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Keys to cost reductions for outsourcing electronics in China

By David Levy

The “China price” is not what it used to be. Many old-time manufacturing professionals reminisce about the good old days, when a cheap Yuan, cheap and abundant labor, cheap real estate and lax regulatory regimes meant easy money.

You could succeed in China manufacturing by just showing up and making stuff real cheap, then selling at nice margins. The China price was so low, and competition so scarce there was enough profit for both importer and maker to prosper. And with such an obsessive focus on the price, expectations for quality, service, and social accountability were all low.

Today, China still competes well in electronics manufacturing, but not solely on price. The new China value proposition is more sophisticated and embraces mature supply chains, availability of quality upstream processes, modern infrastructure, and a wide range of contract electronics providers offering varying specializations, technical competencies, and capacities. But it’s still possible to get good pricing from EMS providers.

Below, some strategies to help you get reasonable pricing from your EMS providers.

Go local. Go Direct.

Some Chinese EMS providers maintain sales or engineering offices in US cities. To the US customer, this may seem like a best-of-both-worlds proposition — outsourcing to China while dealing locally; no need for late night calls to catch China business hours, phones are answered in English, and face-to-face meetings won’t require international travel. (Request list of EMS/ODM providers anywhere in China or the greater Asia region)

While US or European offices may be a plus, these can also add unnecessary costs, and risk.

This adds cost because the office adds no value to the product but still needs to be funded, and the US-based staff handling your program needs to be paid. It also adds risk because Western-based individuals who have ownership of your account are not the ones performing the work– those folks are in China. (See: China contract negotiations)

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Its also generally a good idea to deal as directly as possible with the people actually doing the work. And chances are the local sales office you deal may, or may not, have a strong relationship with the China-based facility.

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