Is the reason that Samsung makes their smartphones in Korea is probably due to the fact that their supply chain already exists in Korea. Since they manufacture all of their products in Korea it stands to reason that moving somewhere else has a much deeper cost than just labor.
The ExtremeTech article makes a lot of calculations based on the assumption that Samsung assembles the Galaxy S3 itself, but they don't provide any evidence of that.
The Reuters article cites a source (a Korean newspaper) saying that the S3s are being made at Samsung's South Korea smartphone factory (which is in Gumi, I think).
The article assumes that both companies produce 130 tablets per worker per month. Is this valid? I would assume that Samsung would be more efficient, if only because their higher labor costs give them a greater incentive.
If only America was building up neighbors like Mexico with all this payout for labor, which might have the side effect of reducing crime and immigration.
We'd also be able to more easily supervise working conditions, which may explain why Mexico is not used for this kind of labor.
Plus it'd lower transportation costs and time, not to mention it'd be a lot easier to communicate with the Mexicans (more similarities in language & culture than with the Chinese).
As previous posts regarding "building in America" point out, it's not just the cost of labor, but being close to your supply chain that makes China so great. Mexico faces the same supply chain problem as building in America, so it wouldn't really get anywhere.
You should also note that with NAFTA in place, there has been significant shifts of manufacturing to Mexico. A lot of car factories sprung up in Mexico after NAFTA (both brand new factories, as well as relocated from Canada/US). While the degree of work being done in Mexico is not as large as in China, it is not fair to say that none as happened. There's a decent business week article that gives some overview of whats going on down there.
Harvard Business Review did a study back in the mid-90's comparing the cost to manufacture in a range of countries (outside the US). Mexico came in at the top ranking for lowest total cost of operations, much of it due to reduced shipping, reduced lead times, and tax benefits due to NAFTA. A lot of the problems with Mexico, though, are due to infrastructure and workforce.
When I worked for a big electronics multinational, we had a plant in one of the Mexican maquiladoras. Management wanted to expand operations there, but the problem at the time was that the power grid and water supply in the area weren't sufficient.
The factory I visited was nice, the working conditions were safe and clean, employees had a straight 40-hour work week, and the atmosphere was friendly and relaxed. But according to the plant manager, there was really high turnover. This wasn't a sweat shop, the pay was good, and they weren't any chemicals or other hazardous materials - conditions you often read about regarding the high turnover in maquiladoras. Whatever the reason, it's really hard to run an operation when you lose the majority of your trained workers every year.
> "South Korea actually has a rather high income per capita — $24,000 — and the average monthly salary for a factory worker is $2000 per month."
South Korea is an economic miracle. Back in 1985 I ran out of money half-way through college and enlisted in the US Army for the college fund (plus they repaid my existing student loans, which was a nice deal). I got stationed in S. Korea and became friends with a number of KATUSA soldiers. KATUSA stood for Korean Augmentation to the US Army, and was mostly college students fulfilling their service requirement.
Quite a few of my KATUSA friends were engineering students like myself. They told me that the average starting salary for an engineer was $400 / month. So when I see that 25 years later, the average factory worker is making 5 times that amount, it's truly stunning.
As a side note, when I was there, most of the cars on the road were new. It wasn't because everyone could afford to ditch their old cars and buy new ones. It was because prior to that period, not many people could to afford to buy any car, so there simply weren't many old ones.
And their products were crap. Buy a TV, VCR, or other electronic device, and they often failed out of the box. Pop open the hood of a Korean car and you half expected to see a squirrel on a tread mill. But they keep plugging away, improving quality, and growing their markets. Today, I buy Korean products with confidence.
People talks about the rise of China, but to me, with factory salaries at $2000/month, South Korea is the more impressive success story in the developing world.
Japan, Korea, and China are really just three countries at different places on the same road. There was a time in the 20th century when the story of Japan was young people moving from the countryside to work in sweatshops taking in raw Chinese silk and turning it into spools. But the workers were paid more than they'd get on the farm, and the capitalists accumulated capital, and the supply of surplus labor was absorbed, and by WWII Japan was in more or less the relative position that Korea is now.
And China seems to be in more or less the same position that Korea was under Park[1]. Of course, China has this huge hinterland that wasn't there in South Korea, and there's nothing saying that China's political evolution will look like South Korea's (hopefully it won't look like Japan's). But its engaging in almost exactly the same sort of export led growth under an authoritarian government.
> China has this huge hinterland that wasn't there in South Korea
Exactly. China can't solely depend on export for its growth, like South Korea did. That will make its development quite a bit slower, not to mention more difficult. Parts of the country will become developed first (this has already significantly happened in Beijing and Shanghai), and then bring the rest of the country up. In the process, there will be significant economic disparities, which has the potential to rupture the social fabric.
There was a program on BBC2 recently [2] of a business owner with textile factories in both China & the UK. One of the illustrations they made was an increase in pay in China (something like 3-fold in recent years IIRC). The employees over there were getting quite vocal, they'd go to the office and demand a 50% increase or walk away. There were also markets were employers would advertise their business, job seekers compared pay and extras. One of the things that stood out most were the worker's clothes & haircut: colorful, modern, trendy.
These days? Nothing much. When they had half-finished industrializing? They were a totalitarian state that invaded its neighbors and launched a surprise attach on the US to keep us from intervening. Lets call that the worst case scenario.
The same thing is happening in the major manufacturing hubs of India, ten years ago the salary of an unskilled laborer was around $1.50/day today it is around $8 per day
I visited Samsung Headquarters in Suwon, just south of Seoul, last year.
It's a scarily 1984-esque walled-city with airport-type security, heavily regimented work times, where it's not uncommon to find people still working through 2AM. Workers are often given apartments by the company as part of their package, and consider a low salary in such a package with the probable security of long term employment as a good career prospect and a valuable position.
On a human level, the various departments I saw felt like there was little to no room for innovation or creative thinking on the part of individual workers.
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[ 2.8 ms ] story [ 61.0 ms ] threadThe ExtremeTech article makes a lot of calculations based on the assumption that Samsung assembles the Galaxy S3 itself, but they don't provide any evidence of that.
We'd also be able to more easily supervise working conditions, which may explain why Mexico is not used for this kind of labor.
You should also note that with NAFTA in place, there has been significant shifts of manufacturing to Mexico. A lot of car factories sprung up in Mexico after NAFTA (both brand new factories, as well as relocated from Canada/US). While the degree of work being done in Mexico is not as large as in China, it is not fair to say that none as happened. There's a decent business week article that gives some overview of whats going on down there.
http://www.businessweek.com/magazine/content/08_13/b40770009...
When I worked for a big electronics multinational, we had a plant in one of the Mexican maquiladoras. Management wanted to expand operations there, but the problem at the time was that the power grid and water supply in the area weren't sufficient.
The factory I visited was nice, the working conditions were safe and clean, employees had a straight 40-hour work week, and the atmosphere was friendly and relaxed. But according to the plant manager, there was really high turnover. This wasn't a sweat shop, the pay was good, and they weren't any chemicals or other hazardous materials - conditions you often read about regarding the high turnover in maquiladoras. Whatever the reason, it's really hard to run an operation when you lose the majority of your trained workers every year.
South Korea is an economic miracle. Back in 1985 I ran out of money half-way through college and enlisted in the US Army for the college fund (plus they repaid my existing student loans, which was a nice deal). I got stationed in S. Korea and became friends with a number of KATUSA soldiers. KATUSA stood for Korean Augmentation to the US Army, and was mostly college students fulfilling their service requirement.
Quite a few of my KATUSA friends were engineering students like myself. They told me that the average starting salary for an engineer was $400 / month. So when I see that 25 years later, the average factory worker is making 5 times that amount, it's truly stunning.
As a side note, when I was there, most of the cars on the road were new. It wasn't because everyone could afford to ditch their old cars and buy new ones. It was because prior to that period, not many people could to afford to buy any car, so there simply weren't many old ones.
And their products were crap. Buy a TV, VCR, or other electronic device, and they often failed out of the box. Pop open the hood of a Korean car and you half expected to see a squirrel on a tread mill. But they keep plugging away, improving quality, and growing their markets. Today, I buy Korean products with confidence.
People talks about the rise of China, but to me, with factory salaries at $2000/month, South Korea is the more impressive success story in the developing world.
And China seems to be in more or less the same position that Korea was under Park[1]. Of course, China has this huge hinterland that wasn't there in South Korea, and there's nothing saying that China's political evolution will look like South Korea's (hopefully it won't look like Japan's). But its engaging in almost exactly the same sort of export led growth under an authoritarian government.
[1]http://en.wikipedia.org/wiki/Third_Republic_of_South_Korea
Exactly. China can't solely depend on export for its growth, like South Korea did. That will make its development quite a bit slower, not to mention more difficult. Parts of the country will become developed first (this has already significantly happened in Beijing and Shanghai), and then bring the rest of the country up. In the process, there will be significant economic disparities, which has the potential to rupture the social fabric.
[2] The town Taking on China http://bbc.co.uk/programmes/b01hn6l8
I'm curious: what's wrong with Japanese politics?
It's a scarily 1984-esque walled-city with airport-type security, heavily regimented work times, where it's not uncommon to find people still working through 2AM. Workers are often given apartments by the company as part of their package, and consider a low salary in such a package with the probable security of long term employment as a good career prospect and a valuable position.
On a human level, the various departments I saw felt like there was little to no room for innovation or creative thinking on the part of individual workers.
Most impressive was their QA department.