IT and Business Insights for SMB Solution Providers

Custom Systems Made in the USA

Data indicates that PC manufacturing is heading back onshore, and that’s providing a revenue boost to custom builders who have embraced the trend. By Hank Hogan

It seems you can go home again. For proof, consider that Apple Inc. and Lenovo have both announced plans to manufacture products in the United States. This trend back to U.S. manufacturing has already brought increased revenue to some system builders.

“Probably most of the visits to our website are from some USA-related search term, and of course we're seeing sales go up every year as a result,” says Karel Felipe, CEO of Lotus Computer Inc., in Altamonte Springs, Fla.

The system builder produces desktop and laptop computers, with customer and tech support, like manufacturing, located in the United States. While comfortable with labeling the company's products “American made,” Felipe believes a better term is “Assembled in the USA.” No matter the designation, though, being able to provide domestically sourced and supported product is a selling point, he says.

There could soon be a bottom-line boost to moving manufacturing onshore. Rising labor costs overseas have almost completely wiped out what was at one time a significant offshore cost advantage, according to the Boston Consulting Group. As a result, the firm believes U.S. manufacturing is close to a competitive tipping point, when all costs are considered and automation accounted for. The consulting company predicts reshoring of manufacturing will begin in earnest by 2015 across a swath of industries.

System builders who assemble and support their products domestically have discovered this can pay off. However, they may avoid labeling their product as “Made in America.” That's the tactic followed by Medford, Ore.-based Falcon Northwest Computer Systems Inc., a boutique PC manufacturer.

President Kelt Reeves notes that one reason for the company's approach is that defining just what it means for a system to be U.S. made can be difficult. Should the final place of assembly be the criterion? In that case, stamping a system as having an American origin might be fine. Or should it be the location where a majority of the value is produced? In this situation, some pretty complicated calculations can result, since the components of a system often come from all over the world.

But perhaps the biggest reason why Falcon Northwest states that its products are assembled and supported in the U.S. is the makeup of the company's customer base, Reeves says. “The market that we address is higher-end buyers who are buying a higher-end product, and they expect better levels of support for it. They're usually extremely busy people.”

The company's customers anticipate being able to call and get support from a local or nearby time zone. For such customers, having American - and good - tech support is probably more of a selling point than where the machines are manufactured.

Puget Custom Computers of Auburn, Wash., has seen an increasing demand for made-in-America systems, says President Jon Bach. Often this seems to be driven by a desire for better tech support, so the company makes the point on its website that all of its customer support is U.S. based.

While Peoria, Ariz.-based Interstate Systems supports the “Made in the USA” concept, President Jim Heath notes that almost every subsystem from major vendors is assembled offshore. Thus, the whole country-of-origin exercise can be misleading. What's more, he adds, his customers have not been requesting products that are made in America.

Finally, there are some downsides to the “Made in the USA” designation. For instance, machines thus labeled may face tariffs of as much as 30 percent or more when exported to some countries. Bigger firms can sidestep this expense if they have properly set up and configured their operations in the target country. That option isn't available to smaller companies, however. As a consequence, builders like Falcon Northwest, which has an American but not foreign location, face a steep competitive disadvantage.

As Reeves of Falcon Northwest notes, “We're effectively locked out of a lot of foreign markets just because we don't have a presence in other countries.”

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