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U.S. Manufacturing costs are almost as low as China’s

fortune.com

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Re: U.S. Manufacturing costs are almost as low as China’s

#41

Post by JohnTHaller »

dhimes wrote: post #39
rjdagost wrote: post #13

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 troubl…

outsourcing to China is almost not worth the trouble Almost?

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.

Re: U.S. Manufacturing costs are almost as low as China’s

#42

Post by nickpinkston »

geon wrote: post #18
nickpinkston wrote: post #5

Earlier quoted context omitted.

It's actually the opposite: We're great at speciality, high-tech stuff, but we don't do commodity contract manufacturing as well as China. The good part of this is that the former has far better margins than the latter.

Someone explained the attraction of China with the complete supply chain. If you need 1k speciality screws now , you can order them from the screw factory next door and have them ready in no time.

This is definitely true, but with better information on suppliers + air freight, we're able to ship from China to the US very quickly and most components are tiny, so shipping costs are de minimis.

The problem is more that the Chinese market is still highly fragmented and not easily searched without insiders on the ground. Alibaba is just scratching the surface on transparency in global supply chain, but once the market becomes legible, the local supply chain thing won't matter as much.

Re: U.S. Manufacturing costs are almost as low as China’s

#43

Post by burger_moon »

digitalzombie wrote: post #35
downandout wrote: post #26

As oil and gas prices in the US reach parity with China, China remains relevant only where labor costs are a factor. As manufacturing becomes increasingly automated, Chinese factory workers (and indeed most of the world's unskilled workers) will become unemployed. That is a double edged sword....it will be great for businesses until enough people are unemployed that only a small percentage of the population can affor…

I used to have this view but it free up workers to be more educated and do less menial tasks is a counter argument. Having an educated labor force would keep US be competitive. Unfortunately that means getting higher and higher degree.

A counter to your counter ;) would be that now you have a larger population of young adults going head first into debt for degrees that will have an equally expanisve labor pool. So now you graduate with a higher education degree but so did everyone else and there may not be enough human job growth to sustain it.

I'm not sure there is a simple answer to any of these problems.

Re: U.S. Manufacturing costs are almost as low as China’s

#44

Post by ghaff »

jkot wrote: post #8
nickpinkston wrote: post #5

Earlier quoted context omitted.

It's actually the opposite: We're great at speciality, high-tech stuff, but we don't do commodity contract manufacturing as well as China. The good part of this is that the former has far better margins than the latter.

So you are only cheaper on expensive stuff.

It's not that simple. I was just happening to look at a plastic bucket I was using yesterday and it was manufactured the next town over in Massachusetts, It's probably true that the US tends not to be competitive for cheap goods that don't have a large individual labor component. But it's more than high-margin items.

Re: U.S. Manufacturing costs are almost as low as China’s

#45

Post by rjdagost »

dhimes wrote: post #39
rjdagost wrote: post #13

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 troubl…

outsourcing to China is almost not worth the trouble Almost?

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.

Re: U.S. Manufacturing costs are almost as low as China’s

#46

Post by tormeh »

feelslikefelt wrote: post #37
adventured wrote: post #34

Earlier quoted context omitted.

American entrepreneurs are the best thing that has happened to China in centuries. If it weren't for American capital, and the American consumer, China would have developed drastically slower (if at all). China's GDP per capita in 1994 was ~$480. That's ~45 years after the Mao revolution. There was no alternative than to pay them cheap wages to start. If you paid them 'first world' wages, nobody would have set up man…

I just don't understand how anyone could be OK with /anyone/ that takes part in this process. It's not okay for the "200 Chinese billionaires" to be profiting off of abusing others, just as it is not okay for Americans to be giving money to these people. There is a difference between being successful financially and being able to sleep well at night.

Experience suggests that most people rising to riches don't have any troubles sleeping at night regardless of what they've done. Just world fallacy and all that.

Re: U.S. Manufacturing costs are almost as low as China’s

#47

Post by SiVal »

rjdagost wrote: post #13

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 troubl…

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.

Re: U.S. Manufacturing costs are almost as low as China’s

#48

Post by gregpilling »

sachingulaya wrote: post #3

At what scale? I pay roughly $3/hr for welding in china.

I have a Panasonic Ya 102 welding cell that will do it for much cheaper. I have one part we make with it that has 12 cents of human labor per part, based on a $30 per hour operator cost.

Automation keeps getting cheaper and better, too.

Re: U.S. Manufacturing costs are almost as low as China’s

#49

Post by yeukhon »

hebdo wrote: post #32
yeukhon wrote: post #12

Earlier quoted context omitted.

Speaking from a Chinese perspective, $3/hr in China today is still very low. That's like 3000 RMB for a 9-5 blue collar (which doesn't really happen as many workers work between 12-16 hours a day). But there are just so many expenses you cannot avoid while living in China as a Chinese... $3000 - $5000 is barely enough.

Wait, what. I've lived in Beijing in 2013. You can live off 3000RMB/month = 500USD/month. That's far from being rich, but also not barely survivable. Everything was cheap for me, and I'm from Poland.

I specifically said living in China as a Chinese, so to be exact here Chinese means the Chinese local with family. I don't know much the life of foreigners / immigrants and how well they integrate into the society, but usually there are

* wedding gift

* "business" expense that you did out of your pocket (take your co-workers to lunch, buying gift for your clients)

* gifts (giving red envelopes during Chinese New Year, friend / elder birthday)

* rent

* personal saving

* family support (especially supporting your parents)

* medical expense (for a lot of people they have to pay before they can see a doctor)

Here is an article http://business.sohu.com/20131210/n391561808.shtml. Many people can only afford a tiny room today in the city and this depressing phenomenon is coined "蝸居" (snail house, about 10 square feet, and sometimes less, or sharing that tiny space with two or more people), and has been televised and documented multiple times (e.g. a TV drama called 蝸居 was made a couple years ago).

If you are a blue collar working at a city far away from your hometown, you have to go back to your hometown at least once a year (during new year break), and usually it is expected that you have to get a lot of gifts from the city for your family and your neighbors (to thank your neighbors for helping your family / keeping an eye on your family in your absence).

You can almost say the Chinese culture is all about showing gratitude with gifts, this is why e-commerce is such a big deal in China (also why foreign brands like Apple can make so much money in China ;-))

Re: U.S. Manufacturing costs are almost as low as China’s

#50

Post by hueving »

feelslikefelt wrote: post #37
adventured wrote: post #34

Earlier quoted context omitted.

American entrepreneurs are the best thing that has happened to China in centuries. If it weren't for American capital, and the American consumer, China would have developed drastically slower (if at all). China's GDP per capita in 1994 was ~$480. That's ~45 years after the Mao revolution. There was no alternative than to pay them cheap wages to start. If you paid them 'first world' wages, nobody would have set up man…

I just don't understand how anyone could be OK with /anyone/ that takes part in this process. It's not okay for the "200 Chinese billionaires" to be profiting off of abusing others, just as it is not okay for Americans to be giving money to these people. There is a difference between being successful financially and being able to sleep well at night.

If you use a computer, you're part of that process as well.
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