The speed of the electronics manufacturing migration to China is unprecedented in history. It started in about 1995, gained momentum through the rest of the late 1990s, and moved to “warp speed” when China was admitted to the world trade organization, and the electronics industry recession hit in 2001. 

There are some important issues about the migration to China that require some thought. First, how fast was the buildup? Second, how much of the world’s electronic connector manufacturing is there now? Third, what percentage of the build up has occurred? Or, how much more manufacturing will leave North America, Europe and Asia for China? Fourth, when will the vast majority of the China build up be finished? Fifth, how much of the world’s electronic connector manufacturing will China have when the migration is over? Sixth, how much of the product design will follow manufacturing to China?

Here’s our analysis of China and our answers to these questions

1. How fast was the China buildup?

It happened in 10 years. In 1995, China accounted for only $79 million of the world connector market. In 2005, China manufactured $4,926 million in connectors, or 13.9% of the world market. That’s a compound annual growth rate (CAGR) of 51.2% over the 10-year period of 1995-2005.

During the same period, North America achieved a CAGR of 0.9%, Europe 3.6%, Japan 2.8% and Asia 6.3%. The world connector market grew 4.5%.

2. How much of the world’s connector manufacturing is in China now?

China now has a 13.6% share of the world market, surpassing the rest of Asia in size in 2004. China is now larger than Asia Pacific and Rest-of-World countries.  It is only $1.0 billion smaller than Japan.

3. What percentage of the buildup has occurred?  How much more manufacturing is leaving North America, Europe and Asia for China?

Connector industry personnel believe that 60% to 70% of the manufacturing migration to China has occurred. We asked industry personnel, “In your opinion, what percentage of the manufacturing migration to China has occurred?” Approximately 28% of respondents believe the China manufacturing build up is 60% complete. More than 70% respondents believe it is 50% or more complete.

4.  When will the vast majority of the China buildup be over?

Industry personnel (64%) believe the buildup will be over in the next five years, by 2010. Here is how connector personnel see the future.

5. How much of the world’s connector manufacturing will China have by 2010, when the majority of industry personnel believe the buildup will be over?

China will account for $10.5 billion of the world’s connector market, or 22% of all connectors. This is up from $4.9 billion in 2005. That’s a CAGR of 16.4% over the five years. The following table compares the China performance to the other geographic regions.

Some interesting findings from this table include:

• China will be the largest connector market by 2010, slightly larger than North America.
• The China growth rate from 2005-2010 is still an impressive 16.4% CAGR, but significantly below the 52% CAGR of the ten year period 1995-2005, and below the 2000-2005 CAGR of 24.9%.

So when the vast majority of the China buildup is over; China will:

• Account for 1 in every 5 connectors manufactured worldwide (22%).
• Be the largest connector market, just slightly larger than North America (China = $10,545, North America = $10,474).
• Continue to be the connector industry’s growth engine with annual increases in the high single digits.

6. How much of the product design has followed manufacturing to China, now and in 2010?

We estimate that China has 8% of the world’s connector design function. This will grow to 17% in 2010, and 25% in 2015.

The following table shows how connector product design will shift between regions over the next 5-and 10-year periods.

	Source: Bishop & Associates’ staff with input from knowledgeable industry personnel.

Another useful way to analyze product design is to compare the percentage of engineering design located in a region to that region’s share of the market. The following table provides that comparison:

The world is changing. In 2015, China will be the largest region by a wide margin and have over one-quarter of the world’s connector design function will be located in China.