Bringing Manufacturing Back to the US – PCBDesign007

After many years of seeing manufacturing jobs move to China and other low-wage countries, there’s a trend for many U.S. companies to bring production back to the United States. Higher wages in China, coupled with the cost of international operations, are prompting more companies to consider a return to American shores.

A number of consulting companies have examined this trend. The Boston Consulting Group predicts that by 2020, higher U.S. exports, combined with production work that will likely be “reshored” from China, could create 2.5 million to 5 million American factory and service jobs associated with increased manufacturing. Last year, IPC did a survey and found that companies in the electronics supply chain were moving back to the United States.

“About 11 percent have brought operations back, while nearly 20 percent created new opportunities in North America instead of establishing them elsewhere,” Sharon Starr, director of market research for IPC, said last fall. “The 11 percent represents $9 billion in operations and several new jobs.”

Determining whether or not reshoring an operation will improve profits and efficiency is not a minor decision. Now there’s help for corporations that want to see if reshoring, which includes capacity increases in the United States as well as reshoring operations that are now overseas, makes sense for them.

“Instead of just looking at wages and per-piece prices, companies need to look at the total cost,” said Harry Moser, president of the Reshoring Initiative. “That includes duties, freight costs, packaging, and factors like opportunity lost due to long lead times. The challenges of language and the potential problems translations can create are also a factor.”

He noted that these hidden costs have already driven some high-level reshoring moves. Apple, Motorola, Lenovo and General Electric have all announced plans to transfer offshore manufacturing operations to the United States. The emergence of a middle class in China is one of the factors that’s making U.S. manufacturing more attractive.  

“In the past 10 years, wage rates in China have gone up 14–18 percent per year,” Moser said. “Their cost structure is getting close enough to ours that either now or in a few years the total costs can be advantageous here.”

When corporations decide that China may be getting too costly, they have options other than the United States. Vietnam and Cambodia are among the countries that have been luring some companies. However, Moser doesn’t view these countries as viable options.

“They have the same hidden costs, which may be higher because they don’t have the same infrastructure or the same level of trained workforce,” Moser said. “One factor that always came up with China was that manufacturing there helped companies sell into a market with 1.3 billion people. That argument certainly isn’t the same for Cambodia or Vietnam.”