“If something belongs to Asia, it goes there to be manufactured,” he added. “People look more holistically at their supply chain, their manufacturing. There are no absolutes. No, not everything is coming back to the U.S. in spite of some of the hype we hear, and some things are still going [to China]. If that’s your market, you make it there, but if your market is the U.S., then you make it here.”
Bonifacio added, “Going forward, people may make a different calculation, but no one will go back and unwind what they’ve done in China, particularly in the medical device manufacturing industry. They all see the massive market on the medical side and the access to that middle class of 500 million people. China’s rising middle class wants good healthcare.”
Front-line business owners in China also have labor issues, but it’s a strange dynamic. “There are people everywhere, but unless they bring the talent in from the western regions of China, there will be labor shortages,” Bonifacio said. "The younger people in China want high-tech jobs with one of China’s ‘Silicon Valley’ companies. They’ve had wage creep as people change jobs for money, much like mold shops have had in years past. When I was at Magor Mold, every time we’d put someone through the apprenticeship program, he or she would jump ship for better pay at the shop down the street. I used to say we were training people for the whole valley.
|Mark Bonifacio, President of Bonifacio Consulting Services.|
“Wage growth as a percentage has definitely slowed in Shenzhen, one of the big mold manufacturing centers, and in Shanghai. They had double-digit wage growth last year; this year will be much more muted. Government sets the wages by region and the increases that companies need to follow.”
Bonifacio concluded that he’s “not a believer in shock-jock headlines,” so we need to take a step back. “There are no absolutes in manufacturing because it’s so dynamic. While jobs can be automated, China—like the U.S.—needs labor.”
Perhaps the predictions that I made to the moldmaking industry 20 years ago are coming to pass. As manufacturing becomes more global, the playing field will become more level. Every country will have the same problems. Wages will rise along with the costs of raw materials, shipping and labor until chasing low-cost manufacturing hubs becomes a wasted effort. Doing business in a Communist-led country might start to have greater drawbacks. Perhaps now is the time to step back and re-evaluate your position.