Some of you may have heard of Bunnie Huang. He’s the electronics genius that cracked the XBox among other hacks, and is now making a name for himself in the electronics industry by developing the Chumby… basically an internet-enabled alarm clock. With that project he has been setting up the manufacturing supply chain in China, and along the way he has been blogging about the experience. His posts, which include numerous photos and even videos, are rather fascinating.
His posts should almost be required reading for any CEO contemplating a move to China. Let’s go through some of them in rough sequence.
In this post he makes some general observations about China, and manufacturing wages in particular.
The most remarkable thing about China are its sheer numbers, and how it compares to America. In Shenzhen, the minimum wage is about $0.60/hour. However, there is a very competitive labor market in China–there is a shortage of workers and mobility between factories is unimpaired by employment agreements. Minimum wage has increased by 30% per year for the past two years. It’s unclear how sustainable this is, but factory owners seem to see more increases down the pipe and 30% per year is a ridiculous CAGR.
He goes on to describe in detail wages, costs of living, corruption, and even morality.
Here Bunnie describes the ordeals he experienced with just the first steps of setting up a supply chain. Basically it was far more convoluted and confusing than he had anticipated.
While almost every factory will “clean up” the day you come to visit, a sharp eye and the right questions can see through any quick veneers put in place. One place I always liked to visit was the QC room. The best manufacturers I visited all had a couple rooms with sophisticated equipment for thermal, mechanical, and electrical limit testing, and of course operators were in the room actually using the equipment (I could definitely believe a Chinese manufacturer would buy a room of equipment just for show and not actually use it).
The remainder of the post deals with how he went about and finally selected a factory for the Chumby.
This post has a couple of good videos of Chinese factories, and as the title suggests, focuses on the sheer magnitude of factories in China.
Foxconn is where all of the iPods and iPhones are made. It’s a huge facility, apparently with over 250,000 employees, and it has its own special free trade status. The entire facility is walled off and you apparently need to have your passport and clear customs to get into the facility…
Another post with some good videos of actual Chinese production lines. Very manual operations with apparently a lot of skill and productivity variation between operators.
Another thing that’s pretty amazing is how rubberized tags are made in China. These are the tags you see all over clothes–chances are you are wearing a piece of clothing or you carry around a bag with a tag like this. I always thought that the tags were pressed by a machine. I was wrong. All those words, colors, and letters–they are drawn by hand.
This is consistent with a comment someone made to me once about the McDonald’s Happy Meal toys. If you look at the bottom of one, it’s held together with screws. That’s because it’s cheaper pay someone to screw together that toy over the whole production run for it than it is to make a steel tool with the necessary precision so that it just snaps together.
Think about trying to justify lean manufacturing in that environment. Or how well lean has to be implemented to compete with that cost structure.
Here Bunnie describes how his contract Chinese factory helped him resolve some design and assembly problems with the Chumby.
I literally had a panel of factory workers standing by me the entire night to help me with anything I needed–soldering irons, test equipment, more boards, X-ray machines, microscopes. The remarkable thing is that not a single one hesitated for a moment, not a single one complained, not a single one lost focus on the problem, people cancelled dinner plans with friends without even batting an eyelash. If they weren’t needed that moment they were busy overseeing other aspects of the project. And this went on until 3 AM. I hadn’t seen blind dedication like this since I worked with the autonomous underwater robotics team at MIT.
But the global knowledge of these workers provides an interesting counterperspective.
I asked her [Chinese factory QA Manager] if she knew what the world wide web was. She said no. I asked her if she knew what the internet was. She said no. I was stunned. Here is a girl who is an expert in building and testing computers–I mean, on some projects she has probably built PCs and booted Windows XP a hundred thousand times over and over again (god knows I heard that darn startup sound a zillion times that night on the factory floor, as right next to me was a bank of final test stations for ASUS motherboards)–yet she didn’t know what the internet was. I had taken it for granted that if you touched a computer today, you were also blessed by the bounties of the internet. If she were given the opportunity, she was certainly smart enough to learn it all, but she’s busy making money that she’s probably sending back to her family at home.
Wow… makes you wonder how innovative and entrepreneurial their people will become when they do get mass access to global information networks.
An interesting look at the logistics required to just feed all of the factory workers.
One interesting fact is that every facility I went to had separate utensils and plates for guests. This is because I haven’t passed the factory’s physical examination. They do this to prevent me from contaminating the factory with potential foreign diseases.
The menu is quite interesting in China. I think the menu the day I went to this factory had items on it like pig intestines, kidneys, fungus and vegetables, along with some other more western-friendly items. Again, the scale of some food operations is pretty impressive. I heard that Foxconn–the place that makes the iPods and iPhones–consumes 3,000 pigs a day.
As Bunnie puts it, "from pigs to iPhones!"
Take a few minutes to read through some of his posts. You’ll get a new appreciation for the problems, and opportunity of Chinese manufacturing. Also read the comments to several of his posts, as you’ll see a wide collection of perspectives, from manufacturing types to free-traders to anti-globalization activists.