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Made in America, Again
Why Manufacturing Will Return to the U.S.

The Boston Consulting Group (BCG) is a global

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Made in America, Again
Why Manufacturing Will Return to the U.S.

Harold L. Sirkin, Michael Zinser, and Douglas Hohner

AT A GLANCE

LOOK AT TOTAL COSTS

REASSESS YOUR CHINA STRATEGY
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F

The reallocation of
global manufacturing
will become more
pronounced over the
nies face decisions
about where to add

The U.S. “Decline” and Renaissance in Perspective

The Tide Is Turning

increased

with a workforce that

The manufacture of
high labor content
that are produced in
high volumes will

The New Manufacturing Math

China's Wage Rates Are Growing Rapidly
Average wages could approach 17 percent of those
in the U.S. by 2015, up from 3 percent in 2000
2000–2005
(%)

Fully loaded factory-worker wages ($/hour)
30
26.1
25
20

U.S.

CAGR
2005–2010
(%)

2010–2015
(%)

2

4

3

10

19

17

22.3
18.8
16.6
17%

15
9%
10
3%

4%
4.5

5
0.5

0.8

2.0
0
2010
2012E
2014E
2000
2002
2004
2006
2008
2011E 2013E
2015E
2001
2003
2005
2007
2009
Sources:

Ratio of
average
Chinese
to average
U.S. wage
rates

China

China’s Productivity Gains Will Lag Behind Wage Increases Growing at nearly 10 percent per year, China’s productivity could reach 40 percent of U.S. productivity by 2015
Chinese productivity relative to U.S. productivity (%)

100
Average unit productivity, CAGR
2000–2010
(%)
U.S.: ~2
China: ~10

80

Average unit productivity, CAGR
2010–2015
(%)
U.S.: ~1
China: ~8.5

60
40

40
29
20

20 13
0
2000
Sources:
Note:

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Economics Will Drive Reinvestment in the U.S.
Imagine a
company...
U.S.-based auto parts
supplier
Most customers are U.S.
OEMs that manufacture
in the U.S.

Parts require eight
minutes of labor, on
average, in the U.S.
Labor represents
one-quarter of the
total cost of the part

...with the following
choices of location
U.S.,
selected
southern
states

Flexible unions/
workforce
Minimal wage
growth
High worker
productivity

China,
Yangtze
River
Delta

Scarce labor
Rapidly rising
wages
Low productivity
relative to the U.S.

2000

2015E

15.81

24.81

Productivity (%)

100

100

Labor cost/part ($)

2.11

3.31

Wage rate ($/hour)

0.72

6.31

13

42

Wage rate ($/hour)

Productivity (%)

1

2.00

65

39

Total cost savings before
transportation, duties,
and other costs (%)
Sources:

0.74

Labor cost savings (%)

Labor cost/part ($)

16

10

Greater investment
in automation
would undercut the
chief competitive
advantage of
manufacturing
in China—low

Increased Automation in China Is Unlikely to Change the Cost Equation Product with 20 percent labor content
Cost savings (%)

100

100
80

75
66

60

61
44

40
25
20
0

13
2000

21

27

39

Total savings before
supply chain costs

13

19
2005

2010

15

2015E

2015
(China’s productivity
assumed to be equal
to U.S. productivity)

16

1

Labor cost savings in China (%)
Total cost savings in China (%)
China’s productivity relative to U.S. productivity (%)
Source:
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