May 16, 2012
The electronics industry has been at the forefront of manufacturing outsourcing for more than a decade. Many of the largest companies in the industry began this trend by selling manufacturing capacity here in the United States to electronics manufacturing service companies (contract manufacturers). Then the global chess game began as manufacturing rapidly moved from region to region, chasing cheaper labor costs. First there was the shift to Mexico prior to the dot-com meltdown, then a movement to Eastern Europe and eventually Asia, with a primary focus on China. Large contract manufacturers like Flextronics and Foxconn became dominant players in the electronics industry; employing hundreds of thousands of low wage workers and controlling a large portion of the total global electronics component spend.
However, now that companies have been outsourcing for some time it appears that when the labor cost savings are weighed against the total costs of manufacturing overseas, there is not a significant savings, if any savings at all. Rising labor costs in China, higher transportation costs, intellectual property concerns and many other issues are causing manufacturers to reassess their strategies. A recent poll by The Boston Consulting Group of the 100 largest manufacturing companies in the United States indicates that they are considering bringing back manufacturing to the U.S. (http://www.bcg.com/media/PressReleaseDetails.aspx?id=tcm:12-104216). This could be good news for the U.S. economy.
Posted by Joe Stafford