From: Joseph Legris
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Subject: Re: Examples Of Common MCU's In Consumer Electronics?
References: <email@example.com> <3D7F8BFF.5CC55B23@xympatico.ca>
Date: Wed, 11 Sep 2002 17:20:18 -0400
NNTP-Posting-Date: Wed, 11 Sep 2002 17:14:33 EDT
Organization: Bell Sympatico
Spehro Pefhany wrote:
> In sci.electronics.design Joseph Legris wrote:
> > I don't think so. There are many very rich Chinese and Taiwanese who got
> > that way by owning factories, not by working in them.
> > If a Chinese factory pays US$100/week for a 60 hour week for
> > semi-skilled assembly work, a $3 product might have 50 cents worth of
> > labour. The 7% gross margin of 20 cents looks pretty good if there is an
> > order for 100,000 units, which is just 3 days production in a factory
> > with 1000 workers. Potential yearly gross profit: US$2 million.
> I don't think margins are that much different in Asia compared to similar
> volumes of consumer products in North America. If you think they are
> working for nothing, you're probably grossly misinformed on their costs.
> Where's this $100/week coming from, for example? Besides, their quality is
> relatively low, they probably waste 7% of raw materials overall. Dealing
> only in full container loads of stuff does add to the efficiency though.
O.K, my wage figure is a little high - make that US$50/week.
The point is that a large orders of inexpensive goods made possible by
low costs, notably wages, can yield profits in spite of thin margins. My
unstated assumption was that with low wage costs even a fairly complex
product can be reduced to the equivalent of a commodity. If you can make
a profit selling soy-beans at a 7% markup, you can do it also by making
CD-ROM drives if the order is big enough. Western companies could do it
too, but how many of their products ever achieve million-piece volumes?
The ones that do, get moved offshore, except cars and washing machines.
I wonder what their profit margins are?
GM - FY2001
Sales: $177 billion
Operating income: $1.5 billion
Margin: less than 1%
Ford - FY2000 (the last year they made a profit on sales)
Sales : $141 billion
Operating income: $5.32 billion
Margin: less than 4%
Maytag Corp - FY2001
Sales: $4.19 billion
Operating Income: $289 million
Margin: less than 7%