Element Electronics and US TV Manufacturing: The Current Posterchildren for Reshoring

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Reshoring should be nothing new to MetalMiner readers, as we’ve covered closely as it relates to US manufacturing. (Feel free to get a refresher on the pros and cons by clicking on the previous links.) For some, it may make more business sense to reshore labor-intensive castings, stampings, or other industrial metal parts or machinery, as shipping cost considerations, not to mention labor, factor in heavily.

But TVs? After LG Electronics sucked Zenith up into its folds 17 years ago, we thought TV production was never coming back from China!

Turns out a couple Midwestern companies are bucking the trend. A recent article outlines how Minnesota-based Element Electronics and Michigan-based Lotus International are teaming up to make TVs right here in the Midwest.

Michael O’Shaughnessy Element’s owner-president (and former Polaroid CEO), will employ 100 workers at Lotus’ Canton, Mich., plant, producing 46-inch TVs as early as March, according to the article. 100 workers? Peanuts!” you may say; and you’d have a point. But, one step at a time, O’Shaughnessy’s approach seems to say: “We are doing this to set an example … this is the right thing to do,” the article quotes him as saying.

So how will Element make a killer profit if the US-made TVs will cost the exact same as those units made in and shipped from China, as the company promises?

Lotus’s production facilities are tooled to service both the electronics and automotive industries, and its value propositions (not only being able to assemble, test and deliver final products upon manufacturers supplying components, but managing the entire supply chain by working diligently with the vendors including procurement, logistics and providing assembly, testing services and coordinating final delivery of the product”) certainly sound like they would reduce a partner company’s total cost of ownership (TCO).

Element Electronics started out by importing TVs and other electronics to sell at Circuit City (wow, remember them?), and in 2011 contracted with Tongfang Global, based in Shenyang, to produce its products. However, once Element hires its first American workers in Canton, they’ll pretty much just be assembling — nearly all of the parts for TVs are still made in China, so Element will have to ship those from Shenyang.

Also, according to O’Shaughnessy, the economics only work for TVs 46 inches and larger. On a price basis, apparently, it still costs Element less in parts/labor/shipping etc. to make small TVs in China. (Although Chinese labor costs have been slowly increasing, other costs have been dropping in the short term — cerium oxide, europium oxide, and terbium oxide and metal, all rare earth metals used in TV image coloring and screens, for example, have all fallen off 15-20 percent over the last 2 months, according to our MetalMiner IndX.)

So ostensibly, companies like Element likely want to keep a closer eye on the end of their supply chain and finished product quality, as well as proximity to their core consumer markets, not to mention ‘doing the right thing’ and creating more US jobs. (‘Doing the right thing’ is all well and good, but if there’s no profit motive, most companies likely won’t be paying workers simply out of social compassion.)

Will there be any government incentives to continue reshoring? If so, what are they?

Check in for Part Two later today.

–Taras Berezowsky

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