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Is Reshoring the Next Big Thing for Electronics Industry?

Over the past few decades, the electronics components industry has seen countless companies pursue production overseas in an effort to reduce costs. OEMs have gone abroad to find the best value-added locations for building boards via offshoring: mainland China, Southeast Asia, and more recently Eastern Europe. However, this trend is shifting.

Wages in China are steadily rising at an annual rate in the double digits. Tax incentives for foreign manufacturers are expiring, energy costs continue to increase, and the costs associated with shipping are increasing. In short, China is becoming a far less attractive manufacturing option for American companies.

“With newer technologies in the components industry, manufacturers have turned to reshoring in our post-recession economy,” says Wilson Lee, director of product manufacturing for Newark element14. He says that reshoring has been especially prevalent with new-product initiatives or technologies in which total acquisition costs can be significantly reduced. These costs include robotics, smart metering, medical equipment, and even 3D imaging.

“The ‘new normal’ of manufacturing for OEMs in the electronic components industry has been to balance offshoring with reshoring,” says Lee. He admits that when cost is the primary determining factor, offshoring may still be the best option for some companies. While the offshoring practice has brought great success for companies with fast product-to-shelf turnaround, this doesn’t always hold true when additional supply chains are taken into consideration. In these cases, OEMs have come to rely on reshoring. “This includes the cost of building a board, the cost created by the distance between the design and production points of the manufacturing process, communication barriers, customer demand, and more,” Lee says.

He believes that reshoring to America could be a better option than nearshoring to Mexico. Manufacturing in the U.S. can reduce contentious issues of translation and turnaround time. According to Lee, some tier-1 contract electronic manufacturers (CEMs) and smaller, regional players that are developing NPIs are delivering a powerful commentary: “you don’t have to offshore to have the best value in terms of OEM and the supply chain.”

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Keywords: offshoring, nearshoring, reshoring, U.S. manufacturing, logistic services, logistics & supply chain

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