NanoTech Entertainment Inc (NTEK)

[Nikodemos]

Detroit's Wages Take on China's
By TIMOTHY AEPPEL


CANTON, Mich.—For the past four weeks, a team of 45 workers in gray
smocks have been doing something here that hasn't been attempted
on a large scale in America for at least four years.

They're making TVs.

The new assembly line is tucked inside a cavernous factory in this
Detroit suburb that once made old-style tube televisions. Their
first product: a 46-inch flat-screen model going on sale soon at
Target stores for $499.

The project is the unusual result of a partnership between a U.S.
branding company and a Chinese producer and is as much about
marketing a U.S.-made television as it is about a global shift
in manufacturing costs.

Making TVs in the U.S.A.
View Slideshow

Justin Parks worked at Element Electronics in Canton, Mich. Brian
"We think the economics favor this," says Michael O'Shaughnessy,
chief executive of Element Electronics Corp., the Eden Prairie,
Minn., company that has sold Chinese-made televisions in the U.S.
under its Element brand name for six years.

To be sure, costs in China are going up as worker pay and other
expenses, such as transportation, rise. Meanwhile, muted wage gains
in the U.S. and fast productivity advances have reshaped many U.S.
factories into tougher competitors. A recent survey of large U.S.-
based producers by the Boston Consulting Group found more than a
third plan to or actively considering bringing work home from China.

But Element's televisions also illustrate the limitations in
restoring some types of production on U.S. soil. The only other
domestically assembled televisions today come from a tiny
California producer of waterproof models designed for use outdoors
and there is virtually no domestic supply base for crucial parts,
such as glass screens. The upshot: Virtually all the key parts
needed to make a television today are imported.

Few industries have fallen as hard as television manufacturing.
In the 1950s, there were some 150 domestic producers and with
employment peaking at about 100,000 people in the 1960s. Then came
the imports, first from Japan and later from other parts of Asia.
TV manufacturing in the U.S. went all but extinct in the last
decade. Syntax-Brillian Corp., a Tempe, Ariz.-based, company opened
a production facility in Ontario, Calif., in 2006 to much fanfare—
but that operation lasted only two years.

Flat screens tipped the scales even more in favor of the Far East,
because as tube televisions grew bigger, the weight and size of the
glass made shipping increasingly costly. That was the one thing
that kept U.S. production going even in the face of imports. Flat
screens, however, are a fraction of the weight and much more
compact.

Element says the decision to produce in Detroit hinges on savings
they gained by avoiding the roughly 5% duty on imported televisions
and the reduced cost of shipping final products from the heartland
of the U.S. to retailers. All the parts are initially being
imported— which is one reason the products can only be marketed as
"U.S. assembled."

Mr. O'Shaughnessy estimates the average savings on duties is about
$27 for a 46-inch television—enough "to account for the increase
in labor costs" in Detroit. The company declined to give more
specifics, but noted that production methods in the U.S. are
streamlined, involving component assemblies that in China might
be separate steps on the production line.

The first televisions being made for Target have 52 pieces and
require 24 production steps, including testing and final packaging.

Mickey Cho, chief operating officer of Tongfang-Global, the
television-making arm of state-owned Tsinghua Tongfang Co., the
Chinese partner, says Canton is only its first move toward what
he calls global localization, making more products closer to where
they are sold.

"Our Chinese suppliers want to invest domestically, too," he said.
"They'll follow someone who shows them how to do it."


Shawn DuBravac, chief economist for trade group Consumer
Electronics Association, says there are "definitely financial
reasons" television companies are looking again at domestic
production—though so far only Element has taken the plunge with
a U.S. factory. "The labor cost differential isn't as great as it
once was" compared with China, he says, and automation has reduced
the amount of labor needed in to put together a television in any
locale.


The project does have skeptics. Paul Gagnon, director of North
American TV research at NPD DisplaySearch, a Santa Clara, Calif.-
based market research company, says the real competition for
Element is factories just over the border in Mexico, not China.
About half the televisions sold in the U.S. every year are made in
Mexico, using parts imported from Asia—a model that avoids import
tariffs and benefits from lower-cost Mexican labor.

"I just don't see any advantage to doing it here, other than for
marketing purposes," says Mr. Gagnon.

Mr. O'Shaughnessy, however, insists there is reason to do it here.
He notes that televisions made in Mexico, though benefiting from
cheaper labor, end up costing more to ship to customers. The final
cost of a set made in Mexico or Michigan "would be very similar,"
he says.

Enlarge Image
An Element worker in Michigan inspected a flat-panel set last month.

To be sure, being able to market a U.S. assembled product is part
of Element's strategy which the company is convinced also carries
value. The company's U.S.-made televisions are being sold in boxes
emblazoned with a red-white-and-blue flag splashed across the side.

Mr. O'Shaughnessy says he began by showing retailers a more subtle
design, but they requested the big flag. The image of a television
on the box, meanwhile, displays a picture of American workers on
the line assembling televisions in Detroit. The company had to hire
actors to stage the work when they were developing the packaging
because production hadn't yet begun.

But even the boxes illustrate the difficulty of sourcing things
domestically. The first wave of product is going out in boxes
imported from China. Mr. O'Shaughnessy says he hopes to have a
domestic supplier for those and the plastic pads and other
packaging by the end of the year.

Scott Nygaard, Target Corp.'s TGT +0.65% vice president of
electronics, said in a statement that he views the domestic origins
of the televisions an "added bonus" to the product. QVC Inc.,
which also plans to market the Detroit-made sets, said the new
factory shows how Element can "zig while others zag."

For now, the production is starting small, but could rise to
200,000 TVs a year if a second shift were added on the line. The
factory, owned by Lotus International Co., a U.S. company that
mostly does television repair on behalf of Element and other TV
producers, has opened up floor space for up to five assembly lines.

Walking through the factory, Mr. O'Shaughnessy stops next to one of
the flag-splashed boxes near the assembly line. "You get no points
for subtlety in the TV market," he says.

Write to Timothy Aeppel at [e-mail]

http://online.wsj.com/news/articles/SB10001424052702303716204577384113745825098

The pictures from the slideshow may be helpful to view. However,
without a subscription perhaps they may not be available.

Hope this helps!!

BTW, if it WASN'T Clear "Element" is a BRAND of Tong-Fang Global,
the parent company of Seiki & may be ACCESSED by the Seiki site,
which should ALSO tell the reader something.

Moreover, NanoTech has ALREADY announced doing business with the
ONLY OTHER U.S. Manufacturing entity named in the article. See if
you can NAME who they are...NTEK has a partnership with them too!!


NTEK