Postcards From Tomorrow Square (11 page)

The low-road reason is the “Nike problem.” This is the buyers’ wish to minimize their brand’s association with outsourcing in general and Asian sweatshops in particular, named for Nike’s PR problems because of its factories in Indonesia. By Chinese standards, the most successful exporting factories are tough rather than abusive, but those are not the standards Western customers might apply.

The high-road reason involves the crucial operational importance of the “supply chain.” It is not easy to find the right factory, work out the right manufacturing system, ensure the right supply of parts and raw material, impose the right quality standards, and develop the right relationship of trust and reliability. Companies that have solved these problems don’t want to tell their competitors how they did so. “Supply chain
is
intellectual property,” is the way Liam Casey puts it. Asking a Western company to specify its Chinese suppliers is like asking a reporter to hand over a list of his best sources.

Because keeping the supply chain confidential is so important to buyers, they try to impose confidentiality on their suppliers. When an outside company’s reputation for design and quality is strong—Sony, Braun, Apple—many Chinese contractors like to drop hints that they are part of its supply chain. But the ones who really are part of it must be more discreet if they want to retain the buying company’s trust (and business).

So I will withhold details but ask you to take this leap: If you think of major U.S. or European brand names in the following businesses, odds are their products come from factories like those I’m about to describe. The businesses are computers, including desktops, laptops, and servers; telecom equipment, from routers to mobile phones; audio equipment, including anything MP3-related, home stereo systems, most portable devices, and headsets; video equipment of all sorts, from cameras and camcorders to replay devices; personal-care items and high-end specialty catalog goods; medical devices; sporting goods and exercise equipment; any kind of electronic goods or accessories; and, for that matter, just about anything else you can think of. Some of the examples I’ll give come from sites in Shenzhen, but others are from facilities near Shanghai, Hangzhou, Guangzhou, Xiamen, and elsewhere.

Why does a foreign company come to our Mr. China? I asked Casey what he would tell me if I were in, say, some branch of the steel industry in Pittsburgh and was looking to cut costs. “Not interested,” he said. “The product’s too heavy, and you’ve probably already automated the process, so one person is pushing a button. It would cost you almost as much to have someone push the button in China.”

But what is of intense interest to him, he said, is a company that has built up a brand name and relationships with retailers and knows what it wants to promote and sell next—and needs to save time and money in manufacturing a product that requires a fair amount of assembly. “That is where we can help, because you will come here and see factories that are better than the ones you’ve been working with in America or Germany.”

Here are a few examples, all based on real-world cases: You have announced a major new product that has gotten great buzz in the press. But close to release time, you discover a design problem that must be fixed—and no U.S. factory can adjust its production process in time.

The Chinese factories can respond more quickly, and not simply because of 12-hour workdays. “Anyplace else, you’d have to import different raw materials and components,” Casey told me. “Here, you’ve got nine different suppliers within a mile, and they can bring a sample over that afternoon. People think China is cheap, but really, it’s
fast
.” Moreover, the Chinese factories use more human labor, and fewer expensive robots or assembly machines, than their counterparts in rich countries. “People are the most adaptable machines,” an American industrial designer who works in China told me. “Machines need to be reprogrammed. You can have people doing something entirely different next week.”

Or: You are an American inventor with a product you think has “green” potential for household energy savings. But you need to get it to market fast, because you think big companies may be trying the same thing, and you need to meet a target retail price of $100. “No place but China to do this,” Mr. China said, as he showed me the finished product.

Or: You are a very famous American company, and you worry that you’ve tied up too much capital keeping inventory for retail stores at several supply depots in America. With Mr. China’s help, you start emphasizing direct retail sales on your Web site—and do all the shipping and fulfillment from one supply depot, run by young Chinese women in Shenzhen, who can ship directly to specific retail stores.

Over the course of repeated visits to Shenzhen—the breakfasts!—and visits to other manufacturing regions, I heard about many similar cases and saw some of the tools that have made it possible for Western countries to view China as their manufacturing heartland.

Some involve computerized knowledge. Casey’s PCH has a Google Earth–like system that incorporates what he has learned in 10 years of dealing with Chinese subcontractors. You name a product you want to make—say, a new case or headset for a mobile phone. Casey clicks on the map and shows the companies that can produce the necessary components—and exactly how far they are from one another in travel time. This is hard-won knowledge in an area where city maps are out-of-date as soon as they are published and addresses are approximate. (Casey’s are keyed in with GPS coordinates, discreetly read from his GPS-equipped mobile phone when he visits each factory.) If a factory looks promising, you click again and get interior and exterior photos, a rundown on the management, in some cases videos of the assembly line in action, plus spec sheets and engineering drawings for orders it has already filled. Similar programs allow Casey and his clients to see which ship, plane, or truck their products are on anywhere in the world, and the amount of stock on hand in any warehouse or depot. (How do they know? Each finished piece and almost every component has an individual bar code that is scanned practically every time it is touched.)

The factories whose work flow Casey monitors vary tremendously, though not in their looks. I’ve come to think that there is only one set of blueprints for factories in China: a big, boxy, warehouse-looking structure, usually made of concrete and usually five stories; white or gray outside; relatively large windows, which is how you can tell it from the workers’ dormitories; high ceilings, to accommodate machines. But inside, some are highly automated while some are amazingly reliant on hand labor. I’m not even speaking of the bad, dangerous, and out-of-date factories frequently found in the north of China, where leftover Maoist-era heavy-industry hulks abound. Even some newly built facilities leave to human hands work that has been done in the West for many decades by machines. Imagine opening a consumer product—a mobile phone, an electric toothbrush, a wireless router—and finding a part that was snapped on or glued into place. It was probably put there by a young Chinese woman who did the same thing many times per minute throughout her 12-hour workday.

I could describe many installations, but I was fascinated by two. The first represents one extreme in automation. It is owned and operated by Inventec, one of five companies based in Taiwan that together produce the vast majority of laptop and notebook computers sold under any brand anywhere in the world. Everyone in America has heard of Dell, Sony, Compaq, HP, Lenovo-IBM ThinkPad, Apple, NEC, Gateway, Toshiba. Almost no one has heard of Quanta, Compal, Inventec, Wistron, or ASUSTeK. Yet nearly 90 percent of laptops and notebooks sold under the famous brand names are actually made by one of these five companies in their factories in mainland China. I have seen a factory with three “competing” brand names coming off the same line.

The Inventec installation I saw was in an export-processing zone in Shanghai specially created for the company, in which imported components for manufacturing and finished products for export were free of the usual duties or taxes. It turns out more than 30,000 notebook computers per day, under one of the brand names listed above. Each day, an Inventec plant on the same campus produces hundreds of large, famous-brand-name server computers to run Internet traffic.

This is today’s rough counterpart to the Ford Motor Company’s old River Rouge works. In the heyday of The Rouge, rubber, steel, and other raw materials would come into the plant, and finished autos would come out. Here, naked green circuit boards, capacitors, chip sets, and other components come in each day, and notebook computers come out. Some advanced components arrive already assembled: disk drives from Taiwan or Singapore, LCD screens from Korea or Japan, keyboards and power supplies from other plants in China.

The overall process looks the way you would expect a high-tech assembly line to. Conveyors and robots take the evolving computer from station to station; each unit arrives in front of a worker a split second after she has finished with the previous one. Before a component goes into a machine, its bar code is scanned to be sure it is the right part; after it is added, the machine is “check-weighed” to see that its new weight is correct. Hundreds of tiny transistors, chips, and other electronic parts are attached to each circuit board by “pick and place” robots, whose multiple arms move almost too fast to follow. The welds on the board are scanned with lasers for defects. Any with problems are set aside for women specialists, looking through huge magnifying glasses, to reweld. “Why did this factory invest so much in robots and machine tools?” I asked a supervisor from Taiwan. “People can’t do it precisely enough,” was his answer. These factories automate not what’s too expensive but what’s too delicate for human beings to perform.

Many of the notebook computers have been ordered online, and as they near completion each is “flavored” for its destination. The day I visited, one was going to Tokyo, with a Japanese keyboard installed and Japanese logos snapped into the right places on the case; the next one was headed for the United States. After display screens are installed, each computer rides on a kind of racetrack along the ceiling of the factory, where it runs for several hours to make sure that all components work. Then the conveyors carry it to the final flavoring step—the “burn in” of the operating system, which on my visit was Windows Vista, in many languages. One engineer pointed out that because Vista requires up to 10 times as much disk space as Windows XP, the assembly line had to be altered to allow a much longer, slower passage through the burn-in station.

The other facility that intrigued me, one of Liam Casey’s in Shenzhen, handled online orders for a different well-known American company. I was there around dawn, which was crunch time. Because of the 12-hour time difference from the U.S. East Coast, orders Americans place in the late afternoon arrive in China in the dead of night. As I watched, a customer in Palatine, Illinois, perhaps shopping from his office, clicked on the American company’s Web site to order two $25 accessories. A few seconds later, the order appeared on the screen 7,800 miles away in Shenzhen. It automatically generated a packing and address slip and several bar-coded labels. One young woman put the address label on a brown cardboard shipping box and the packing slip inside. The box moved down a conveyor belt to another woman working a “pick to light” system: She stood in front of a kind of cupboard with a separate open-fronted bin for each item customers might order from the Web site; a light turned on over each bin holding a part specified in the latest order. She picked the item out of that bin, ran it past a scanner that checked its number (and signaled the light to go off), and put it in the box. More check-weighing and rescanning followed, and when the box was sealed, young men added it to a shipping pallet.

By the time the night shift was ready to leave—8 a.m. China time, 7 p.m. in Palatine, 8 p.m. on the U.S. East Coast—the volume of orders from America was tapering off. More important, the FedEx pickup time was drawing near. At 9 a.m. couriers would arrive and rush the pallets to the Hong Kong airport. The FedEx flight to Anchorage would leave by 6 p.m., and when it got there, the goods on this company’s pallets would be combined with other Chinese exports and re-sorted for destinations in America. Forty-eight hours after the man in Palatine clicked “Buy it now!” on his computer, the item showed up at his door. Its return address was a company warehouse in the United States; a small MADE IN CHINA label was on the bottom of the box.

At 8 a.m. in Shenzhen, the young women on the night shift got up from the assembly line, took off the hats and hairnets they had been wearing, and shook out their dark hair. They passed through the metal detector at the door to their workroom (they pass through it going in and coming out) and walked downstairs to the racks where they had left their bikes. They wore red company jackets as part of their working uniform—and, as an informal uniform, virtually every one wore tight, low-rise blue jeans with embroidery or sequins on the seams. Most of them rode their bikes back to the dormitory; others walked, or walked their bikes, chatting with one another. That evening they would be back at work. Meanwhile, flocks of red-topped, blue-bottomed young women on the day shift filled the road, riding their bikes in.

GOOD FOR US—FOR NOW

What should we make of this? The evidence suggests what I hadn’t expected: that the interaction has been good for most participants—so far.

Has the factory boom been good for China? Of course it has. Yes, it creates environmental pressures that, if not controlled, could pollute China and the world out of existence. The national government’s current Five-Year Plan—the 11th, running through 2010—has as its central theme China’s development as a “harmonious society,” or
hexie shehui
, a phrase heard about as often from China’s leadership as “global war on terror” has been heard from America’s. In China, the phrase is code for attempting to deal with income inequalities, especially the hardships of farmers and millions of migrant laborers. But it is also code for at least talking about protecting the environment.