Former President Trump had a policy called America First which was designed to encourage manufacturers to have some manufacturing in America. The results were tepid at best but it did make good copy at his rallies. President Biden wants computer chip manufacturers to manufacturer in the US and has come up with $50 billion to encourage the actions. Meanwhile, big tech companies including Apple and Google have been shifting some manufacturing from China but they went to Vietnam and India.
In an article by Daisuke Wakabayshi and Tripp Micke of the New York Times News Service, for the past 40 years or more China was the number one place to go to lower costs on manufacturing. The rising geopolitical tensions and the pandemic-induced supply chain disruptions have sent the high tech electronics to other countries besides China.
China has the dominant position of well over 90% in consumer electronics manufacturing, but companies are slowly moving to other countries. Apple is producing iPads in northern Vietnam, Microsoft is producing Xbox game consoles from Ho Chi Minh City, Vietnam and Amazon’s Fire TV devices are made in Chennai, India. These devices used to made in China and the effect is according to purchasing managers survey, factory activity in China has fallen for 2 months.
Foxconn, Apple’s largest contract manufacturer recently signed a contract to expand their facility in Quang Chau Industrial Park located outside of Hanoi, by $300 million which will generate 30,000 jobs. The pay in Vietnam is $300 a month for an entry level position which is good pay relative to farming but is more than 50% less than the $650 Foxconn pays in Shenzhen, China.
Linking to dividend paying stocks, all companies develop links or partnerships with other companies and for the most part the consumer does not fact in where the product is made, but does it work and how easily can it be fixed. In the world there is always a country will lower wages, China is finding out with a rising middle income group, there are other countries than can do manufacturing for less. One would think with the advent of more robots, they could be done closer to the head office, but things move relatively slowly, until there are consistent problems then options are examined. For your investments how much are your concerned where the manufacturing is done?
There are more questions than answers, till the next time – to raising questions.