How to Find a Contract Manufacturing in China?
Finding a contract manufacturer in China is becoming increasingly popular. This option is suitable for large organizations that do not want to own a factory or invest in fixed equipment, as well as smaller companies that cannot build production facilities.
In addition to cost savings, using Chinese contract manufacturers allows companies to focus their efforts on product innovation, sales, and marketing.
Outsourcing to Chinese contract manufacturers may be a smart move for large companies with a large number of products, good leverage, and relatively mature products. However, smaller companies early in the product development cycle run the risk of limiting their options too early.
Once you choose a contract manufacturer, you are limited by their plant and equipment and subject to their pricing and terms. Compared to larger companies, you have little leverage to negotiate smaller volumes.
Table of Contents
What is a Contract Manufacturer in China?
A contract manufacturer in China is a company that specializes in producing goods on behalf of other businesses (often located in other countries). Think of them as outsourced fabrication and assembly partners.
Difference Between Contract Manufacturing and Outsourcing
The main difference is that contract manufacturing is a form of outsourcing when you do not have access to the resources needed to produce your product.
Outsourcing is often a strategy that reallocates resources and contributes to cost savings and other economies of scale.
Contract Manufacturing Costs
Costs will vary depending on the product being manufactured.
- Pharmaceutical Industry: They might charge 3 cents per bottle to fill a pill or liquid, another 1 cent per cap, and 4 cents for shrink-wrapping and boxing — totaling hundreds of thousands of dollars in volume.
- Food Manufacturers: Automated lines perform thousands of tasks per hour, but some processes, such as hand-dipping chocolates, require manual labor — resulting in cost differences between 10 cents and 25 cents per piece.
In most cases, Contract Manufacturing Organizations (CMOs) represent only a small fraction of the final cost of goods for process manufacturing (food, pharmaceuticals, chemicals, consumer goods).
Detailed Cost Examples
When considering contract manufacturing in China, it’s crucial to understand the cost implications for various industries. For instance, in the pharmaceutical industry, regulatory compliance, high-quality standards, and intellectual property protection contribute significantly to the overall cost structure. On the other hand, food manufacturers face challenges such as stringent food safety regulations and the need for specialized equipment, which can drive up costs. By understanding these sector-specific expenses, businesses can better plan and allocate resources for contract manufacturing projects in China.
In most cases, CMOs represent only a small portion of the final product costs in process manufacturing industries like food, pharmaceuticals, chemicals, and consumer goods.
Types of Contract Manufacturing in China
To find the right supplier in China, you should be aware of the different types of factories available. Depending on your product, you may need one or more of the following factory types:
- Raw Material Factory: Produces the basic materials needed for your product. These parts are then sent to other types of factories.
- Component Plant: Produces discrete parts or components needed to manufacture the final product, usually in combination with what the raw material factory produces.
- Assembly Plant: Receives all materials and components from other factories to assemble your final product ready for the market.
Sometimes, you will find that a contract manufacturing company in China is a combination of all three types of plants, but typically, you need to develop a supply chain that includes all three types. Understanding your needs is crucial.
How to Find a Contract Manufacturer in China?
Finding a contract manufacturer in China might seem simple—just search the internet and send a few emails, or use a sourcing agent to provide you with options. However, neither method guarantees that you will ultimately find the best manufacturing partner.
Many companies, e-commerce businesses, and entrepreneurs who use the internet or sourcing agents quickly realize they have made the wrong choice. It’s common to find sourcing agents colluding with factories. Additionally, avoid responding to individuals on social media who wish to become your manufacturing partner.
Unless someone on your staff has experience and local contacts in manufacturing in China, ensure you work with someone who does. They may be based in the US or China, but either way, they need to understand the culture and build relationships with companies upstream and downstream in the supply chain.
Step 1: Conduct Research
Before you start creating any product, research is critical. Product development, regardless of the method you use, is an investment of time and money. Ensuring that you are pursuing the right product opportunity is essential, especially for small companies with limited budgets that cannot afford to make wrong bets.
By investing time in the research phase, you will know if you are developing the right product at the right time. You will identify your customers, understand their needs, and discover opportunities to fill niches that your competitors are ignoring or underperforming. You will also capture and document the desired features and functionality of the product.
Research includes market research, competitive analysis, trend tracking, keyword searches, margin and profitability calculations, and finding the right partner to bring your product to life.
Step 2: Complete Product Design
Product design is where the rubber meets the road—your product idea goes from concept to actual design. Whether you design in-house or work with a team of experts, you’ll need to collaborate with industrial designers and various engineers who can translate your research insights into a viable product design.
The exact design deliverables will vary depending on the type of product you create but typically include sketches, CAD models, detailed drawings, 2D renderings, prototypes, and bills of materials. At this stage, you will also identify and document your intellectual property.
The more complete your product design is, the easier your manufacturing process will be and the better your chances of having your developed product produced by a Chinese manufacturer.
Step 3: Prepare Product Definition and Specifications
Regardless of which manufacturer you choose, they will need your final design documents with clearly defined exact dimensions and tolerances. Just as building blueprints help builders, this information will help your manufacturer understand exactly what you need so they can accurately price, source, and manufacture products that meet your specifications.
These documents are also what you will check after you manufacture your product. If the product does not meet the definition and specifications, you have the evidence to demand that the contract manufacturer fix it.
Step 4: Find Potential Suppliers and Ask Questions
- Have a complete and accurate product definition.
- Ask detailed questions about their capabilities and experience, and request examples of how they use those capabilities on actual products.
- Understand their supply chain—how much they do in-house and how much they outsource.
- Obtain multiple quotes.
- Perform due diligence on the factory to evaluate their quality system, available manufacturing processes, and supply chain.
- Request specific examples of complete products they have made in the past that are similar to your product.
- Ask for references and contact them.
- Investigate how they handle intellectual property.
- Request a copy of their business license and any proof they have.
Take your time and be thorough in asking questions and demanding answers. Visit the facility or have your local representative visit and contact you. Once you have chosen a manufacturing partner, negotiate with them on cost, schedule, and quality. Avoid being overly greedy—strive for a mutually beneficial relationship rather than trying to take advantage of them.
Step 5: Understand Chinese Culture
Remember that doing business in China is different from doing business in the United States. There will be language barriers and cultural differences, so it is important to have a local representative who understands both. This person will be your local eyes and ears and help you build a good relationship with your plant partners.
Your contact person will know your expectations and should ensure that they are met. Due to challenges with international travel, it is especially important to ensure proper production wherever you manufacture your products.
Step 6: Get a Sample First
Before giving the green light for mass production, you need to see production samples of your product. If you can’t visit the factory in person, your local representative will inspect the product on your behalf and send you photos and documentation to better understand the construction, design, and quality of the product. Alternatively, the factory can ship samples to the USA.
When you are satisfied with the sample, it is ready for mass production and quality control. Maintaining a consistent local presence to oversee production and perform quality control is highly beneficial. This includes monitoring Acceptable Quality Limits (AQL), which are internationally agreed standards for the number of defective products allowed in each product run.
Stay in contact with factories and request regular updates on throughput, supply chain, scrap, and warehousing.
Step 7: Follow Compliance, Import, and Logistics
Finally, once your products are manufactured and packaged, you are ready to bring them to your country. Here, you will also need an expert on your side to ensure that your products arrive at your warehouse safely and on time, avoiding any delays in shipping or customs.
In terms of compliance, you must adhere to product standards, substance regulations, labeling, testing, tariffs, and documentation requirements. Next, you will work with an international shipping company to deliver your products to your distribution point.
Step 8: Protect Your Intellectual Property (IP)
Protecting your intellectual property (IP) is critical in your outsourcing process. Copyrights, trademarks, and patents are some of the tools you can use. If IP is a concern to you, make it clear in your discussions with potential suppliers—their response may be a key determinant in issuing a contract for the work you need done.
Before engaging a contract manufacturer in China, you must assess your own concerns about their ability to handle your intellectual property to protect your interests. Their response to the concerns and questions you raise should provide tangible assurances—but nothing can guarantee their compliance.
One often-overlooked factor when analyzing IP risks in outsourced contract manufacturing is that you are making a product to sell. Your contract manufacturer supplier is unlikely to produce an identical product or borrow “extra” product from your inventory unless it is really easy to sell and has a high profit margin—a risk that makes anything less worthwhile.
However, your competitors may be more interested. Once your product is in the market, your competitors can acquire most or all of your intellectual property, and they are your real risk.
Specific Measures for Protecting Intellectual Property (IP)
Some simple steps can provide you with greater security:
- Use specific designators in the design-to-manufacture process to ensure manufacturers reference the product only by that identifier.
- Assign well-thought-out document numbers to track and trace key confidential documents shared with the manufacturing team. Using a centralized repository gives you visibility into your vendor’s document operations.
- Roll call at the beginning of meetings or calls to ensure only pre-approved individuals from the manufacturer attend.
- Assign unique IDs or serial numbers to track engineering prototypes and monitor their whereabouts.
- Consider signing individual confidentiality agreements with specific manufacturing team members.
- Consider breaking the final product design into sub-assemblies and outsourcing them to other manufacturers to ensure no single supplier has all design details.
Any competent contract manufacturer will understand that to win new customers, they must ensure that their customers’ intellectual property is protected. Therefore, they must accommodate your concerns and provide assurances—reluctance to do so is a very bad sign!
20 Chinese Contract Manufacturing Companies List
Additionally, we have compiled a list of top contract manufacturing companies in China for your reference:
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Supplyia (速湃供应商)
- Global sourcing and supply chain management company offering sourcing, quality control, warehousing, and logistics services.
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BOE Technology Group Co., Ltd. (京东方)
- Leading global supplier of LCD displays and solutions, offering TFT-LCD, AMOLED, and other display panels.
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XunYu (舜宇光学科技有限公司)
- Leading global manufacturer of optical components, providing precision lenses, camera modules, and other products.
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Luxshare Precision Industry Co., Ltd. (立讯精密)
- Leading global manufacturer of connectors and precision components, serving well-known smartphone manufacturers like Apple, Huawei, and Xiaomi.
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GoerTek Inc. (歌尔)
- Leading global manufacturer of acoustic components, providing miniature speakers, microphones, and other products.
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BYD Electronics Co., Ltd. (比亚迪电子)
- High-end electronics manufacturer, offering smartphones, laptops, automotive electronics, medical devices, and more.
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Flextronics International Ltd. (韦创力)
- Leading global manufacturer of electronic products, providing design and manufacturing services across multiple industries.
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Jabil Inc. (捷普)
- Fortune 500 company offering comprehensive design, manufacturing, and supply chain services across various industries.
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USI Global Inc. (环旭电子)
- Leading global provider of electronic design and manufacturing services, serving communications, computers, consumer electronics, and more.
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Wistron Corporation (纬创资通)
- Leading global contract manufacturer of laptops, also producing connectors, motors, electronic modules, and other products.
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SANMINA Corporation (四海电子)
- Leading global provider of electronic manufacturing services, offering diversified contract manufacturing services across various industries.
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Inventec Corporation (英业达)
- Globally renowned manufacturer of servers and notebook computers, focusing on consumer electronics and mobile communications.
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Compal Electronics, Inc. (广达电脑)
- Leading global contract manufacturer of laptops, also producing tablets, servers, industrial computers, and other products.
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Compal Computer Group (仁宝电脑)
- Leading global contract manufacturer of laptops, also producing tablets, servers, Chromebooks, and other products.
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ASE Technology Holding Co., Ltd. (亚旭科技)
- Leading global provider of semiconductor manufacturing services, offering wafer testing, packaging, and testing services.
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SPIL Corporation (日月光半导体)
- Leading global provider of semiconductor manufacturing services, offering wafer testing, packaging, and testing services.
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Taiwan Semiconductor Manufacturing Company, Ltd. (台积电)
- The world’s largest contract manufacturer of wafers, providing 7nm, 5nm, and other advanced process wafer foundry services.
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United Microelectronics Corporation (联电)
- The world’s second-largest contract manufacturer of wafers, providing 5nm, 7nm, and other advanced process wafer foundry services.
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Samsung Electronics Co., Ltd. (三星电子)
- Leading global semiconductor manufacturer, providing 5nm, 3nm, and other advanced process wafer foundry services.
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BOE Optoelectronics Co., Ltd. (京东方光电)
- Leading global manufacturer of semiconductor displays, providing AMOLED, LCD, and other display panels.
Contract Manufacturing and Managed Marketplace
The Managed Marketplace Model represents a powerful alternative to traditional contract manufacturing methods in China. This model provides a complete solution for companies that lack deep product development or supply chain expertise.
It allows companies to maintain flexibility and control while still outsourcing critical steps with trust and confidence. Instead of learning as you go—which can be frustrating and costly—you can partner with a company like Supplyia to help you with product development, research, contract manufacturing, and logistics in China.
Regarding the supply chain, the managed marketplace gives you the flexibility to source the best factories around the world and the ability to change factories when needed. Sourcing factories is a key aspect of the production process. Negotiating a good deal and overseeing production to ensure that contract manufacturers in China do exactly what they promise takes skill. Few small companies have the expertise or local staff to build personal relationships with manufacturers and manage production.
Deeper Explanation of the Managed Marketplace Model
The managed marketplace acts as an intermediary between businesses and contract manufacturers, offering a curated list of vetted suppliers. This model mitigates risks associated with quality control and delays, as the marketplace oversees production timelines, ensures compliance, and provides transparency. Companies using this model often enjoy faster time-to-market, reduced administrative burden, and better quality assurance, making it an attractive option for businesses looking to enter the Chinese manufacturing sector without the complexity of directly managing local suppliers.
Latest Trends and Future Outlook
The contract manufacturing landscape in China is evolving rapidly, with several key trends shaping its future. Automation and digital transformation are at the forefront of this change, with many manufacturers adopting Industry 4.0 practices, such as robotics, AI-driven production lines, and smart logistics systems. Additionally, there’s a growing emphasis on sustainable manufacturing, with Chinese factories increasingly adopting eco-friendly practices to meet global environmental standards. Businesses that stay ahead of these trends will benefit from improved efficiency, reduced costs, and stronger competitive positioning in the global market.
Common Challenges and Solutions
While contract manufacturing in China offers many advantages, it is not without challenges. Communication barriers due to language differences can lead to misunderstandings and delays. Quality control is another common issue, as manufacturers may cut corners to save costs. Additionally, cultural differences can affect how business relationships are built and maintained.
To address these challenges, businesses should ensure they have clear and detailed contracts, conduct regular quality inspections, and maintain open lines of communication with their suppliers. Hiring bilingual staff or working with third-party agencies can also help bridge communication gaps and ensure smoother operations.
More Details on Supply Chain Management
Effective supply chain management is critical when working with contract manufacturers in China. Businesses must carefully vet suppliers to ensure they are reliable and capable of meeting production requirements. It’s also essential to optimize logistics and inventory management to prevent delays and disruptions. Having a backup supplier can help mitigate the risks of supply chain interruptions. Moreover, regularly reviewing and updating logistics strategies, including warehouse management and shipping routes, can lead to significant cost savings and improve overall efficiency.
Legal and Compliance Requirements
Navigating legal and compliance requirements is a vital aspect of contract manufacturing in China. Companies must be aware of Chinese labor laws, environmental regulations, and export/import restrictions that may affect their operations. Furthermore, understanding taxation policies and ensuring compliance with local intellectual property laws are essential to avoid potential legal disputes.
Businesses should also familiarize themselves with the process of customs clearance and other regulatory hurdles when shipping goods internationally. Working with legal experts who specialize in Chinese manufacturing law can help ensure that operations are fully compliant with all relevant regulations.
Start Your Journey with an Expert
As you can see, the product development process is long and complex, especially when dealing with contract manufacturing in China. If you want to minimize risk and maximize profits, letting Supplyia’s experts manage the entire process may be the right choice for your company.
Contact Us:
If you are interested in learning more or need professional contract manufacturing support, please visit Supplyia’s website or contact us through the following methods:
- Email: support@supplyia.com
We look forward to collaborating with you to achieve success in the global market!
