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Concerns and tips for outsourcing electronics to China

By David Levy

China seems to produce as many outsourcing war stories as it does iPhones. The complaints I hear mostly go like this: “The EMS provider created a competing product from our design and began selling it in the local economy.” “The provider swapped out my AVL designated components for counterfeit, knock-off parts.” “I clearly stated which certifications were required, but the provider could never validate his standards certificates.” “Delivery was always late. Quality slipped considerably when in full production and we never regained control, ultimately losing some market share.”
If any of the above scenarios describe your dealings with a Chinese EMS provider, then I have some good news and some bad news for you.

First the good news: you are the proud owner of yet one more ‘China war story’ to tell at dinner parties.

Now the bad news: It’s your own fault for not implementing best practices at the initial partner evaluation stage.

The truth is, many OEMs have fulfilling partner relationships with EMS facilities in China, but these don’t develop by chance. It takes some due diligence on the front end, and some ongoing work later on.

 

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If you’d prefer a successful outsourcing experience to another ‘China war story’, here are some dos and don’ts in choosing an electronics outsourcing manufacturing partner in China.

Do ask around
Find out whom other companies are using for their outsourcing programs that might be similar to your product in functionality, program scope, or end market. Companies who are happy with their Chinese providers are sometimes happy to support them, as long as you are not in direct competition with these companies (for either their market or resources).

Do look for relevant experience
If you’re doing a mobile handset or smartphone, look at the potential provider’s product list and see if they’ve done other consumer electronics or smartphone products in the past.

Find product development services
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In your search results you can further target other Industries and/or Services plus, you can add more geographies to your search.


This is especially true for ODM projects, but is also largely true for electronics OEM, where the vendor is charged with following your BOM and instructions. Relevant experience is always a plus as it flattens out the learning curve. (OEM Exclusive: Request list of EMS/ODM providers anywhere in China or the greater Asia region)

Do go local
Find a translator to put critical information in Chinese, either on the drawing, spec sheet or manufacturing process instructions (MPIs). Oftentimes, the English information is well received at the start of the relationship, when the provider sales staff is in control, but later on you will need to ensure the right information makes it to the manufacturing floor.

Don’t be gullible when starting an initial sourcing effort online
General online directories exist like Alibaba or Global Sources, plus ThomasNet. Each of these might list some China EMS providers. But it’s much more advisable to search using an industry-focused resource or Website or, a product-specific site. Either way, online is only one of the many ways to begin or to augment your search. And when doing so, you will still need to do your due diligence on your results. (Search EMS/ODM companies by markets served, geography, services offered)

Search SMT assembly services
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In your search results, you can further target provider End Markets and/or Services.


Don’t be cheap, especially on due diligence
Managing your program will cost you something before you get product out the door. How much it costs will depend on the nature of the project and other factors, but don’t be afraid to spend a reasonable amount up front to ensure smooth sailing going forward. (See: Considerations for manufacturing electronics in China)

 

SEE ALSO
How to become a better EMS program manager
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Don’t be lazy
Talk to several potential providers, and narrow down your EMS list only after you’ve made visits and analyzed the pros and cons of each facility.

Do get references
Besides looking at which various products the provider has worked on in the past, get references. Get names and contact info of real people (customers) you can contact to get the low down on the provider’s service and quality level.

It’s best if those references you get are in your country and are more or less in your product category.

Call them and ask open-ended questions about their experience with the EMS provider: What was the biggest problem you had with them? How would you describe their quality? What would you like for them to do better? How is their responsiveness? On-time delivery? Overall reliability…

Don’t be unrealistic about quantities
If you find a small facility that is interested in smaller orders, unless it’s a design house, it is most likely low-tech (and low quality) or, it’s not a real EMS facility to begin with. A cost analysis will show how much you save going to China. (See: Outsourcing Calculator)

Don’t assume bigger is better
Find a provider whose value proposition matches your program’s requirements. Don’t assume that a bigger, high profile provider is necessarily right for your program. (See: Top 10 EMS / ODM providers)

Many of the really large providers / facilities are geared toward extremely large production runs (think: iPhones, motherboards, tablets…). The selling point for this type of factory is speed and capacity (and maybe capitalization, allowing for longer payment terms).

If your program requires smaller volumes of medical or industrial boards, for instance, you are out of their sweet spot. You should aim for a smaller, slower facility whose value proposition is geared toward flexibility and service, not volume.

 

SEE ALSO
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Working with manufacturing reps

 

Don’t perform without a net
It’s always good to have backup, or alternate, providers available for consideration from your ‘short’ list. In many instances, it won’t hurt to tell the alternates you are looking at them as a backup but, of course, if they can offer a better deal, you can discuss migrating your project to them. However you sell it, be honest. A good provider will understand the situation and advise you accordingly.

Do sign an OEM or ODM agreement – in Chinese
You may have heard China doesn’t have the rule of law, and that contracts are not worth the paper they are written on. This is not really true. China does have enforceable tort law, and a well written contract can protect you from malfeasance or poor performance on the part of your Chinese manufacturing partner.

How this is done is best left to professionals. You should also visit the Website for the US Embassy in Beijing on IP protection, plus the Chinese government Website on intellectual property protection in China.

Requiring that various responsibilities be codified in a legal document sends the message you take both partners’ responsibilities seriously. The legal implications may get a higher level of management involved in satisfying your requirements. (See also: OEM-EMS electronics hardware contract)

Nothing can guarantee you will have a good outsourcing experience in China, but not doing enough of the above can almost certainly guarantee you will not have a good experience.




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