Consumer Electronics
May 4th, 2008
Submitted By: David Zarcone
When it comes to consumer electronics, prices only seem to go up when a new technology is revealed or next-generation products are introduced. However, consumer electronics (CE) will be going up across the board this year. What’s the reason for the price increase? CHINA! Click here to find the Yahoo! article.
Numerous factors are contributing to this incredible increase, according to well-placed sources, including the rise in manufacturing and material costs. At the moment, China is the production center for the majority of CE partly due to the cheap cost of labor. But this might be coming to an end; China is bettering its relationships with workers by introducing new labor and protection laws which in turn pushed labor costs up 15%. On another note, one thing to blame is the Olympics. Many factories are shutting down in June to help clear the air pollution. Additional reasons include higher oil prices affecting shipments to the US, factory relocation in China from south to north, and finally, the biggest reason of all: the falling US dollar.
The US dollar just isn’t what it used to be, and the exchange rate between the US dollar and the Chinese Yuan has gone down since the beginning of the year. It has fallen about 10% in the last year, so basically Chinese companies now earn 10% less than they did a year ago due to falling exchange rate.
When asked about this problem and ideas of possible alternatives, a US manufacturing executive said “Some have mentioned Vietnam, but we are talking about consumer electronics. China has the infrastructure. There really isn’t an alternative.” At the manufacturer’s level, prices in China are up 8-20%, and the US retail prices will follow shortly, so stock up on your new cell phones and laptops before it’s too late.
Entry Filed under: China, Pre-Departure
4 Comments Add your own
1. Brandi Eng-Rohrbach | May 4th, 2008 at 8:53 pm
I’m not sure if it will raise all prices. What if in a slower economy companies start price wars to move product? I mean if you have a lot of inventory that is going to be obselete in a few months which is the case with consumer electronics why not try and move it? Here’s a blog that says TVs will get a lot cheaper in a month.
2. Pierre Michael | May 4th, 2008 at 9:41 pm
Seems like quite the dilemma. If US companies start raising their prices to cover their higher oil costs and increasing Chinese costs, demand will decrease. As demand decreases prices will rise even higher. Most companies are reluctant to raise their prices significantly because they know that their price sensitive customers will start to dwindle in numbers. Since companies want to remain competitive in this highly elastic industry, and since price fixing is illegal due to antitrust laws, I envision companies will be slow to raise their prices as they wait to see what their competitors are doing. I think prices of consumer electronics will indeed rise gradually, but so are all other products in other sectors, as well as salaries. This can just be viewed as a form of international inflation. The falling strength of the dollar sure isn’t helping.
3. Shasta Palmer | May 7th, 2008 at 10:03 am
If prices on electronics go up, how much do they have to go up before factories bring business back here? I think with us outsourcing so much stuff to China and letting them build the infrastructure we are setting ourself up for some major issues. We are making it where our dollar is decreasing in value and we are outsourcing everything that requires equipment. Therefore, we don’t have the structure or the equipment to produce these things anymore. So, what happens if prices do go up? Do we have the money, technology and manpower to make our own if we ever to? Equipment isn’t just something you set-up easily and start producing. It takes lots of time and money to set-up and take down industries. Given, everything can’t be set-up on what if’s, but there should be some thought about this as we continue buying all these goods from China and don’t keep up on technology here.
4. Gary Chou | May 7th, 2008 at 4:28 pm
I have talked about this several times before…and this is just reaffirming my postulate that according to the second law of thermodynamics, the entropy of an isolated system which is not in equilibrium will tend to increase over time, approaching a maximum value at equilibrium.
The global economy is an isolated system and is not in equilibrium: some countries have far lower quality of life (measured in household income per capita) than others. But the law dictates that this unevenness, like ALL unevenness, will quickly dissipate over time to a state that the system becomes completely even (disordered). No further exchange of energy or movement of particles could result in a more disordered (even) state.
In the global economy, this means all wealth generated from trade will go toward zero to a point that every country is equally rich with one another.
We are at a very uneven state (low entropy, high ordered), so America can profit from cheap labor of China while China moves up in its wealth.
As China moves up, the very source for its progress–its cheap labor–decreases. When China reaches the same level of wealth–when its labor is the same price as America–no further exploitation could take place. China and America then must exploit another country who is not at equilibrium, such a India. This process will continue until the world becomes even (most disordered).
Leave a Comment
Some HTML allowed:
<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <code> <em> <i> <strike> <strong>
Subscribe to the comments via RSS Feed