Offshoring Offshoring

Hewlett-Packard’s reported decision to shift production of some computers it sells in Japan from China to Akashima in Tokyo is a harbinger of the future for manufacturers. The calculation, according to the Nikkei, is that higher production costs – labor is four times more expensive in Japan than China – will be more than offset by productivity gains and closeness to market shortening the supply chain. The change has been sufficiently successful with HP’s desktops to apply it to its consumer notebooks. While the move goes against the conventional wisdom that China’s manufacturing will decamp to lower-cost countries like Vietnam and Indonesia, HP’s calculation is applicable to more developed markets than Japan. An important factor is the closeness of final assembly plants to component suppliers.

Footnote: At the other end of the value chain, rising costs and falling demand are continuing to squeeze manufacturers. Stanley Lau, deputy chairman of The Hong Kong Federation of Industries, says one-third of the 50,000 Hong Kong-owned factories in China (they are mainly in the Pearl River delta) could scale back operations or be shut by the end of the year.

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