IPC’s 2008 survey indicates some sourcing patterns are shifting from Asia back to North America and Europe.
Business without borders
One year ago, the world was an entirely different place, says Bob Wiegand, vice president of sales and marketing for Eastek International, an electronics manufacturing services company in greater Chicago with 465,000-square-foot manufacturing facilities in southern China. Gas had soared to $4 dollars a gallon, copper peaked at a record high, the U.S. dollar exchange rate was weakening and labor rates in China were increasing.
“Given all of those factors, the cost of doing business in Asia was growing,” says Wiegand, whose company markets a concept called, The Eastek Edge, an end-to-end manufacturing process for companies seeking to design, source and/or produce products in China. “That had people re-evaluating, ‘Does it make sense to go to China?’ For a lot of companies, it didn’t anymore.”
IPC Market Research also observed the possible trend, says Sharon Starr, director of market research for IPC. Industry buzz indicated sourcing patterns may have been migrating away from China and back to North America and Europe. In response, Starr’s department surveyed executives and marketing professionals from EMS, printed circuit board and supplier companies to explore the issue.
The survey, conducted in November 2008, concluded that 42 percent of the 50 participating companies had seen some portion of their business return from Asia in the past two years. Survey findings were made public to IPC members in January 2009 through the report, A Reverse Trend in Regional Sourcing in the Worldwide Electronic Interconnect Industry.
“This issue seemed to be coming up regularly, but there was no hard evidence to support it,” Starr says on IPC’s decision to conduct the survey. “[It] was an attempt to confirm that the trend is real and to begin to quantify its impact.”
A Problem of Quality
Michael Gasch, consultant at statistical data firm Data4PCB in Schramberg, Germany, and a 20-year industry veteran, says that from his perspective, quality control was the main reason an increasing number of companies reversed their sourcing patterns.
“Some Chinese manufacturers became sloppy and many quality issues … have been [plentiful] during 2008,” Gasch says. He also adds that the increase in fuel prices through mid-2008 raised both the transportation and final costs of products. “Combine that with long supply chains and rising costs, and European customers with smaller volumes and quality-critical products pulled their orders back to European manufacturers. Small volumes as they are the case in industrial electronics were no longer welcome in China last year. The changes in the economic environment have changed this fundamentally.”
In the U.S. markets, Wiegand says he observed similar source reversal trends. “About two years ago, there was a migration, especially with the quality issues surrounding China products,” he says. Additional IPC survey findings, including currency exchange rates, long supply chains, costs and communication difficulties, all came into play for Wiegand and his company, as well.