Tag Archives: China

Taiwan’s New Gravity

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How bad is the labor problem in China? We are aware, of course, of the steady hikes in wages, which have annually risen by at least double-digits for over a decade.

But now it’s being reported that Taiwan-based component makers have had enough, to the point where some are considering repatriating their production from China, or packing it up for Brazil, Mexico and elsewhere in Southeast Asia.

Now, I’m not going to put too much stock in an unsourced report. That said, the notion that Taiwan could steal back jobs from China has been floating around for months. The average salary in Taiwan has risen just 0.9% in the past decade, despite a working population of just 11 million. (China, by contrast, has an estimated 920 million working aged citizens.) Monthly wages in Taiwan’s manufacturing sector were NT 41,087 (US$1,358) as of October,  and have trended considerably more slowly than China for some time.

All in all, it’s a stunning development, given that just a few years ago China’s promise appeared mostly still in the “potential” stage. Is it possible that promise will ultimately go unfulfilled?

System Failure

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Apple is front and center today saying the death of a 15-year-old worker at one of its subcontractors was not the result of conditions at the Pegatron factory in Shanghai.

The teenager died of pneumonia, according to news reports. He was employed after using someone else’s ID to get the job.

It’s very sad that this happened. But the truly uncomfortable fact is that the worker was 15.

Apple’s response, as usual, was stiff and unconvincing: “Apple has a long-standing commitment to providing a safe and healthy workplace for every worker in our supply chain, and we have a team working with Pegatron at their facility to ensure that conditions meet our high standards.”

Underage workers continue to gain employment in Chinese factories. Why does this continue to happen there? Is it a failure of management? Is it cultural? And how many others will die before the system is fixed?

 

 

Why a Tight Supply Chain Is Actually Less Restrictive

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This is a great first-hand account of why a tech OEM found manufacturing in Mexcio to be far superior to China. The shorter supply chain, lower inventory, access to plentiful skilled engineering and machine talent (and accountants versed in manufacturing operations) — all of these have played roles in the decision-making and success of 3D Robotics.

Is A New Vision Needed?

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China’s industry minister has put forth an aggressive goal of building five to eight giants in the electronics industry with $16-plus billion in sales in the next two years through consolidation and overseas acquisitions and alliances. The Ministry of Information and Technology’s blueprint wants to move the country away from low-cost electronics manufacturing toward higher-yield, higher technical segments such as Lenovo and Huawei Technologies.

We believe that China will reduce the mining of rare earth metals to increase margins and offset recent price declines while using these materials as leverage in foreign dealings. The country is still far behind the rest of the world in chip design and manufacture, so we can expect major moves in that arena. The China Development Bank will put $20 billion behind ZTE to help it reach the $16 billion goal. The Haier Group, one of China’s bigger electronics companies, spent $700 million to buy a New Zealand company to increase access to Australia and Europe while increasing its technology base.

One has to wonder how the rest of the world will compete with this massive government supported approach. (China has a stated similar goal for automotive calling for 10 companies to have 90% of its industry concentration by 2015.) One has to speculate who will join forces with China’s electronic industry forays. How greatly does it threaten open markets and free competition elsewhere? How serious a role does industrial espionage play in this new game with newly stated ambitious goals? How big a role will defense issues and security have? Does America need a new vision for the future?

China Chemical Registration

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As of March 1, 2013, the following must obtain an appropriate Registration Certificate for Environmental Management Registration for Hazardous Chemicals in China:

  • newly established companies that produce hazardous chemicals
  • companies using hazardous chemicals for production purposes
  • companies importing or exporting hazardous chemical.

Registration Certificates will be issued by China’s Environmental Protection divisions and will be valid for three years. Existing companies that produce or use hazardous chemicals for production purposes have a three-year transition period to complete registration— this registration is separate from the registration required by the State Administration of Work Safety and it is said to aim at better tracking of the environmental impact caused by hazardous chemicals, rather than the health and safety impact.

Perhaps the biggest concern with the new Chinese chemical policies overall is how they add to the larger international weave of chemical restrictions, standards and regulations. The way to handle China’s hazcom rules— all of them, new and future— is to make sure that the way your company handles REACH, RoHS, Prop 65, GHS and TSCA also handles any Asian restrictions as well, from South Korea to Japan to India and China.

Newbies, look out. Newly established manufacturers must register their hazardous chemicals before completion and final acceptance of their project, while importers must register before they import a hazardous chemical for the first time. And the Registration must be complete before the final acceptance of any new construction projects or expansion projects of hazardous chemical manufacturers and users.

Legacy. Entities in China that manufacture or import hazardous chemicals must register their hazardous chemicals with China’s State Administration of Work Safety and China’s Ministry of Environmental Protection (MEP), while entities that use hazardous chemicals must register with China’s Ministry of Environmental Protection (MEP). Hazardous chemical manufacturers and users must also engage in material disclosure, that is, public disclosure of information regarding their hazardous chemicals production and use.

Information to submit when registering includes:

  1. classification and labeling information
  2. physical and chemical properties
  3. primary use
  4. hazardous characteristics
  5. safety information for storage, use and shipment
  6. emergency response measures.

In addition, hazardous chemical manufacturers must maintain a 24-hour domestic telephone hotline to provide users with emergency consulting services and technical instructions and other assistance with respect to hazardous chemical accidents. Another option is to assign the hotline to the Chinese government.

Action. In light of these regulations, the legal firm Baker & McKenzie suggests that entities in China who are manufacturing, importing, or using hazardous chemicals should consider: Designating certain employees, or creating a specific department, to be in charge of hazardous chemical registration and ongoing compliance requirements Conduct due diligence on suppliers in China who may be subject to these requirements as part of

Supply Chain Management (SCM). Rather than setting up an entire department to manage these changing compliance requirements in Asia, we would suggest subscribing to a secure SaaS software that manages compliance for you. In the end, it’s the most cost-effective way to manage fluctuating global regulations and supplier relations around them.

Outsiders Taking Over

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Is the bloom off the rose in Vietnam?

The Vietnam News Service is reporting that with many businesses shifting from production to imports, Vietnam’s electronics industry is “standing on the verge of extinction.” More than 90% of the nation’s electronics exports are performed by foreign-based countries, the Viet Nam Electronics Business Association maintains. Meanwhile, major OEMs are closing domestic plants and switching to an import model to serve Vietnamese customers.

For those who see Vietnam as an alternative to China, this is not the wakeup call they expected.

New CEO Mitchell Breathing Life in IPC

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The early feedback is that new IPC CEO John Mitchell has brought a much-needed breath of fresh air to an organization that had lost its drive and character after 11 years under the previous regime.

Among the early changes include a recognition that IPC has become out of touch with many segments of its membership. Designers were so disenchanted, a group of the Designers Council leaders were preparing to bolt the organization altogether. Fabricators’ antipathy toward IPC is well-documented and may even run deeper, as many smaller and private shops have long since labeled IPC as disinterested in their concerns. Even some assembly equipment suppliers have shared concerns over the standards process and perceived biases toward certain groups.

Much of that is turning around under Mitchell. He has moved quickly to make the rounds of various constituents, and in a departure from his predecessor, has not relied on staff to vet member opinions. He has begun to shed some of the entrenched “lifers” who had alienated too much of the membership to continue in their roles. And he has made clear, according to sources, that the staff focus going forward needs to be on the members, which is a long overdue switch from a decade of “Is It Good for the IPC?”*

Further, he is repositioning the organization to better reflect the way the industry is structured. One new division is simply called Member Success, which he describes as a group of functions (membership, member support, events and industry councils and market research) “focused on helping our members be more successful and taking an active role in helping them more fully benefit from their IPC membership.” Most of these areas had grown stagnant to the point of calcification. One of the problems many had identified with IPC is that it existed as much (or more) to ensure its own success but had lost its vision on how to improve members’ profitability. Recognizing that the onus needs to be on IPC to help its members (and not the other way around) is a long overdue and welcome shot in the arm.

Dave Torp, whom many feel is a talented but marginalized asset, is now clearly in charge of the technology and training programs, a role where his background in engineering at Rockwell Collins and sales and marketing at Kester will truly help him excel.

There is a renewed interest in Public Policy, which will in the future coordinate with Brussels and Beijing (and perhaps other key spots). IPC plans hire a new vice president for this space, a sign that it needs fresh input and energy if it plans on making a difference with the legislative branch.

Mitchell seems highly motivated to invest in IPC’s international operations, a space where the trade group’s board had been critical of the previous president for moving at a glacial pace. To that end, IPC is casting about for a president of its China organization, a smart move and a tacit nod that in Asia, titles mean something, and the approach of using a middle manager with no real authority was not working. It says here that if vice president Dave Bergman stays on, he should move to Shanghai, where his experience at IPC (30 years) could better be put to use.

One very smart move was to create a Special Projects function, which allows IPC to look at new or short-term initiatives without distracting staff from the core functions.” We see this as wise because new projects often either sap all the attention and resources from important but functioning efforts, thus potentially leaving those programs to wither, or vice versa, attending to existing programs can act as a excuse for letting new efforts simply dangle. Mitchell has brought on a former colleague named Ed Trackman to run this area.

IPC holds a critical place in the electronics supply chain, but that spot had slowly been eroding over the years. It’s early, and the proof will be in the results, but based on several conversations with IPC members who are much happier today than I’ve seen them in years, Mitchell appears the right person for the job.

*With apologies to Office Space.

3 Thoughts on Foxconn

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A few thoughts on Foxconn in the wake of last night’s Fair Labor Association report:

1. Not that Mike Daisey feels much better today, but the excessive overtime was clearly way out of whack with Chinese law.

2. The FLA head was very clear in stating that Foxconn’s assembly lines are on par with any in the world. We knew that. There’s only so many placement machines and screen printers out there. Don’t let that obscure the larger picture, which was the dehumanization of employees. One quote that jumps out: “We’ve got to make sure people can opt out and if they do feel that they’ve suffered any kind of incriminations as a result, that they can complain, and that complaint will be handled fairly.”

3. The Electronic Industry Citizenship Coalition, which supposedly sets standards on how electronics OEMs should behave, has been fully exposed as being nothing more than a PR front.

Finally, you should read this piece from the Silicon Valley Mercury News that explains what the FLA is — including the main source of its funding.

 

How Much Would You Pay?

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Would you be willing to pay for more “fair-trade” electronics?

The host of This American Life, a public radio show based in Chicago, revives that debate in a recent segment on Mike Daisey —  the author of The Agony and Ecstasy of Steve Jobs — and his visit to Shenzhen (so polluted, it looks like “Bladerunner threw up on itself”).

The issue over China’s labor practices, the show finds, boils down to that question.

 

GKG: Westward Ho?

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Southeast Asian assembly process equipment companies have approached Western markets in fits and starts.

A few have made inroads: From time to time, we have seen JT and Fulongwin soldering equipment at US plants, usually smaller ones (Flextronics is an exception) and often on the US West Coast. But while we’ve been reporting for more than a decade on the availability of literally scores of Chinese-made brands, some of which are very popular in Taiwan and China, it’s still highly unusual to see any make it across the ocean.

Many have been stymied by patent issues that effectively have blocked them specifically from the US and European markets. Another problem is finding good channel partners. From time to time, firms ranging from independent reps like FHP Reps and Bill West to solder paste vendors like Qualitek have tried, with limited success. Service and access to spare parts have been limiting factors.

That’s what makes Friday’s announcement from GKG so interesting. GKG has named Juki as exclusive distributor of its screen printers in the Americas. Known primarily for its placement equipment, Juki has been inching toward a full-line offering for the past couple years, having begun distributing Intertec’s selective soldering equipment in 2009.

For years, DEK and Speedline have dominated the Western printer markets, with Asys/Ekra in third with an estimated 10% share. Juki’s track record and never-say-die approach to selling makes it a formidable competitor. However, Juki has many of the same distributors as Speedline, and it is unclear that they will give up the latter for a new player.

But the real prize may be the emerging South America market. As Juki CEO Bob Black told us, “In Latin America, out major competitors are offering complete lines. To be competitive, we need to do the same.” And Juki has the breadth and depth in its service department that many standalone reps have not.

Keep an eye on this.