InForum analyst Eric Miscoll today asks, Is the migration of electronics manufacturing to Asia slowing?
An excellent question.
And Eric points out some compelling data for why manufacturers might be reconsidering their choice of geography, including substantial hikes over the past 30-plus months in the average, non-weighted cost of fully burdened labor in China: over 50% for board assemblies and over 100% for box-build. Eric also correctly points out that OEMs have taken a certain amount of builds back in-house. (Alcatel-Lucent and Nokia are two widely noted examples.)
But it’s his next comment – almost a throwaway line – that caught my attention: “[T]he pursuit of the next low-cost region continues, with countries like India, Vietnam, Ukraine, Tunisia, and Macedonia garnering the attention of the industry.”
That’s frightful. The Ukraine has a host of roadblocks, not the least of which its much-publicized battles with Russia and general political instability. Vietnam has been oversold; after nearly a decade of temptation, it has simply failed to take hold as an EMS hub. And while the CIRCUITS ASSEMBLY EMS Directory finds that two major EMS companies – Zollner, the world’s 12th largest EMS company (and largest privately held one), and LaCroix have factories in Tunisia – the nation’s population is just 10.3 million, not enough to accommodate a wave of production. Macedonia is even smaller: 2.1 million. Moreover, it is surrounded by mountains that make it difficult to move product to other locales.
Thailand, on the other hand, doesn’t garner much ink, but in my opinion stands as a far more attractive area, with a population of 63 million, relative political stability, the experience of major EMS companies (Cal-Comp and Fabrinet, among others), a cadre of local English speakers, and the attraction of Bangkok.
And, it says here, the food’s darn good too. For some reason, that’s always ignored.
My listing of India, Vietnam, Ukraine, Tunisia, and Macedonia was not intended as an endorsement of all these countries for electronics manufacturing. I listed them as examples of countries that are curretnly getting attention in the industry due to their low cost labor rates. You are correct to point out the problems that exist in these countries. As I point out in the report, the development of these new areas is not without its challenges. The main challenges faced are: poor infrastructure, lack of manufacturing talent, corruption, and lack of indigenous supply base. Very few of these countries offer any indigenous demand for the products produced, so the manufacturing is primarily for export.
And there is good food to be had in these other regions as well. Tunisia, for example, offers such tasty treats as couscous, baklawa, and bambaloni.
Baklawa? Awww, man. Next time we have dinner, I’m picking the restaurant!