Why are all electronics made in China?

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Top Electronics Exporters to the United States 2020

Why are all electronics made in China?

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

 

Certainly, a big part is 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.

 

Countries like Mexico, Canada, Japan and Germany, while they’ve seen a decreased in their amount of electronic exports to the US, they still remain in the top 10 of countries the US gets electronics from.

 

However, considering that China still remains the top exporter of electronics to the US – 42% of US electronic exports are from China-It’s understandable why some believe all electronics are made in China.

 

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

 

10 reasons why most electronics are made in China

 

  1. After Mao, China was stuck with a lot of very poor 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 agree to disclose technology.

 

     3. Most Western firms could not resist the temptation. That’s how a whole generation of workers and engineers in China got trained.

 

     4. After Chinese workers learned a certain trade, they immediately started their own little factory, often making some components.

 

     5. Low cost was China’s competitive advantage.

 

     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. A lot of 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, as it meant more profits.

 

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

In the past 60% of the population was working in agriculture, that got reduced to 4%.

 

In present time, 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 of American manufacturing.

 

People started getting 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, entertainment.

 

And like that, China became the place to outsource manufacturing of anything, including electronics.

Labor is no Longer Cheap in China

It all started with cheap labor, but now that’s no longer the reason 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.

 

And if you’re wondering why doesn’t a country like the US buys the parts from China and assemble 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 especially in the beginning will need some adjustments.

 

If your first shipment of 10,000 LCD’s 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 those same LCD’s would have been shipped 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 it took before they noticed the cable problem, the LCD factory would have continued to produce another 200K LCD’s with 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.

 

That is why when Foxconn opens a new factory, it demands their 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, web shops, 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 keep in mind.

 

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

 

  • 35 years ago, electronics and cars from Japan became better value for money than those from the US.

 

A lot of people started to buy from Japan, to the point that 25 years ago people were really scared about Japan taking over the world.

 

           After Japan had caught up with the world’s quality standards, and started to     exceed them, their growth started to slow down markedly. Same thing happened for 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 boring job superfluous.

 

Much sooner than you think.

 

Today there may be 1000 people in India interpreting X-ray pictures. As soon as AI can do this, these people 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, China is quickly upgrading its industry with robotization, IoT, infrastructure. Modern clean factories are replacing old ones.

 

With the largest concentration of factories in the world, 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 most all the equipment needed to automate factories will be made in China.

 

They will stay a manufacturing powerhouse for decades to come.

Mexico labor cost is cheaper than China's

Conclusion

 

The reason why so many electronics are still made in China is because of its electronic component’s ecosystem, not because of Cheap labor.

 

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

 

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5  Country Alternatives to Manufacture Electronics

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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