Sponsored By

Twenty years ago, when the glamour of manufacturing in China was taking the USA by storm, a long-time moldmaker told me that everyone who was heading off to China for the cheap wages and high profits to make their products would live to regret it. He told me that in spite of customers asking him about making molds in China, his absolute refusal was a stand for the United States and for U.S. mold manufacturing.

Clare Goldsberry

March 10, 2015

5 Min Read
China's like a big roach motel: Once you get in, you can't get out

This moldmaker has since sold his company and moved into retirement, but his reasoning has stuck with me. He warned that if U.S. manufacturers took their production to China--along with the production machinery technology, blueprints, know-how, and innovation and ingenuity that U.S. manufacturers have developed over the 20th century--China would never be happy just "making stuff" for these American companies. They would soon own it--lock, stock and barrel.

It seems that others believe the same thing, now that it's happening. In the February 19 issue of Manufacturing & Technology News, Michael Wessel and Dane Slane, members of the U.S.-China Economic and Security Review Commission, wrote an interesting editorial that appeared on the front page. The title alone is very telling: "Having Milked American Companies of IP and Marketing, the Chinese Don't Want You Any More."

They echo what my moldmaker friend pointed out: "The Chinese Communist Party never had any intention of turning over their domestic markets to foreign companies. They needed your technology, production and marketing expertise to grow their economy. Now that they have it, both legally and illegally, the party is over and the Party no longer wants or needs you anymore."

My moldmaker friend didn't have a crystal ball, but he'd been around for enough years to understand the real motives of the Chinese. He'd even read Sun Tzu's Art of War, a book that explains how to defeat the enemy without having to go to battle. One must welcome the enemy into one's house, learn from the enemy all that is needed to be successful, then kill the enemy. It's not prudent to kill the enemy before one has learned all the enemy has to teach about being successful.

Doesn't that advice sound familiar? I can remember back in the 1990s when a very large injection molding company here in Arizona made cell phone housings for Motorola Mobility, which had become its largest customer. That lasted a few years, until a call came one day from an employee who I knew well telling me that Motorola just rejected three tractor-trailer shipments of cell-phone housings. That was the beginning of the end for this molder.

Motorola Mobility was the owner of the patents for the Android, and it had started manufacturing in China, which would be very telling in their future. In May 2012, Google purchased Motorola Mobility for its patents, and then sold it in January 2014 to Lenovo, a successful Chinese brand. Without firing a shot, Lenovo became the owner of some very profitable technology. "The greatest victory is that which requires no battles," said Sun Tzu, who considered war a necessary evil.

It seems that China has cautiously acquired a number of U.S.-based companies for the technology they developed and patented. But, of course, China has no problems acquiring technology patents or not. Confiscating intellectual property is seen as part of the game. "All warfare is based on deception," said Sun Tzu.

"The Chinese government is solely interested in protecting its domestic companies and national champions," write Wessel and Slane. "Foreign corporations are in the way. The party got what it wanted from Western companies and no longer needs their help, nor, in many cases, does it want it."

That means it's not easy for companies that have established Chinese plants to leave China and reshore production. Rosemary Coates, Executive Director of the Reshoring Initiative and the President of Blue Silk Consulting, a global supply chain consulting firm, wrote an article in the December 2014 issue of CEO World, "Failure Alert: What happens when reshoring goes wrong." She points out that there are "significant consequences" to shutting down a plant and leaving China. There are employee contracts that must be fulfilled if their terms are not up. And, most importantly, you may not be able to remove equipment and technology.

"Molds and IP can be additional concerns," Coates wrote. "If you have transferred a production mold or die to China, or purchased one developed in-country, they will typically be considered the property of the Chinese production plant. Unless you have an agreement in writing to ship molds and dies back at the end of production (including serial numbers of each piece), don't expect anything to be returned. The Chinese view this equipment as your investment in their production facility and they believe they own it and expect to continue to use it long after you are gone."

Sun Tzu says, "Engage people with what they expect; it is what they are able to discern and confirms their projections. It settles them into predictable patterns of responses, occupying their minds while you wait for the extraordinary moment--that which they cannot anticipate."

Need we say more about intellectual property (IP) theft. That's a given if you are manufacturing in China. "IP theft is more a matter of ordinary business in China than a contract violation," she wrote. "You shouldn't expect IP rights to be suddenly respected when you leave. Chinese manufacturers are very likely to continue to manufacture the same products using cheaper raw materials and processes."

It is common for the Chinese to steal IP, even while you're still manufacturing there! Did you see the news about an Apple Watch knock-off that came out the day after Apple introduced its latest and greatest technology? And the knock-off costs only $50! Such a deal they have for you!

You can try to reshore your manufacturing production, but there are a number of difficulties, as both Coates, and Wessel and Slane note in their respective articles. Skilled workers are in short supply. Machinery and equipment that many of your suppliers used to manufacture your products may have been disposed of when you left. And when we've been jilted once, why should we trust you again?

Let's remember what Sun Tzu said: "The supreme art of war is to subdue the enemy without fighting."

About the Author(s)

Clare Goldsberry

Until she retired in September 2021, Clare Goldsberry reported on the plastics industry for more than 30 years. In addition to the 10,000+ articles she has written, by her own estimation, she is the author of several books, including The Business of Injection Molding: How to succeed as a custom molder and Purchasing Injection Molds: A buyers guide. Goldsberry is a member of the Plastics Pioneers Association. She reflected on her long career in "Time to Say Good-Bye."

Sign up for the PlasticsToday NewsFeed newsletter.

You May Also Like