Needless to tease us, if you have developed a product, especially an electronic one, you will surely have looked for a manufacturer in developing countries, such as India or China. The narrative we are accustomed to is that, in new economies, there are substantial economic advantages, which attract startups and large companies.
Is it true that it is no longer advantageous to produce electronics in the old continent?
We at Hemargroup are sure it is not.
In this guide we will show you why your next electronics manufacturing company will not be in India or China.
Let's start immediately with the elephant in the room: cost advantages. The narration of these years has always seen the eastern countries as cheaper, especially if you have huge quantities to produce. Among other things, it is well known that many companies, even the most famous ones, produce their products thanks to agreements with Asian partners.
But is it really so big the cost difference? Not really. If in the past, the production of any device was very labor intensive, today this is no longer the case. We all know what the real advantage of Asian countries is: low labor costs, due to wages that are enormously lower than those in the West. All this would lead to a huge competitive advantage and this has been the case for many years, but it does not take into account automation and the cost of raw materials.
First of all, the development of robotics and, in general, automation in recent years, has made it possible to reduce labor costs, moving human capital into more suitable, less repetitive roles, where the added value it can bring is enormous. Secondly, the cost of raw materials and components has dropped, again thanks to technological developments, and there are no hidden transport or logistics costs, as importers often offer free shipping costs for the volume ordered by a company.
Summing these two phenomena, you get that the cost of raw materials is identical and the cost of labor has lost its weight in the final cost of production. Not to mention that, with the development of internet and corporate social responsibility practices in recent years, no company would wish to be involved in a scandal due to the sub-optimal working conditions offered by its suppliers.
Quality is a very important issue in the world of electronics, especially if you work in sensitive sectors such as medical or military. A malfunction is absolutely undesirable, because it affects the safety of people, as well as the brand of your company. Even small mistakes or oversights can threaten the market for a product: you may remember that a few years ago there was a scandal about lead paint used in children's toys.
More stringent regulations and historical externalities, have made our European companies more careful about these issues. Without forgetting that, in an increasingly diversified world, countries like Switzerland have tried to make their qualitative identity prevail, according to the famous English quote "quality over quantity". Brands like the "Swiss-Made" allow a higher final sale price, in electronics usually 10-15% more.
3) Norms & Institutions
ISO, CE, Patents ... The old continent has always been a leader in the field of standards and institutions that protect the economic initiative and the various actors that make it up. Regarding ISO and CE certificates, we have already talked about it partially in the previous paragraph: we always advise you to look at the certifications of your partners to avoid bad surprises.
The quality that a certified manufacturer can offer you is far superior, especially when operating in sectors where compliance with regulations is mandatory. If an artificial fan were to suddenly stop working, it would be a disaster. In addition to production quality, another issue that is foremost relevant to startups is the protection of intellectual property. How many times have you heard of Chinese manufacturers copying their customers' products? It is a major issue, especially when you do not have huge resources to spend on legal fees, often without positive results. Just remember the battle lost by Piaggio for the Vespa clones in China.
Working with solid partners immersed in widely regulated and historically compliant contexts (and from this point of view, Switzerland has always been an excellence) can make you sleep soundly.
4) Proximity and Language
In the previous paragraphs, we focused on economic and legislative issues, easily verifiable because they impact directly on the income statement of your company. But we cannot forget "softer" issues, indirect, but paradoxically epicenter of problems and errors.
Interfacing with different countries and cultures is not at all fun and games, e.g. we have already discussed intellectual property issues in Asia. Few people know, however, that in China, the culture of "copy" is not seen in a negative way as we do: copying is an act of deep respect towards the original author, a recognition of his value and his skill. In the Chinese school there are in fact hours of "copying", to allow students to appreciate the value of the original works. Although in our culture, copying has a negative meaning, in the oriental one it acquires exactly the opposite meaning. This is just one example of how cultural differences can create misunderstandings and possibly problems in the development of a partnership.
Moreover, the proximity of the partners brings another advantage: we are not only referring to the obvious savings in logistics costs, but also because it is easier to control a supplier when you can visit him in person without effort (and he may even speak the same language). Certainly, human interaction, trust and respect are issues that, although "soft", are the foundation of any solid partnership relationship.
If you want to deepen the topic, you want to tell us your experience or simply, would you like a comparative offer for your company, please contact us!