The Verge reporting:
Sonos today announced that it will increase prices on the Sonos Amp and Sonos Port by $50 as it shifts production out of China and into Malaysia. […]
Sonos telegraphed this move earlier in the year, telling analysts on earnings calls that it would be moving production out of China and prices might be affected. The company tells me the move is less about tariffs, which it called a “one-time hit,” and more about diversifying production for the future.
I’ve been expecting this kind of move for a while, so here it is. You’ll see it again.
I was working at Sonos in 2006 when the company decided it was time to move production of a product, mid-life cycle, from Malaysia to China. This is not a simple task. In a typical contract manufacturing scenario, you might think you know how your product is made, but the reality is that the CM knows plenty of things that you don’t. Also, there’s the small matter of redirecting your entire supply chain without too many people finding out. (I was a little surprised that management couldn’t wait for the next product.)
Most of the products I’ve worked on since that time have been assembled in China. I’ve had generally good experiences. But China is no longer a clear-cut default for electronics manufacturing. Factory wages have grown at such a remarkable and consistent clip that it’s no longer automatically the cheapest option. Business decision-makers routinely underestimate the human (and climatic!) costs of frequent travel around the world and long stays away from home.
There are still compelling reasons to make things in China today. First of all, everyone else is already doing it, so there’s an incredible supply chain for everything you need. Everyone still hustles. And they’ve been investing in training that the U.S. hasn’t–if you’re looking to hire an experienced CNC machinist, you could probably interview hundreds of candidates tomorrow.
It’s no secret that the latest wrinkle in the equation are the arbitrary and unpredictable tariffs coming out of the White House. As an economic tool they make no sense–they’re greatly complicating global logistics and will have negligible benefits for Americans. But they are certainly proving disruptive in a way that may unseat a long-term equilibrium. I’m keen to see what the new normal will look like when the dust finally settles. In the meantime, it makes sense not to play all your cards on China.