What China's Rising Costs Mean for Design

Thoughtful post from Chris Byrne, co-founder of loudspeaker manufacturer NHT:

The amazing thing about China is the speed at which it caught up in manufacturing and design capability.  By 2001 you could find some of the finest craftsmanship the world has ever witnessed, and on a huge scale.  It was intoxicating.  Factories were going up in a matter of weeks throughout the province.  You could discuss an idea for a new part in a morning meeting and it was not uncommon to find a prototype, still warm from manufacturing, on the conference room table upon returning from lunch.  For the first time in years we were no longer bound by cost constraints.  Any design, no matter how complex, was possible to produce and often at mass market prices.  It was so easy.  We got lazy and complacent.

In 2008 the hammer fell.  Costs in our industry increased by 30% or more this year. Consumers have not even seen the impact of this yet, but soon will.  A substantial part of the sudden increase is due to the rising standard of living in China, but it also came from the rising prices of the world’s dwindling natural resources.  Some believe manufacturing companies will move to the next low cost, underdeveloped country.  I think not.

In my opinion there are a specific set of circumstances that made China the powerhouse it is and those same circumstances are also the reason we have run out of practical places to go next

Western Europe and the US watched Japan’s prowess in manufacturing efficiency emerge over a period of 30 years.  As the standard of living rose in Japan, the crown moved to Taiwan where efficiency met lower cost labor.  This lasted 15 years or so, then it all moved to China where the investment and skills of the automated world met the largest, untapped and under paid labor pool.  This combined with the existing logistic infrastructure in the Pacific Rim and the proximity of Hong Kong, the world’s largest free port, makes China the perfect location.

Certainly there remain countries with abundant low cost labor.  However most of them have little or no infrastructure in place to support mass manufacturing and are geographically difficult to get to.  The investment required would be many times the amount used in building China.  And don’t forget that our declining and increasingly expensive  natural resources only exacerbate the problem, making costs higher no matter where products are made.

So what does all this mean to you and I?

It means that manufacturers are going to have to become clever again about design. We are going to have to choose what is important and give up on the “nice to have” features if we want to remain affordable.  It means we are going to have get smarter, work harder and maybe for the first time learn real marketing.

For consumers it means mainstream products are going to be more expensive, or they are going to lose desirable cosmetic and feature elements to which we have become accustomed.  It means that people will have to make choices that they will live with, not throw away.
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