CONTRACT MANUFACTURING IN CHINA
The Advantages and The Obstacles
A White Paper by W.J. Peterson
PTTS (Professional/Technical Training Services)
ABSTRACT
There is mounting evidence that the ability for large contract manufacturers (CM’s) to exist in their present
form in the United States is being put to the test by the recent surge in operations to overseas facilities. This
paper will address China in particular as a choice for many CM companies.
As with any shift overseas, companies that have considered themselves “best practice” are suddenly
confronted with cultural and managerial issues that are completely unique to a particular country. In this
respect, China certainly presents obstacles that require delicate maneuvering and careful consideration.
Understanding what will work here, rather than what has worked elsewhere, is the key.
In attempting to understand foreign cultures and practices, avoiding racial stereotypes is absolutely
necessary. Remarks of that nature degrade and demean vast groups of people without merit. However, it
would be equally harmful to dismiss cultural differences as inconsequential to doing business in another
country. China defies definition in many respects. As a country beginning its way through global economic
markets, many issues will surface which cannot even be predicted. What is predictable, however, is that
China represents a vast, largely untapped pool of resources and opportunities. Recent attempts by dozens of
countries on several continents to normalize trade relations with China support the assertion that
opportunity for investment exists.
WHY CHINA?
A typical hourly floor employee in Silicon Valley makes about $12-14 dollars per hour. In other
concentrated areas of electronics manufacturing, the hourly wages are slightly less. In China, however, a
typical SMT engineer (a person with the task of operating, programming and trouble-shooting machines
that are worth half a million to one million dollars) earns about 2-3 dollars per day. The difference in profit
margins is ob