Consumer Electronics Firms Say No Real Manufacturing Alternatives to China

The Consumer Technology Association asked the Section 301 hearing panel to remove 380 items from the $200 billion list, arguing that there will be a drop in consumer demand as prices rise. Because many of the items are inputs, there will not be a direct 25 percent cost increase, but CTA commissioned a study that said there could be price increases of up to 6 percent, even on U.S. products, because of tariffs on circuit boards.

Sage Chandler, vice president of international trade for CTA, said the tariff on connected devices, such as Bluetooth speakers, fitness trackers and the like, will cost Americans $3.2 billion annually. "That contradicts USTR’s stated aim in the product selection process of avoiding goods commonly purchased by American consumers," CTA said. The panel asked Chandler after her testimony on Aug. 21 which of the 380 items were unavailable outside China. She could not quantify that, but said many are cost-prohibitive to source elsewhere.

Generally, the panel asked technology firms about intellectual property theft and alternate sourcing. "Has iRobot ever looked into shifting outside China," one of the panelists asked Colin Angle, co-founder and CEO of the company that makes the Roomba. He said they did a strategic sourcing review, and "the results are very unencouraging. If we were to try to bring manufacturing of the Roomba to the U.S., "there would be a cost increase of 57 percent between higher material costs and higher labor costs. While it would be more affordable to move manufacturing to other countries outside China, "even a 10 percent increase in costs would significantly disadvantage iRobot," he said.

Brilliant Home Technology CEO and co-founder Aaron Emigh said, in response to a question on IP concerns raised by manufacturing smart home products in China, the vast majority of the intellectual property in the company's product is in the software. "We don’t provide source code to the Chinese factory, we only provide object code," and there is further protection because the Chinese manufacturer is a U.S.-owned firm, he said.

"We did an evaluation of where we could build the device [other than China] before we knew about tariffs," Emigh said, and they found quality in Vietnam and Indonesia could not match Chinese standards. India could manufacture the product well, but since most of the components come from China, extending the supply chain in that way would introduce risks Brilliant felt weren't worth it. "In our estimation it was not practical to manufacture anywhere outside of China," he said.