The recent move by Philips to backshore the complete production of its shavers from China to the Netherlands has received wide attention. It follows a series of backshorings, and a discussion of now almost a year whether the US has become now “cheaper” than China. The Philips site manager of the shaver plant in Drachten, Rob Karsmaker, sites two causes: the increase in wages in China’s coastal provinces, and – he stresses this was the deal maker in the end – the huge turnover of personnel in their China plants. Attrition has been a problem in many Chinese and Indian operations for many years, but it apparently takes some time to realize.

In a recent article in HBR, Michael Porter argues that companies generally make poor quality location decisions: “Many benefits of locating elsewhere, such as low wages or taxes, are visible and immediate, whereas the drawbacks are frequently subtle and apparent only over the long term.” Last year, following a study of BCG that American manufacturing is again wage-competitive with China, I tried to find out whether there was really something new. The Chinese statistics indeed revealed that between 2000 and 2009, a substantial increase in wages had been realized, and the RMB had been appreciated as compared to the US Dollar. However, the statistics also revealed that Chinese productivity has kept up pace. This implies that Chinese manufacturing wages are more or less as competitive now as they were in 2000.

I think that many companies now moving back to Europe or the US are not moving because of the wages. It is because they now – after being in China for 10 years – gain insight into the subtle drawbacks that Porter is referring to. We now have to make sure that the subtle drawbacks that exist in Europe are taken away before they are discovered in 2020.