As China costs rise, technology lures U.S. factories home

Tue Jul 24, 2012 1:24am EDT
 
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By Scott Malone and Ernest Scheyder

SCHENECTADY, N.Y./NEW YORK (Reuters) - Seesmart Inc, a small California lighting company, used to make all of its LED products in China, but last year that started to change.

Frustrated by expensive and slow shipping and wanting more control over the manufacturing process, the 15-year-old company started building factories in Simi Valley, California, and Crystal Lake, Illinois.

"When we do the numbers we're actually ahead manufacturing here instead of paying for air freight and dealing with the logistical issues that we're having in China," said Raymond Sjolseth, the company's president and co-founder.

With just $11 million in revenue last year, Seesmart is a tiny company, but it is one of many manufacturers of all sizes - from Master Lock to blue-chips General Electric Co and Caterpillar Inc - that are expanding production in the United States.

After decades roaming the world in search of lower costs, U.S. manufacturers are finding that factories at home can compete with China, India, Mexico and other low-cost countries.

To be sure, labor-intensive industries like clothing and electronics, which are heavily dependent on hand assembly, are seen as unlikely to come back to the United States in a major way. And the trickle of returning jobs is far from a flood.

But higher transportation costs and wage inflation in China could drive more production back to the United States.

Prime candidates for return are bulky, heavy items. GE has shifted production of appliances from Mexico and China to Louisville, Kentucky, partly due to rising shipping costs. The new plant that Caterpillar is building near Athens, Georgia, will employ about 1,400 and make small bulldozers and excavators.   Continued...

 
General Motors assembly workers Monique Watson (L) and Evetta Osborne install an electric battery on the underside of a 2011 Chevrolet Volt electric vehicle at the Detroit-Hamtramck Assembly plant in Hamtramck, Michigan November 30, 2010. REUTERS/Rebecca Cook