Comment by bobjordan | Hacker News Reader

Comment by bobjordan | Hacker News Reader

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Shenzhen China factory owner here.

The costs are definitely rising in China for English speaking technical labor such as the engineers we need. We compete with companies like Apple and all the other foreign companies rushing to China these days to keep them employed. But we are still talking much lower salaries overall, for example, $30,000 USD/year for a degreed Sr. Electrical design engineer with 20 years experience.

Regarding rents, the Shenzhen central business section rents are expensive now and cost/sqft comparable to anywhere else. However, good industrial space is still far cheaper, for example, I just leased an additional 12,000 sqft high quality assembly space with low ESD floors in a technical park along with 8 dorm rooms to sleep up to 32 people (4 per room - last owner had 8 per room). Lease on this new space cost me $3500 per month. There is also a kitchen ran by the tech park where they serve 3 hot buffet style meals per day for $2/day/worker. I'm not aware of anyplace in USA where you can lease a space like this for $0.29 per square foot nor get a buffet meal for $0.66 cents nor have door rooms for workers. Now, it is competitive to find this space and you need to lease when you find it not wait 1 day, it took us 4 months searching and we lost several spaces waiting 1-2 days, but it exists.

But ultimately what is far cheaper here in China and the main reason I must remain here to make money is for the lower cost of the materials required to actually build the products.

There is a critical mass of suppliers here where you can find half dozen capable suppliers for nearly anything you'd need to buy. For example we do a lot of custom molded plastic parts and many times I can make multiple cavity hard (300K shot life) injection mold tools for plastics for $3K-$5K USD and it would cost 5x or even 10x as much to buy them in USA. No less, bolts, nuts, screws, electronics all vastly cheaper here.

Lastly, as someone else noted, the cost of shipping is much cheaper when you originate your shipping quotes from a Chinese account, especially for air shipping to USA, rates originating from my China company's Fedex account is routinely 50% cheaper than what Fedex quotes in the USA. This really adds up when you need to ship stuff around the world quickly.

Certainly one thing the article failed to mention is the critical mass of suppliers in China that makes manufacturing much more efficient in China than in the USA. Not sure how the USA is going to address that, but I honk the first step is to bring at least some of the manufacturing back to the USA and lower energy cost certainly helps start that.

Factors other than labor cost were discussed a few years ago wrt the iPhone:

http://gizmodo.com/5878209/why-apple-doesnt-make-the-iphone-...

Thanks for the costs breakdown, I found it interesting. I'm in software, and in the North; there are definite similarities and differences.

For those reading this that are interested in software costs, here's a similar breakdown:

A Senior Developer (Java, C# being predominant technologies), with around 7-10 years' experience, or similar QA, good English language, makes around USD 25,000 per year. The market gets very thin at 10+ years, especially for English speakers in management, and ceilings at around USD 45,000 per year unless the person has had international placements. [At more junior levels, income is less, with starting salaries at around USD 6 - 8k per year.]

For those reading, this is gross salary (individual income tax at 15-30% for these salaries), but the company contributes around 40% in addition to this gross salary as social security benefit.

For a bigger city like Shanghai, add 30-40% to the above.

A software worker probably won't live in a dormitory. They'll have an apartment and mortgage, often close to their office complex (software parks are constructed as mixed commercial-residential developments over 20-30 square kilometers, with residential areas on the peripheral and offices / shopping mall in the center).

I'm surprised your rent is so low. Modern, international grade office buildings go for around USD 150 per square meter per year (or, around 2.5 Yuan per day). Bigger cities are a little more. On the outside of Shanghai it is around 3 Yuan per day for an office in a technology park in the outskirts of the city.

Local software parks also do food, but prices are more like $2.5 (15 Yuan) for a meal.

Parts maker. It's something people forget about. Britain for a time was the premier plane/jet developer and manufacturing center after WW2. Like the Comet. And that helped a lot of parts makers (like Rolls-Royce jet engine) for planes grow in UK. Even when UK lost the crown of biggest jet maker to Boeing, those parts makers in Britain are still around and thriving.

So it's more disturbing to me that you can't find such competitive/numerous parts makers in US.

The U.S. has a pretty big parts industry, but it varies a lot by sector. It's quite strong in heavy machinery, for example, where domestic suppliers have a majority marketshare in both the market for the machinery itself, and the parts used for building and maintaining said machinery (and the tooling for the machines that build those machines... etc.).

There are various ways to slice it, but if you take the broad sector of "machinery and equipment" as defined by the U.S. Department of Commerce, domestic suppliers have about a 60% share of the U.S. market overall: http://selectusa.commerce.gov/industry-snapshots/machinery-a...

Americans are more aggressive in strategy - which includes outsourcing. It also makes them more prone to being aggressively stupid and aggressively short-sighted.

But hey, profits.

I want a tour of your dorms and factories. Can you post pics of a bunch of the buffet meals, please?

Here's a tour of a few factories in Shenzhen that I made when I began doing my factory search for my company, http://pavlok.com

http://www.youtube.com/watch?v=S0_blmix2IU

Really impressed with that factory! I am a part-time Horologist, and the gears in a mechanical watch always amazed me. I wondered how they were made in large quantities. I now know.

For years, I wanted to do business(small quantities at first) in China, but always chicken out when I start to think about the risk of fraud.

Do you know of any service that vets these factories, and is not subject to payoffs? I guess you need to travel there if a big order is on the table.

An important anti-fraud measure is escrow, another is QA on the sending site before your stuff goes into the container.

That was really cool, thanks for sharing that (also the music was awesome). Crazy how much custom machinery is there, like the circular railing for the Lego-like arms.

I'm really curious how you do qa on an electric shock device? Do you have extra standards for medical devices that you have to meet for this product?

We use the jolt on ourselves, we test with a voltimeter, etc. No, we meet low voltage standards and need no certification.

That site (pavlok) asks for my email and doesn't even say what the price of the product is supposed to be, nor any other details. They really expect people to donate their email address to don't-know-who for don't-know-what? I wonder how well that works.

We have a 23% conversion rate on that email form.

That said, we are currently A/B testing the buy button on the front page, so 50% of people see the buy button right now.

Also, you can see the full shopping cart page at http://buy.pavlok.com

your product reminds me of Quitter's Inc story by Stephen King. Don't know if that is a merely coincidence or you actually inspired by it.

https://en.wikipedia.org/wiki/Quitters,_Inc.

I read that story afterwards! Very interesting.

Welcome to check up for a blog post in coming weeks at blog.asianops.com. We're also redoing the websites listed in my bio that will have tons more pics (live 4-6 weeks from now).

> $30,000 USD/year for a degreed Sr. Electrical design engineer with 20 years experience.

Just to add a little context: in some EU countries (even EU-15, such as Portugal), people with similar qualifications are actually paid less than that.

It's already hard to compare salary/cost-of-life across cities, and definitely impossible between countries like China, US and EU (in the extended meaning of "country").

As a rule of thumb, when comparing a US salary with an European, I divide by 2 the number and I roughly get the equivalent in EUR and after taxes* (and considering cultural differences like the healthcare is already included in taxes, etc.) So 30,000 USD/year would be something like 15000 EUR/year, which is extremely low even for a engineering graduate working in academia.

* With "after taxes" I mean the part of the salary that you don't even receive, not the income tax that you pay (or receive back) once a year.

in Poland, 30k USD would be considered extremely good salary for engineer (35k for software devs). With 30k USD gross income, you receive 22k net compensation (health care, retirement plan, included in tax ).

How did you end up owning a factory in Shenzhen?

I wondered the same thing. His linkedin page (in his profile) is pretty interesting. I'd like to hear his thoughts on some of the IP-theft topics being brought up elsewhere in the thread...

some details:

- https://www.linkedin.com/in/bjordan1

- http://www.bomquote.com

What are the credit terms that you extend to your customers?

Generally, most favorable terms my company gives are 30% down and balance before shipment from China. Of course everything is negotiable and if I really want to do a job then we'll accept more risk.

U.S. Manufactures have access to capital such that they extend net 30 terms. That impact on our working capital is tremendous and outweighs the percentage cost savings.

It's also much less risky to extend such terms to a customer in the same nation. It's harder for a Chinese factory to sue a recalcitrant customer in the US.

My Chinese supplier extends net 90. But only because I've paid upfront so many times. It's not different over there, but you're not getting net 30 if you're an unknown person.

It sounds like this is how its supposed to happen. Now if the leftists would get this fixed pie ideology out of their ass we could move on to greater things like we've already done in the last 20 years.

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