Although it is true that the labor rate in China is far lower than in the USA, their productivity (the value of the work they do per hour) more than compensates for their lower wage. Productivity is a fancy way of saying how much work can be done in an hour. Price is what you pay, and value is what you receive.
This whole productivity discussion is complex — but what it boils down to is that if the task to be performed is simple and requires simple tools, supply chains, processes, and leadership, China will be cheaper. The more complex the task, the more likely the US, or some other country, will be cheaper.
This complexity leads to an interesting dynamic when it comes to the design of a product. If the product will be produced in low-productivity geography, then the design must be simple. If the product will be produced in high productivity geography, the design can take advantage of complexity: robotics, advanced processes and supply chains, etc.
If you simply take a product designed for low-productivity geography and ask a US manufacturer how much it will cost to make, it will always be more. If you take that same product and change the design to take advantage of US productivity, it may be cheaper.
Two important takeaways:
- Know where the product will be manufactured before you design it.
- If you are going to reshore, you will likely have to make design changes.
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