I expected the routine this morning from a Wall Street Journal article entitled “LG Display Plans Plant in China.” I expected it would say LG was going to manufacture in China to save costs and/or to diversify its manufacturing.
But the following line from the article gave me an ah-ha moment:
“China’s LCD market is growing rapidly, so we felt it necessary to manufacture LCDs from the region in the long run,” said LG Display spokesman Park Sang-bae.
I know many of you have already realized this, especially those of you in the business of buying and selling product, but China manufacturing is in its second wave.
China’s first wave was strictly for cost savings; its second wave is for internal consumption. In a backward analysis brought on by this article, I realized that many (maybe as many as 50 percent) of the manufacturing clients my law firm has been helping go into China are going there as much to sell as to save. Of course, I have always realized this of our clients going there to start a restaurant or to sell beverages or to provide business consulting services, but it really just occurred to me how so many of our manufacturing clients are going there to sell there products in China in addition to having them made there.
After reading the article, I immediately recalled a recent conversation I had with a client that manufactures truck parts. I asked why they were going into China now (implying, as opposed to five years ago when things were even cheaper). The answer I got was that shipping costs had gotten too high and they were worried about losing out to those already there. I also recall a similar conversation with a company that makes very high end, large testing equipment. Why was it going into China now, I asked — while thinking the answer would be that before now the capabilities had just not been there. The answer I got was they now had a strong sales and repair force in China and so they were ready to start manufacturing there as well.
What are you seeing out there? Why does your company manufacture in China?