Virtonomics - Lien Ledger
An interesting article was published in the WSJ yesterday evening titled: India Has Designs on Toy Manufacturing - Suppliers seek out new opportunities as labor costs rise in China.
The article can be found in full at the end of this post. It discusses low cost manufacturing moving from China, to Vietnam and now to India.
This made me think that I need to pull the four-eyed number cruncher out of the closet where I keep him locked up and have him compile some figures on the best low-cost manufacturing centers in the Lien realm of Virtonomics.
I apologize for the small typeface. Be assured, I slapped my four-eyed number cruncher aside the head and told him to produce pretty charts and graphs next time.
What this data shows is that China in general and Hefei in particular are great places to produce in the Lien realm. Hefei is at only 18% of the realm average salary cost, has only a 14% higher average salary cost than the lowest average salary cost and Hefei has 138% of the realm average education level! Also, if you sell to the China market from Hefei, no customs and low transport costs are to be expected.
If the interesting picture from the WSJ at the top of this post has you thinking about the toy business, never fear. Toys are a product that is easy to produce and retail in Virtonomics.
In summary, China in the Virtonomics Lien realm may be a little behind real world China when it comes to rising labor costs. For both new and established players it's still a fine place to do business.
The Wall Street Journal
India Has Designs on Toy Manufacturing
Suppliers seek out new opportunities as labor costs rise in
China; from farms to factories
By Raymond Zhong
Jan. 6, 2016 7:11 p.m. ET
KAKINADA, India—Entrepreneur
Ajay Sinha made stuffed toys in China for a decade before he started
doing something almost unheard-of in his industry: manufacture in his native
India.
At Mr. Sinha’s new factory here recently, dozens of
sari-clad women assembled Elmo dolls for
Hasbro Inc., cutting furry red
fabric, running it through sewing machines and stamping plastic eyes into
smiling faces using a hydraulic press.
As rising wages push production of T-shirts, sneakers and
teddy bears out of China, countries with lower labor costs and proximity to
Chinese supply chains, such as Vietnam and Cambodia, have picked up much of
that business. But India, with its enormous pool of workers willing to sew and
operate machinery for even less compensation, is trying to establish itself as
a contender.
Labor-intensive manufacturing represented the first rung on
the ladder of industrial development for a host of Asian countries. That makes
the success of companies like Mr. Sinha’s a bellwether of India’s potential to
raise millions of people out of destitution like those nations did: by luring
them off small farms and into steady if low-skilled factory work.
In the world’s second-most-populous country, manufacturing
wages today are less than half China’s, after adjusting for productivity: $5.36
an hour compared with $14.60, according to Boston Consulting Group. Labor will
be abundant and wage-growth stable, some factory owners reckon, for more than a
decade.
Whether that is enough to offset other shortcomings that
have stymied India’s rise as an export power—including roads and ports that
badly need upgrading, power cuts and cumbersome bureaucracy—remains to be seen.
China won’t be the world’s toy workshop forever, said Mr.
Sinha, president of Pals Plush Ltd. “The kind of labor we need, for the next 15
years there’s nowhere to beat India.”
Pals Plush’s new plant is in a 16-square-mile special
economic zone in Kakinada, on India’s southeastern coast, where exporters enjoy
incentives from the federal and state governments, including tax-free imports
of materials.
The factory’s 500 workers, all of them women from nearby
farming villages, earn monthly salaries and benefits valued at around $100, or
around a third, per hour, of what Pals Plush pays in China. Many of the women
said they had never held a formal job before, and that factory work was a way
to achieve financial independence.
Heads of several China-based toy makers who came to scout
Kakinada recently said they had high hopes despite the unfamiliar environment.
The businessmen snapped photos of monkeys scampering up buildings and of
garbage in the streets.
Leo Cheng of Wing Fat Paper Box Co., a Hong Kong-based
producer of board games, stationery and electronics, said setting up in India
would be little different from his experience, 30 years ago, expanding into
mainland China. Factory technology and know-how were just as scarce. “They had
workers, nothing else.”
John Leung, chairman
of GFT Group Ltd., a manufacturer of Transformers, “Star Wars” and other toys
for Hasbro that is based in China’s Guangdong province, said he plans to start
producing soon from a rented factory in Chennai.
Eight years ago, GFT shifted much of its production from
China to Vietnam, where today the company’s workers earn around $215 a month,
less than Chinese counterparts’ salaries. But Vietnam is quickly becoming
saturated with factories, Mr. Leung said.
“In the next eight to 10 years, Vietnam will be finished,” he
said. He said Hasbro, based in Pawtucket, R.I., had urged him to set up shop in
India.
Though his Chennai workers’ monthly wages will be around
$110 each, Mr. Leung said he doesn’t expect to turn a profit in India for at
least three years, given the costs of training workers and importing raw
materials.
Getting an Indian business license has been a laborious,
months long process, Mr. Leung added. “They make it very difficult.”
Julie Duffy, a Hasbro
spokeswoman, said although Hasbro has begun sourcing from India, Vietnam,
Indonesia and other countries, “We expect that China will continue to be where
the vast majority of our product is manufactured in the foreseeable future.”
Mr. Sinha of Pals Plush grew up near New Delhi and set up
his first toy factory close to the capital in 1995. But it was costly and slow
to import all his materials through Mumbai. Heavy rains could bring rail lines
to a halt. Customs and other procedures were burdensome.
After five years, he said, “I was totally defeated.”
He moved to the eastern Chinese city of Hangzhou, where his
factories have produced soft toys for
Walt Disney Co. , Wal-Mart Stores
Inc., Williams-Sonoma Inc. and others.
But in 2010, Mr. Sinha found himself with a large Christmas
order for Disney and not enough manpower to fill it. He said he “paid through
the nose” to bus in temporary workers. In China, “aspirations have changed,” he
said. “Nobody wants to be on a sewing machine anymore.”
He started looking elsewhere. He ruled out Sri Lanka, which
was still recovering from its decades long civil war. He was wary of political
instability and natural disasters in Bangladesh. Labor and construction costs
were low in Cambodia, but he worried about corruption. He ended up buying land
in Sri City, an industrial estate in India’s Andhra Pradesh state.
India’s infrastructure is better than it was 20 years ago,
Mr. Sinha said, and more government clearances are computerized. After two
years manufacturing for Disney in Sri City, he signed a deal with Hasbro and
built the Kakinada factory.
To help maintain product quality, Mr. Sinha last year hired
six managers from southern China.
“People’s way of thinking here—it’s opposite to ours,”
said Chen Xiaolin, originally from
Sichuan province, as he watched workers milling about and listening to
instructions at the end of a shift. “If it were us having a meeting, we’d line
up neatly.”
India’s lower labor costs mean that even though Mr. Sinha
needs to import all of the specialized fabrics he uses and his Indian workers
are less productive than Chinese ones, he can still afford to offer buyers a
discount on his India-made toys—and keep the same profit margin, he said.
Still, patriotism played a role in his decision to move his
business back to India. “This is our country, above all.”
Fuel oil power plant Fuel oil is a consumable. It has a small environmental benefit compared to coal powered plants. 
Incinerator A type of power plant without consumables that uses garbage collected from cities. Accordingly, the stations of this type in a large part are helping the city to solve the problem of garbage disposal. But it has very high operating costs and reduced environmental friendliness.
