I recently took a trip to with a Client and our Hong Kong based services broker to vet some manufacturers for several newly developed products. We ranked the candidates on usual categories such as technical aptitude, quality control, worker conditions, and of course cost. That’s where the surprise would come.
On the ride from the Shekou Ferry terminal into Shenzhen, we cruised along a paved road that could easily have been in a major US city. Our host explained that not long ago it was a dirt road. In the 1990’s Shenzhen’s migrant work force and consequently, GDP grew at a sharply increased pace. China eased foreign travel restrictions to the region in 2003 further contributing to economic growth. Workers streamed from the countryside to take manufacturing jobs, and the bountiful labor supply kept manufacturing costs attractively low – until they weren’t low anymore. With the economic growth, the extreme polarization of wealth and class are giving way to the rise of a middle class. Workers are demanding better pay and better jobs. While still well below advanced manufacturing nations such as South Korea, wages in the Shenzhen region are currently on pace to double over a 6 year period.
So what did we do? Logistic simplification, reduced shipping costs and the opportunity for more robust collaboration with the manufacturer offset the modestly lower labor cost and resulted in selection of a domestic candidate in this case.
The next time we set up a manufacturing line abroad, assuming basic requirements are met, I’d like to have a look at other up & coming locations including Indonesia, Vietnam, each of which have labor costs of 60% or less those in China. Some African nations, India, and Mexico are other possibilities. Of course these lower cost options are not without concerns of their own such as primitive supply chains, and non-existent patent law resulting in shameless product rip-offs.
Unless you are fortunate enough to have a bunch of subsidies in your back pocket, Solar PV just isn’t that great of an investment. In fact it’s a horrible one. Frustrating isn’t it?
Just take the money and throw it in an S&P 500 index fund, or even one of today’s painfully low interest fixed income securities, and you’re likely to do better. You won’t even have to put any holes in your roof.
Granted panel costs have come down, but installed cost remains stubbornly high at $6.50 / watt or higher in places like California. Historically low efficiencies of 15-20%, and a 20% lifetime output depreciation add up to an ugly looking cash flow stream. So I was excited to see this article about a Silicon Valley startup making 44% efficient cells, and planning to go upwards of 50%. They do it by building multi-layer cells. Each layer is optimized to convert different spectral wavelengths of solar radiation to electricity. Of course we’ll need to see what kind of price tag they put on all this – the manufacturing process is rather tedious.
Click here for the IEEE article.
Kleinholz Inc. has an extensive background in Forensic Engineering, having conducted 1,000s of hours of research and testing in several different fields. Our Forensic Engineering areas of expertise include:
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