{"id":465,"date":"2016-12-15T20:47:11","date_gmt":"2016-12-15T20:47:11","guid":{"rendered":"https:\/\/mattersgraph.com\/?post_type=insight&p=465"},"modified":"2026-06-16T16:46:49","modified_gmt":"2026-06-16T20:46:49","slug":"assessing-the-threat-of-low-cost-imports","status":"publish","type":"insight","link":"https:\/\/mattersgraph.com\/es\/insights\/assessing-the-threat-of-low-cost-imports\/","title":{"rendered":"003: Assessing the Threat of Low Cost Imports"},"content":{"rendered":"

Anyone who has worked deals in the industrial engineered products and components markets in the last decade likely encountered a common diligence issue (although the issue is by no means limited to that sector): the threat of low cost imports to \u201chigher-cost,\u201d and perceived \u201chigher-quality\u201d European or American suppliers.<\/p>\n\n

Two recent cases \u2013 both in air handling components \u2013 highlight the very different scenarios that emerged in two seemingly similar industry spaces. One faced an emerging low-cost (in this case, Asian) import threat; the other was very secure. What drove this difference?<\/p><\/div>\n\n

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Common factors<\/span><\/h2>\n\n

We find there are a few common factors that contribute to increased competition from low-cost imports:<\/p>\n\n

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  1. High \u201cvalue-density\u201d<\/strong> \u2013 products can be shipped longer distances more economically, if they have greater \u201cvalue density\u201d<\/li>\n\n\n\n
  2. Acceptably long lead times<\/strong> \u2013 customers and processes that have limited issues with long lead times necessary for low cost shipping options<\/li>\n\n\n\n
  3. Global customers<\/strong> \u2013 OEMs with global manufacturing bases may be able to leverage first-hand experience in a low-cost location where a low-cost supplier is the local supplier to \u2018try before they buy\u2019 globally<\/li>\n\n\n\n
  4. A low degree of custom engineering (and non-critical components)<\/strong> \u2013 product that is both highly-engineered and low volume high mix (LVHM) in nature often reverts to local suppliers, where design and engineering can be iterated rapidly. Even in HVLM applications, if the cost of failure\/downtime is very high relative to the cost of the product, then it may not be worth the risk of offshoring<\/li>\n\n\n\n
  5. High relative cost\/and high labor quotients<\/strong> \u2013 more expensive components generally receive more attention from procurement and, all else equal, are more likely to be offshored<\/li>\n\n\n\n
  6. Industry regulation<\/strong> \u2013 e.g., A&D requirements for domestic suppliers<\/li>\n\n\n\n
  7. Importance of pre- and post-sale service<\/strong> \u2013 and the ability for low-cost competitors to access a channel (e.g., if channel is captive to current OEMs, then it can be very hard to break in)<\/li>\n\n\n\n
  8. Tipping point<\/strong> \u2013 Quality among foreign suppliers is changing and perceptions and biases have changed, too. Superbly high-quality products are designed and built oversees (and suppliers understand the opportunity) and engineers know how to measure and determine quality<\/li>\n<\/ol>\n\n

    As referenced in our recent air handling experiences, even two apparently similar industries can be affected very differently by low-cost imports. As such, this is a diligence topic where reliance on previous expertise in a \u201crelated sector\u201d can lead to logical, but highly inaccurate, conclusions.<\/p>\n\n

    A more thorough, research-based approach should address a couple of key issues<\/span><\/h2>\n\n