Manufacturing costs up this year in China
Oldbitcollector (Jeff)
Posts: 8,091
So I went to restock one of my more popular products to find that they've gone up a dollar pretty much across all the listings of this particular product.
Chatting with my contact in China last night, it seems that labor costs for manufacturing in China have actually gone up a little for 2013.
Interesting stuff.. Could it be that we've finally hit the ground floor?
Jeff
Chatting with my contact in China last night, it seems that labor costs for manufacturing in China have actually gone up a little for 2013.
Interesting stuff.. Could it be that we've finally hit the ground floor?
Jeff
Comments
Do you really believe that, for example, a five dollar device going up to six dollars reflects a twenty percent increase in labor costs?
I would guess that some middle man has jacked the price up for increased profit.
After all, the price of anything is little to do with it's material cost and labor input and more to do with what the market will put up with.
I agree.
I was just suggesting that the increase in price to us is not necessarily anything to do with what is happening to the workers on the ground.
Perhaps it's the guys in the middle fishing for a higher profit. Perhaps it's movements in exchange rates etc etc.
I find it hard to believe that a twenty percent increase in price to us over night equates to a twenty percent better standard of living for labor.
Yes, (With the understanding that I can only prove this with one item) two reasons.. First of all, I can buy this item from a variety of vendors out of China. They all went up about the same. Second, due to my purchase relationship with the vendor I'm using, I was still able to secure a good price.
I'm not sure if I'll see this reflected in labor costs over all, only time will tell, but it is interesting that in a market were items generally trend downward to see this happen.
Jeff
-Phil
This is universal, and shipping costs are also working against the Chinese.
http://www.forbes.com/sites/stevedenning/2012/12/07/why-apple-and-ge-are-bringing-manufacturing-back/
The GE example are large units, and probably dominated by shipping costs.
There was a news item about the GE factory recently, and whilst the 'new' jobs may not have the feather bedding union extras of the past, they are real jobs, and the flow-on effects are massive.
At the electronics end of the scale, with a Pick and Place machine, Labour costs are less of a factor, and flexible production matters more for all but the largest producers.
I am sure you are right that the labor force is not getting anywhere near a 20% increase, and that there are probably several other factors at work here. It's just good to see signs of improvement, even if the improvement is small.
It's just a matter of rising aspirations -- a phenomenon that's both natural and inevitable. It would be hard to begrudge anyone an increase in pay to $2.31 (14.5 RMB) per hour.
-Phil
Surely you jest. http://forums.parallax.com/showthread.php/145565-Were-the-science-fiction-writers-correct-Is-automation-killing-the-middle-class?p=1159773&viewfull=1#post1159773
I think it might be one reason Chinese officials have tried to get a grip on the rare earth metals market: they know those materials are essential to automation (magnets for motors), and automation is something that can very well upset their exploitation of cheap labor.
I would agree if it were an across the board increase but when it is just a couple of items it seems more like supply and demand.
These are the correct labor costs for production line labor. In my view the real costs are far from monetary: the time and travel required to manage the process; the progressive inability to prototype when the production is shifted offshore; the communication efforts to keep it all straight; the higher minimum order quantities; and the fact that some shipments have to be tested (for a second time). And this is actually easy for us with Ari taking care of the process, but without him I'd probably never bother making anything in China. Some parts are only available in China.
In recent years we've spent more time re-patriating production efforts than moving anything offshore. This helps us further develop our niche for high-quality, American-made products. Margins are lower, but the gap between American-made and China-made has narrowed significantly as their costs have been increased.
Interesting article and confirmation of the economic leveling effect of world trade.
Now if we could only get Architects and Engineers out of their offices once in a while to talk to the end users and maintainers of the buildings they design. Maybe we wouldn't have office spaces with several computers, printers, fax machines, and other office equipment built with only four electrical outlets and inadequate ventilation.
China will need to address the environmental concerns, worker safety and health, and a free-floating currency. Interesting how their political focus is mostly on eliminating corruption and excess, but these other items really affect the whole population very closely.
Are the rises you are experiencing due to legitimate rises in labor... maybe, maybe not. Salesmen love their scapegoats. The goal is always the same, more profits via more sales.
Air pollution in China.... it is bad, but it is generally a slow killer and takes the frail and young. London had its killing smog at one time and was able to move beyond it. The air doesn't have to be perfectly clean, just cleaner. China is shifting from coal to hydroelectric and nuclear for these reasons.
On the other hand, glaciers are melting so fast that I wonder if the earth is going to be thrown out of balance and seek a new axis all of a sudden. A sudden wobble might awaken long dormant volcanoes and create a drastic cooling. The air pollution from a few good eruptions might be more than China could produce in many years.
It would seem from looking at your linked article that I was wrong and labor really is seeing huge increases in renumeration:
26% increase in 2 years is pretty dramatic.
I think the government still controls housing, so much of that cash may become disposible income. They might even visit the USA and spend some there.
-Tor
I would suspect that is because PCB production is automated already so there is very little labor cost involved.
I've some restaurants here in Kaohsiung that have increased their costs 150% from when I arrived in 1994, and others that refuse to raise their prices. While my rent hasn't gone up, the laundry service across the street is charging me 150% from what I originally paid, and there are occasional extra charges.
Meanwhile we have huge inflation debates about the price of fuel and electricity. The minimum wage is yet another inflation debate.
Some inflation is structural and healthy. It keeps people engaged in being competative and aware. Just keep an eye on how much a whole chicken is at your supermarket to average it out.
I have been living and working in China for over 10 years, but I grew up in LA and I recall many days of smog alerts and painful breathing after physical exercise. Even now going done the Cajon pass on I-15 into the LA basin, you still see the thick brown haze hanging over the area. Certainly the pollution standards here are far from the US standard, but what was the pollution level in the US 50 years ago. It improved over time, just like it is here. The elctroplating and painting, etc are being forced out of Donggan with increasing stricter regulations, though there are still a number of illegal factories. These things take time and things are improvng here.
Cost have been steadily rising for sure. One factor is the exchange rate. When I moved to China in 1991 it was 8.2RMB to $1 and now it floats around 6.2RMB to $1. Plus stricter labor laws, some of which are stricter than the US and clearly favor the worker over the employer. It is not all sweatshops like most people perceive it to be.... This year I also raised prices for some products that I have held the price down on though my costs kept going up. As my profit kept going down I sold it for the same price but this year decided I had to make some adjustments, not for increased profits but to recover some of the lost profit.
David
But at some point, the pollution gets to the point that it is to nobody's benefit - local or otherwise. Cleaning up messes is as important as the messes we create getting rich.
China may feel that inflation is a big problem with export, but the reality is that people are also not buying as much as before. They just don't have the disposable income to spend freely.
At the height of the industrial revolution, London was famous for killer smog from coal burning. Now it seems to be Beijing's turn. Every thing has its limits, and they are just as often no learned unless they are exceeded.
There is a season to economics and one has to adjust to it.