China's Role as a Global Supply Chain Leader
Semiconductors from Germany and Taiwan, memory from Korea and Japan, display panels and circuitry from Korea and Taiwan, chips from Europe and rare metals from Africa and Asia -- all of these components arrive in China, where they are assembled into finished products.
At a dinner last February, Barack Obama asked Steve Jobs if the roughly 700,000 jobs at Apple suppliers--mainly in China--could be moved to the US.
Those jobs aren't coming back," Jobs said unequivocally, according to The New York Times.
The reason? The US simply cannot compete with China's position in the global supply chain. China no longer competes on price alone -- indeed labor costs in China are rising fast -- but big government investment in transport infrastructure and rising levels of educational achievement have seen the country use its position as a low-cost manufacturing base to develop into an efficient and skilled supply chain hub.
For Apple, the sheer size of factories in China -- including Apple contractor Foxconn, which employs hundreds of thousands of workers -- as well as the flexibility, skills and hardworking nature of China's labor force mean shifting jobs back to the US is not viable. "Asian supply chains have surpassed what's in the US," one Apple executive told The New York Times.
The Apple experience is also true for many other big electronics companies as well as for companies in other industries, such as pharmaceuticals, which is seeing Chinese-made finished-dose products begin to arrive on the US market, supported by tougher Chinese environmental and safety regulations.
Chinese companies are also working harder than their US counterparts to become global supply chain leaders, according to research firm Gartner. While US supply chain executives wanted to cut costs, the Chinese were striving to improve customer satisfaction, increase market share, reduce supply chain risk, and respond to diversified customer demand.
"The Chinese sure seem to know how to identify what we in the research world consider leadership," wrote supply chain expert Kevin O'Marah on his Gartner blog.
Meanwhile, global consumption patterns are also changing as emerging nations become richer and Western countries struggle with the global financial crisis, upending the "source-from-the-east-and-sell-in-the-west" model of globalization. Some observers say that out of the projected $14 trillion of global consumption in 2020, about 60 percent will be accounted for by developing countries worldwide.
Much of that consumption will likely be in China and Asia in general. China's own rapidly-growing markets stand to benefit greatly, simply by using the skills and competence for making store-ready, distribution-ready, and assembly-line-ready goods gleaned from serving Western companies.
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