[jdietrich]

Chinese labour isn't particularly cheap by global standards, especially in Shenzhen and the wider PRD region. We outsource to China because they're damned good at manufacturing.

Apple products could be built anywhere, but only because Apple have absolutely vast economies of scale. Most consumer electronics products couldn't be built anywhere else at a viable price, not because of labour costs but because of infrastructure. China has the supply chains and the expertise to build anything from a handful of PCBs to a couple of million units. There's just nowhere else on earth where you can set up several assembly lines in a few weeks or get a prototype built and tested in a few hours.

[jbay808]

> We outsource to China because they're damned good at manufacturing.

I suspect it's the other way around. The supply chains, manufacturing expertise, automation, and skilled labour that are now China's main advantages were created through decades of investment that began with a search for cheap labour, and gradually crept up the value chain.

30 years ago in 1989, you would have said that you outsource manufacturing to Japan because they're "damned good at it". Only the very cheapest products would have been outsourced to China at that time. The skilled labour and supply chains weren't there.

30 years before that, in 1959, you would have looked to the US for a force that was "damned good at manufacturing". Only the cheapest products would have been outsourced to Japan.

Basically you start setting up factories making cheap stuff. Then as you gain skill and expertise, your quality gets better faster than your prices go up. The expensive countries see how much they can save by outsourcing more and more of their supply chain to you, and in the process their domestic supply chain dwindles and their skilled labour retires or gets laid off.

Eventually, you're the only choice for anything, until someone cheaper shows up to undercut you on the cheaper stuff...

[jdietrich]

>I suspect it's the other way around. The supply chains, manufacturing expertise, automation, and skilled labour that are now China's main advantages were created through decades of investment that began with a search for cheap labour, and gradually crept up the value chain.

Of course China started at the bottom of the value chain and moved up. The point I'm making is that China is no longer just a mass of undifferentiated cheap labour and low legal standards - it's a serious industrial power with a lot of unique strengths. A lot of low-skill, low-cost manufacturing has already left China in search of cheaper labour, but China is likely to remain a powerhouse in many industries for the foreseeable future. They're heavily investing in automation and are well-equipped to remain competitive despite rising labour costs.

[jbay808]

I didn't mean to come across as disagreeing with you about China's strengths. I fully agree with what you have written -- but it's also exactly the same thing we could have said about Japan in 1989 or the USA in 1959. Right down to investing heavily in automation and being well equipped to remain competitive despite rising labour costs.

And Japan still makes a lot of top-notch stuff, and even the USA does too, although neither are the obvious go-to places to get something made, which they used to be.

The same thing may well happen with China; their integrated domestic supply chain and expertise are huge advantages, but the same used to be the case in the USA and that didn't stop companies from looking elsewhere.

At the same time, Chinese companies have noticed that they don't have to be anybody's contract manufacturers; they can design products faster and better than engineers in the USA who have never visited a production floor in their lives. And so it goes...

[bsder]

> We outsource to China because they're damned good at manufacturing.

They are now. They were not when outsourcing began.

And that amazing "supply chain" relies on the fact that the West consumes large amounts of expensive consumer goods continuously. Consequently, the parts flow continuously and are consumed without need for inventory. If manufacturers start moving out of China, the parts flow will stop, inventory will back up, and the supply chain will dry up and blow away post haste as everybody heads for the door to avoid being the one holding the bag.

Many things in manufacturing rely on flywheel inertia to keep going. When the flywheel hiccups, the stuff upstream crashes to a halt.