Thursday, July 4th 2019
Major American OEMs to Move Some Manufacturing Out of China
Major American PC and consumer-electronics OEMs, namely Dell, HP, Microsoft, and Amazon, are reportedly moving some of their manufacturing out of China, in the wake of the ongoing US-China trade-war, an offshoot of which inflicts import-tariffs on a spectrum of products imported from China. This impacts China as a destination for manufacturing. According to Japanese business publication Nikkei, HP and Dell are each moving 30 percent of their laptop manufacturing volume out of China. This roughly aligns with their volumes bound for the US market. They could continue manufacturing in China for volumes headed to other markets.
Currently, the U.S. Government imposes import tariffs on $200 billion worth goods imported from China, and fully built PCs were immune to these tariffs. This has had an adverse and unfair impact on U.S.-based system integrators such as OriginPC, Falcon Northwest, etc., who import components and assemble gaming PCs and notebooks on U.S. soil, on a build-to-order basis. A new round of import tariffs proposed by Washington changes this, and brings even fully-built laptops, smartphones, and gaming consoles under the ambit of import tariffs. This explains why Microsoft and Amazon are eager to change their manufacturing landscapes. Microsoft makes its Surface line of premium portable computers, and Xbox game consoles in China, while Amazon makes a vast array of IoT products under its main brand, and various knick-knacks under its Amazon Basics brand.
Source:
Nikkei Asia Review
Currently, the U.S. Government imposes import tariffs on $200 billion worth goods imported from China, and fully built PCs were immune to these tariffs. This has had an adverse and unfair impact on U.S.-based system integrators such as OriginPC, Falcon Northwest, etc., who import components and assemble gaming PCs and notebooks on U.S. soil, on a build-to-order basis. A new round of import tariffs proposed by Washington changes this, and brings even fully-built laptops, smartphones, and gaming consoles under the ambit of import tariffs. This explains why Microsoft and Amazon are eager to change their manufacturing landscapes. Microsoft makes its Surface line of premium portable computers, and Xbox game consoles in China, while Amazon makes a vast array of IoT products under its main brand, and various knick-knacks under its Amazon Basics brand.
21 Comments on Major American OEMs to Move Some Manufacturing Out of China
(So did the rest of us, long time ago, but it's not like the rest of us could do something about it)
There may be other benefits, but quality is not one of them. At best, it will sink on only certain products (some will find skilled workers elsewhere, like Taiwan) only to get better/back to normal as factories, tooling and employees get up to speed. At worst, it will sink drastically and not recover until the trade war ends.
Keep in mind yes China makes cheap junk, but they also make damn near everything and a lot of good stuff is actually Chinese.
I don't have a crystal ball but I certainly don't see quality improving.
I will never buy a made in china HDD again.
Chinese companies cut to many corners, and generally it feels their workmanship is subpar compared to rest of the world, though less evident in major companies...
China being good at cutting corners is actually an attribute in their favor here...
I don't care about short term price increases. The closer the manufacturing is the better, less middle men, importers, shipers, reshipers, transporters.
Products were not so bad quality before companies start production in China.
I'm not sure in what mind people think that the country with the largest track record of mass production is incapable of doing it in the best way, but it cannot be logic. Economy of scale also works towards higher quality in the end. Cheaper production leads to margin that can be used to increase quality - and that is precisely why we buy Chinese product. Look at Chinaphones for example. Much better hardware per dollar than any 'Western' brand phone.
Quality is not the issue here, the only reason to move production back to your own plants is because you want to secure assets, you want to regain the actual production capacity, and you want to control it. There is no economic principle that supports it in a global economy. Expensive labor is just that. Its not like the working conditions of US factory workers is going to be much better than in China, make no mistake, and if it is, that will make the product a harder sell - which in turn leads to less product sold and people getting fired.
There also isn't a problem with brain drain, these are factory jobs, simple work and certainly not in need of high volumes of highly qualified people. That would be the only reason to outsource work to a specific place besides cheap labor...
fortune.com/2019/06/07/us-china-trade-war-manufacturers-leaving/
edit: It's kind of amazing just how many little ideas off the top of my head that China screws innovators on..and I'm only familiar with products that I actually use myself. And it's not always big American products. It could be new type of guitar tuners and other machine parts. Or ecigs, like I said. Or maybe new book printing techniques. Or fan blades. Or some new fangled pleather that might've once been the prize of a European company now getting cranked out by China. These smaller companies need the huge manufacturing arm of a place like China, but once it's there, it's stolen and cranked out in inferior products. It's like the flea market phenomenon of crappy Nike ripoffs, but on a massive scale. One might say this is a good thing, and there should be no such thing as intellectual property (or even pride in craftsmanship), but such a person is just an ideologue and wants to open source the world. Not everyone agrees, and they're deluding themselves if they don't think there's going to be a fight.
Trump seems to be trying to re-conceive commerce in almost old world/monarch era terms, where cost is actually a secondary concern, and patriotism takes precedent. Full of trade wars, tariffs, and countries protecting their niches and expertise. The idea of fighting for kingdom/commonwealth and/or patriotism are bywords in this day. "Make America Great Again" is suddenly Nazi hate speech. Nobody gives a shit about any of this, for some reason. Neither the Republicans who are of a "purer" capitalist predator variety... or the Left (I could go on all day on why, but it's probably obvious). Both of them see a globaiized economy working to their benefit, but in different ways.
For the current form of capitalism and monetary system we live in, we need somebody to work for cheaper than the end buyer. Example "western middle class" need cheap labor for WMC people to be able to afford it. Be it cheap labor or robots. You can't manufacture something in a country where the workforce is proportionally paid more than you are which is more expensive and it doesn't work financially unless there are robots & automation.