fb-pixel Skip to main content

After coronavirus, ‘Made in China’ isn’t what it used to be

Vibram maintains a high tech testing center in China.Vibram

In 2016, Eastern Acoustic Works, which makes professional loudspeakers, shut down its last US factory, in Northbridge, and moved all of its production to China.

Now its president, TJ Smith, is having second thoughts. Even before the coronavirus known as Covid-19 shuttered factories in China, trade tensions and Hong Kong protests made doing business in China not only more expensive but downright difficult.

“We are seeing some of the cracks in the model,” acknowledged Smith, whose company makes speaker systems for venues like Gillette Stadium and TD Garden. “We are headed toward a rebalancing of the strategy.”

Eastern Acoustic wants a reliable supplier, but increasingly “Made in China” isn’t what it used to be. Smith anticipates the company will always have a presence there, but he is now looking for manufacturing options closer to home.


“Had I to do it over again, I would have spent more time looking for contract manufacturers in New England that could do some of the work instead of moving it abroad,” Smith said.

For now, it seems like everything is made in China, from Apple iPhones to Nike sneakers. Becoming a global manufacturing hub helped propel China to the rank of the world’s second-biggest economy. According to the US Census Bureau, China has been the United States’s largest source of imports, supplying $452.2 billion in goods in 2019. Consider that two-thirds of the cargo volume going into and out of the Port of Boston is tied to China.

But the confluence of rising labor costs, intellectual property theft concerns that sparked a trade war, and now a viral infection that has restricted production and travel is making companies rethink their reliance on manufacturing in China.

“I suspect coronavirus will be a game-changer,” said Ravi Ramamurti, a Northeastern University professor of international business and director of its Center for Emerging Markets. “For years, many US companies have been over-dependent on China, especially for supply . . . But the coronavirus crisis may have exposed the systemic risk of sourcing from China.”


Public companies from Apple to Boston Scientific to Hasbro are warning that the fallout from the virus will hurt revenue in the first half of the year. It’s unlikely companies will pull out of China altogether, but a shift to other countries has been under way and accelerated in 2018, when President Trump launched the trade war with China. Some companies moved production to other parts of Asia to escape hefty tariffs on Chinese imports.

Last February, iRobot, the Bedford maker of consumer robots like the Roomba, announced it no longer made financial sense to manufacture solely in China. By November, iRobot had begun production in Malaysia, and CEO Colin Angle said at the time that the move was “a fundamental component in our initiative to diversify iRobot’s manufacturing and supply chain capabilities.”

OrthoLite, an Amherst company that is a leading maker of foam insoles for hundreds of brands, ranging from Adidas to Timberland, owns and operates factories in Asia that support major footwear suppliers. In recent years, OrthoLite has been increasing its global manufacturing footprint and expanding overall production capacity outside of China to its other factories in Vietnam and Indonesia.

Today, China constitutes approximately 40 percent of the company’s production, down from 60 percent just two years ago, according to C.B. Tuite, OrthoLite’s chief sales officer. While the company expects growth across all regions, including China, its clients want supply chain diversification so “there’s no disruption to retail,” Tuite said.


The Covid-19 outbreak has been a case study of the dangers of having too much manufacturing in one country. Because China has been the epicenter of Covid-19, the government has shuttered many factories for weeks at a time. While some workers have returned, factories still aren’t operating at full capacity, with quarantines and travel restrictions preventing a return to business as usual.

Charles Kane, a senior lecturer at MIT who teaches international finance, said the full effect of the outbreak on the global economy won’t be felt for a couple of months, while companies still have inventory. Consumers, he notes, should expect higher prices. “It’s supply and demand,” he said. “Companies are scrambling to redirect out of China . . . [The virus] happened so quickly companies couldn’t prepare for it."

But untangling commitments in China is not so easy. Just ask Tom DeVesto, founder of Como Audio, a Boston maker of wireless and streaming-music systems. In the early stages of the Covid-19 crisis, DeVesto thought he’d have enough inventory to ride it out. Not anymore.

“What’s already happened has already put me in a position where I’m probably going to have some gaps in my product flow,” he said. “It shows how nice it would be to make everything here.”


By here, he means in the United States — preferably in Massachusetts — but he thinks that’s impossible, given that his entire supply chain is centered around China. And that has raised other issues. DeVesto began moving manufacturing work to China more than two decades ago, when he was president of Cambridge SoundWorks, a now-defunct audio equipment company.

From the beginning, he had problems with Chinese contract manufacturers copying his firm’s intellectual property. “We said ‘we want you to make this for us,’ and the next thing, they’re selling it in Germany,” DeVesto said.

When DeVesto complained to his Chinese counterpart, this was the response: “In the United States you have copyright. In China we have the right to copy.”

That’s why DeVesto is sanguine about the Trump administration’s tariffs, even though they’ve raised his company’s costs by 25 percent. “I’ve been a victim of stolen technology for decades, and if in some way it helps put a stop to that, I’m willing to suck it up for a while,” he said.

At the Port of Boston, meanwhile, furniture and apparel are among the top imports coming from China, while top exports to China include waste paper, scrap metal, and seafood. Massachusetts Port Authority CEO Lisa Wieland said importers in recent years have begun exploring supply chains beyond China, whether to save money or to set up contingency plans.

Still, Wieland doesn’t expect cargo from China to drop off overnight, largely because other developing countries have yet to build a port or a transportation infrastructure that is comparable to China’s.


“That is going to take many, many years to facilitate,” Wieland said of modifying supply chains. “In the near and medium term, we will see a lot of volume coming out of China.”

The Port of Boston eventually will expand where its customers want to go. “If we looked at 10 years from now, we would see a shift from north China that dominates now towards Southeast Asia,” she said.

Vibram Corp., a leading maker of high-performance soles for brands such as Merrell and North Face, doesn’t plan to reduce its presence in China, where about half its production takes place and where it built a high-tech testing center in Guangzhou a decade ago. Vibram also has factories in North Brookfield, Mass., and in Italy.

Dealing with work stoppages related to Covid-19 has been frustrating, and like many other companies that have operations in China, “our revenue will be affected,” said Fabrizio Gamberini, Vibram’s president and global chief brand officer.

Still, the advantages of being in China outweigh the disadvantages.

“China for us is very important and will continue to be very important,” Gamberini said.

For Eastern Acoustic Works, last year’s Hong Kong protests exposed how companies can at times be at the mercy of China’s authoritarian government. Loudspeakers were on the list of items the government banned in an attempt to control protesters.

Even though Eastern Acoustic’s massive speakers — some weigh 350 pounds — aren’t the type protesters would use, the company’s freight forwarders couldn’t move anything out of the Hong Kong airport. Finding alternate routes proved difficult, as the company ran into other onerous restrictions.

“It’s a perfect example of the systematic risk,” said Smith, Eastern Acoustic’s president. “Suddenly the government places an austere restriction on something that doesn’t even make sense, and the entire equation changes.”

Hiawatha Bray of the Globe staff contributed to this report.

Shirley Leung is a Business columnist. She can be reached at shirley.leung@globe.com.