In Steve’s latest Guest Blog for Q Source, he examines developing trends in electronics manufacturing
|American companies are bringing electronics manufacturing back to the U.S.|
An increase in manufacturing in the North American market will affect virtually all operations strategies. Buyers involved in out-sourcing decisions will need to evaluate the manufacturing and supply chain capabilities of CMs doing business in North America. These buyers that have decided to in-source may need to find new suppliers or further strengthen relationships with existing ones in Mexico and the United States (and perhaps other locations worldwide).
Resultantly, U.S. distributors will certainly benefit from the transition of electronics manufacturing back to the U.S. (and Mexico) as the demand from OEM and CM providers will increase. That demand will include parts, design, supply chain management, and aftermarket services.
Many in the industry call the trend "on-shoring" or "re-shoring." Sometimes these terms have an “us versus China” connotation, which is inappropriate. The trend is really "regionalization." In true regionalization, electronics equipment is manufactured in the market where the product is sold. And, it’s all about capacity utilization. The current data indicates that the geographies that are growing (in terms of electronics manufacturing) are Mexico, Eastern Europe, and Malaysia. Currently, China is stable. This indicates that regionalization is indeed a growing and global trend.
|High-volume electronics will still be built in Asia.|
Ten years ago, manufacturing of low- to mid-volume appliances and industrial equipment moved to China because electronics OEM executives wanted to take advantage of extremely low Chinese labor rates. It is now apparent that they didn’t account for the true total cost of manufacturing in China, based on today’s analysis.
In recent years, labor rates in China have increased 20% per year—and they will continue to rise—so labor cost advantages have greatly lessened…if not disappeared in the region. In addition, transportation costs from Asia have increased significantly, as well.
Currently, it is uncertain exactly how much electronics manufacturing will migrate back to North America. We do know that the trend will continue as labor costs in China and other Southeast Asian countries continue to rise.
For 2015, the contract manufacturing industry is expected to grow, despite continued economic weakness worldwide. In a report from its Outsourced Manufacturing Intelligence Service, IHS pegs the industry growth rate at 4.0% this year to $404.5 billion. That’s slower than the roughly 5% growth the industry saw in 2014, but IHS predicts steady, though unremarkable, growth for contract manufacturers worldwide over the next three years. By 2017, the group says revenue will rise to nearly $452 billion as original equipment manufacturers seek to boost production to serve customers in consumer electronics, industrial equipment, appliances, and automotive end markets.
However, many industry experts are now saying that a “major economic dislocation” could easily derail market growth pointing to the sovereign debt crisis in Europe and the U.S. response to realigning its long-term spending trajectory. IHS also noted two key trends to watch in contract manufacturing: Customers’ desire to lower costs and suppliers’ drive for improved cash flow. Notwithstanding, the trend of manufacturing flowing back to North America is good and will continue for the foreseeable future. We view this as a great opportunity for new and innovative products to service this market space.
Steve Allen is the Vice President of Marketing and Innovation at ACL Staticide. For information about ACL, please visit our ACL Staticide Department at QSource.com. You may also contact us via email or phone at 800-966-6020 and one of our associates will be happy to assist you.
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Steve Allen's Previous Guest Blogs
- Flux Cleaning Myths: The Basics - Guest Blog
- An Update on the HCFC-225 (AK-225) Phase Out & Ban – Guest Blog
- More About the Basics of Flux in Electronics Soldering – Guest Blog
- Focusing on Sustainability in Chemical Processing & Product Development – Guest Blog
- Strength of a Cleaning Solvent – Kauri-Butanol Values & Solvent Solubility – Guest Blog
- Volatile Organic Compounds & Evolving Regulations – Guest Blog
- Use Proper Balance to Create an Efficient, Cost-Effective PCB Cleaning Process - Guest Blog
- Why Clean "No Cleans?" Printed Circuit Board Flux Removal – Guest Blog
- How to Use the 80:20 Rule to Focus on the Business Innovation Process - Guest Blog