The impact of China’s internal problems on lighting availability
While not widely publicized, many lighting manufacturers are struggling with dramatic changes in China’s approach to their manufacturing sector. Some horror stories might illustrate the issues.
One large lighting factory was simply closed without notice. When their customers realized there were problems and went to China to see what was happening they found the place locked and vacant. Unfortunately all of their molds, dies, drawing, etc were locked inside and they were unable to get anyone in China to allow them to retrieve their property. In order to supply their customers that firm has moved to Vietnam and is working to get a new manufacturing plant up to speed on their products. US buyers trying to order those products are seeing backorder dates of up to 6 months.
As a decree driven economy, wage pressure has suddenly bloomed in China. Reports of overnight increases in wages to be paid to workers in the lighting factories range from 3 to 5 times. No warnings, no negotiation, pay or leave. Products in the pipeline and pending orders are instantly marginalized as they are feeding a supply chain in this country with published prices in effect. Until alternatives are found those products are unprofitable for the importers.
Raw materials present another interesting problem. Contracts and pricing agreed to for production runs have little meaning. When a shipment is ready it likely won’t be delivered for the agreed upon price. The explanation, costs for fuel, materials, labor, etc have changed and there is no one to appeal to in their system as agreements are only enforced if to the benefit of the local party.
These rapid changes have lead to dramatic price escalation for all types of lighting products. This is particularly difficult for the industry in the face of the current housing and construction crisis in the states. We are going to see the failure of many local lighting retailers as well as a shakeout in the importers and manufacturers with Chinese factories.
While difficult for this particular industry it may lead to more domestic production which would be a good thing.
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