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Making Sense of Bringing Manufacturing Back Home

Most electronic consumer goods in our house bear the "Made in China" label. Recently, though, Royal Philips moved its electric shaver production from China back to the Netherlands, where the high-quality shavers will be assembled in the same highly-automated factory where development, manufacturing and logistics processing takes place. Does moving back home mean sense and simplicity?

The move by Philips is not the only one. More companies are considering bringing their product manufacturing back to Europe or the U.S. The Chinese economy is growing so fast that it shows some signs of overheating: Skilled labor is becoming scarce and that translates into fast growing wages (last year’s average annual salary increase in China was 15 to 20%).

Factory workers in China are used to long hours and regular overtime, working in enormous factories (often more than 100,000 workers per factory) under harsh conditions. In the last couple of years, for example, multiple incidents were reported in the Foxconn factories where Apple products are manufactured for the American and European markets. These incidents often relate to long (boring) working days, bad working conditions, and poor living conditions. Under pressure from Apple, Foxconn doubled all wages and improved working and living conditions. 

Increasing Wages: Fueling Demand

The Chinese people have worked for many years to earn a better living and better living conditions (including housing, education, and health care). They now understandably want a larger portion of the prosperity cake: Their own consumer electronics goods, fashion products, and, ultimately, their own car. This is how increasing wages fuel domestic demand. Read the full column here.Editor's Note: This column originally appeared in the October 2013 issue of SMT Magazine.