West Can Still Be Best

I recently attended a meeting in London organised by the Messe Muenchen International, the Munich-based organisers of huge exhibitions like Electronica and Productronica. This meeting, which concerned Productronica, was interesting because several electronics companies that will exhibit at this year’s show came along to talk to us press people.

As the name suggests, Productronica is mainly about electronic production. Though it's not really my beat, it did provide an opportunity to ask the exhibiting companies about the dominance of China when it comes to the business of electronic production.

Guess what? It seems China isn't having it all its own way. Europe is starting to pick up more electronic manufacturing business, particularly in those European countries like Poland, Hungary, and the Czech Republic that made up part of the old eastern Bloc areas of Europe.

How is this happening? After all, China has cheap labour, a vast domestic market for electronically-based end products, and a modern infrastructure that continues to develop at an incredible pace.

The answer is that whereas China is great at rapidly mass-producing high-volume products, particularly those aimed at the consumer markets, it's not always the best choice when comes to more complex engineering requirements—those that can often result in lower volumes or greater design reiterations. Factor in the pure logistical aspect of doing business in China, and Europe becomes a more practical prospect for many companies.

And let’s not forget that many of the old Eastern Bloc countries now run some very attractive financial incentives in the form of government-funded regional development grants and tax breaks for companies that do commit to them.

So, okay, China is considered cheaper, but that’s not going to last. Take the Taiwanese economic model relative to electronics manufacturing. Back in the late 1980s and early 1990s, manufacturing was cheap in Taiwan because of a plentiful and low-cost labour force. But as the economic growth of that country escalated, so too did the wages and the price of living. By the end of the 1990s, cheap labour had disappeared and Taiwan no longer represented a cheap manufacturing base.

This Taiwanese model can be taken as a microcosm of China’s economic expansion. It may well prove in the near future that when it comes to electronics manufacturing, West can still be best.