TFI’s take on these pressing issues is: North Africa and the Middle East will be the future low wage regions (add post-unification North Korea, according to APEX panelist Jan Vardaman), consolidation is coming but not to the degree of the auto industry, and Chinese manufacturing will likely not experience contraction until about 2017. But in the long term, we see other issues that will have a major impact on the industry.
Our industry has typically used 5-year forecasts, which TFI has provided for 25 years. This past month TFI has forecast near-term outsourcing percentages by electronics sector (computer most, auto least), contract manufacturing in China vs. other regions (China electronic manufacturing services (EMS) revenue will be 18% higher in 2016 than in 2011), and China EMS vs. original design manufacturing (ODM) revenue (the latter growing faster).
However, we’ve always pointed to the strategic advantages of longer-term forecasting. We’re happy to report that some clients are now open to 10-year, 20-year, and longer forecasts (though not yet approaching our Japanese clients’ 50-year forecasts!). Though technology breakthroughs have always been at the forefront of smart forecasting (surface mount technology, increasing board densities, solar, etc.) and will continue to be so, the future will be significantly impacted by additional factors:
- Material shortages: Demand for helium, phosphorus, indium, gallium, and other elements is predicted to exceed supply in the foreseeable future. The West relies on China to supply rare earths, but as China’s domestic demand grows, alternatives are desperately required.
- Supply-chain interruptions owing to natural disasters: In his recent SMTA paper, my colleague Dr. Harvey Stone attributes increasing disruptions not only to “Acts of God” but also to population growth, migration to coastlines and cities, inter-dependence of the world’s nations and economies, reduced natural resources, and increased carbon emissions leading to heat effects, drought, more intense storms, and rising seas.
- Growing intolerance for maltreatment of workers: Rising labor rates in one region, such as Singapore and Taiwan 15 years ago, has always foreshadowed migration of manufacturing to lower-labor-rate regions. But -growing consumer awareness and concern over companies’ ethical treatment of workers in China, in the Congo, and anti-slavery measures will steer manufacturing to regions with greater worker, environmental, and IP protection.
- Carbon fees: Business and societal concerns over oil shortages/conflicts and climate change have prompted not only carbon cap-and-trade but also carbon fees (or taxes) — both of which (along with rising oil prices) will translate into executive-suite decisions about reducing wasteful practices in both operations and products.
Many thanks to the IPC (consider APEX 2013, Feb. 19-21 — again in San Diego) this week for prompting so many engaging questions about the future. Now I have a question for you: how far into the future is your executive team looking? What new factors have you identified?