Much like the kickstarter project mentions, this book covers repeatedly broken promises, misleading claims (like the laser etching that turned out to be CNC), continuous reassurances followed by convenient disappearances, completely mythical factory sites and machinery, supposedly mechanical processes that turn out to be skilled hand-labor, and the need for vigilant and cynical quality control. It makes a convincing argument that once you account for the cost of all these shenanigans, export manufacturing is nowhere near as good a deal as it seems.
While these types of horror stories are everywhere - some of the best consumer goods manufacturers (by quality and price) are in China / Taiwan. While working to find injection molding and CNC suppliers - people continually referred me to their vetted suppliers in Asia.
The general consensus in my work was that Asia wants it more than we do. There are a lot of superfluous American manufacturers that survive based on old relationships and word-of-month, not on quality, price & innovative marketing - the former ones are becoming harder and harder to win with. The Chinese manufacturing sector is ultra-competitive with each other, more than in the US, and this leads them to their position - beyond just being cheap labor. This is at least my experience.
"The general consensus in my work was that Asia wants it more than we do. There are a lot of superfluous American manufacturers that survive based on old relationships and word-of-month, not on quality, price & innovative marketing "
The general consensus in my work(engineering on a German multinational company) is that ANYTHING that is worth something on China is made from Europeans, Americans, or Japanese people.
This multinational is going to China because you don't pay taxes for something like 5 years, minimum taxes after 10 years there and so on...
Of course, once there they steal your plans and know how(as they force you to have Chinese partners), and a Chinese company starts making exactly what you used to, with very poor quality but at half or quarter of the price(they got their knowhow free from western greediness).
One nice thing about the book is that it gives sympathetic economic context to some of these issues, humanizing what might otherwise seem like utter fraud. Briefly, it's a combination of:
- inevitable human motives when faced with a chance to escape poverty
- different cultural expectations about what it means to deliver on a manufacturing contract (i.e. does it have to always be exactly to spec, or can it just be roughly equivalent in the important ways)
- different cultural focus on surface appearances vs. less visible qualities
- information asymmetry between local operators and distant foreign counterparties
- greed on the part of foreign counterparties, which the Chinese manfucaturers exploit to get deals and then ruthlessly trim back everywhere they can get away with, backing off only when they push too far and get called on it
What's almost as interesting are the similarly misaligned incentives within the foreign counterparties. Western capitalist companies are unabashedly greedy, short-term (gotta make the quarterly numbers), share-price-oriented, and have all their own dysfunctions as a result. That's not to say the kickstarter guys are guilty of any of that -- just that there's plenty of parties trying to screw the other on both sides of this international dynamic, and finding a truly honest partner is difficult in business anywhere.
The question is whether the unethical factory would go bankrupt. Information inefficiency and asymmetry prevents stories like this from being widespread to other potential product companies. So other product companies don't know what to expect and then have to experience the same mistakes. Even if an online directory and feedback mechanism were created, those are horribly easy to game if one wanted (see Yelp). My friend who used to work at Alibaba said fraud was rampant among the vendors listed on the website. I expect that the large demand for production facilities from abroad, coupled with information inefficiency and asymmetry, will allow the unethical factory to continue to make money.
Because you get what you pay for, and because there are too much demand that they don't care if they screw you and lose their reputation (to you)--They can simply find another buyer. At least those are the reasons my friend told me about his experience with manufacturing in China.
When the average annual income in China is around $4000 USD, it's no wonder that people would lie through their teeth to get at a contract. This is the answer to the "lowest price at any cost" game. Capitalism at work. No one wants the company that offers the best quality, only the company that is the cheapest.
I believe your Intel example has very little to do with the cost or quality of manufacturing in China and more to do with export restrictions on current generation semiconductor fab equipment. Intel does operate a fab in China but is based on an older 65nm process.
Bullshit. It's Chinese at work. Similar stories from dealing with Indians. Poverty is not an excuse. Wild hypothesis: Maybe they're poor because they cheat each other all the time.
When the Japanese were dirt poor back in the 60s people didn't have complaints about them regularly shafting everyone in business. Same for the Taiwanese.
How do you know? There was no internet back then and such stories usually don't appear in newspapers, even now.
> "Maybe they're poor because they cheat each other all the time."
No, they're poor because it's been just 30 years and 20 years since China and India opened up (liberalized) their economies respectively and these two countries have massive population.
Most Chinese are extremely honest. There's plenty of stories about restaurant owners running out in the street, because the crazy westerner left some money on the table (Chinese don't tip).
There are dishonest Chinese, and sadly, they are the ones who seem to do well at foreign trade. The honest ones will make realistic quotes. The dishonest ones will figure they can deliver 80% of the product volume (after which point, your legal costs will outweigh the cost of suing for the last 20%), steal the IP, steal the moulds, screw their own workers and suppliers, and deliver a substandard product. The really dishonest ones just pretend to own a factory (when they just bribed or bluffed someone for use of a conference room), take your deposit and run. Guess who can deliver the lowest quotes?
China's growth is nothing special. It's similar to Korea's or Taiwan's, but about 20 years later (due to slow growth until 1989). It's slower than Japan's post-war bounce, but Japan was building back from a high mark (having had it's factories bombed to the ground, but still having the technology know-how).
The reality is, people are easy to con when they get greedy. Virtually every con in the book is based on a get-rick-quick scheme. The myth of cheap Chinese products is one such myth. Given that labor is only ~30% of many goods, it is a myth that you can cut costs in half just by employing cheaper labor.
> Virtually every con in the book is based on a get-rick-quick scheme.
This is something people like to believe because it makes them think they're immune to being scammed. It is not really the case: For example, look at fake charities, which are based on generosity, or the grandparent scam, which is based on generosity and love.
If scammers can find an emotion, the can get rich from it.
http://www.amazon.com/Poorly-Made-China-Insiders-Production/...
Much like the kickstarter project mentions, this book covers repeatedly broken promises, misleading claims (like the laser etching that turned out to be CNC), continuous reassurances followed by convenient disappearances, completely mythical factory sites and machinery, supposedly mechanical processes that turn out to be skilled hand-labor, and the need for vigilant and cynical quality control. It makes a convincing argument that once you account for the cost of all these shenanigans, export manufacturing is nowhere near as good a deal as it seems.