The Malaysian Straits Times newspaper carried an interesting article today; “Foxconn eyes US, Indonesia”. Foxconn is a Taiwanese company with huge production facilities in China and THE leading supplier of Apple iPhones and iPads. The article claims that the rising costs and labour unrest in China are main reasons for Foxconn to relocate production by building high-tech factories in Indonesia and the USA. So does this also apply to the woodworking industry in China? I partly think so; our industry is low tech and is difficult to automate so it will always rely on low cost labour. One does already see a move of production from China to lower labour cost countries such as Indonesia. And yes it would be logical that some of the production moves to the USA especially if it concerns products using US sourced timber. However the USA timber industry is already facing a labour shortage so this would only work for that type of production which can be automated such as panel furniture, flooring etc. but probably less for solid furniture. Lastly I do find it recommendable that Asian manufacturers are willing to invest in the USA whereas many American seems to have lost the spirit of entrepreneurship.
Shenzhen has raised the minimum monthly salary from RMB1500 to RM1600 (USD255) per March 1 this year. And Guangdong Province recently announced to raise the minimum wage level with 20% to RMB1550 per May 1. These increases are very much in line with other provinces and cities that also have increased the minimum wage levels from January 1, 2013 onwards.
China has announced that they intend to increase the minimum salaries with at least 13% per annum before 2015 including the more inland provinces. It is obvious that the cost of living in China has risen drastically over the last few years and these salary increases are common sense but one wonders what this will do to the Chinese manufacturing output. Many Chinese manufacturers are complaining about the shortage of workers and they believe that the nationwide minimum wage increase will only worsen this situation as migrant workers can earn decent salaries in their home provinces.
I was last week at the Interzum in Guangzhou and noticed a few things;
1. The general visitors attendance seemed less to me as previous years
2. Many of the European machine manufacturers showed highly automated production lines
3. The number of overseas exhibitors offering timber and timber products was very small
One could conclude that the Chinese timber industry is slowing down (we do notice this in our business), manufacturers must upgrade and automate their production lines and lastly the interest of overseas suppliers to sell to China seems to be less.
We certainly do encounter a shortage in the supply of certain American hardwoods and a few US suppliers told me at the show that their domestic sales is booming for example the sales of red oak to local flooring plants.
Might this be the end of the enormous growth of the timber manufacturing industry in China and production shift closer “home” to those locations with natural resources?