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For some industries the USA is and has for some time been a bit lower cost for manufacturing than China. Labor costs are only part of the equation- you also ha

For some industries the USA is and has for some time been a bit lower cost for manufacturing than China. Labor costs are only part of the equation- you also have to take into account transportation costs, energy costs, costs of obtaining capital, etc. all weighed against political, scheduling, and quality risks. For my own industry (specialty machine vision systems) outsourcing to China is almost not worth the trouble.

dhimes 11y ago
outsourcing to China is almost not worth the trouble Almost?
- JohnTHaller 11y ago
  Likely, as in many industries, there is still a lower cost in total with manufacturing in China, so many companies still will. But there is more risk in terms of product quality, safety, delivery, etc due to the whole supply chain, sub-contracting, etc.
- rjdagost 11y ago
  Yes, for my industry China is still a little lower cost. If our products were more labor intensive then China would look much more appealing.
SiVal 11y ago
You left out the biggest cost of all: technology theft. The Chinese government wants its manufacturers to watch for technologies that could be of economic or military value and to pass them on to relevant Chinese organizations for use. When the local Party leader's son starts producing your "specialty machine vision systems" in his factory down the road, are you going to go to the Party-controlled court and sue him? If I had a "technology" that was immediately discernible by any buyer (a plastic cup, a game board with an image printed on paper and glued to cardboard), I might make it in China, but for any non-obvious technology, I would assume that any money I saved on COST by making it in China, I would lose on PRICE when my manufacturer's brother-in-law started competing with me.
- rjdagost 11y ago
  You are correct, IP is a bit of a joke in China (oh, the stories I wish I could tell...). You can't rely on the Chinese legal system to protect your IP so you have to take a number of technical precautions to ensure that it is extremely difficult to knock off your product even with inside the factory knowledge. My company has gotten burned about this in the past. Needless to say, this all adds cost to your product.
- rgbrenner 11y ago
  Brother-in-law? Sometimes the link isn't so indirect. For example, GM has a partnership (since foreign manufacturers aren't permitted to have majority ownership (last I checked)) with Chery Motors. Chery has access to everything produced in that plant, including tooling, tech, designs, etc. Chery takes this and uses it in their own plants to produce cars that compete directly with GM (and they export these cars too). This is why many manufacturers use last-gen tech in their products within China.
- mistermann 11y ago
  > You left out the biggest cost of all: technology theft. Or plain old fashioned outright theft. I did business for a few years with a Chinese supplier, the contact was made from a (local Chinese) reliable friend of many years who did international business so had contacts. After two years of a pretty seamless business relationship, one day the supplier decided to simply disappear with the $45k deposit on an order.
  - icelancer 11y ago
    We are pretty sure that a previous supplier of ours was running their machines on a competitor's (of mine) dime and billing them for materials/goods and burying it in the sales sheets, while shipping us the product that was near-identical to theirs but with our logos and branding on it. I understand this is fairly common when making knockoff goods, too.
- icelancer 11y ago
  >You left out the biggest cost of all: technology theft. Absolutely. The factories I deal with OPENLY DISCLOSE what contracts they have (not price, but brands) with other companies in my line of business. This is unbelievable. I didn't even ask for this information - and never would want it, given the implications - but they VOLUNTEERED it as part of their sales pitch. And what are those companies - many of them multimillion dollar entities - going to do about it? Switch factories? Certainly not file a lawsuit. It's crazy.
logicallee 11y ago
You left out what (I would think) is the biggest thing! (For your industry especially). That is IP! It is worth noting specifically, because the costs of China not being on board with protecting innovation means 1) they create a lot less of it (which is both their loss and ours) 2) the stuff you manufacture there has to be protected by the laws of physics, the software, and access etc, rather than a simple code of laws. This cost is clearly not insurmountable - everyone manufactures in China. But they have to take precautions as they do so, instead of just relying on local law. By the way I don't think this is in their interests, and I think they will move away from this model with time. There are no doubt great Chinese inventors and creators who need very little by way of protection before creating amazing things that are temporarily protected all over the world. It is almost just an ancillary benefit that they will also start to respect what others (i.e. the rest of the world) manufacture there.

dhimes 11y ago

outsourcing to China is almost not worth the trouble Almost?

JohnTHaller 11y ago
Likely, as in many industries, there is still a lower cost in total with manufacturing in China, so many companies still will. But there is more risk in terms of product quality, safety, delivery, etc due to the whole supply chain, sub-contracting, etc.
rjdagost 11y ago
Yes, for my industry China is still a little lower cost. If our products were more labor intensive then China would look much more appealing.

SiVal 11y ago

You left out the biggest cost of all: technology theft. The Chinese government wants its manufacturers to watch for technologies that could be of economic or military value and to pass them on to relevant Chinese organizations for use. When the local Party leader's son starts producing your "specialty machine vision systems" in his factory down the road, are you going to go to the Party-controlled court and sue him? If I had a "technology" that was immediately discernible by any buyer (a plastic cup, a game board with an image printed on paper and glued to cardboard), I might make it in China, but for any non-obvious technology, I would assume that any money I saved on COST by making it in China, I would lose on PRICE when my manufacturer's brother-in-law started competing with me.

rjdagost 11y ago
You are correct, IP is a bit of a joke in China (oh, the stories I wish I could tell...). You can't rely on the Chinese legal system to protect your IP so you have to take a number of technical precautions to ensure that it is extremely difficult to knock off your product even with inside the factory knowledge. My company has gotten burned about this in the past. Needless to say, this all adds cost to your product.
rgbrenner 11y ago
Brother-in-law? Sometimes the link isn't so indirect. For example, GM has a partnership (since foreign manufacturers aren't permitted to have majority ownership (last I checked)) with Chery Motors. Chery has access to everything produced in that plant, including tooling, tech, designs, etc. Chery takes this and uses it in their own plants to produce cars that compete directly with GM (and they export these cars too). This is why many manufacturers use last-gen tech in their products within China.
mistermann 11y ago
> You left out the biggest cost of all: technology theft. Or plain old fashioned outright theft. I did business for a few years with a Chinese supplier, the contact was made from a (local Chinese) reliable friend of many years who did international business so had contacts. After two years of a pretty seamless business relationship, one day the supplier decided to simply disappear with the $45k deposit on an order.
- icelancer 11y ago
  We are pretty sure that a previous supplier of ours was running their machines on a competitor's (of mine) dime and billing them for materials/goods and burying it in the sales sheets, while shipping us the product that was near-identical to theirs but with our logos and branding on it. I understand this is fairly common when making knockoff goods, too.
icelancer 11y ago
>You left out the biggest cost of all: technology theft. Absolutely. The factories I deal with OPENLY DISCLOSE what contracts they have (not price, but brands) with other companies in my line of business. This is unbelievable. I didn't even ask for this information - and never would want it, given the implications - but they VOLUNTEERED it as part of their sales pitch. And what are those companies - many of them multimillion dollar entities - going to do about it? Switch factories? Certainly not file a lawsuit. It's crazy.

logicallee 11y ago

You left out what (I would think) is the biggest thing! (For your industry especially). That is IP! It is worth noting specifically, because the costs of China not being on board with protecting innovation means 1) they create a lot less of it (which is both their loss and ours) 2) the stuff you manufacture there has to be protected by the laws of physics, the software, and access etc, rather than a simple code of laws. This cost is clearly not insurmountable - everyone manufactures in China. But they have to take precautions as they do so, instead of just relying on local law. By the way I don't think this is in their interests, and I think they will move away from this model with time. There are no doubt great Chinese inventors and creators who need very little by way of protection before creating amazing things that are temporarily protected all over the world. It is almost just an ancillary benefit that they will also start to respect what others (i.e. the rest of the world) manufacture there.