SMT007 Magazine

SMT-June2014

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10 SMT Magazine • June 2014 placating their international trading partners and through the continued success of a grow- ing middle class. Being part of the WTO has its advantages. I do believe the leadership in China wants to have a more open, democratic society, really. They're getting there. I don't want to condone their absolute, dictatorial control and lack of personal freedoms, but they have been able to pull off an economic miracle with the help of the West, which has lifted some of their people out of poverty. It ain't all bad, if you're one of those middle-class Chinese. The release goes on to state that the UK is the low-cost producer in Western Europe, which isn't surprising. They've held a top spot for some time. They've had very friendly busi- ness policies since the Margaret Thatcher days. French government activist Olivier Cadic, the founder of PCB007, moved from Paris to the UK to take advantage of the lower costs, in part to strengthen the competitiveness of his busi- nesses, but more likely, to send a message to the French government. Mexico now has lower manufacturing costs than China. This news does a couple things for the U.S. First, it potentially brings manufactur- ing closer to home, to the same time zones and to a culture Americans are more familiar with. Second, it takes the pressure off of the border with Mexico. As more Mexicans find work in their own factories, there is less need to seek employment in "El Norte." A Few Surprises The cost of manufacturing in Brazil was a surprise and doesn't seem to make sense. They now call Brazil "one of the highest-cost coun- tries." Another report from the World Eco- nomic Forum said this: "Brazil's manufactur- ing competitiveness is expected to strengthen over the next several years. Driven by ongoing investment in infrastructure in preparation for the 2014 World Cup and 2016 Olympic Games, relevant changes in the energy sector, and other recent policy reforms, Brazil appears to be fa- vourably positioned for the future regarding manufacturing competitiveness." There seems to be a disconnect between these two organiza- tions. A pleasant surprise was that U.S. manufac- turing is now on par with costs in Eastern Eu- rope. Here's another quote from BCG: "Overall costs in the U.S., meanwhile, are 10–25% lower than those of the world's ten leading goods- exporting nations other than China." Energy: that's the ticket. We have the market; we have low-cost and very reliable sources of energy, a stable currency, great trading partners, a well- educated, hard-working labor force and a solid infrastructure to reliably produce and move goods to market. BCG's study looks at four direct economic drivers of manufacturing competitiveness: wag- es, productivity growth, energy costs, and cur- rency exchange rates. Harold L. Sirkin, a BCG senior partner and a co-author of the analysis said this: "Many companies are making manufactur- ing investment decisions on the basis of a de- cades-old worldview that is sorely out of date. They still see North America and western Eu- rope as high cost and Latin America, eastern Europe, and most of Asia—especially China— as low cost. In reality, there are now high- and low-cost countries in nearly every region of the world." Based what we've seen as the economies of those low-cost producers improve, costs climb, as well. There are no more "Chinas" as far as I can see so we won't experience that phenom- enon again, anytime soon. Those emerging low cost producers will take business from China, Mexico and elsewhere, in small bites here and there, serving mostly local and some interna- tional markets. I see the shift to automation re- moving most of the cost advantages associated with low-cost producers overseas in the not- too-distant future. With that, economies will continue to equalize as we move into the next decades. That's the way I see it. SMT The way i See iT ray rasmussen is the publisher and chief editor for i-Connect007 publications. he has worked in the industry since 1978 and is the former publisher and chief editor of CircuiTree Magazine. To read past columns, or to contact rasmussen, click here. We SAW THIS COMIng continues

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