I think that a real key to competing with Chinese manufacturers is to take a look at what they can't easily do that customers still need.
The logistics of over seas shipping can be mostly overcome with money, but not always. When an engineer is on such a tight schedule that they want to drop a kit off one morning and pick up a finished prototype the next morning, expensive air shipping isn't going to cut it. Some government contracts fall under ITAR (International Trafficking in Arms Regulations) and more or less has to be built in the U.S.
I doubt that we'll ever see high volume consumer manufacturing back in this country, but there are still growth areas for American manufacturing.
Agree, Duane. Surface Mount Technology is ITAR certified and has military customers. Since they are "designing the labor out" of manufacturing products, they won't create a lot of new manufacturing jobs. But any products that can be made here rather than in China is a plus for the U.S. economy, right?
I see this as the converse of TI's move to do more product origination *in* China for products intended for the Chinese market. Time to market is critical, and the closer you are to your customer, the greater the advantage you have. Add that doing everything in China by Chinese vastly reduces the misunderstandings inherent in cross-cultural communications, and eases the problems of doing business there at all. The Chinese government will be far happier to see and approve you if you plan to do *everything* there, since "grow the economy" may be their number 1 priority.
Time to market is critical here, too, and the closer to the customer you are, the better you have it. The cost advantages of doing manufacturing overseas come when you have huge volume commodity products where competition is on price and the low cost producer wins. The costs become low enough that it's cheaper to do it there and ship here. When volumes are smaller and the products are higher in the value chain, domestic manufacture becomes feasible, and you get the possibility of a customer being able to send an electronic ECO and see the change put into production the same day. (Not to mention the fact that you are communicating in the same language, and may even be in the same time zone.) You can also get what you make to your customers a lot faster.
We aren't likely to see high volume consumer manufacturing in this country again unless it is almost entirely robotic. The trick is finding things to manufacture that can command a high enough price and carry a high enough margin to pay for the manual labor needed to make them.
The Chinese are heading in that direction now. The main source of cheap manual labor has been peasants on the farms, for whom factory jobs are a step up, with better hours and working conditions, and much better pay. China is confronting the problems associated with rapid urban growth because of the migration from rural areas to get those jobs.
But that pool appears to be beginning to dry up, and Chinese manufacturers must increasingly compete for workers, with corresponding rising wage scale and higher costs. There was a note here a while back about a big Chinese manufacturer that announced a full scale move to robotics in consequence.
The problem with going all robotic is enormous up front costs. It might be hard to get a US manufacturer to make the investment unless they saw a really good opportunity in it, and I doubt they would see such opportunities in low margin commodity products.