Debunking the ‘Made in China’ Myth

By Akanksha Goel

9284423_origAs soon as we read the label and get to know that it’s a “made in China” product, our mind suddenly conjures up an image of a product which is low in quality and made up of cheap raw material. Inspite of the fact that it’s the largest growing economy of the world we often disgrace the ‘made in China’ products by concluding that they belong to the ‘won’t last long’ category. Chinese products are to American / German/Japanese/Korean products as a Maruti Suzuki Alto car is to a Range Rover – but this is the mask which needs to be removed to reveal the true face. Global manufacturers have picked China as the top sourcing destination outside their home countries, cementing the mainland’s status as the world’s factory, a survey has found.

The survey, conducted by global accounting firm KPMG in November last year, said respondents from Japan, Germany and Britain – three of the five largest economies – had chosen the mainland as their top sourcing destination after their home bases.

Almost, rather all the leading luxury line of brands get their entire range of products made at the World’s factory – China.   In the last decade, annual U.S. imports from China have grown from about $81 billion to last year’s $338 billion. Everything, it seems, comes from the Middle Kingdom. Over the last 20 years, supply chains have fragmented across the globe — with one part made here, and another made there. Rarely is any one product made in any one country. China often specializes in the final stage of production: putting components together before exporting to the final users. Indeed, much of the value of U.S. imports from China, includes parts and components made in other countries — the United States among them. According to our recent study, domestic content (the stuff that directly contributes to domestic economic growth) makes up about 45 percent of Chinese exports to the United States.

What does China have that Others lack?
Quite a lot. China has more mid-level engineers, a more flexible workforce, and gigantic factories that can ramp up production at the drop of a hat. China also offers tech firms a one-stop solution. “The entire supply chain is in China now,” a former high-ranking Apple executive tells The Times. “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.”

It’s not just about cheaper wages?
No. Wages actually aren’t that big a part of the cost of making consumer electronics. Paying American wages to build iPhones would add only about $65 to the retail price of each handset, according to analysts’ estimates. That’s an amount Apple could likely afford. And in fact, China no longer offers rock-bottom wages. But when it did, it used that window “to innovate the entire way supply chains work,” says Sarah Lacy at Pando Daily. China is now “a place other countries can beat on sheer cost, but not on speed, flexibility, and know-how.”

What does China’s competitive edge look like in practice?
One example from The Times article: When Jobs decided just a month before the iPhone hit markets to replace a scratch-prone plastic screen with a glass one, a Foxconn factory in China woke up about 8,000 workers when the glass screens arrived at midnight, and the workers were assembling 10,000 iPhones a day within 96 hours. Another example: Apple had originally estimated that it would take nine months to hire the 8,700 qualified industrial engineers needed to oversee production of the iPhone; in China, it took 15 days. Anecdotes like that leave you “feeling almost impressed by the no-holds-barred capabilities of these manufacturing plants,” says Edward Moyer at CNET News, “impressed and queasy at the same time.”

Massive operations dubbed “cities” in remote areas where assembly plants are complete with dormitories and cafeterias to house and feed thousands. The ability to find the requisite number of engineers or laborers within days to win new contracts. Government subsidies for requisite facilities. Component  factories that support assembly. And a labor force willing to work 12 hours a day, six days a week, for wages low compared to American standards. Brands repeatedly cite this flexibility and responsiveness as unmatched. When the sum of these parts equals a higher profit margin, all of the ocean toys bobbing in my bathtub come from China.

So, Chinese products are not at all low quality products, unless and until you start considering your branded wardrobe or your sophisticated electronic gadgets or your sedan standing out (it also contains parts made in China), tawdry.

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