Yet another article on manufacturing moving back to Western countries. This is particularly where the cost of labour is a small fraction of the total cost of production – eg in high-tech products.
WSJ: “The CEO of Flextronics International Ltd., a Singapore-based company that helped hundreds of firms move manufacturing of electronic parts and products to Asia, says it is getting “easier to justify” production in the U.S.
The difference in labor costs is narrowing and local officials in America have been giving more financial incentives to companies setting up plants in the U.S., Mike McNamara, chief executive of Flextronics, said in an interview Friday. Mr. McNamara said he could even imagine some smartphones being made in the U.S. eventually. But he cautioned that the return of manufacturing to the U.S. is likely to be a “slow and evolving process” rather than a flood. Many obstacles remain, including relatively high U.S. taxes, health-care expenses and regulatory costs, he said.
“In Asia, if I want to get something done, we just go and get it done,” he said. An Asian plant with 5,000 employees could be set up in 90 days, he said, but it takes much longer in the U.S., partly for regulatory reasons. Flextronics has plants in 30 countries, including the U.S.
Apple Inc. raised hopes for a revival of U.S. manufacturing a month ago by announcing plans to build some Mac computers in the U.S. for the first time in about a decade. Flextronics says Apple is one of its customers, but Mr. McNamara declined to comment on whether his company could be involved in the Mac initiative. Apple declined to comment on exactly where and how those computers will be made.
In the first decade of this century, Mr. McNamara said, manufacturers flocked to low-wage countries. Over the next decade, he said, more are likely to adopt regional manufacturing strategies, making goods closer to where they are sold. That can reduce transport and inventory costs; it also allows companies to respond faster to changes in demand and more effectively protect technological secrets.
Asian plants typically have more flexibility to set up new production lines quickly, which is important for products with short life cycles like smartphones. Still, as products become more customized and companies try harder to keep rivals from copying technology, Mr. McNamara said, some phone makers who want to make products to order for local customers eventually may produce certain types of smartphones in the U.S.
Flextronics, founded in 1969 in Silicon Valley and incorporated in Singapore in 1990, provides design, logistics and manufacturing services for several hundred companies. Mr. McNamara said Flextronics is the world’s second-largest company in that business, after Hon Hai Precision Industry Co., known as Foxconn and based in Taiwan.”
- Outsourcing Reversal (businessinsider.com)
- Google hands over Motorola’s factories in China and Brazil to Flextronics (androidauthority.com)