Think electronics manufacturing is on life support? Think again

HEERBRUGG, Switzerland -- Across North America and Western Europe, electronics manufacturers of varying sizes are taking steps to differentiate themselves and hold their own against the "Made in China" juggernaut of the last 15 years. These manufacturers are helping to erase the notion that the West is not competitive while providing a glimmer of hope for the future of Western manufacturing.

We recently visited EMS Escatec, the Swiss specialist in advanced electronics production, custom designs and cradle-to-grave manufacturing and supply chain services. Despite its relatively small size -- about $200 million in annual sales -- Escatec is demonstrating with some modest success why electronics production is still viable in high-cost locations in Western Europe and North America.

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Escatec's offerings include telecom equipment so sophisticated that it requires high-level security encryption. That means manufacturing the gear anywhere outside of the West is simply not an option.

Then there are products that require precision engineering, meaning that outsourcing of production to Asia is a non-starter for OEM vendors and equipment users. Much of this sensitive equipment is used by governments, the military and the security-conscious financial services industry. Chinese and other Asian contract manufacturers may offer lower costs for such equipment, but as long as security remains a top priority, production will remain at Western companies able to guarantee security and precision.

"Some production will never leave the West," said Daniel Pfeifer, global R&D manager at Escatec. "What we do in Switzerland is make higher value, high-mix and low-volume products that are critical to the customer's operations. There are some products that we make here that the customer won't let us ship even to the United States.”

Escatec's structure and business strategy reveals the future of Western manufacturing. The company is owned by a Swiss entrepreneur but has operations in both Europe and Asia as well as partnerships in North America. It offers international clients design, project management, prototyping, testing and regulatory approval for equipment used for critical applications. While volumes are typically small (sometimes only a few hundred units), the cost of its services can be high as can Escatec’s profit margins.