Wednesday, January 18, 2012

Manufacturing: It's Not the Labor Cost

Nothing new in this item if you've been paying attention.

...My host, a NASA engineer turned Silicon Valley entrepreneur, has just conducted a fascinating tour of his new clean-energy bench-scale test facility. It’s one of the Valley’s hottest clean-technology startups. And he’s already thinking of going abroad. 

“Wages?” I ask. 

His dark eyebrows arch as if I were clueless, then he explains the reality of running a fab -- an electronics fabrication factory. “Wages have nothing to do with it. The total wage burden in a fab is 10 percent. When I move a fab to Asia, I might lose 10 percent of my product just in theft.” 

I’m startled. “So what is it?” 

“Everything else. Taxes, infrastructure, workforce training, permits, health care. The last company that proposed a fab on Long Island went to Taiwan because they were told that in a drought their water supply would be in the queue after the golf courses.

Read the rest--and Part Two when it materializes.


Beer, Bicycles and the VRWC said...

Yes and no. Labor cost is the big deal where I work. By far. It is not always that way and tax and regulation play a big part, but by far it is labor cost.

neomom said...

It's all regs here... Quality, finance, EHS, security... Some of them extremely necessary, a lot of them not so much. Our labor cost at a fabrication plant in PA is ~$25 per hour, fully burdened it goes to over $100 per hour.

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