Big Big Trouble... in Little China!

Here in North America, a never-ending conversation permeates everyone involved in the audio industry: manufacturing products in the USA vs. manufacturing elsewhere (particularly in Asia). Asian imports have a long history of poor public opinion, with many consumers convinced that the quality of North American made products is greatly improved over that of the products coming from countries like China. Of course, this idea is mostly incorrect and, as Stereo Integrity Owner Nick Lemons wrote for us earlier, there are some big advantages to having products manufactured elsewhere. Still, human rights practices and increasing costs in China are making many re-consider the viability of manufacturing electronics in the United States of America.

The rising cost of commodities is a major problem across the globe, and the impact is starting to be felt in every single item we purchase. The cost of electronics, driven low by inexpensive manufacturing in China, is now rising for a variety of reasons. Steel, which is predominantly sourced from China, is being hit by increased mining costs and the rapid inflation of oil prices caused by excessive speculation is hurting production and transport costs of virtually every material. Meanwhile, magnets are still one of the most problematic materials to source in China, particularly if you're looking for less common magnets like neodymium.

In the midst of these problems, China is facing challenges in the workforce. Pressure from the international community and the Chinese workforce is pushing wages higher, with some experts suggesting an increase of ~80% in recent years. To top it off, the Chinese government has responded to pressure from the US and Europe and has removed some tax rebates for those Chinese businesses who rely on exports. The shortage of skilled labor in China is being compounded by the one child per family law that has been in place since 1979.

Steve Mowry of SM Audio Engineering has an excellent article in the 2008 Loudspeaker Industry Sourcebook that is published annually by Audio Amateur Inc. The article looks at manufacturing in China from the viewpoint of someone looking to start a company, cites what Steve believes to be the benefits and shortfalls, and includes a 10 step checklist for those considering manufacturing in China. The lessons from the article are, however, completely applicable to manufacturing in every region and should probably be followed by anyone in the industry. They are easily summarized as such:

1. Know and stay within your buildhouse's capabilities.
2. Design your products to leave as little room for human error as is possible.
3. Don't be too trusting: test your products during prototyping and randomly after production.
4. Communicate openly and freely.

So while there are no reasons to abandon ship, it will pay to continue closely monitoring developments in China (and elsewhere). Brent Butterworth, a former editor for Robb Report Home Entertainment recently provided an article for The Integrator that suggests manufacturing could start moving manufacturing back to North America, which would likely be received positively by many consumers.