Why are All Electronics Made in China? Can It Change?

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Top Electronics Exporters to the United States 2020

Why are All Electronics Made in China? Can It Change?

I see this question a lot on different forums, but it is not true that all electronics are made in China.

 

If the question was, where are most electronics made? Then yes, the answer is China.

 

Indeed, a big part can be considered electronics made in China, but countries like Mexico, Taiwan, and Malaysia are also in business.

 

Have a look at the graph above. Taiwan increased its electronic exports to the USA by 23%

 

Thailand and Vietnam did by 24% and 11%, respectively.

 

And when it comes to electronics companies and their performance, we can see (graph below) that Chinese electronics manufacturers like Tencent and Xiaomi had double-digit revenue growth from 2019 to 2020, but they’re not the only ones in the game.

 

South Korea’s Samsung and Taiwan’s Hon Hai Precision are at the top.

 

top electronics companies Asia

Graph Source: Global Data

While countries like Mexico, Canada, Japan, and Germany have seen a decrease in their electronic exports to the US, they remain in the top 10 countries the US gets electronics from.

 

However, China remains the top exporter of electronics to the US – 42% of US electronic exports are from China- It’s understandable why some believe all we have are Chinese electronics.

 

The more accurate question is, why are most electronics made in China?

 

10 reasons why there are so many Chinese Electronics

 

  1. After Mao, China was stuck with a lot of impoverished people. Deng Xiao Ping started to open up China to the west, luring them with low labor costs.

 

     2. The China government played their hand well by only allowing foreign firms to set up in China if they did so in the form of a Joint Venture with a Chinese partner and agreed to disclose technology; the first electronics made in China started coming to life.

 

     3. Most Western firms could not resist the temptation of having their electronics made in China at a low cost. So that’s how a generation of china electronics assembly plants came to life.

 

     4. After Chinese workers learned a particular trade, they immediately started their own China electronic assemblies or tiny plants, often making some components.

 

     5. Low cost was China’s competitive advantage and allowed them to start the electronics made in China wave.

 

     6. All factories in China were working hard to out-cheap their neighbor. Hence China became the cost leader in Manufacturing for nearly everything.

 

     7. Low labor costs, of course, attracted a lot of Western clients.

 

     8. Many Western companies followed the strategy to focus on their core competencies, often marketing and branding, and outsource non-core activities to the best value-for-money provider.

 

     9. This meant that they outsourced the manufacturing part of their business to China; having electronics made in China meant more profits.

 

     10. Outsourcing manufacturing was also seen as a natural evolution.

In the past, 60% of the population worked in agriculture, which got reduced to 4%.

 

At present, only 1% of the population of the US works in the agriculture industry.

 

Manufacturing followed the same trend.

 

The rate of people in the US getting higher education led to the 1970s’ decline in American Manufacturing.

 

People started reaching higher levels of education and getting dreamed jobs in academia, business, and medicine. 

 

Europe and the US focused on service industries such as legal, advertising, medicine, wall Street, and entertainment.

 

And like that, where are most electronics made? The answer was China; it became the place to outsource Manufacturing of anything, including electronics.

Labor is no Longer Cheap in China

The rise of Chinese electronics started with cheap labor, but now that’s no longer why such a large percentage of electronics are made in China.

 

Hourly Manufacturing Wage around the world - China is no longer Cheap

Now, the reason why so many electronics, especially high-end, are made in china is its complete and cost-effective ecosystem of components.

The largest and most complete one in the world.

A lot of different parts are needed to build a product such as an iPhone:

 

  • Touch screens
  • Camera modules
  • Batteries
  • USB ports

 

Many of these are custom-made in China, and unfortunately, there are simply no suppliers of those kinds of parts left in the US or Europe.

 

If you’re wondering, why doesn’t the US buy the parts from China and assembles the product at home?

Well,

Doing final assembly in the US of 37 parts, of which 32 are custom-made in China, is a logistic nightmare.

Every custom part is a new product in itself, which will need some adjustments, especially in the beginning.

If your first shipment of 10,000 LCDs has a wire which turns out to be a little too long.

In China, you just send them back to the factory 5 minutes down the road, and they will send the fixed units back within 2 days.

If you ship those same LCDs to the US, it would be in a batch of 100,000, the shipment could take 3 weeks, and they would all have to be sent back and forth again.

 

The production line is dead for 6 weeks.

 

Oh, and during those 3 weeks, before they noticed the cable problem, the LCD factory would have continued to produce another 200K LCDs with the wrong cables…

 

See What would happen if we stopped Buying Electronics from China?

 

Final assembly should be done as close to the factories making the custom parts as possible.

When Foxconn opens a new factory, it demands its top 20 suppliers to set up a new factory next to that assembly plant.

This also means that the most effective way to design and engineer electronics is to do it in China or Taiwan, so you can directly discuss, coordinate and optimize with all these suppliers.

People complain that the US has lost a lot of jobs to China.

In fact, just like with agriculture, these jobs have been replaced with other jobs.

 

SEO, webshops, pizza delivery…

 

The US unemployment rate in 2019 fell to 3.5%, the lowest since 1969.

 

As a late-night host said: “We want to buy sneakers; we do not want to stand in a factory making them.”

 

Made in China Electronics

Will China’s manufacturing power take it to dominate the world?

 

If you’re worried about jobs, Manufacturing, and the future of world economies, here are a couple of things to consider.

 

  • Manufacturing is an employment wave that has already passed over the US and Europe.

 

  • 35 years ago, a term like Chinese electronics was unheard of; electronics and cars were manufactured all in Japan and became a better value for money than those from the US.

 

Many people started to buy from Japan to the point that 25 years ago, people were terrified about Japan taking over the world.

 

After Japan had caught up with the world’s quality standards and started to exceed them, its growth started to slow down markedly. The same thing happened to Korea & Taiwan.

 

  • New factories will be mostly full of robots anyway.

 

If you’re going to worry about job losses and future economic leadership, you should worry about AI and Robotization; they’ll make ANY tedious job superfluous.

 

Much sooner than you think.

Today there might be 1000 people in India interpreting X-ray pictures. As soon as AI can do this, they will lose their job. Tomorrow.

India, China, and the Western world will soon have a billion unemployed on their hands…

 

China has an advantage

 

As for Manufacturing and Chinese electronics, China is quickly upgrading its industry with robotization, IoT, and infrastructure. As a result, modern, clean factories are replacing old ones.

 

With the largest concentration of factories globally, it is easy to find clients wanting to buy robots.

 

And through supply chain and scale, they can be made there at the best cost.

 

This means China will make most of the equipment needed to automate factories in China.

 

They will stay a manufacturing powerhouse for decades to come.

Mexico labor cost is cheaper than China's

Top 7 Chinese Electronics Products

What electronics are made in China? Many.

 

The amount of Chinese electronics products in the market is enormous, count them and listing them all would be a challenging task; products in virtually every category are made in China.

 

  • Computers
  • Smartphones
  • Speakers
  • Electric cars
  • Cameras

And way more

 

But, to have a better sense of the electronics manufacturing power of China, we put together a small list of popular Chinese electronics products.

While it may not fully answer the question of “What electronics are made in China? It does shed some light on it. Swipe left or right.

Electronics like the Gopro and Oculus VR set are not designed in China but are manufactured there.

 

Further below, you can also find a list of the top Chinese Electronic Companies.

Top 10 Chinese Electronics Manufacturing Companies

Most of these companies have over 20 years of history and are now publicly traded.

 

Company
1- Legend Holdings
2- Haier Group
3- Huawei Technologies
4- BOE Technology Group
5- Midea Group
6- TCL Group
7- Hisense
8- Founder Group
9- Panda Electronics
10- ZTE

By now, it must be clear that China is, without a doubt, an electronics manufacturing powerhouse, but it is by no means the only country where you can manufacture electronics; here’s our Top 10 electronics manufacturing countries.

Top 10 Electronics Manufacturing Countries.

  1. China
  2. Taiwan
  3. Malaysia
  4. Vietnam
  5. Thailand
  6. India
  7. Indonesia
  8. South Korea 
  9. Japan
  10. Mexico

 

To understand why we listed Taiwan as number two, please click here ODM Electronics: When is Taiwan better than China?

Conclusion

 

So many electronics are still made in China because of its electronic component’s ecosystem, not because of Cheap labor.

AI and robotization in Manufacturing are well underway and will create a new manufacturing niche for which china is well prepared.

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Case Engelen

I'm the CEO of Titoma and I've been working in electronic product development in Taiwan & China since 1994. What I've discovered is that to get to market FAST you need to take time to prevent delays. And the most important way to do that is with early supplier involvement. With us doing both Design AND Manufacturing, we save our clients time, aggravation and a quite a bit of money. If you're an established B2B company needing a Reliable Custom Device, on Time and on Target, we should talk!

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