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Few Alternatives To China’s CE Plants

Aside from visiting lovely locales like Playa Del Carmen, Mexico, one of the main advantages of attending the annual CEA CEO Summit is networking with top executives, and last week’s event was no exception.

When you meet with industry leaders at a place like the Fairmont Mayakoba, the world of business seems a million miles away, except when the talk turns to a subject like the CE industry’s reliance on Chinese manufacturing. 

As discussed earlier in the year, Chinese manufacturing costs are going up and CE manufacturers large and small are going to have to handle higher prices due to energy and raw-material costs, plant shutdowns, some plants closing for the weeks around the Summer Olympics and the like.

More than one major CE executive said the industry’s sole reliance on Chinese plants has come back to haunt everyone.

In talking with a handful of CE manufacturers, the cost of making certain types of products will go up this year. They will take a hit, but retailers will have to take a hit too, as both try to convince consumers that they might have to pay more for CE products.

The natural question is this: Is there an alternative to Chinese manufacturing? From what I found out last week, the short term answer is no. Vietnam, Malaysia and other Pacific Rim countries would be the first choice. But those countries don’t have the electronics plants, the roads or the basic infrastructure to take on a major role immediately. It could in a few years, but not now.

That’s not surprising. China has been in the CE manufacturing business for at least two decades. Building the type of infrastructure and expertise for CE didn’t happen overnight in China and won’t happen in any other country overnight either.

As one manufacturer put it: “For the foreseeable future, manufacturers are going to have to diplomatically balance the needs and higher costs Chinese factories have, convince retailers that this is a serious ongoing problem, and maybe try to convince consumers that CE product prices may go up … or at least not go down as fast as they are used to.”

Like the energy crisis, credit crunch and the housing debacle, there are no easy and quick solutions to this problem.