Flextronics Flextronics CEO hints of a return to U.S. manufacturing

Just recently CEO Mike McNamara of Flextronics International Ltd., which is a Singapore-based company, hinted on bringing manufacturing back to the United States. 

Speaking last month at the annual Raymond James IT Supply Conference, Mike McNamara, who serves as the chief executive officer of Flextronics, predicts that more smartphones will be produced by the U.S. in the near future.  As with any corporation, that decision would of course be based entirely on profit potentials.

A higher standard of living is quickly becoming the norm in countries that U.S. manufacturers once saw as profitable labor alternatives. With a higher standard of living, other costs rise in tandem such as higher pay and incentives for workers.  Because of this, many U.S. manufacturers are eyeing a return to U.S. production.  Nevertheless, those decisions would pivot on tax incentives, labor demands and the unknown costs that would stem from the newly enacted federal health insurance mandates.

In 2012 production costs in China rose about 20%, and they are also predicted to rise at that same rate every year thereafter for at least 5 more years.  Labor rates are also rising in many other parts of the globe such as India, Indonesia, Taiwan and Malaysia.

“What that is going to do is probably push more work into Mexico,” McNamara said. “And, over time, as those costs continue to go up, you'll probably see more things get pushed back in the USA.  With the costs continuing to go up around the world like they are, and with the cost in the United States staying relatively flat over the last few years, I would expect you would to see a little bit more coming back."

In November 2012 one of the hot button issues during the U.S. Presidential debates was the financial crisis and unemployment problems affecting the country.  And just a year previous a report from the U.S. Commerce Department stated that approximately 1/3 of the 31 million employees involved in multi-national corporations were working abroad.

Of course the U.S. wants to see a return to more manufacturing, but hopefuls must understand that it would entail less expensive automation processes along with construction and where to place a new facility. 

We must remember it is only a supposition when men such McNamara predict a likely return of jobs to the United States.  Markets are always changing, so a return of jobs would not be some instant, miraculous event.  It may take many years before we see anything.

Flextronics is a Fortune Global 500 electronics company that offers manufacturing and end-to-end supply chain services.  Currently employing more than 200,000 employees, they have facilities in over 30 countries.