As most of our customers understand, the labor costs in China continue to increase. Effective May 1st we experienced yet another labor cost increase of 19%. This is one of many increases over the last 3 years that has now caused our labor cost to effectively double over the same period of time. This increased labor cost not only impacts our direct costs but also has a negative effect on our raw material costs as our vendors’ labor costs have also increased at the same rate.
As well, the fluctuation in the exchange rate related to the Chinese Renminbi has further increased our costs in terms of U.S. dollars.
In an effort to minimize these cost increases HALO has been working diligently on a number of labor reduction campaigns. Streamlining production lines and increasing the level of automation wherever possible are a few of the key areas in this effort. New automation equipment has been implemented on many high volume parts and this has had the positive results we expected.
At the end of the day, those products which have higher labor content and where we have been unable to increase automation, due to industry equipment technology constraints, we will be forced to increase prices. The price increase will become effective on August 1st, 2013. We will continue to work on solving existing automation limitations in the industry with the goal of being an automation leader in the magnetics industry.
Please feel free to contact your HALO sales office, representative or franchised distributor for more information.