How to Get Quality Electronics Out of China
April 23, 2013
Let’s be honest here, China doesn’t exactly have that stellar, Germanic reputation of quality, reliability, and precision. But regardless, companies both small and of Apple-like proportions still rely on China because it’s the only way they can stay competitive. But since everyone’s going to China, it inevitably becomes a battle of who can design with the cheaper components and negotiate better prices with the manufacturers. And therein lies the problem.
You can’t get something for nothing
You want quality but you want it as cheap as possible; Chinese manufacturers want your business and so lower their prices and cut corners to be able to make a profit. Some blame quality problems on the relentless pursuit of cheapness. Foreign buyers often go with the lowest bidder—at the end of the day price is their job description, not quality. As a result, the factory that quotes the lowest and surreptitiously cuts corners is the one who gets it. Some vendors even deliberately quote below cost, fully planning to raise prices after the client has been locked in with a deposit, and with the shipping deadline close he knows the client has no choice but to grudgingly accept.
Point to Ponder: You can always find someone who will go cheaper in China. The question is, how much risk are you prepared to take and endless flights back and forth to try to sort out the mess?
Newspapers are full of reports of some Chinese manufacturer being the cause of the recall of tens of thousands of products because of a few seemingly insignificant parts like a spring or a battery. One can only guess at the size of the losses that the brand owners incur, not to mention the irreparable damage to their reputation. Interestingly, the lack of long term vision causes some China manufacturers to do some unthinkable things such as substituting already cheap .15 cent components for even cheaper, non-standard and defective ones and thus ruining an otherwise good product.
Those in the know attribute this to “fading quality”. The problems from quality fade are not immediately apparent, but over time they worsen. It may seem incomprehensible why a company would endanger its reputation like this but it appears that many Chinese manufacturers will go to great lengths to shave off a few cents here and there. And defects get worse as products become more complex and thus become more difficult to inspect.
Another phenomenon is that once you’re finally happy with the quality performance the China factory takes this as a cue to start raising prices, knowing that you’re not eager to start another year of qualifying and training new vendors. So any change in input prices such as labor or resin or local taxes is used as an excuse to raise prices on you, often by much more than reasonable. This is something which is hard to fight if you’re not intimately familiar with the real costs, and sometimes there is no other alternative than to just change supplier every 3 years or so.
Why shoot their own foot?
It’s not so much so manufacturers can pull in heftier margins. On the contrary, it is so they can survive. Many Chinese manufacturers have very little margin, and with massive competition and government efforts with regard to currency revaluations and rebates, many are operating at a loss. In essence quality fade is necessary for them to survive.
This provides a number of lessons and guidelines:
- Pay a realistic price. As Titoma’s CEO Case Engelen likes to say: If you pay peanuts then expect to get monkeys. Or if the price is too good to believe don’t believe it.
- Don’t fight price increases tooth and nail even when you know it’s necessary. Material prices like plastics and RAM do fluctuate dramatically, and it is true that labor has gone up quite a bit.
- Be wary of manufacturers quoting low and then quickly raising prices and lead times.
- Never stop monitoring quality because sooner or later it will slip.
- Many manufacturers are in survival mode. Few of them are concerned about the long term. They just want this one order NOW.
So is it possible to get quality out of China? In a nutshell, yes. Many foreign companies over the years have taken the proactive approach and trained manufacturers to implement quality systems and appropriate manufacturing and assembly procedures essential to ensure quality. It is a serious time investment and finding the right partners takes quite a bit of trial and error. But after kissing numerous frogs, you’re bound to eventually find some “princes.”
Titoma Design has been designing and manufacturing quality electronic products in China and Taiwan since 1999. We work only with reputable manufacturers we’ve trained for numerous years and who share our vision: To produce products at the quality, and cost required to make them a worldwide sales success.
Contact us today and see what we can do for you.
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