Rising Costs Impact Electronics Producers’ Profit Margins
Asia’s electronics manufacturers are being squeezed by rising costs for materials, energy, labour and other items on one side, while struggling with retail price erosion on the other side. This daunting pair of forces must be closely managed in the coming years if manufacturers are to continue succeeding. To survive in this increasingly hostile market environment, Asia’s electronics manufacturers must become leaner and meaner competitors.
Asia’s electronics products have gained substantial market share in regions throughout the world. For example, as a manufacturing or assembly location, China in 2004 accounted for 27 percent of all mobile-phones, 52 percent of mobile PCs, more than 80 percent of MP3 music players and 92 percent of DVD players.
Low-cost materials, relatively inexpensive labor, cheaper land and preferential investment policies among Chinese provinces helped attract overseas electronics makers to China in recent years. And as these overseas electronics manufacturers established large factories in China, this trend assisted the prospects of domestic makers.
However, starting in 2004, many of the forces underlying China’s success began changing dramatically.
First, labor shortages cropped up last year in the Yangtze River Delta and Pearl River Delta regions, the two main locations for electronics equipment manufacturing in China. Labor costs also are increasing in these areas.
Second, electric power shortages are impacting the production schedules of many manufacturers. In fact, many producers were forced to operate factories at night and during weekends in order to comply with requests to stagger the peak consumption of electric power in the summer of 2004. They will face the same difficulties this summer as well.
Meanwhile, the price of electric power is increasing.
Third, profit margins also are being impacted by the escalating prices of materials, such as petroleum and steel. China must import 50 percent of its iron ore and more than 30 percent of its petroleum, and the level of imports is likely to continue rising. In fact, as of May 2005, the overall price of imported iron ore has risen 71.5 percent compared to the beginning of 2004.
The wave of international petroleum price increases is severely impacting operating and material costs for many industries, including the electronics manufacturing business. For example, in the second quarter of 2005, the production costs of home appliances increased by 8 to 15 percent compared to the fourth quarter of 2004, iSuppli believes.
Fourth, the government now is embarking on a plan to limit Real Estate usage by the industrial sector in order to ensure that there is sufficient land for agriculture.
Rising Prices Impact the Bottom Line
The overall impact of the increasing prices of major materials on China’s electronics makers is easy to see.
For example, escalating prices contributed to a loss posted for last year by Guangdong Kelon Electrical Holdings Co. Ltd. of Shunde, Guangdong Province, a major maker of white goods. Guangdong Kelon’s losses amounted to US$7.7 million in 2004, according to the company’s most recent annual report.
Asia’s electronics manufacturers are being squeezed by rising costs for materials, energy, labour and other items on one side, while struggling with retail price erosion on the other side. This daunting pair of forces must be closely managed in the coming years if manufacturers are to continue succeeding. To survive in this increasingly hostile market environment, Asia’s electronics manufacturers must become leaner and meaner competitors.
Asia’s electronics products have gained substantial market share in regions throughout the world. For example, as a manufacturing or assembly location, China in 2004 accounted for 27 percent of all mobile-phones, 52 percent of mobile PCs, more than 80 percent of MP3 music players and 92 percent of DVD players.
Low-cost materials, relatively inexpensive labor, cheaper land and preferential investment policies among Chinese provinces helped attract overseas electronics makers to China in recent years. And as these overseas electronics manufacturers established large factories in China, this trend assisted the prospects of domestic makers.
However, starting in 2004, many of the forces underlying China’s success began changing dramatically.
First, labor shortages cropped up last year in the Yangtze River Delta and Pearl River Delta regions, the two main locations for electronics equipment manufacturing in China. Labor costs also are increasing in these areas.
Second, electric power shortages are impacting the production schedules of many manufacturers. In fact, many producers were forced to operate factories at night and during weekends in order to comply with requests to stagger the peak consumption of electric power in the summer of 2004. They will face the same difficulties this summer as well.
Meanwhile, the price of electric power is increasing.
Third, profit margins also are being impacted by the escalating prices of materials, such as petroleum and steel. China must import 50 percent of its iron ore and more than 30 percent of its petroleum, and the level of imports is likely to continue rising. In fact, as of May 2005, the overall price of imported iron ore has risen 71.5 percent compared to the beginning of 2004.
The wave of international petroleum price increases is severely impacting operating and material costs for many industries, including the electronics manufacturing business. For example, in the second quarter of 2005, the production costs of home appliances increased by 8 to 15 percent compared to the fourth quarter of 2004, iSuppli believes.
Fourth, the government now is embarking on a plan to limit real estate usage by the industrial sector in order to ensure that there is sufficient land for agriculture.
Rising Prices Impact the Bottom Line
The overall impact of the increasing prices of major materials on China’s electronics makers is easy to see.
For example, escalating prices contributed to a loss posted for last year by Guangdong Kelon Electrical Holdings Co. Ltd. of Shunde, Guangdong Province, a major maker of white goods. Guangdong Kelon’s losses amounted to US$7.7 million in 2004, according to the company’s most recent annual report.
About the Author
The author writes for GiftsAcrossIndia.com which specializes in sending gifts to India from Asian countries. Search from wide range & send electronic gifts to India
.
|
|
Reproduce Almost Anything Reproduce Almost Anything With Basic Silicone Mold Making — Reproduce Almost Anything With Basic Silicone Mold Making is a video workshop with 44-page workbook that shows you how to reproduce plastic and metal parts for prototypes, antiques, architectural models, scale models, jewelry, old cars and more. — By watching the video and reading the workbook, you will quickly see how easy it can be to… |
|
|
RollerCoaster Tycoon Gold Edition: RollerCoaster Tycoon / Loopy Landscapes / Corkscrew Follies $9.99 This is a 2 cd-rom set! this item is supplied as 2 cds in sleeves. contains 3 best-selling games create the ultimate amusement park! product information rollercoaster tycoon gold edition allows players to design build and operate their own simulated theme parks with access to a complete set of design and construction tools that make even the wildest roller coaster easy to build and tune. Offers p… |
|
|
The Sims 2: Open for Business Expansion Pack $10.45 In Sims 2: Open For Business you’ll get to design your own clothing boutique, beauty salon, florist, high-end electronics shop, bustling restaurant chain, or virtually any other type of business. Hire your staff as the business grows and put talented Sims to work making toys, running the register, crafting floral bouquets, giving sales pitches, or manufacturing robots. But watch out for slacker em… |
|
|
Restaurant Empire $2.50 Restaurant Empire takes you on a journey from junior chef to major player in the restaurant business! Create the restaurant chain you’ve always dreamed of with this fun simulation!… |
|
|
High-Frequency Trading Experts Workshop 2010 DVD Video Package $995.00 High-Frequency Trading has changed the electronic trading landscape for all participants in the market, exhibiting extraordinary interest and growth. What has been made publicly available however, is only a limited subset of what others have been doing for years and a limited insight into what is actually possible. Golden Networking’s High-Frequency Trading Experts Workshop 2010 DVD Video Package,… |
|
|
Prison Tycoon 4 Supermax $4.49 Build a profitable privately run prison from the ground up. Every wall, every fence, every decision is yours. Start small and forge your reputation as a first rate warden. Grow your facility to SuperMax capabilities, housing the most dangerous and diabolical criminals on earth ? all for the bottom line.Features include: •Manage the layout, construction, and equipping of your lockdown•Bui… |
|
|
Sold Out Software Tropico2 Tropico 2 – Pirate Cove [windows 98/xp/vista] $10.29 Tropico 2: Pirate Cove Is The Sequel To The Award-winning Fun In The Sun Carribbean Simulation Tropico. As A Pirate King Rule A Secret Pirate Island Full Of Despicable 17th Century Sea Dogs. Fuel Your Economy By Plundering Wealthy Merchants And Taking Prisoners Back To The Island As Captive Workers. Keep Your Scurvy Buccaneers Satisfied With Rowdy Gambling Jolly Feasting And Barrels Of Rum! World … |
|
|
New – Microsoft Office 2010 Professional – 32/64-bit – Complete Product – 1 PC – CX3177 $159.90 General Information Manufacturer/Supplier: Microsoft Corporation Manufacturer Part Number: 269-14964 Brand Name: Microsoft Product Name: Office 2010 Professional – 32/64-bit Marketing Information: Office Professional 2010 combines everything you need to create, edit, and share documents from virtually anywhere. You get top-of-the-line tools to run your business and projects efficiently. Package Ty… |
|
|
Enterprise Architecture As Strategy: Creating a Foundation for Business Execution $22.71 Enterprise architecture defines a firm’s needs for standardized tasks, job roles, systems, infrastructure, and data in core business processes. Thus, it helps a company to articulate how it will compete in a digital economy and it guides managers’ daily decisions to realize their vision of success. This book clearly explains enterprise architecture’s vital role in enabling–or constraining–the ex… |
|
|
The Home-Based Bookstore: Start Your Own Business Selling Used Books on Amazon, eBay or Your Own Web Site $9.95 Want to discover the most profitable, lowest-risk idea for your home business? It’s selling used books online, which is growing 33 percent annually, according to a new study by U.S. publishers. Learn how to start your business part-time, then expand at your own pace. This step-by-step guide, written by one of the most successful and highly rated sellers on Amazon and eBay, includes everything you … |
Related Articles
No user responded in this post
Leave A Reply