Firms heading home as benefits wane in China

More companies from Europe and the United States that outsourced production to China are returning home as price gaps narrow, reports Matt Hodges

For Dutch engineering and electronics conglomerate Philips NV, improved automation and smarter robots meant it made more sense financially to build a new factory in Drachten last year than extend its operations in China.

Philips found the robots to be more productive than workers in Guangdong in southern China, where it, like many other foreign multinationals, faces rising labor and raw material costs and occasional staff shortages.

General Electric Co took arguably a bigger gamble by opting to reshore some production from China to its Appliance Park in Louisville, Kentucky, also in 2012.

There, GE was able to redesign one of its water heaters and slash the time it takes to get it to warehouses. Efficiency rose and material costs fell by more than 20 percent, enabling it to lower the US retail price of its GeoSpring heater from $1,599 to $1,299. GE also returned production of some washing machines and refrigerators.

Such cases have become more common over the past five years as more European and US companies find it attractive to return jobs and production home, a strategy known as reshoring.

These moves mostly involve companies that sell mainly to their domestic markets. And they indicate that China's competitiveness as a global low-cost production base is waning.

"Current research shows many (US) companies can reshore about 25 percent of what they have offshored and improve their profitability,"said Harry C. Moser, founder and president of the Reshoring Initiative, in an e-mail to China Daily.

Figures from the nonprofit organization show that from 2000 to 2008, the number of manufacturing jobs offshored from the US grew by 100,000 to 150,000 each year, while the number reshored was about 2,000 per year.