By Brendan I. Koerner
My wife is a lingerie designer (seriously), and thus makes semi-frequent trips to China's Guangdong Province to oversee sample production. Upon her last return, she made a bold pronouncement: the Middle Kingdom's days as the world's chief producer of affordable ladies' undergarments are numbered. Lingerie companies are already finding it cheaper to deal with factories in Bangladesh, Cambodia, and other nations with a dearth of modern skyscrapers.
Her learned observation got me thinking: will China's reign atop the low-end electronics heap soon end as well? After all, the natural cycle in gadget production has been for a country to start out as a purveyor of discount knock-offs, then gradually reinvent itself as a premium supplier. We're all probably too young to remember this, but "Made in Tokyo" was a sign of inferior quality circa 1950. And weren't LG and Samsung considered cheaper alternatives to Japanese goods just a generation (or less) ago?
You can already see what might be the first stirrings of China's maturation—the transformation of Lenovo into an IBM-buying global brand, for example, or the efforts of Japanese companies like Matsushita Electric to move high-end manufacturing operations to Shanghai. I'm not saying that the flood of cheap MP3 players from Shenzhen is gonna stop in the next twelve months, but maybe it's time to start asking: when it comes to low-end gadgets, what's the next China? Oddsmaking after the jump. PLUS: The Van Morrison riddle resolved, and Low End Theory goes on hiatus—in the jungle.
The obvious prerequisites for a successful low-end electronics industry are political will, stability (even, alas, of the odious authoritarian variety), and a low-wage workforce. China offers all three, at least in the regions especially set aside to interact with foreign economic interests. The cycle starts out with established foreign manufacturers either showing an interest in contract factories, or actually establishing their own industrial operations to handle low-level products. Local managers are thus mentored on the details of technical production and international trade; they soon split off to form their own contract factories, and the deluge of cheap watches and whatnot begins in earnest.