Tuesday, June 22, 2010

Chinese Labor Costs Rising; Increase Automation In China Factories

From Bloomberg article, "Rising China Wages Prompt Nissan, Foxconn to Boost Automation" by By Mark Lee:
New minimum wage laws, a looser yuan and worker strikes like those affecting Honda Motor Co. and Toyota Motor Corp. are raising costs at plants in China’s Pearl River Delta, leading to increased automation of assembly lines.

Foxconn Technology Group, Nissan Motor Co.’s Chinese venture and VTech Holdings Ltd. said they are investing in factory equipment to reduce their reliance on labor.
The natural drive of all manufacturers, whether Chinese or American, is to reduce production costs. As labor costs rise, whether in the US or China, producers look for ways to lower their product costs.

Companies have several ways to lower goods costs. Workers can become more efficient, i.e. produce more in the same time; companies can invest in machines and automation to produce more goods at a lower unit cost; or companies can outsource to lower labor cost countries. Employers will use all three methods and others to lower their cost per product made.

Preventing outsourcing only speeds up automation and the drive for more efficient workers. In all manufacturing, eventually, more will be produced with fewer workers at a lower unit cost.

No comments:

Post a Comment