Author Topic: Why is Shenzhen the king of cheap?  (Read 2181 times)

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Offline Pineapple Dan

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Why is Shenzhen the king of cheap?
« on: February 21, 2019, 07:33:20 am »
I saw some crowd selling 20 ds1307 breakout boards on banggood for $12. How do they do it? I can't buy 20 ds1307's for $12 not to mind add a crystal and put a PCB under it.

You'd think as well that there'd be some crowd outside of Shenzhen that could make pcb's for cheap but the differences are obscene. $25 for 10 of them including shipping or if I buy off the likes of beta layout it's 60-70 euros for 1 board. Is it really just labour costs that are creating the huge difference?
 

Offline HalFET

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Re: Why is Shenzhen the king of cheap?
« Reply #1 on: February 21, 2019, 08:54:25 am »
I saw some crowd selling 20 ds1307 breakout boards on banggood for $12. How do they do it? I can't buy 20 ds1307's for $12 not to mind add a crystal and put a PCB under it.

You'd think as well that there'd be some crowd outside of Shenzhen that could make pcb's for cheap but the differences are obscene. $25 for 10 of them including shipping or if I buy off the likes of beta layout it's 60-70 euros for 1 board. Is it really just labour costs that are creating the huge difference?

The reason is twofold: the setup cost is a large portion of the cost per board and you're being ripped off by the middle man. Even for fancy flex in low volume in China you end up paying maybe 70 bucks / square meter for the PCB substrate, FR-4 in large volume you can go sub 20 bucks. The components are going to be in the cents range if you buy them by the box (10+ reels) probably, and assembly costs virtually nothing by itself (again, setup costs). But you pretty much have to know where you order from to get a good pricing, and it does pay to go to the industry trade fairs if you really want to squeeze out a nice deal.

Also, another factor is that European manufacturers use fancy expensive base material, while the Chinese ones will use the locally sourced equivalent. I've been prices for base materials that differ more than tenfold, and the Chinese stuff performs just as well most of the time. So unless you want unobtanium pixiedust for 50 GHz RF or need to meet some sort of safety standard, you can probably use the Chinese material.
 

Online james_s

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Re: Why is Shenzhen the king of cheap?
« Reply #2 on: February 21, 2019, 09:08:35 am »
A couple of other aspects that come to mind. Often times the parts are counterfeit or gray market, a manufacture will make a bunch of components for the client, then run off a few more batches to sell themselves.

The other thing I suspect leads to many of these cheap modules is surplus. You've probably seen or heard stories about the vast amount of nifty electronic surplus that was available in the US back in the day. Now all the manufacturing is in China so all the surplus is in China. There are still mountains of surplus parts, remainders from production runs, cancelled equipment, goofed orders, used/salvaged components, factory rejects and floor sweepings, you name it. It's likely a bit of all this stuff ends up in various dirt cheap modules and widgets from China. Some of it is quite good quality, others not so much.
 

Offline OwO

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Re: Why is Shenzhen the king of cheap?
« Reply #3 on: February 21, 2019, 08:31:12 pm »
It is because you are getting ripped off by distributors and retailers who charge anywhere between 2x to 10x markup and (IMO) add little value. There are also manufacturers who don't bother dealing with distributors at all, but you wouldn't have heard of them. LCSC is probably the closest to a fairly priced distributor you can find, and there you will find that even genuine parts from non-Chinese brands are cheap as well.
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Online wraper

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Re: Why is Shenzhen the king of cheap?
« Reply #4 on: February 21, 2019, 08:57:05 pm »
LCSC is probably the closest to a fairly priced distributor you can find, and there you will find that even genuine parts from non-Chinese brands are cheap as well.
BS, most of the well known brand parts are more expensive than at Mouser or Farnell, except passives. But then you also have TME with cheap passives.
 

Online wraper

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Re: Why is Shenzhen the king of cheap?
« Reply #5 on: February 21, 2019, 08:59:57 pm »
How do they do it? I can't buy 20 ds1307's for $12 not to mind add a crystal and put a PCB under it.
By using counterfeit DS1307.
 

Online wraper

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Re: Why is Shenzhen the king of cheap?
« Reply #6 on: February 21, 2019, 09:08:39 pm »
If you look on the pictures, Package of DS1307 does not match datasheet and pictures of genuine IC.

Genuine


Clone

« Last Edit: February 21, 2019, 09:23:17 pm by wraper »
 

Offline OwO

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Re: Why is Shenzhen the king of cheap?
« Reply #7 on: February 21, 2019, 09:14:39 pm »
BS, most of the well known brand parts are more expensive than at Mouser or Farnell, except passives. But then you also have TME with cheap passives.
I said non-Chinese brands, not western brands. I'm talking about the Japanese and Korean stuff, for example u.fl connectors (genuine hirose ones) cost 1/5 the price compared to digikey, surface mount TCXOs, SAW filters, and other precision components that are too low margin for the western manufacturers to care about but still don't yet have local alternatives.
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Offline OwO

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Re: Why is Shenzhen the king of cheap?
« Reply #8 on: February 21, 2019, 09:16:16 pm »
TI and other western manufacturers make you sign BS contracts that say you can not resell the parts if you have negotiated a very high volume deal with them, in an effort to keep market prices for low volumes way inflated. This is why they can only be found for good prices on the gray market. OTOH I see a lot of Japanese parts for very good prices on LCSC (some TCXOs from daishinku with decent specs are even cheaper than ordinary crystal oscillators), which means they aren't as bothered with "controlling the market" like western manufacturers do.
« Last Edit: February 21, 2019, 09:21:12 pm by OwO »
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Online wraper

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Re: Why is Shenzhen the king of cheap?
« Reply #9 on: February 21, 2019, 09:18:55 pm »
TI and other western manufacturers make you sign BS contracts that say you can not resell the parts if you have negotiated a very high volume deal with them. This is why they can only be found for good prices on the gray market.
I usually find that if the parts are cheap, there is something wrong with them. Like salvaged parts, NOS with oxidized leads which do not solder well, counterfeit, etc...
 

Offline OwO

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Re: Why is Shenzhen the king of cheap?
« Reply #10 on: February 21, 2019, 09:25:25 pm »
I usually find that if the parts are cheap, there is something wrong with them. Like salvaged parts, NOS with oxidized leads which do not solder well, counterfeit, etc...
Hasn't been my experience. I have used >100 different parts from taobao now and had only one case of a part not meeting spec, which was a 78L05. However the "big ticket" parts like FPGAs, high speed ADCs, RF parts, etc all performed like the datasheet stated. I do test key specs like noise floor, phase noise, etc. Maybe you just need to better vet your sellers...
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Offline OwO

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Re: Why is Shenzhen the king of cheap?
« Reply #11 on: February 21, 2019, 09:29:13 pm »
The chip in question, ds1307, is a RTC chip which is quite mundane meaning it is likely a "clone". Not a direct copy (that's a myth), but a reimplemented compatible chip. Part numbers just mean "this part will perform to these specs", so anyone is free to make a ds1307 compatible chip and sell it as long as they aren't claiming it is a genuine maxim part. If it performs to spec then does it matter?
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Online wraper

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Re: Why is Shenzhen the king of cheap?
« Reply #12 on: February 21, 2019, 09:32:34 pm »
I usually find that if the parts are cheap, there is something wrong with them. Like salvaged parts, NOS with oxidized leads which do not solder well, counterfeit, etc...
Hasn't been my experience. I have used >100 different parts from taobao now and had only one case of a part not meeting spec, which was a 78L05. However the "big ticket" parts like FPGAs, high speed ADCs, RF parts, etc all performed like the datasheet stated. I do test key specs like noise floor, phase noise, etc. Maybe you just need to better vet your sellers...
Then your incoming QC ability is junk. Most of that crap somewhat work but there is no chance you got 99% of genuine brand new parts. Inspecting under microscope can expose a lot of crap.
 

Offline OwO

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Re: Why is Shenzhen the king of cheap?
« Reply #13 on: February 21, 2019, 09:35:52 pm »
I don't see anything wrong with new old stock parts as long as you bake them prior to reflow. Indeed most taobao sellers are ignorant about moisture sensitive parts handling and I would recommend baking all parts. You can't blame them because when you order 20 chips they still have to break open the pack of 10000 and what are they going to do, store it in a humidity controlled room?
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Online wraper

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Re: Why is Shenzhen the king of cheap?
« Reply #14 on: February 21, 2019, 09:39:00 pm »
For example I've got things like ATTINY24 and ATTINY24A mix with marking ground, blacktopped and new ATTINY24A marking applied with fresh date code . AD8293 which were genuine but like 20% of them were faulty. ICs which were salvaged but sold as new.
 

Online wraper

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Re: Why is Shenzhen the king of cheap?
« Reply #15 on: February 21, 2019, 09:40:16 pm »
I don't see anything wrong with new old stock parts as long as you bake them prior to reflow. Indeed most taobao sellers are ignorant about moisture sensitive parts handling and I would recommend baking all parts. You can't blame them because when you order 20 chips they still have to break open the pack of 10000 and what are they going to do, store it in a humidity controlled room?
Baking is for moisture sensitive parts which are not that many of a total amount. It won't make oxidized leads solder better.
 

Offline OwO

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Re: Why is Shenzhen the king of cheap?
« Reply #16 on: February 21, 2019, 09:42:31 pm »
My QC has caught a ADC with marginal jitter performance in a batch of 200. These are NOS with date codes going back to 1997, and the failure was because I didn't bother to bake the chips. The prices I got for them was $0.5 each, which is about 1/10th the price on digikey.

If you are getting that kind of garbage then you need to see what kind of sellers they are and see about avoiding them in the future. From experience I find that a positive feedback rate of >4.8 on taobao (>98.5% on aliexpress) usually mean you get good parts. On ebay the feedback system is far more confusing and I found it impossible to weed out the bad sellers from the good ones.

I haven't had solderability problems even with the 1997 batch of ADCs. Maybe it can be fixed with better flux.
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Online wraper

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Re: Why is Shenzhen the king of cheap?
« Reply #17 on: February 21, 2019, 09:48:03 pm »
My QC has caught a ADC with marginal jitter performance in a batch of 200. These are NOS with date codes going back to 1997, and the failure was because I didn't bother to bake the chips.
Most likely it had nothing to do with baking. With moisture sensitive parts you'd more likely have things like parts completely failing immediately or after some time. Not due to silicon failure but things like bond wires coming off due to package expansion.
 

Offline tooki

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Re: Why is Shenzhen the king of cheap?
« Reply #18 on: February 21, 2019, 09:52:41 pm »
It is because you are getting ripped off by distributors and retailers who charge anywhere between 2x to 10x markup and (IMO) add little value.
Well, the value you are paying for (when talking about serious top-tier distributors like Digi-Key, Mouser, Farnell, RS, Distrelec, etc) includes:
- known-good components sourced directly from the manufacturers
- massive selections of components, from multiple manufacturers, kept in stock (warehousing is expensive, and some parts might stay on the shelves for months or years between sales)
- quick shipping from a warehouse fairly close to you (for example, if I absolutely need a part today, I can drive a half hour to Distrelec and get it)
- and in the case of retailers, the extremely high overhead of retail, in exchange for instant availability (if I absolutely need a part right now I can walk to the city's only remaining electronics shop and buy it on the spot)
- and you're paying for the overhead of pulling just a few units of a part — this effort is similar whether you're buying 2 pieces or 2000.

So if you're not in a hurry and don't mind having to order from multiple places, you can save money, but with distributors you're paying for convenience, speed, and traceability.
 

Offline tooki

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Re: Why is Shenzhen the king of cheap?
« Reply #19 on: February 21, 2019, 09:56:51 pm »
The chip in question, ds1307, is a RTC chip which is quite mundane meaning it is likely a "clone". Not a direct copy (that's a myth), but a reimplemented compatible chip. Part numbers just mean "this part will perform to these specs", so anyone is free to make a ds1307 compatible chip and sell it as long as they aren't claiming it is a genuine maxim part. If it performs to spec then does it matter?
It depends on the application. If it's for a hobby project, sure, go ahead.

But if it's for a commercial product, where you not only worry about whether it works now, but whether it will work reliably in 22 months, right before your warranty obligations expire, then you may not want to risk an unknown vendor.

Furthermore, specs often don't say everything. There's a ton of stuff that's… how shall I say, "specified by omission". And sometimes, in a design, you may unwittingly design something that relies on such an unspecified behavior. And when a different implementation of a part behaves differently in this unspecified characteristic, your design may act up. (No, that's not a good design, but it happens.)
 

Online wraper

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Re: Why is Shenzhen the king of cheap?
« Reply #20 on: February 21, 2019, 10:02:14 pm »
If it performs to spec then does it matter?
The thing is, usually they don't. If part apparently works in your application, does not mean it performs up to all specs.
 

Offline BBBbbb

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Re: Why is Shenzhen the king of cheap?
« Reply #21 on: February 21, 2019, 10:15:26 pm »
How do they do it? I can't buy 20 ds1307's for $12 not to mind add a crystal and put a PCB under it.
By using counterfeit DS1307.
In case of Maxim's RTCs this is the most dominant reason.
In some module cases, salvaged stuff is common (PSUs,...)
Surplus for really cheap stuff.

For a hobby and playing around I see no problem, makes stuff available, you just have to be aware of it and not trust "new" or "genuine" in the description.

Some cost reduction comes from low margins and subsidized shipping, but its influence on the price is being exaggerated IMO.

When you look at the stuff that is not available as counterfeit/salvaged/surplus, prices come very close to some other sources.
 

Offline Electro Detective

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Re: Why is Shenzhen the king of cheap?
« Reply #22 on: February 21, 2019, 10:43:56 pm »

"You get what you pay for"   police haven't spotted this post yet   :popcorn:

FWIW, everyone will feel the Shenzhen Effect down the track when the honeymoon spend period is over on suss parts

and stuff BREAKS   :-BROKE   :-[

AND/OR...the suss parts get even SUSSER   :scared:  when competition gets more fired up   >:D >:D

I've jumped off the Cheep Ship, sticking with old school fixits and buy local in Australia,
hey even working with salvaged parts is a better bet, at least they were top dollar parts and WORKING long term

Shenzhen, ThreeHungLow and 1000for2Dollar can keep their product dumping gig,
cheap prices for cheap sh!t parts that increase the chances of repair comebacks (aka UNPAID WORK)  no longer tickles my pocket   :--
 
 

Offline HalFET

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Re: Why is Shenzhen the king of cheap?
« Reply #23 on: February 22, 2019, 05:51:20 am »
You get what you pay for isn't really true. The worst assembled boards I've ever gotten were from a local Belgian assembler, worst PCBs were from some French PCB manufacturing consortium. Paid a massive amount for both, worst quality I've ever seen. They even managed to assemble the components 180° rotated, even though the component wasn't even symmetric in its pad design.  :palm:

A couple of other aspects that come to mind. Often times the parts are counterfeit or gray market, a manufacture will make a bunch of components for the client, then run off a few more batches to sell themselves.
Not really, volume pricing is very much a thing, both for PCBs and components. A lot of what you're paying for administrative and logistics costs when ordering things in small volume. For example, the prices you see on Farnell, Mouser, Digikey and RS pretty much include their shipping prices. Why do you think you can buy a whole cardboard box of taped 2N3904 BJTs on Aliexpress for the same price as maybe a few hundred of them on Farnell? Farnell you pay for the service.
In the case of PCBs it mostly comes down to a two factors: process setup (design rule check, production tooling, ...) and production method. If you go for the one-off methods you're going to be paying more per board since they're usually more costly in time, but the moment you go to volume production you pay a setup cost once and you can crank out a few thousand boards at minimal price. I can really point out cases where we paid a few hundred bucks of setup costs and then the actual price per board was a few bucks, so a board that initially costed maybe $120 a pop during the prototyping stage (setup cost in other words) went down to a few dollars when we went towards production quantities on subsequent orders. Additionally, in terms of finishing quality I've had better experiences with some of the Chinese suppliers than with European ones for prototyping quantities when stepping away from standard FR-4. Laser cut flex from European suppliers was often delivered with a serrated edge when inspected under the microscope, while the ones from the Chinese suppliers came with a smooth edge, in other words, the Chinese suppliers actually configured their machines properly.

The other thing I suspect leads to many of these cheap modules is surplus. You've probably seen or heard stories about the vast amount of nifty electronic surplus that was available in the US back in the day. Now all the manufacturing is in China so all the surplus is in China. There are still mountains of surplus parts, remainders from production runs, cancelled equipment, goofed orders, used/salvaged components, factory rejects and floor sweepings, you name it. It's likely a bit of all this stuff ends up in various dirt cheap modules and widgets from China. Some of it is quite good quality, others not so much.
Don't forget that manufacturers will probably just buy thing by the reel anyway, even if they only need 20 of them. So surplus is very likely to occur.

So honestly, before you go "it's counterfeit" because of a low price, realise that in Europe and the US you're kind of being ripped off half the time or are paying for the cost of labour. My main recommendation though is to actually call the supplier, or better yet, visit them if you're going to be running any volume production. You can also hire some folks to randomly barge in and do quality inspection if you stipulate it in the contract. The only issue I've ever run into with having boards manufactured in China was the bank transfers taking too long, never any fakes, no dodgy work. But on every occasion we clearly stipulated the material they should use (manufacturer, specific product code and ask for the conformance paperwork) and provided the tolerances we accepted. If you exactly stipulate what you want they'll only cut corners where you're ok with it.
 
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Online wraper

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Re: Why is Shenzhen the king of cheap?
« Reply #24 on: February 22, 2019, 06:06:09 am »
So honestly, before you go "it's counterfeit" because of a low price, realise that in Europe and the US you're kind of being ripped off half the time or are paying for the cost of labour. My main recommendation though is to actually call the supplier, or better yet, visit them if you're going to be running any volume production. You can also hire some folks to randomly barge in and do quality inspection if you stipulate it in the contract. The only issue I've ever run into with having boards manufactured in China was the bank transfers taking too long, never any fakes, no dodgy work. But on every occasion we clearly stipulated the material they should use (manufacturer, specific product code and ask for the conformance paperwork) and provided the tolerances we accepted. If you exactly stipulate what you want they'll only cut corners where you're ok with it.
Honestly, if price is 10 times lower than from reputable source, most likely it is counterfeit or salvaged crap. Also it's good to google "counterfeit DS1307" or "counterfeit LM2596" to realize there ain't free lunch when buying cheap modules/parts.
Quote
in Europe and the US you're kind of being ripped off half the time or are paying for the cost of labour.
If you go to somewhat reputable source in China, component price won't be that much different.
 

Offline HalFET

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Re: Why is Shenzhen the king of cheap?
« Reply #25 on: February 22, 2019, 07:14:24 am »
Honestly, if price is 10 times lower than from reputable source, most likely it is counterfeit or salvaged crap. Also it's good to google "counterfeit DS1307" or "counterfeit LM2596" to realize there ain't free lunch when buying cheap modules/parts.
Now I'm curious, what do you use as point to set your reputable source price? I'm not talking about purchasing fifty or even a thousand components, so basing yourself on Farnell pricing for that one is ludicrous. Component purchasing in volume is already pretty much the wild west as far as pricing goes.

If you go to somewhat reputable source in China, component price won't be that much different.
Yeah, it does differ quite a bit, less administrative and logistics costs.
 

Online james_s

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Re: Why is Shenzhen the king of cheap?
« Reply #26 on: February 22, 2019, 08:18:42 am »
My experience has been a mixed bag. Some of the very cheap parts out of China are great, either genuine or clones that are as far as I can tell bang on. Other stuff not so much, every Dallas battery backed RAM I've tried is either a re-marked pull or an obvious counterfeit confirmed by X-ray. One of the re-marked parts actually came with data on it, 3 out of 4 counterfeit parts were faulty in various ways. All sold as new genuine parts. In at least one other event I wasted a considerable amount of time trying to debug a project before I realized the IC was not what it was labeled as. Another time I bought some EEPROMS that turned out to be obsolete mask ROMs.

I still buy certain types of parts this way but one does need to be vigilant. Some types of parts like those Dallas SRAMs and a lot of more esoteric transistors are fakes. Other parts are used pulls that have been blacktopped and sold as new. The annoying thing is I would buy an aftermarket compatible battery SRAM or or some other used part assuming it actually works, but when I buy something presented as new genuine I feel cheated if it turns out to be something else.
 

Offline HalFET

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Re: Why is Shenzhen the king of cheap?
« Reply #27 on: February 23, 2019, 03:30:07 am »
My experience has been a mixed bag. Some of the very cheap parts out of China are great, either genuine or clones that are as far as I can tell bang on. Other stuff not so much, every Dallas battery backed RAM I've tried is either a re-marked pull or an obvious counterfeit confirmed by X-ray. One of the re-marked parts actually came with data on it, 3 out of 4 counterfeit parts were faulty in various ways. All sold as new genuine parts. In at least one other event I wasted a considerable amount of time trying to debug a project before I realized the IC was not what it was labeled as. Another time I bought some EEPROMS that turned out to be obsolete mask ROMs.

I still buy certain types of parts this way but one does need to be vigilant. Some types of parts like those Dallas SRAMs and a lot of more esoteric transistors are fakes. Other parts are used pulls that have been blacktopped and sold as new. The annoying thing is I would buy an aftermarket compatible battery SRAM or or some other used part assuming it actually works, but when I buy something presented as new genuine I feel cheated if it turns out to be something else.
Where did you get them though? I find that most of the folks complaining about this are talking about shady ebay sellers or alibaba.
 

Online james_s

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Re: Why is Shenzhen the king of cheap?
« Reply #28 on: February 23, 2019, 05:29:24 am »
Where did you get them though? I find that most of the folks complaining about this are talking about shady ebay sellers or alibaba.


Yes, where else do you get ridiculously cheap components and modules from China? Cheap parts from ebay, aliexpress, etc is what this thread is about.
 

Offline HalFET

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Re: Why is Shenzhen the king of cheap?
« Reply #29 on: February 23, 2019, 07:04:08 am »
Yes, where else do you get ridiculously cheap components and modules from China? Cheap parts from ebay, aliexpress, etc is what this thread is about.
Uhm, I buy them from professional component distributors. If you have a bit of a working relationship with them they'll also ship you smaller quantities. Never really buy the small modules, so can't help you there. Smallest "modules" I've bought on Aliexpress were FPGA boards.
 

Offline janoc

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Re: Why is Shenzhen the king of cheap?
« Reply #30 on: February 23, 2019, 07:59:47 am »
Where did you get them though? I find that most of the folks complaining about this are talking about shady ebay sellers or alibaba.


Yes, where else do you get ridiculously cheap components and modules from China? Cheap parts from ebay, aliexpress, etc is what this thread is about.

I thought the thread was about Shenzhen being cheap, not eBay, Aliexpress and Alibaba sellers? Pretty much all of the latter get their wares from Shenzhen but Shenzhen is not only these mom-and-pop fly-by-night sellers! There are tons of actual component distributors, part vendors, PCB manufacturers and what not which serve the local electronic industry. And it is possible to actually go there and order things from them - and you will get good quality goods. I think that's what HalFET was talking about.

So just because you got ripped off by a dodgy seller that buys whatever they found on discount in one of the Shenzhen markets today and then resells it on eBay or AliExpress, it doesn't mean that that is all that's available there.
« Last Edit: February 23, 2019, 10:23:38 pm by janoc »
 
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Online james_s

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Re: Why is Shenzhen the king of cheap?
« Reply #31 on: February 23, 2019, 11:51:14 am »
The thread that started this post "I saw some crowd selling 20 ds1307 breakout boards on banggood for $12. How do they do it? I can't buy 20 ds1307's for $12 not to mind add a crystal and put a PCB under it."

Reputable OEM component sellers are not going to sell 20 DS1307 breakout boards for $20. Just because the title of the thread has the word "Shenzhen" in it doesn't mean he's asking about the entire city. He is obviously talking about Banggood and similar sellers of insanely cheap components and breakout boards.
 

Offline Siwastaja

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Re: Why is Shenzhen the king of cheap?
« Reply #32 on: February 23, 2019, 08:34:26 pm »
Reputable OEM component sellers are not going to sell 20 DS1307 breakout boards for $20.

The question was how the low end price is possible. The answer lies in the manufacturing of said products, and their component sourcing, which is being discussed right now.

A reputable component seller might sell 2000000 DS1307 ICs to a manufacturer who uses it in a mass product, is then left with 20000 parts in excess, and then uses a cheap Shenzhen PCB fab that manufactures and assembles the modules for a few cents each, then sell them on Banggood. All this would usually go through various steps inbetween; you'd either lose traceability or you won't, but for the end customer, a hobbyist buying a cheap module, it doesn't usually matter.

The key thing to understand is that component pricing is arbitrary, and given enough volume and the right contacts, it can easily go down by 90% from what you see on Digikey for 20pcs, and this doesn't necessarily mean compromising the traceability. OTOH, almost anything is possible, so this is just speculation. You can't know from the price alone whether they are fakes or not. Some are, some are not.

It's fairly common to see this discussion happening: if an IC costs, say, $5 at qty 10 on Digikey, or $2 at qty @10000 at Digikey, how a finished module can cost "only $1" on Ebay - "it must be fake".

But, this doesn't take into account for a few facts:
* A typical markup on the Digikey seems to be around 3x, even for large volumes - hence, from directly sourcing from the manufacturer at large qty, it's well possible the "$2" price is down to around 50-70 cents.
* The assumption that a few support components (a few resistors, capacitors, a connector) are expensive is often wrong by x100. Even brand resistors and chipcaps on DK cost something like $0.002 each. In volume, local Chinese brands, it's evel less.
* The assumption that PCB manufacture and assembly is expensive, is clearly wrong. A small module can be fabricated and assembled for a few cents. This is because the highly automated process. A PCB panel can hold thousands of module PCBs because they are so small, and a modern P&P machine can populate large panels at a pace of, say, 1 second per module.
* The shipping costs can be surprisingly low when one ships hundreds of thousands of small packets from China or HK. The real cost happens at the delivery, in the receiving country, and the real cost is spread across the customers of the postal services of the receiving country. This isn't fair, but it's the reality.

So, for a "typical" $1 module that contains a "$2 part", the cost might actually spread down like this:
* The $2 part, actually, in volumes: $0.50
* Support components: $0.05
* PCB manufacturing: $0.05
* PCB assembly: $0.05
* Testing: $0.00 - no testing
* Packaging: $0.05
* Worldwide shipping: $0.15
* Ebay/Paypal/Ali cost: $0.05
* Profit: $0.10

If a counterfeit part exists, and if it is significantly cheaper, you can of course push that profit margin up. But, a counterfeit is not always available at all, or the actual manufacturer is actually competiting on the Chinese market (because that's a huge market opportunity - only working with lawsuits against fakes won't work - it's better to sell your good stuff for good price, compromising on your profit margin!) and selling the genuine chips for affordable price.
« Last Edit: February 23, 2019, 08:59:09 pm by Siwastaja »
 
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Offline HalFET

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Re: Why is Shenzhen the king of cheap?
« Reply #33 on: February 24, 2019, 12:59:11 am »
The thread that started this post "I saw some crowd selling 20 ds1307 breakout boards on banggood for $12. How do they do it? I can't buy 20 ds1307's for $12 not to mind add a crystal and put a PCB under it."

Reputable OEM component sellers are not going to sell 20 DS1307 breakout boards for $20. Just because the title of the thread has the word "Shenzhen" in it doesn't mean he's asking about the entire city. He is obviously talking about Banggood and similar sellers of insanely cheap components and breakout boards.
Uhm, yeah they will and do. You honestly are making assumptions based on low volume production with EU or US-Canadian prices.

To put it in terms you might understand, say someone like Sparkfun orders 10k breakout boards, odds are the manufacturer is going to make 12k on the assumption that Sparkfun is probably going to order more in the short term. Pretty much all PCB manufacturers will over-produce on large orders to cover yield loss and follow-up orders. If they don't order them by a certain date they'll either dispose of them (in the case of more complex boards) or just sell it off. Now you might go "see, they're selling my design!", but keep in mind such breakout boards are rarely - if ever - designed by the company selling them. Usually it's a small team of designers at the PCB manufacturer who does this, so you're basically ordering the final product, not a specific design. Since design and manufacturing expenses were already covered by the initial order, the manufacturer can increase their profit margin by selling these things at a low price.
 

Offline madires

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Re: Why is Shenzhen the king of cheap?
« Reply #34 on: February 24, 2019, 01:30:44 am »
I'm buying only genuine Chinese parts from China. ;D Works well for semiconductors since there isn't much profit in counterfeiting inexpensive parts already made in China. Bird seed (caps and resistors) can be problematic, especially when too cheap. Also be cautious about the quality of electromechanical stuff like plugs and connectors.
 

Online wraper

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Re: Why is Shenzhen the king of cheap?
« Reply #35 on: February 24, 2019, 01:32:52 am »
It's fairly common to see this discussion happening: if an IC costs, say, $5 at qty 10 on Digikey, or $2 at qty @10000 at Digikey, how a finished module can cost "only $1" on Ebay - "it must be fake".
Because it is in 99% of cases  :palm:
 

Online wraper

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Re: Why is Shenzhen the king of cheap?
« Reply #36 on: February 24, 2019, 01:34:54 am »
I'm buying only genuine Chinese parts from China. ;D Works well for semiconductors since there isn't much profit in counterfeiting inexpensive parts already made in China. Bird seed (caps and resistors) can be problematic, especially when too cheap. Also be cautious about the quality of electromechanical stuff like plugs and connectors.
Really? How about ebay/ali full of fake fake LM358 which you can buy genuine for <10 cents/piece QTY of 100 from reputable distributor?
« Last Edit: February 24, 2019, 01:37:34 am by wraper »
 


Offline janoc

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Re: Why is Shenzhen the king of cheap?
« Reply #38 on: February 24, 2019, 01:55:54 am »
I'm buying only genuine Chinese parts from China. ;D Works well for semiconductors since there isn't much profit in counterfeiting inexpensive parts already made in China. Bird seed (caps and resistors) can be problematic, especially when too cheap. Also be cautious about the quality of electromechanical stuff like plugs and connectors.
Really? How about ebay/ali full of fake fake LM358 which you can buy genuine for <10 cents/piece QTY of 100 from reputable distributor?

And why are you buying fake crap from eBay? Nobody is disputing that it exists, so I don't see why so many people have the need to point at junk being sold by eBay sellers that no serious person would buy and expect genuine stuff.

The point is that this does not mean that everything being sold from Shenzhen is fake only because it is cheap or comes from Shenzhen!  Ever heard about an implication and its converse? (aka that A => B being true does not mean that B => A is!).

With Asian suppliers (not only Chinese) cultivating personal contact and business relationship is the key. Do your due diligence, vet your suppliers and you can get products of decent quality and cheaply, assuming you are being reasonable with your expectations (and order in quantity). Or, if you don't have time or resources for it (which is completely OK!), rely on the major suppliers like Digikey or Farnell to do it for you. But then don't complain about the prices or assume that anyone selling cheaper has to be selling counterfeits only because they don't have the same overhead. That service costs something - in Western wages. And even then you can get dodgy or outright counterfeit parts on occasion.

These claims about things that must be fake only because they are cheap while neglecting the vastly different supply chain and resources available in China (labor costs, various environmental regulations, loads of manufacturing capacity) vs. what we have in the EU and generalizing from junk sold by mom-and-pop stores on eBay in single quantities is being really ignorant.
« Last Edit: February 24, 2019, 01:59:37 am by janoc »
 

Online wraper

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Re: Why is Shenzhen the king of cheap?
« Reply #39 on: February 24, 2019, 01:59:52 am »
And why are you buying fake crap from eBay? Nobody is disputing that it exists, so I don't see why so many people have the need to point at junk being sold by eBay sellers that no serious person would buy and expect genuine stuff.
I don't intentionally buy fake crap. Occasionally I buy parts from there for different reasons, not ultra cheap and still often get some sort of crap. I see that, because I inspect the parts meticulously. The point is, most of those stupid buyers think it's a real deal when part/module is sold for 10x less.
Quote
The point is that this does not mean that everything being sold from Shenzhen is fake only because it is cheap or comes from Shenzhen!  Ever heard about an implication and its converse? (aka that A => B being true does not mean that B => A is!).
The point is, if it's 10 times cheaper, there is 99% chance there is something fishy with that part.
« Last Edit: February 24, 2019, 02:07:48 am by wraper »
 

Online wraper

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Re: Why is Shenzhen the king of cheap?
« Reply #40 on: February 24, 2019, 02:09:36 am »
These claims about things that must be fake only because they are cheap while neglecting the vastly different supply chain and resources available in China (labor costs, various environmental regulations, loads of manufacturing capacity) vs. what we have in the EU and generalizing from junk sold by mom-and-pop stores on eBay in single quantities is being really ignorant.
Quote from a Chinese person who knows better what's going on there:
The only magic in China is that you can buy 1 off parts at 1kpcs price. Nothing more. If you see an AliExpress seller sells a $10@1kpcs part for $1, then it is bound to be fake.
Paying a genuine price usually gets you genuine parts, but there are exceptions. Rarely, but it happens, that an unethical seller will sell you fake parts even if you paid the genuine price.
In China, there is a special job called purchasing engineer, this job does this thing -- to save cost from buying from a reputable distributor, while trying to avoid getting fake parts from gray market.
 

Offline madires

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Re: Why is Shenzhen the king of cheap?
« Reply #41 on: February 24, 2019, 02:11:27 am »
I'm buying only genuine Chinese parts from China. ;D Works well for semiconductors since there isn't much profit in counterfeiting inexpensive parts already made in China.
Really? How about ebay/ali full of fake fake LM358 which you can buy genuine for <10 cents/piece QTY of 100 from reputable distributor?

I was talking about genuine Chinese parts from Chinese manufacturers. If I need an LM358 from TI, ST and so on I'll source it from one of the large distributors.
 

Online blueskull

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Re: Why is Shenzhen the king of cheap?
« Reply #42 on: February 24, 2019, 02:20:48 am »
Quote from a Chinese person who knows better what's going on there:
snip

I said to compare with quantity price from a big player. If you compare with 1 off price, you can still have pretty high markups.

Also distributors work differently.

DigiKey and Mouser tend to markup heavily, Arrow and Premier (and its ilks) tend to be cheaper. LCSC has virtually no markup, as they are competing local Shenzhen companies.

Even within a distributor, policies vary with company to company.

For instance, from what I know from a Chinese power module manufacturer, DK offers a number or pricing policies.

DK can markup heavily, and make your product less competitive than Japanese and Western manufacturers, at no cost at you, or can ask you a chunk of money for listing and stocking, while having lower markup.

They may ask you to not to sell cheaper on other platforms, or they may allow you to do so, depending on how much markup do you allow them to have, and how much money do you want to pay them.

For instance, ADI DSPs and non-Lattice FPGAs are sold at a stupid high price on DK, while you can get genuine chips not only in China, but many times even from IC mfg's website, for much cheaper.

TI is also a good example. Almost everything from TI Store is way cheaper than from a major distributor, regardless quantity.

-----------------

Business strategy is also a driving factor. For instance, Arrow offers literally negative profit operation. They offer free overnight on $1 orders, and once a while they offer freebies.

They are trying to grab a market, and they have to whatever they have to do to challenge DK/Mouser.

-----------------

So the bottom line is, if you want to compare price to see if your eBay listing is genuine, consider comparing the LOWEST price from any genuine distributor.

For this purpose, Octopart is an invaluable resource. Use it well, and don't rule out smaller or Chinese distributors like Abacus or LCSC.
 

Offline Siwastaja

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Re: Why is Shenzhen the king of cheap?
« Reply #43 on: February 24, 2019, 03:08:28 am »
One further issue is that you can't get a genuine distributor price for high volumes without requesting a quote manually (for which you need to have an actual business relationship with them). Of course, everyone can see a price for 100000pcs at Digikey or Mouser, but it tends to be saturated at nearly the same price it is for 1000pcs, and they even hint about requesting a quote to get the real price.
 

Offline HalFET

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Re: Why is Shenzhen the king of cheap?
« Reply #44 on: February 24, 2019, 08:48:24 am »
I don't intentionally buy fake crap. Occasionally I buy parts from there for different reasons, not ultra cheap and still often get some sort of crap. I see that, because I inspect the parts meticulously. The point is, most of those stupid buyers think it's a real deal when part/module is sold for 10x less.
Don't buy components of ebay, period. You pretty much always get ripped off, even if it's expensive and not from China. Most of us learn that after the third order.

The point is, if it's 10 times cheaper, there is 99% chance there is something fishy with that part.
Depends, having seen volume pricing for genuine parts straight from the manufacturer I can say this statement is BS.

These claims about things that must be fake only because they are cheap while neglecting the vastly different supply chain and resources available in China (labor costs, various environmental regulations, loads of manufacturing capacity) vs. what we have in the EU and generalizing from junk sold by mom-and-pop stores on eBay in single quantities is being really ignorant.
Quote from a Chinese person who knows better what's going on there:
The only magic in China is that you can buy 1 off parts at 1kpcs price. Nothing more. If you see an AliExpress seller sells a $10@1kpcs part for $1, then it is bound to be fake.
Paying a genuine price usually gets you genuine parts, but there are exceptions. Rarely, but it happens, that an unethical seller will sell you fake parts even if you paid the genuine price.
In China, there is a special job called purchasing engineer, this job does this thing -- to save cost from buying from a reputable distributor, while trying to avoid getting fake parts from gray market.
Again, you got to know where you order. Another point is availability, some parts are simply not being shipped in small volume in Europe or US markets. For example, the SiLabs DAB+ parts, half of them aren't even available through Digikey, Mouser, Farnell, etc. in small quantities. You can luckily still find them in small quantities from Chinese distributors, so you can actually prototype without having to put down a few thousand EUR/USD to get your hands on a few chips.
« Last Edit: February 24, 2019, 09:16:20 am by HalFET »
 
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Offline aqarwaen

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Re: Why is Shenzhen the king of cheap?
« Reply #45 on: February 24, 2019, 09:07:25 am »
BS, most of the well known brand parts are more expensive than at Mouser or Farnell, except passives. But then you also have TME with cheap passives.
I said non-Chinese brands, not western brands. I'm talking about the Japanese and Korean stuff, for example u.fl connectors (genuine hirose ones) cost 1/5 the price compared to digikey, surface mount TCXOs, SAW filters, and other precision components that are too low margin for the western manufacturers to care about but still don't yet have local alternatives.

i have one  friend who used to work,in company who claimed to their customers that they use only geniue parts,but actually used cheap clones.and they clones even had same exact name..thats was also reason why he leaved that company and his work..it was very long time ago..
 

Online wraper

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Re: Why is Shenzhen the king of cheap?
« Reply #46 on: February 24, 2019, 09:19:14 am »
I don't intentionally buy fake crap. Occasionally I buy parts from there for different reasons, not ultra cheap and still often get some sort of crap. I see that, because I inspect the parts meticulously. The point is, most of those stupid buyers think it's a real deal when part/module is sold for 10x less.
Don't buy components of ebay, period. You pretty much always get ripped off, even if it's expensive and not from China. Most of us learn that after the third order.
It amounts to less than 0.1% of total cost of components I buy. Sometimes you simply cannot buy from reputable source. Usually it is something not stocked by western distributors, too expensive to ship for one off and similar. Also I suggested to not buy there just a few posts ago.
Quote
The point is, if it's 10 times cheaper, there is 99% chance there is something fishy with that part.
Depends, having seen volume pricing for genuine parts straight from the manufacturer I can say this statement is BS.
Now you talk about volume pricing directly from manufacturer  :palm:.
« Last Edit: February 24, 2019, 09:24:21 am by wraper »
 

Offline HalFET

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Re: Why is Shenzhen the king of cheap?
« Reply #47 on: February 24, 2019, 11:03:56 am »
Now you talk about volume pricing directly from manufacturer  :palm:.
Well, then start defining what you mean by price point. Because guess what, the original manufacturer's volume price is the lowest price you can find under normal conditions. If it'd be under that price point I'd agree, it might be a fake. But it might also simply be left-over stock that's being sold off below market value to recuperate costs. But I've never seen the reputable Chinese distributors go below the price point of the manufacturer for large volume sales. And the price point that manufacturers will sell at when you order a million components gets rather interesting, maybe someone here actually has quotations that they are allowed to share? But I can tell you that diving sub-10% from the price on Digikey is perfectly doable for parts like DC-DC converters, LED drivers and application specific MCUs from some of the large manufacturers. You honestly need to stop confusing a guy selling stuff on ebay out of his apartment with a proper distributor.
 

Offline Siwastaja

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Re: Why is Shenzhen the king of cheap?
« Reply #48 on: February 24, 2019, 06:45:21 pm »
Now you talk about volume pricing directly from manufacturer  :palm:.

That was completely spot-on on-topic (as an explanation what these module manufacturers can do to push their end product price down: for example, buy in volume from the manufacturer!), until you started shifting goalposts to have a completely unnecessary internet forum fight  |O. Would you please just stop, you can do better, and usually do. Thanks.
« Last Edit: February 24, 2019, 06:47:03 pm by Siwastaja »
 

Offline olkipukki

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Re: Why is Shenzhen the king of cheap?
« Reply #49 on: February 24, 2019, 08:08:26 pm »
I saw some crowd selling 20 ds1307 breakout boards on banggood for $12. How do they do it? I can't buy 20 ds1307's for $12 not to mind add a crystal and put a PCB under it.


Why not?  :o
Actually, you can buy almost 30 pcs for $12 (exclude delivery) that approx 3 times cheaper than buy directly from Maxim in 1000pcs :wtf:

The devil hides in details  >:D



 
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Offline nick_d

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Re: Why is Shenzhen the king of cheap?
« Reply #50 on: February 24, 2019, 09:24:36 pm »
Disregarding the ebay / ali fake market for a moment and just talking about Shenzhen, well from what I understand Shenzhen is a "special economic zone" which means that ordinary capitalistic policies apply, unlike in other parts of China where state owned enterprises are still quite big and it can be hard to get permission to run a normal business, as well as having to deal with taxes and bribery etc. In effect you could consider Shenzhen like China's "duty free store" -- in the sense that countries lose no tax revenue by offering duty free purchases to travellers who are going to a lower taxing jurisdiction anyway and clearly wouldn't buy the local stuff unless they were offered some sort of inducement. The special position occupied by Shenzhen and other special economic zones is kind of like Hong Kong used to be, except that Hong Kong is getting more heavily regulated these days. Probably that's for political reasons, since Hong Kong-ese have had a taste of freedom and would like it back.

And, why do ordinary capitalistic policies result in much lower prices for everything? Simply that, in the 20th and 21st century in Western countries we have not had ordinary capitalistic policies, we've had a so-called mixed economy where there is lots of central planning (consider AmTrak for instance, compared with the 19th century way where different railroads actually competed with each other), there are extremely high taxes by historic standards, minimum wages, and many employee-friendly but business-hurting policies (401k, paid holiday leave, medical insurance and so forth). Furthermore everything is tightly regulated, less so in the electronics and IT industries, but it still hurts innovation, for instance you cannot enter the PSU market unless you're willing to pay for a $50,000 fee for testing, so you need really high volumes and deep pockets right out of the gate.

Another thing to consider is the double, triple, quadruple, ... dipping indulged in by Western governments. You get paid, and 30-40% of it goes in income tax, but now when you buy something there is sales tax, and if for instance it's fuel there is fuel excise... and now suppose you pay your mobile phone bill with the money that's already income taxed, well 75% of that money goes straight to the spectrum pricing doesn't it. And the same applies to everything you buy. In the case of companies trading with each other, if 100 companies contribute to your cup of coffee (one makes cardboard, another makes glue, another grows beans, another buys and roasts them, another buys and imports, ...) then EACH of those companies must pay company tax, admittedly this is only applied to profits but they could take much less profits if not taxed.

Given the situation in China where the Government more or less gets out of the way and allows manufacturing to happen as cheaply as possible (since it benefits the bigwigs to have the resulting foreign exchange flow into the country), and the domestic market is not so over-taxed and over-regulated that basic staples like rice cost a fortune like they do here... the Chinese are able to produce things AT THE PRICE THAT THEY WOULD BE PRODUCED HERE IF GOVERNMENT WOULD GET OUT OF THE WAY. The free market price is literally 10s or 100s of times less than the actual price seen in Western democracies, because of the double, triple, quadruple, ... dipping phenomenon and all the business hurting regulation. It's really only the politicians and those whose pension funds are invested in the incumbent, inefficient industrial concerns that benefit from such policies.

cheers, Nick

edit: change unpaid to paid holiday leave, typo
 


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