ChinaMarket Insights

Electronics Manufacturing & Sourcing in China: An Introduction

By 23 June, 2022June 30th, 2023No Comments

Assembling electronics in a Chinese factory


China has dominated electronics manufacturing for decades. Despite the recent trade with the US and Covid restrictions, China remains a crucial manufacturing destination for electronics. It exports almost half of the cellphones and laptops globally and produces many of the subcomponents used for manufacturing elsewhere. In this article, we review China’s electronics manufacturing industry, what the benefits are of sourcing electronics here, and what other alternatives you have.

China’s Electronics Manufacturing Industry

China is the biggest manufacturing hub of electronics globally with much of the production centralized to the Southern region.

It all started around three decades ago when the government took the advantage of its large labor pool and low labor costs. As automation is applied in most cutting-edge production facilities, the manufacturers also benefit from China’s rapid development in infrastructure and innovation. It remains a key trade partner to all developed economies and is the biggest exporter of electronics to the US, accounting for more than one-third of US’s imports.

Another reason that helps China to maintain its position in the electronics manufacturing sector is the availability of sub-components. Manufacturers save much on sourcing components locally as these can be supplied domestically. As a result, foreign companies find it difficult to relocating production overseas as they will lose access to these suppliers and face additional logistics costs.

What electronic products are made in China?

China produces a large variety of electronics products, it’s easier to explain what electronics that cannot be found here. This ranges from consumer products to industrial components. Factories are primarily located in cities such as Shenzhen and Dongguan in the South, but also in Chongqing and Shanghai. Below you can find examples of electronic products that are widely produced in China.


Many global mobile phone brands such as Huawei, Xiaomi, and TCL are originally from China. These brands established strong manufacturing capabilities locally, before expanding sales and manufacturing activities overseas. Naturally, this has benefitted local suppliers of related components, including chips and transistors.

In addition, China is well-known for having a large rare earth elements reserve (44 million tons out of the global reserve of 120 million tons). These are crucial to produce electronic components, particularly cellphones. The availability of the materials ensures that domestic Chinese manufacturers enjoy a relative advantage over foreign manufacturers.

Computers, laptops, and accessories

It’s estimated that China manufactures 90% of the laptops globally and where domestic businesses are capable of supplying most of the components. At the same time, there has been an effort from the government to close the technology gap from foreign manufacturers, especially for semiconductors.

Despite the reliance on imported semiconductors, China is still an attractive option for world-class laptop brands to set up production. Chongqing and Kunshan are known as the two largest clusters of laptop production, in addition to other well-known electronic manufacturing hubs, such as Shenzhen and Dongguan. Not only laptops, but also components and accessories can be sourced in these areas.

Much of the electronics production is concentrated which eases the sourcing process and creates synergies.

Benefits of Sourcing Electronics in China

We have touched on China’s electronics industry and what kinds of products are manufactured here. Let’s review the underlying reasons behind this.

Low labor costs and large labor pool

Despite its increasing wages, China is still considered a low-cost country for sourcing. With wages that are around three times higher than Vietnam on average, companies still see China as a crucial for manufacturing, thanks to its developed supply chains and infrastructure. Relocating production is easier said than done and sometimes not feasible due to other challenges.

Wages are obviously higher in and around the larger cities like Beijing and Shanghai along the East coast. Some manufacturers therefore target cities and provinces in the central areas, as well as in the South.

Skilled workforce

Given the well-established foundation of the manufacturing industry, foreign manufacturers believe that Chinese workers are more skilled compared to competing countries, like Vietnam or Indonesia. With a population of more than 1.4 billion people, 14% are considered skilled workers (approximately 200 million people) 3.6% highly skilled (approximately 50 million people.

Large reserves of rare earth elements (REE)

As mentioned, China has the largest reserve of RRE in the world. Although China accounts for roughly 37materials, These elements are important to produce electronic products, rather and wideused in components such as computer hard drives, flat-screen monitors, electronic displays, and more.

Developed supply chain

China has built a business eco-system that cannot be found elsewhere in Asia. Its developed supply chain benefits manufacturers in both procurement and distribution processes.

As mentioned, domestic Chinese companies can provide most of the components used in electronics, which helps manufacturers to lower logistics costs. Apart from savings in logistics costs, the shorter lead times lower the required working capital, which relieves the financial burden for businesses.

Besides, the transportation infrastructure is comparably high to Southeast Asia. To give an example, four of the five largest seaports in the world can be found in China. In 2019, China handled more goods volumes than all other East Asian and Pacific countries combined. Shanghai port is the only one that can manage volumes of more than 40 million TEUs a year since 2018.

The many large seaports are located alongside the coastal line, making it easy for domestic and foreign manufacturers to reach global ocean shipping lanes.

What are the disadvantages of sourcing electronics in China?

Despite the many advantages of sourcing electronics in China, there are some drawbacks you should be aware of. Manufacturers of electronic goods should understand the following disadvantages.

Communication issues

Foreign companies often encounter communication issues when working with Chinese suppliers. This is a reason why many companies set up local organizations with staff that can reduce the risks for miscommunication.

With that said, China has improved from having “low efficiency” to a “moderate efficiency” in the English language recently, which is a positive sign in the favor of the global companies. However, the business culture is still largely different from Western ones.

It’s important to employ local persons who understand the Chinese business culture and that can communicate swiftly.

Perception of Chinese quality

Chinese brands still face a stigma regarding product quality, even if this has changed much in recent years. Huawei is one example where the product quality is almost on par with that of Apple yet being offered at significantly lower prices.

We see more Chinese brands entering the global market and that receive positive feedback from foreign consumers. Examples include Xiaomi, OPPO, Huawei, and Lenovo that sell everything from cellphones, laptops, and robot vacuums.

Shipping costs and lead times

We’ve seen major supply chain disruptions in recent years, primarily due to the container shortages and Covid outbreak in China. The shipping rates for containers from China increased by ten times compared to pre-Covid levels. This has resulted in near sourcing and diversification trends where increasingly more companies seek to relocate production to Eastern Europe or Mexico, or Southeast Asia.

In addition to the skyrocketing prices, have also affected companies’ future procurement strategies. Before the pandemic, it took roughly forty days to ship goods from China to the US. In the first half of 2022, this figure reached seventy to eighty days.

Alternative Markets to Source Electronics in Asia

Due to increased wages and supply chain disruptions, increasingly more companies seek to diversify manufacturing to Southeast Asia. Below you can find alternative markets in Southeast Asia that should be of interest when sourcing electronics in Asia, and what the benefits are.


Electronics manufacturing contribute much to the exports of Malaysia. Particularly global brands from countries like Germany, Japan, and South Korea have manufacturing activities here. Examples of products produced include computers, semiconductors, and cameras where its semiconductor production gets much attention.

Surprisingly, labor costs are lower in Malaysia on average and blue-collar workers earn around 500 – 800 USD per month. In China, on the other hand, the average salary is more than 1,000 USD per month. Hence, Malaysia’s competitive labor costs, at least when compared to China’s, is something that should be considered.


Another interesting market for electronics manufacturing is India. Factory workers earn roughly 300 USD per month, which is 3-5 times lower compared to China. India also has a labor pool of 500 million people, which is competitive. Yet, a disadvantage is the significantly low participation of women in its labor force, which is one of the lowest in the world.

More companies have moved manufacturing to India in the last years, the government also shows an aggressive approach to promote the country as an alternative market to China. The Production Linked Incentive (PLI) schemes launched in early 2020 allows manufacturers to receive cashbacks if products sold are locally produced. The electronic sector is one of the key focuses, with an incentive of up to 5% of the sales of goods that is manufactured in India.

As a result, dozens of companies pledged to set up mobile phone manufacturing facilities in India, with investments totaling around 1.5 billion USD. Global electronic giants are also showing their long-term commitment to India. Samsung completed the establishment of their display manufacturing factory in India in 2021. Nokia started to produce 5G equipment in India in late 2020. Foxconn, a Taiwanese contract manufacturer, plans to invest 1 billion USD to upgrade and expand its factory in Tamil Nadu. This is one of the two plants of Foxconn that assembles products for Apple and Xiaomi.


Even if China is still a major producer of electronics, it sees increasingly more competition from other Asian countries. It’s crucial for electronic companies to review their current reliance on China, global trends, establishing a long-term vision to produce electronics.

India and Southeast Asian countries are growing as alternatives to China. India, Malaysia, and Indonesia are all promoting attractive investment schemes to attract foreign manufacturers that shift production from China. Apart from the general strengths of each country, the manufacturers are also suggested to consider the tariff for products imported to overseas markets.

Vietnam, for example, has a free-trade agreement with the EU, and a bilateral trade agreement with the US. At the same time, trade agreements are being discussed between the EU and Indonesia and the Philippines.

Read more about our market entry & expansion experience or other consulting capabilities.

    Ready to talk to our experts?

    The insights provided in this article are for general informational purposes only and do not constitute financial advice. We do not warrant the reliability, suitability, or correctness of the content. Readers are advised to conduct independent research and consult with a qualified financial advisor before making any investment decisions. Investing in financial markets carries risks, including the risk of loss of principal. Past performance does not guarantee future results.

    The views expressed herein are those of the author(s) and do not necessarily reflect the company's official policy. We disclaim any liability for any loss or damage arising from the use of or reliance on this article or its content. ARC Group relies on reliable sources, data, and individuals for its analysis, but accuracy cannot be guaranteed. Forward-looking information is based on subjective judgments about the future and should be used cautiously. We cannot guarantee the fulfillment of forecasts and forward-looking estimates. Any investment decisions based on our information should be independently made by the investor.

    Readers are encouraged to assess their financial situation, risk tolerance, and investment objectives before making any financial decisions, seeking professional advice as needed.