Since the late 1990s,the globalization of the electronics industry has put North American and European manufacturers in competition with manufacturers in China and other low-labor-cost areas. Unable to compete on price,many western manufacturers set up operations or began tapping sources of supply in the low-cost regions. High-volume products requiring low-tech electronics were the first to move from west to east. Later,as Chinese manufacturers gradually caught up to their western competitors in quality and advanced manufacturing capabilities,production continued to move east.
The movement of domestic operations overseas in search of lower costs has slowed in recent years,as most high-volume production has already left the west. The impact of some economic trends,such as rapidly rising wages in China and rising fuel costs,have contributed to the slowdown in movement of operations overseas. At the same time,manufacturers were discovering that the actual cost differential was lower than expected. In response,another trend began to emerge: on-shoring.
IPC undertook its first on-shoring study in 2012 in an effort to confirm the trend and measure its impact. Until that time,on-shoring had been the subject of speculation based on anecdotal evidence and many questioned whether the trend was real. IPC’s 2012 study found that 11 percent of the 229 reporting companies had moved some part of their operations from overseas back to North America from the beginning of 2009 through the middle of 2012. It also discovered that 19 percent of these companies had set up new operations in North America during the same period after considering overseas locations.
In 2013,a follow-up study showed that 16 percent of the 92 reporting manufacturers had moved some operations from overseas to North America from the beginning of 2012 to mid-2013,and 14 percent were planning new operations in North America through the end of 2014. The top drivers of these decisions,as reported by the survey participants,were the cost of transportation,management costs,the need to be close to customers and quality control.
The comments offered by the survey participants,particularly in the 2013 survey,indicate that a new way of thinking about operational planning is taking hold. At many companies,siting of operations is no longer a tactical decision,but is now part of a larger regional strategy that takes into account everything that affects their bottom line. They look not only at direct costs,but also at things like the speed of product innovation,time to market and insight on customer needs.
New informational resources are available that help executives conduct a thorough impact assessment,such as those offered by the Reshoring Initiative and IPC’s new study Where in the World? A Regional Strategy Roadmap for Electronics Manufacturers.
This presentation will review the evidence of on-shoring and its impact on companies that have chosen that path. IPC plans to conduct another follow-up study in early 2014 about the actual impact of on-shoring,covering such issues as inventory reduction,quality,innovation turnaround time,intellectual property protection,the “green” impact,sources of supply and customer satisfaction. These new findings will be presented for the first time. The presentation will also summarize insights from the new Where in the World study about how regional strategies are taking shape and changing the global landscape of the electronics industry.
