to final markets will help OEMs, especially if they don't have to get mixed up in international trade wars to make it happen.