Japan moving out of China - Printable Version
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Japan moving out of China - OutsiderFan - 04-11-2020
I'm not going to put this in the thread about Apple and Google releasing a virus tracking technology that drifted to this topic. That thread should be focused on that topic, IMO.
So, I'm putting it here instead. BLUF: Japan will be paying companies to move manufacturing out of China.
https://www.nationalreview.com/news/japan-to-pay-companies-to-move-production-out-of-china/
If the cost of cheap goods in China is the price we are ultimately paying now, it makes ZERO sense to continue manufacturing in China, because the whole cost is way, way higher than the immediate savings. Of course, I'm someone who has been vehemently against any U.S. companies doing business in China for decades, because I don't believe in supporting an authoritarian country that violates human rights into world power.
RE: Japan moving out of China - Snorlax94 - 04-11-2020
The area that I agree with you is that I think this crisis has demonstrated the US should categorize more items as needing domestic production. It's clear more PPE should be manufactured, and even sourced, domestically, and the laws already exist for doing this. Additionally, even before Covid, it was clear that the US needed to manufacture more generic drugs domestically. In fact, with capitalism run amok, there were examples of unnecessary shortages of needed drugs, and in some cases, private equity firms *decreased* production to jack up prices. That kind of behavior needs to be made illegal, and the US needs to create incentives for more medical supplies and drugs to be made here.
Where I disagree is that some kind of "moral" thinking is going to guide this. So I guess the first step is that the whole world should stop buying oil from Saudia Arabia, Russia, Iraq and Iran because they "don't believe in supporting an authoritarian country that violates human rights."
RE: Japan moving out of China - Genuine Realist - 04-11-2020
(04-11-2020, 10:57 AM)Snorlax94 Wrote: The area that I agree with you is that I think this crisis has demonstrated the US should categorize more items as needing domestic production. It's clear more PPE should be manufactured, and even sourced, domestically, and the laws already exist for doing this. Additionally, even before Covid, it was clear that the US needed to manufacture more generic drugs domestically. In fact, with capitalism run amok, there were examples of unnecessary shortages of needed drugs, and in some cases, private equity firms *decreased* production to jack up prices. That kind of behavior needs to be made illegal, and the US needs to create incentives for more medical supplies and drugs to be made here.
Where I disagree is that some kind of "moral" thinking is going to guide this. So I guess the first step is that the whole world should stop buying oil from Saudia Arabia, Russia, Iraq and Iran because they "don't believe in supporting an authoritarian country that violates human rights."
My thought is that bringing these operations back on shore is just good economic and national policy, never mind the dreadful government. If it helps bring down one of the few remaining Communist states, that's a plus.
RE: Japan moving out of China - Mick - 04-11-2020
(04-11-2020, 10:57 AM)Snorlax94 Wrote: The area that I agree with you is that I think this crisis has demonstrated the US should categorize more items as needing domestic production. It's clear more PPE should be manufactured, and even sourced, domestically, and the laws already exist for doing this. Additionally, even before Covid, it was clear that the US needed to manufacture more generic drugs domestically. In fact, with capitalism run amok, there were examples of unnecessary shortages of needed drugs, and in some cases, private equity firms *decreased* production to jack up prices. That kind of behavior needs to be made illegal, and the US needs to create incentives for more medical supplies and drugs to be made here.
Where I disagree is that some kind of "moral" thinking is going to guide this. So I guess the first step is that the whole world should stop buying oil from Saudia Arabia, Russia, Iraq and Iran because they "don't believe in supporting an authoritarian country that violates human rights."
I hope the fact that China is potentially holding us hostage to the goods they manufacture is not remotely surprising to anyone.
Leftcoast - Leftcoast - 04-11-2020
Alternate viewpoint - The opening of China over the last 50 years has been a net good for both China and the Western world.
Don’t believe me? Go look through images and news headlines covering China’s “Cultural Revolution” from 1970 and then take a walk through Shanghai today, perhaps the French concession, or talk to expats at the Blarney Stone (Irish pub and Shanghai expat hangout that pours a good Guiness). I think from reading some comment here you will be surprised at what you see and hear. The world is much safer with China deeply engaged in the world economy - and the people of China are much, much more vibrant, prosperous and free.
I don’t excuse the CCP for what it’s done to the Uighur people, not it’s recent heavy hand in Hong Kong or treatment of religious minorities. I see the flaws in its handling of the CV outbreak but if anyone thinks economic isolation, military stand-off and disengagement are going to help things look toward the past in your rear view mirror and steer forward with that also in your mind. We’ve come a long way and so has China.
The US and China both have a lot to learn from how the early stages of CV were handled. Both will adjust and scapegoating to point at the other as the blame will not help.
RE: Leftcoast - Genuine Realist - 04-11-2020
(04-11-2020, 11:43 AM)Leftcoast Wrote: Alternate viewpoint - The opening of China over the last 50 years has been a net good for both China and the Western world.
Don’t believe me? Go look through images and news headlines covering China’s “Cultural Revolution” from 1970 and then take a walk through Shanghai today, perhaps the French concession, or talk to expats at the Blarney Stone (Irish pub and Shanghai expat hangout that pours a good Guiness). I think from reading some comment here you will be surprised at what you see and hear. The world is much safer with China deeply engaged in the world economy - and the people of China are much, much more vibrant, prosperous and free.
I don’t excuse the CCP for what it’s done to the Uighur people, not it’s recent heavy hand in Hong Kong or treatment of religious minorities. I see the flaws in its handling of the CV outbreak but if anyone thinks economic isolation, military stand-off and disengagement are going to help things look toward the past in your rear view mirror and steer forward with that also in your mind. We’ve come a long way and so has China.
The US and China both have a lot to learn from how the early stages of CV were handled. Both will adjust and scapegoating to point at the other as the blame will not help.
I'm pretty much a one-worlder generally. But everyone knows that the effects of globalization have not been distributed evenly. Some sectors gain, others lose. The NAFTA Treaty was not popular with anyone, because of the devastating effect it had on American workers (who saw jobs shipped to Mexico) and Mexican farmers (who had to compete with American agrobusiness.) There were, of course, winners, but too many losers. Whoever won the 2016 election was going to end it.
Here, if Michael Lind's factoid is correct - a differential of only $2.00 per unit cost to build the I-Phone on shore - there's more than enough reason to repatriate manufacturing operations, quite apart from the health risk. (Lind is not a casual guy, so I assume he's right.) This is a major scandal. The effect of the differential is to enrich highly compensated Apple employees and managers (since the company rarely pays dividends) at the expense of American craft workers. I live in Mountain View. The culture of the companies is so anti-authoritarian as to verge on anarchic. That they at the same time enrich themselves by sending manufacturing off-shore, to a working force known for its docility and passivity, for an incremental return that small is unacceptable hypocrisy. To be sure, American workers are likely to be more unruly and demanding - but isn't that true of the entire society? Something we value?
The fact that there are health risks associated with the sites, and the Chinese government cannot be trusted to handle them responsibly, is another reason. But it is secondary.
RE: Japan moving out of China - Snorlax94 - 04-11-2020
Here’s an article discusses the challenges of trying to manufacture iPhones domestically.
https://www.vox.com/technology/2018/9/13/17851052/apple-iphone-price-china-trump-us-trade
An MIT study cites a $100 increase in costs in parts/labor, which would seem doable, but Apple CEO Tim Cook is quoted saying the reason for manufacturing in China is not the lower labor costs, it’s the manufacturing know-how, expertise, infrastructure and systems in place in China that do not exist in the US.
Here is an article by Thomas Friedman written in 2008 about China passing the US in infrastructure:
https://www.nytimes.com/2008/08/27/opinion/27friedman.html
Presidents across multiple administrations have talked about trying to develop that infrastructure domestically — which would be a long-term project. But I have yet to see a compelling major initiative.
Sheesh, apparently we can’t even manufacture surgical masks.
RE: Japan moving out of China - Genuine Realist - 04-11-2020
I'm just not buying into the idea that a region that produced terrific consumer goods - automobiles, appliances, what not - is suddenly so bereft of skills that consumer electronics can't be relocated there.
RE: Japan moving out of China - Leftcoast - 04-11-2020
I’ve been involved in four studies comparing US manufacturing to outsourced models justifying an existing US plant that EMPLOYED me so I fought the US fight for 20 years. Believe me when I say that no one moved overseas if the difference was $2 on a $400 mfg cost product (Assumed iPhone X cost).
I’ll try to summarize the reasons in the other thread when I have time but be skeptical. There are reasons the price of electronic and other mass produced goods have rarely increased with the inflation rate.
It’s always worth looking at again when the rules change - The question will be, have they changed?
RE: Leftcoast - chrisk - 04-11-2020
(04-11-2020, 12:09 PM)Genuine Realist Wrote:(04-11-2020, 11:43 AM)Leftcoast Wrote: Alternate viewpoint - The opening of China over the last 50 years has been a net good for both China and the Western world.
Don’t believe me? Go look through images and news headlines covering China’s “Cultural Revolution” from 1970 and then take a walk through Shanghai today, perhaps the French concession, or talk to expats at the Blarney Stone (Irish pub and Shanghai expat hangout that pours a good Guiness). I think from reading some comment here you will be surprised at what you see and hear. The world is much safer with China deeply engaged in the world economy - and the people of China are much, much more vibrant, prosperous and free.
I don’t excuse the CCP for what it’s done to the Uighur people, not it’s recent heavy hand in Hong Kong or treatment of religious minorities. I see the flaws in its handling of the CV outbreak but if anyone thinks economic isolation, military stand-off and disengagement are going to help things look toward the past in your rear view mirror and steer forward with that also in your mind. We’ve come a long way and so has China.
The US and China both have a lot to learn from how the early stages of CV were handled. Both will adjust and scapegoating to point at the other as the blame will not help.
I'm pretty much a one-worlder generally. But everyone knows that the effects of globalization have not been distributed evenly. Some sectors gain, others lose. The NAFTA Treaty was not popular with anyone, because of the devastating effect it had on American workers (who saw jobs shipped to Mexico) and Mexican farmers (who had to compete with American agrobusiness.) There were, of course, winners, but too many losers. Whoever won the 2016 election was going to end it.
Here, if Michael Lind's factoid is correct - a differential of only $2.00 per unit cost to build the I-Phone on shore - there's more than enough reason to repatriate manufacturing operations, quite apart from the health risk. (Lind is not a casual guy, so I assume he's right.) This is a major scandal. The effect of the differential is to enrich highly compensated Apple employees and managers (since the company rarely pays dividends) at the expense of American craft workers. I live in Mountain View. The culture of the companies is so anti-authoritarian as to verge on anarchic. That they at the same time enrich themselves by sending manufacturing off-shore, to a working force known for its docility and passivity, for an incremental return that small is unacceptable hypocrisy. To be sure, American workers are likely to be more unruly and demanding - but isn't that true of the entire society? Something we value?
The fact that there are health risks associated with the sites, and the Chinese government cannot be trusted to handle them responsibly, is another reason. But it is secondary.
Maybe during the coming downturn, the US would have the labor available to assemble iPhones, but until March, the US did not have the available labor, so the $2 seems out of context. The Chinese market is still growing much faster than the US market, so US companies would likely need to keep a large and increasing presence in China to serve the Chinese and other Asian markets. It definitely makes sense to avoid sole sourcing components and products from China, but the implication that the US should largely withdraw from China is not realistic as its economy grows to equal and exceed the US’s.
RE: Leftcoast - Genuine Realist - 04-11-2020
(04-11-2020, 01:01 PM)chrisk Wrote:(04-11-2020, 12:09 PM)Genuine Realist Wrote:(04-11-2020, 11:43 AM)Leftcoast Wrote: Alternate viewpoint - The opening of China over the last 50 years has been a net good for both China and the Western world.
Don’t believe me? Go look through images and news headlines covering China’s “Cultural Revolution” from 1970 and then take a walk through Shanghai today, perhaps the French concession, or talk to expats at the Blarney Stone (Irish pub and Shanghai expat hangout that pours a good Guiness). I think from reading some comment here you will be surprised at what you see and hear. The world is much safer with China deeply engaged in the world economy - and the people of China are much, much more vibrant, prosperous and free.
I don’t excuse the CCP for what it’s done to the Uighur people, not it’s recent heavy hand in Hong Kong or treatment of religious minorities. I see the flaws in its handling of the CV outbreak but if anyone thinks economic isolation, military stand-off and disengagement are going to help things look toward the past in your rear view mirror and steer forward with that also in your mind. We’ve come a long way and so has China.
The US and China both have a lot to learn from how the early stages of CV were handled. Both will adjust and scapegoating to point at the other as the blame will not help.
I'm pretty much a one-worlder generally. But everyone knows that the effects of globalization have not been distributed evenly. Some sectors gain, others lose. The NAFTA Treaty was not popular with anyone, because of the devastating effect it had on American workers (who saw jobs shipped to Mexico) and Mexican farmers (who had to compete with American agrobusiness.) There were, of course, winners, but too many losers. Whoever won the 2016 election was going to end it.
Here, if Michael Lind's factoid is correct - a differential of only $2.00 per unit cost to build the I-Phone on shore - there's more than enough reason to repatriate manufacturing operations, quite apart from the health risk. (Lind is not a casual guy, so I assume he's right.) This is a major scandal. The effect of the differential is to enrich highly compensated Apple employees and managers (since the company rarely pays dividends) at the expense of American craft workers. I live in Mountain View. The culture of the companies is so anti-authoritarian as to verge on anarchic. That they at the same time enrich themselves by sending manufacturing off-shore, to a working force known for its docility and passivity, for an incremental return that small is unacceptable hypocrisy. To be sure, American workers are likely to be more unruly and demanding - but isn't that true of the entire society? Something we value?
The fact that there are health risks associated with the sites, and the Chinese government cannot be trusted to handle them responsibly, is another reason. But it is secondary.
Maybe during the coming downturn, the US would have the labor available to assemble iPhones, but until March, the US did not have the available, so the $2 seems out of context. The Chinese market is still growing much faster than the US market, so US companies would likely need to keep a large and increasing presence in China to serve the Chinese and other Asian markets. It definitely makes sense to avoid sole sourcing components and products from China, but the implication that the US should largely withdraw from China is not realistic as its economy grows to equal and exceed the US’s.
That's a good point, though i would still be interested in regional unemployment rates.
RE: Japan moving out of China - fullmetal - 04-11-2020
I don't think that cost differential takes into account long-term tax abatements, big utility deals, etc. etc. There's a manufacturing plant in my hometown that is one of the very few in the USA (most are in Asia), and if it had not been established over two decades ago with big tax incentives and long-term utilities contracts, etc., it would not be built here today.
Look at all the stuff Foxconn is/was supposed to get from Wisconsin for their next-gen TV factory...apparently none of that is happening now.
RE: Leftcoast - BostonCard - 04-11-2020
(04-11-2020, 01:16 PM)Genuine Realist Wrote: That's a good point, though i would still be interested in regional unemployment rates.
The labor force is somewhat flexible though. If more people were employed in (presumably higher paid) manufacturing jobs, fewer might be employed as something like Uber drivers (only meant as an example, not meaning to suggest there’s a one to one correspondence). And that might be ok; Uber rides might cost more, the remaining Uber drivers might be paid more, and folks might have to find a different way to get around.
The other thing is that American manufacturing plants are highly automated. Employee shortages would turbocharge that trend if you had to restore.
BC
RE: Japan moving out of China - Goose - 04-12-2020
Most PCB assembly plants in China (and the world) are highly automated. Pick and place machines just need a few people to hang new reels as they are exhausted. Final assembly and test take more people and are less subject to automation. However, as has been pointed out in this thread, it is the entire infrastructure that goes with assembling the products that would also have to be reconstructed in the US. Just doing final assembly here wouldn't alleviate reliance on offshore component manufacturing.
Making semiconductor parts is a gnarly business. I remember being give a tour of the National fab in Mountain View. My friend who was showing me around said " See that purple pipe up there? If it breaks, you won't have time to run. And, for that matter, neither would much of Mountain View". While there probably was some hyperbole involved, there are lots of hazardous materials involved. Even PCB fabrication involves materials that must be carefully disposed of. (Although there still is at least 1 PCB manufacturer in the Santa Clara. Their prices are 5X what a Colorado company costs and 20X what a "premium" Chinese manufacturer will charge) Making resistors and capacitors also has such challenges, and even lower margins. You aren't building those plants in the Bay Area, and probably not in California. There are many paint processes that are not legal in California that are legal in other parts of the country. In China, nobody is asking. Environmentally friendly it may not be, but it is a big reason why the plants are there.
The other problem with such commodity manufacturing is that it is low margin and highly competitive. Paying "reasonable" taxes is a problem, and paying high taxes is just a non-starter. Nobody in the US is going to regard investing in such a business as a good investment. The ROI is just too low and the competitive risk is too great. Better let somebody else in an area more receptive to that kind of manufacturing take the risk for the (relatively) low return. Buy info Facebook instead.
RE: Japan moving out of China - Mick - 04-12-2020
(04-12-2020, 09:10 AM)Goose Wrote: Making semiconductor parts is a gnarly business. I remember being give a tour of the National fab in Mountain View. My friend who was showing me around said " See that purple pipe up there? If it breaks, you won't have time to run. And, for that matter, neither would much of Mountain View". While there probably was some hyperbole involved, there are lots of hazardous materials involved. Even PCB fabrication involves materials that must be carefully disposed of. (Although there still is at least 1 PCB manufacturer in the Santa Clara. Their prices are 5X what a Colorado company costs and 20X what a "premium" Chinese manufacturer will charge) Making resistors and capacitors also has such challenges, and even lower margins. You aren't building those plants in the Bay Area, and probably not in California. There are many paint processes that are not legal in California that are legal in other parts of the country. In China, nobody is asking. Environmentally friendly it may not be, but it is a big reason why the plants are there.
Manufacturing is a dirty business. America doesn't seem to collectively want to be in many manufacturing businesses. My family had a cannery and moved it to the northern end of the Yuba Valley (still there, although they've transitioned from canning to juicing). Too tough to manufacture in SC County any more.
The percentage of American manufacturing jobs as a percentage of the workforce have declined from 27% to 10% since 1970.