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August 29, 2019 Philippines - For the most part of the past three decades, the global manufacturing industry map was essentially divided into two: the high-cost regions and the low-cost regions. The countries that pioneered global manufacturing—which include the US, Western Europe, and Japan—are considered high-cost regions. Meanwhile, the global manufacturing markets that were established after manufacturing costs became too expensive in high-cost regions are considered low-cost regions, and this includes Latin America, Eastern Europe, and most of Asia.

However, technology and other important factors in the global manufacturing industry which includes wages, production costs, and even currency values are causing the economy to not only expand but also to dramatically change. Have a closer look at how global manufacturing economics is shifting today.

Current status of global manufacturing economics

Yesterday’s manufacturers would have never imagined that many, if not the majority, of low-cost manufacturing countries of the past, especially Brazil, are now part of the highest-cost countries for global manufacturing. Meanwhile, many global manufacturing companies in high-cost regions like Western Europe are now facing a slump and are closing one by one in favor of emerging regions. Furthermore, the new map of global manufacturing is no longer simply divided into two.

To better understand the current status of global manufacturing economics, Boston Consulting Group (BCG) in their The Shifting Economics of Global Manufacturing report from 2014 identified four distinct patterns of change in manufacturing cost competitiveness, namely, under pressure, losing ground, holding steady, and rising global stars.

Countries that were traditionally part of low-cost regions and have a deteriorating competitiveness fall under the under pressure pattern, while losing ground are the traditionally high-cost countries whose competitiveness continues to deteriorate. 

On the other hand, holding steady are countries that are roughly maintaining their relative competitiveness, and last but definitely not the least, rising global stars are what is called to countries whose competitiveness has significantly improved compared with other countries.

Causes of the economic shift

Like how the two main divisions of the global manufacturing map were created, the shift in today’s economy is mostly caused by the changes in wages, exchange rates, labor productivity, and energy costs  which also drives a large shift in the global economy in general. For the global manufacturing industry, on the other hand, the changes in these factors prompt manufacturers to reassess their manufacturing footprints and encourage relocation of their factories from developed countries to developing ones for less cost but higher productivity.

Not to mention, the advancement of technology has also allowed and encouraged the creation of new manufacturing industries, most notably the high-tech industries, which should introduce new factors that could affect the global manufacturing economies as we move towards the future.

As the line between the high-cost regions and low-cost regions continues to be blurred by several factors, it is most likely that goods will be produced closer to where they are to be consumed which may also cause significant changes in the export industry. It will also likely encourage policymakers to take action and improve the manufacturing competitiveness of their country or region.

The shift in the economics of global manufacturing can be worrisome especially for the countries that fall in the categories of under pressure and losing ground but more than one EMS Company in the Philippines and other emerging Asian countries are definitely winning.


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