The employees were worried about another round of redundancies and that production would be moved to a low-wage country, but management had quite the opposite in mind. Dutch multinational Philips is moving its electric shaver production from Shanghai back to the Netherlands.

One of the main reasons for this surprising sea change is the rising cost of wages in China. That, and the fact that employees are not particularly loyal – they tend to leave as soon as they can earn more elsewhere. Philips then has to spend money training new personnel. Spokesperson Eric Drent told Dutch radio station BNR Nieuwsradio:

“There is a higher turnover of personnel in China than in Europe. In the end, if you include training costs, it works out equally expensive. You need highly-qualified people to operate the robots at the heart of the manufacturing process.”

Back to Drachten
There is also a logistical factor. The shavers in question are intended for the European market and the shaving heads are actually made in the Dutch town of Drachten, where production will soon be going. The heads were shipped to China, where they were mounted in the shavers on the assembly line and then shipped back to Europe. Months of logistical effort and delay in earnings.

The move will should produce dozens of jobs in Drachten, according to Drent, but he was not prepared to say whether Philips was planning to bring other production lines back home in future.

Employment numbers at Philips in the Netherlands will continue to fall for the foreseeable future. It was announced in October last year that 1,400 jobs will lost at Dutch branches, ten percent of the total. Worldwide, the company employs 117,000 people.

Forecasting
Economist Serdar Kucukakin, China expert for the Dutch ABN-Amro bank, wonders if this withdrawal from China signals a trend. China has, he confirms, allowed wage increases to stimulate domestic demand and raise living standards.

“However, if you look at the income per head of population in China, it’s still quite a bit lower than in the Netherlands. This is the first time I’ve heard about a big company moving its production back here. It’s difficult to predict what will happen, but foreigners have invested 135 billion dollars in China in the past year. The forecast for this year is 122 billion, so China is clearly still attractive as a business location.”

(imm)