Making sense of the nuances of manufacturing in different regions worldwide
There's an old expression: "They don't make 'em like they used to." In electronics manufacturing today, a more apt expression is: "They don't make 'em where they used to."
In all the years Arrow Electronics has been in the distribution business, serving the electronic components and computer product industries, one of the most profound changes has been the migration of manufacturing to different regions of the world as companies continually search for ways to lower costs, reduce time to market and gain a competitive edge. In today's global marketplace, it's common for products to be designed in one region and manufactured elsewhere.
Three current hotbeds of electronics manufacturing are China, Eastern Europe and Mexico – each for different reasons, and accordingly, each attracting different customers.
China: Low cost, high volume and a huge consumer market.
China is where most of the world's consumer electronics products are made today – from DVD and MP3 players, to mobile phones, to automobile navigation systems—and with good reason. Facing constant pressure on pricing and margins, consumer electronics companies need to minimize manufacturing costs, and China with its low labor costs and ability to produce in high volumes, is well suited for that industry. And China itself is a huge consumer market, giving companies an extra reason to manufacture there. Terry Cheung, director, Global Business Conversion, Arrow Asia/Pacific, says, "Many of our customers want a bigger footprint in China because it's a low-cost region and a very good market with a large population. This is especially true in mobile phones for which there is a huge demand here."
Eastern Europe: Emerging as an economical, high-tech center.
The migration of electronics manufacturing has generally been from west to east – from North America and Western Europe to the Far East. But increasingly, in recent years, western companies have discovered solutions closer to home in the countries of Eastern Europe, offering low-cost, high-skilled labor combined with engineering expertise. Plus, the proximity and accessibility of Eastern European countries make them more attractive as manufacturing centers, especially for some major automobile manufacturers that have either opened or are planning to open new production facilities in Poland, Slovakia and elsewhere in the region. The combination of low cost and technological sophistication also make Eastern European countries attractive to makers of communications equipment and producers of LCD displays. "For manufacturers in the U.S. and Western Europe, Eastern Europe has become a more cost-effective alternative in terms of the total cost of outsourcing compared to China," says Hermann Reiter, sales director, Emerging Countries, Arrow Central Europe. "This region is particularly attractive for low-volume products whose design and manufacture require a great deal of sophistication."
Mexico: Well positioned strategically as well as geographically.
In 2000, Mexico was what China is today – a low-cost manufacturing center for high-volume products. But as most of that manufacturing has now moved to China, Mexico has evolved as a center for the manufacturing of low-to-medium volume products of higher complexity, such as medical equipment, network communications, automotive components and sub-assemblies, and avionics. Proximity to the U.S. is a major benefit to customers because it reduces transportation time and cost. Plus, a countrywide emphasis on building local expertise in software engineering and other high-tech disciplines make Mexico even more attractive for manufacturers of complex electronic products. "Mexico is not the lowest cost, but it is definitely low cost," says David Hoffmann, vice president and managing director, Arrow Latin & South America. "More important, customers are looking at their total cost of delivering product, so other factors come into play besides just labor costs, making Mexico a very viable option."
Arrow: The one constant worldwide.
Arrow helps customers all over the world, wherever their products are designed or manufactured. Arrow's engineering experts help customers with design on the front end and, in whatever region the products are manufactured, Arrow helps maintain the integrity of the design and continuity through the production phase, selecting the right components. Arrow's supply chain solutions help customers reduce inventory costs and get product to market sooner, so they gain competitive advantages they might not otherwise achieve. Plus, wherever customers are, Arrow serves them locally, with people who speak their language and know their industries.
Just the Facts: the world's electronics manufacturing hot spots
China
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The world's most populous country at 1.3 billion people – a major consumer market
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2006 GDP of $2.7 trillion
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2006 electronics components distribution market at $15 billion
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Well suited for low-cost, high-volume production
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Key markets: consumer electronics, communications
Arrow in China
Eastern Europe
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2006 electronics components distribution market at $1.3 billion
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11 of the region's countries joined the European Union in the last two years, simplifying and facilitating movement of goods to and from member countries
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Other countries include the Commonwealth of Independent States (CIS)
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Proximity to Western Europe results in lower transportation costs
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Strong capabilities, varying by country, in a range of industries including:
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Automotive (Czech Republic, Poland, Slovakia)
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LCDs (Poland) and other electrical and optical equipment (Slovakia, Hungary, Czech Republic)
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Medical equipment (Croatia and Hungary)
Arrow in Eastern Europe
Mexico
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2007 estimated total electronic components market is $3-5 billion
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2006 electronics components distribution market of $500 million
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Well suited for low-volume, high-mix production – in particular more complex products – in automotive, aerospace, communications and industrial segments
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Proximity to U.S. for quick, easy access, lower transportation costs, and a breadth of technical and marketing support
Arrow in Mexico
