China Leads The World In Electronics Contract Manufacturing At Average Wage Of $2.19 Per Hour, Says IHS

Europe is faltering in Electronics Contract Manufacturing.  A  bright spot can be discerned, however, coming from the industry’s single biggest growth engine: China. Overall expectations point to another round of high single-digit growth this year in that country, which already accounts for more than half of the contract manufacturing industry’s aggregate revenues.

 

China also has grown to be the world’s largest consumption market of smartphones and PCs—some of the end products it helps produce—so China’s pace of growth in those markets will determine how quickly those areas expand.

 

China, though, is no longer the nexus of cheap labor, instead sitting atop a list of countries characterized by low manufacturing wages. China in 2011 had wages averaging $2.19 for each worker per hour, which is rising at nearly 15 percent per year.

 

Despite this, IHS does not believe another region in the world is likely to emerge as a new low-cost manufacturing location. In most cases, the infrastructure—including power, water and transportation—of locations under consideration is simply not adequate or robust enough to support large-scale manufacturing, especially when compared to what the industry now deploys in two of its largest manufacturing locations in China or Mexico.
The worldwide contract manufacturing industry also will contend with other significant issues in 2012. For instance, the soundness of companies and their balance sheets will continue to be scrutinized after the bankruptcy filing in October 2011 of major player Elcoteq from Finland. In addition, there likely will be continued pressure on suppliers to ensure among customers that they are in compliance with all local labor laws given the recent announcement by Apple to allow outside monitors into its supplier facilities.

 

On a positive note, the continuing popularity among consumers of devices like smartphones and tablets means contract manufacturing in these areas can be expected to help compensate for slow growth elsewhere in the industry. A shift toward fewer product offerings in the notebook industry also will have positive impacts, leading to improved inventory velocity throughout the besieged PC notebook supply chain. Moreover, lower component pricing this year should help improve industry margins for the near term.

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