China Part I : Made in China VS Made in France
Is it more interesting for a startup to industrialize in China than to produce in France?
Your startup is finally successful! But before finding customers, or making an explosive kickstarter to blow away your orders, you have to move to an upper speed and begin the process of industrialization of your product!
China is the factory of the world for over 20 years especially in electronics! (38% of world production in 2015 for electronic devices)
But before boarding the first plane to Shenzhen with your cofounders and suitcases, some issues needs to be clarified:
- Everything can be done in China? electronic, mechanical, injection, plastics ….?
- Is it really cheaper? For how many pieces?
- For the price, it’s ok, but is it the only variable in the equation?
- How to identify the right people in place? Speaking to the good ones
- What are the restrictions to produce in China? Deadlines, production monitoring, quality monitoring, logistic management, exchange rate risks
We need to compare:
The 100% made in China:
Shenzhen is the world capital of electronics and you can find anything! Millions of products like cables, buttons and printed circuits are sold in thousands of small businesses gathered in commercial buildings around Huaqianbei market ... You’ll need a good guide!
(Note, the very good initiative from Seeedstudio => http://www.seeedstudio.com/blog/2013/09/03/shenzhen-map-for-makers/)
And why manufacturing in China is an advantage?
- Cheap workforce, of course, which induce a lower cost of production (minimum wage about 220 €)
- the capacity of mass production, with hundreds of thousands workers ‘available’ within hours. For example, for the first iPhone’s production, apple’s subcontractors recruited 8,700 employees in 15 days instead of nine months doing the same in USA.
- The manufacturers of parts, electronic parts and assembly plants are concentrated in a small territory in the “special economic zone” of Shenzhen.
When you make in China, there are a huge number of variables like commodity shortages, or Chinese New Year, strikes, rural exodus, oil prices, or the dollar change rate… their price may change at any time!!! But if we had to choose one, it would be without an hesitation: the shipping’s price. The price of a container transport increase from 2,000 to 4,000 euros within 3 years. And most of the time, manufacturing at the other side of the world involves a boat transport (30 to 50 days from port to port, clearance’s week, and redelivery, the delay can rise to a total time of 51 to 88 days).
And you have to add customs duties too … We wanted to give you a specific amount, but … uh … well … after an afternoon of searches and nose bleeding on the design of the site www.pro.douane.gouv.fr … we still haven’t found the answer! So you’ll continue freaking everytime you’ll go pick up your container : How much will be charged for the customs taxes.
Industrialize in China works if the workforce represents a major part of the cost of your product, if you have enough volume to “buy” a “full capacity” of production and if your product has a barrier to input or large enough control over the market not to be afraid of copies and counterfeits.
At last and perhaps the most important, you must industrialize non-critical products to prevent intellectual property and technical theft. We will explain the strategies to adopt in a next article: Follow us to get it !
The 100% made in France / Europe
At the beginning and even for large volumes, you do not necessarily have the obligation to move your productions at the other side of the world! For example, a large number of electronic cards for car manufacturers (European) are still made in France, with a higher level of quality for a lower cost than what is practiced in Asia.
The benefits :
- Agility and needs adaptability: delivery of customized parts in a few days
- Renowned products for their quality and reliability
- Good employee productivity and automatization
- Research tax credit
France based subcontractors are able to manufacture high-tech goods of high added value to tens of thousands. The proximity allows you to keep a closer eye on production. Your factory is a few hundred kilometers far and you can quickly and easily adapt you to the needs, while reducing travel and transport costs.
French products are renowned for their quality and reliability, it’s a marketing ploy on the domestic market and for export. Although he speaks less than his predecessor, Emmanuel Macron boasts the “French touch” and made in France in all his trips.
The know-how from leading industries such as aviation, automotive, and defense and means of research & development allow to reduce development time greatly and to improve employee’s productivity.
Manufacturing in France, (when your technology is critical or when intellectual property are important factors), will keep your technological advance and will avoid that all fakes / copies be available on www.alibaba.com or www.aliexpress.com even before you have yourself received your stocks!
Another important point for the made in France is the lack of legal risks with your contractor. In case of dispute, you know where to find your provider, there is a legal contract, lawyers and courts will do the job.
As a conclusion:
Producing in Asia should not be goal to reach! Do not burn the steps, “you’re still learning little beetle! “. Players like Archos or Coyote System (valued 120 Million €) that sell hundreds of thousands of parts each year spent more than 10 years to move their production in China!
A startup that begins has more interests in a local production especially if its products are innovative and high added value.
For sure “Made in France” production causes additional costs, but you don’t waste your energy fighting, in average English, with a guy on the other side of world who said “yes” to everything and barely delivers anything!
To secure your production allow you staying focused on your product development, and you have to develop it on the next steps: Sales and marketing.
Feel free to leave comments and share your startuper experience in comments !