Circuits Assembly - July 2008 - (Page 36)

Domestic Production Reputation Trumps Recession, China By Art Rutledge Mid-tier EMS opportunities are abundant to firms that emphasize the personal touch. hile the mortgage crisis and rising energy and healthcare costs clearly are impacting the US economy, assuming all industries are equally affected is a mistake. In fact, mid-tier EMS providers are alive and well. What drives this trend? First, many OEMs are more focused on rationalizing their supply choices based on the best geographic fit for product lines, rather than simply measuring assumed unit costs. Several years ago, service and flexibility requirements simply might have driven that rationalization. Today, a number of factors influence the decision, including rising offshore logistics costs, inflation in China, quality concerns and a growing “Made in USA” fervor. Additionally, the mid-tier sector has a large number of companies focused on delivering custom service for complex projects. Not surprisingly, new business at the midtier, regional EMS level is being driven by the five Rs: referrals, recommendations, references, relationships and reputation. China continues to be an attractive location for the manufacture of high-volume consumer products. However, costs there are rising. On a recent trip to China, I was 36 Circuits Assembly JULY 2008 W told repeatedly that inflation there might drive up labor costs as much as 25% this year alone. Turnover of experienced personnel is an increasing challenge, as this market continues its rapid growth. Wide variances in supplier quality depend on the age of a company, industries on which it is focused, management team experience and worker turnover. Intellectual property protection is a much-publicized concern. Infrastructure also has become an issue. Reliable power generation can be a problem, as growing energy demands often force utilities to regularly load shed. The result is OEMs have become cautious about long-distance outsourcing of complex, lower volume projects because they recognize hidden costs may outweigh perceived unit cost savings. In some cases, newer product versions are not built in China as an IP protection measure. In other cases, projects with anticipated engineering changes, variable demand or consistent high mix are kept onshore because the cost savings doesn’t outweigh rising logistics costs or poor on-time delivery performance. Quality continues to be a concern. Highly regulated industries can ill afford recalls based on supplier nonconformance. Even companies with robust processes can experience a decrease in quality when turnover of key personnel is high. While growth in China has driven some negative issues, China and other low-cost regions in Asia do offer viable options for circuitsassembly.com http://circuitsassembly.com

Table of Contents Feed for the Digital Edition of Circuits Assembly - July 2008

Circuits Assembly - July 2008 Contents Caveat Lector Industry News Market Watch Talking Heads Focus on Business Global Sourcing On the Forefront Screen Printing Tech Tips Will Electronics Follow the Sun? ‘Warm’ Manufacturing Heats Up Reputation Trumps Recession, China ‘Web Circuits’ A Novel Non-VOC Conformal Coating Krypton: Benchmarking Customer Satisfaction 2008-09 CIRCUITS ASSEMBLY Buyers Guide Wave Soldering Pb-Free Lessons Learned Process Doctor Materials World SMTA Int'l Product Preview Ad Index Assembly Insider Technical Abstracts

Circuits Assembly - July 2008

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