FAQ: Should I Manufacture My Product in China?

For the majority of products, the simple answer is yes, at least eventually. But there are a lot of pros and cons to manufacturing in China which you need to fully understand in order to make the right decision.

The biggest advantage of manufacturing in China is of course lower costs. One of the main reasons that costs are lower in China is the low cost of labor.

China leads the world in manufacturing output, so they have the capabilities – all the equipment, tools, and infrastructure – to manufacture just about anything. They also have a lot of manufacturers and suppliers to choose from. This, combined with the low cost of labor, equals low manufacturing costs.

Another recent advantage of manufacturing in China for U.S. based companies is the new U.S. tariffs of 25% on electronic components coming from China. For reasons I don’t claim to understand, these tariffs only apply to discrete electronic components, but not to an assembled printed circuit board (PCB).

Just to be clear: The term PCB assembly refers to the process of soldering all of the electronic components (microchips, resistors, etc.) onto the PCB. Final product assembly refers to the process of putting all of the pieces together to form your final product. The assembled PCB is just one of these pieces.

This means if you have your PCBs assembled in China, you won’t pay this tariff. But the tariffs will apply if you order components from China, and then assemble the PCB in the U.S.

So to quickly recap, there are two main reasons to manufacture in China: cost and capabilities.

There are of course some disadvantages to production in China, and some can be especially impactful in the early days when production volumes are low. These include:

Quality control

You can have quality control problems regardless of where you manufacture your product, but manufacturing in a distant location makes it more difficult for you to monitor the quality.

It also makes it more difficult to resolve any quality control issues that do pop up, and trust me they will happen.

You also should personally visit the factory that’s going to be making your product. Because, you may think you found a great manufacturer in China, but in reality they may be a 3^rd-party sourcing agent and not the actual manufacturer.

That being said, going through a sourcing agent who is based in China has some real advantages, so this isn’t necessarily a negative. But you obviously need to know that you are working through a 3^rd-party who will be taking a small piece of the profit.

Long shipping times

Manufacturing in China means your product inventory will often be on the other side of the planet when you need it. For those in the U.S. you have two options for shipping your product from China: air or sea.

Shipping your product by air is the quickest method but also the most expensive. Shipping by air may significantly cut into your profit margins. This becomes worse the heavier and cheaper your product. I recommend only shipping small quantities by air when absolutely essential.

For example, for my own product that I brought to market years ago, I had gotten a very nice size order from Home Depot. The only problem was they wanted it fast and I didn’t have enough inventory in my U.S. warehouse to fill their order.

This was a case when shipping by air made financial sense (although in this case I still couldn’t meet their deadline so I had to cancel the order – bummer!).

Shipping by sea cargo ship is the way you will be shipping most of your inventory. It is much cheaper than shipping by air. The downside is it is very slow. For example, on average it takes about 3-4 weeks to ship product from China to Los Angeles.

Inefficient communication.

Anyone you deal with in China will speak English, but it’s not their native language. Most everyone in China that I have dealt with can speak and write in English to a workable level but it is far from ideal. There are a lot of scenarios where miscommunication can cause serious mishaps and delays.

The time difference between your location and China can also be really significant, especially if you’re in the Western hemisphere.

Any email communication is going to take about a day for each reply. One way around this is to work in the evening. This is what I do sometimes, because I deal with so many Chinese manufacturers. That way I’m able to quickly email back and forth on matters without losing a day between each email.

Between the language barrier and the time difference, live phone calls become very problematic. Most of your communication will be limited to emails, especially when discussing technical details.

Everything takes longer

In general, everything is going to take much longer to do in China. That’s mainly because of the time difference, language barriers, and distance. This is especially true when trying to debug any technical or manufacturing issues.

This is why it’s typically best to do your first manufacturing runs close to home so you can quickly work out most of the bugs in the manufacturing process. Once you get things running smoothly, then you can transfer over to doing everything in China as needed.

Ultimately, the best location to manufacture your product is really going to depend on your manufacturing volume.

Early units (less than 100)

I recommend that you do the final product assembly, packaging, and shipping yourself for the first 100 units or so.

Ideally, you need to be the one to assemble the product at first. Doing this yourself initially enables you to figure out ways to make it easier and quicker to assemble the product. This is important because assembly is ultimately going to affect the product quality and the product cost.

Doing this all yourself for these first units also allows you to most closely monitor the product quality. These early units will be like gold and will be used as demo units to get larger orders. Even one defective unit could potentially cost you a major order in the future.

Mid-stage production (less than 10,000 units)

Once you get up into the hundreds or thousands of units, you won’t want to continue your own assembly, packaging, and shipping. At this point you should find a domestic manufacturer to do these steps for you.

What I recommend at these mid-stage production volumes is a hybrid manufacturing strategy, where you do some things in China and some in the US.

For example, I would recommend you have the PCB assembly and enclosure manufactured in China, then do everything else domestically.

The advantage of this strategy is it allows you to keep your prices competitive, yet it still gives you the flexibility to closely monitor the production quality and work on optimizing the assembly process and packaging process.

High volume production (more than 10,000 units)

Once you get up to 10,000 units or more of production volume, that is when it usually makes sense to consider moving everything to China.

At this point you should have most all of the technical issues worked out for both your product and your manufacturing process. You will also have some significant sales, thus proving your product is truly worthy of further investment.

Now, it is time to take your product to next level and set up a high-volume production process. There is simply no better place for doing this currently than China.

As a final note, if you feel that it is important to always manufacture your product domestically as perhaps part of your brand, then that is a different situation. Just be aware that you will end up with a much higher retail sales price or a much lower profit margin.

If you read only one article about product development make it this one: Ultimate Guide – How to Develop a New Electronic Hardware Product in 2020.  
 

Other content you may like:

• FAQ: How Do the New U.S. Tariffs on Electronic Components from China Impact My Product?
• Understanding Manufacturing Costs for Electronic Hardware Products
• Case Study: Manufacturing Cost for a BLE / GPS Tracking Device
• Where Should I Develop and Manufacture My Product?
• How Much Should You Charge for Your New Product?