Dismiss Notice
Welcome to IDF- Indian Defence Forum , register for free to join this friendly community of defence enthusiastic from around the world. Make your opinion heard and appreciated.

The real reason overseas manufacturing is coming to America

Discussion in 'China & Asia Pacific' started by BMD, Jul 29, 2017.

  1. BMD

    BMD Colonel ELITE MEMBER

    Joined:
    Nov 20, 2012
    Messages:
    10,788
    Likes Received:
    3,008
    Country Flag:
    United Kingdom
    https://finance.yahoo.com/news/real-reason-overseas-manufacturing-coming-america-162531766.html

    The real reason overseas manufacturing is coming to America
    [​IMG]
    Krystal Hu



    [​IMG]
    View photos
    Apple’s supplier Foxconn announced a 10 billion investment in the US. AFP/Getty Images
    “If I didn’t get elected, he definitely would not be spending $10 billion,” President Donald trump said Wednesday, referring to Terry Gou, chairman of Taiwanese Apple (AAPL) supplier Foxconn.

    That evening, Trump announced Foxconn’s plans to build a plant in Wisconsin that would produce flat-screen display panels for TVs and other products. The plant would create 3,000 jobs and represent a $10 billion investment, according to White House officials.

    While the investment echoed Trump’s promise to “bring jobs back” to the US, the president can hardly take all the credit for Foxconn’s big move. The relocation of China’s manufacturing industry has been going on for years, as the long-time cost advantage of manufacturing in China has slowly declined. Lower input costs, strong demand in the US market and financial support from US state governments has accelerated the comeback of “made in America.”" data-reactid="33" style="margin-bottom: 1em;">While the investment echoed Trump’s promise to “bring jobs back” to the US, the president can hardly take all the credit for Foxconn’s big move. The relocation of China’s manufacturing industry has been going on for years, as the long-time cost advantage of manufacturing in China has slowly declined. Lower input costs, strong demand in the US market and financial support from US state governments has accelerated the comeback of “made in America.”

    China is not as cheap anymore
    As the world’s largest contract electronics maker, Foxconn operates 12 factories in China. It has faced criticism in the past for paying its workers minimum wage and requiring them to work long hours. In 2010, Foxconn doubled the monthly salary to $290 month after reports emerged that at least 10 workers had committed suicide.

    Boston Consulting Group says industrial electricity prices in the US are 30% to 50% lower than in other major export nations. Foreign manufacturers that make products in the US also save money on shipping time and cost since many customers are here.

    Overall, China’s manufacturing cost advantage over the US shrank from 14% in 2004 to only 1% in 2016, according to research from BCG.

    [​IMG]
    View photos
    Employees in Foxconn uniforms. Image: Reuters
    “The disparity has been driven by things like increasing wages and energy cost in China [and] productivity gains relatively in the US,” Rahul Choraria, principal at BCG, told Yahoo Finance. “Production is likely to be more local for local consumption.” " data-reactid="58" style="margin-bottom: 1em;">“The disparity has been driven by things like increasing wages and energy cost in China [and] productivity gains relatively in the US,” Rahul Choraria, principal at BCG, told Yahoo Finance. “Production is likely to be more local for local consumption.”

    As a result of all of these factors, Chinese manufacturers have been building more factories in the US to save money — in the same way US manufacturers have moved jobs offshore. This trend predated the election of Donald Trump." data-reactid="59" style="margin-bottom: 1em;">As a result of all of these factors, Chinese manufacturers have been building more factories in the US to save money — in the same way US manufacturers have moved jobs offshore. This trend predated the election of Donald Trump.

    “We’ve seen this trend start since about 2009, and there’s been an uptick especially in the past two years,” said Cassie Gao, an analyst at Rhodium Group. Rhodium’s China Investment Monitor shows Chinese companies are spending billions on new projects and expansions of existing US subsidiaries.

    For example, Keer, a Chinese thread producer, has been operating its factory in South Carolina since 2015. “In the US, land, electricity and cotton are all much cheaper,” Keer’s president, Zhu Shanqing, told CNBC in May. “My production cost per ton of textiles is 25% lower.”

    Local government’s support
    [​IMG]
    View photos
    Foxconn’s Gou smiles as Trump delivers remarks on his investment on Wednesday. Photo: Reuters
    Besides competitive production cost, financial incentive packages have become another selling point when US state governments try to win investors over. Foxconn’s Terry Gou, who was standing beside Trump during Wednesday’s announcement in White House, knows how to leverage those incentives." data-reactid="83" style="margin-bottom: 1em;">Besides competitive production cost, financial incentive packages have become another selling point when US state governments try to win investors over. Foxconn’s Terry Gou, who was standing beside Trump during Wednesday’s announcement in White House, knows how to leverage those incentives.
     
    Blackjay likes this.

Share This Page