December, 2014
www.us-
tech.com China’s Key Opportunities and Threats Continued from previous page
ing regions seeking to win part of China’s manu- facturing business. Clearly they don’t have the same infrastructure and they certainly don’t have the same supply chain —no place in the world does — but they are gaining attention and investment from international OEMs and EMS companies. I do not expect great things from India. The
country seems too hampered by red tape and cor- ruption to compete, but many of the others have great potential, including Indonesia, with its large dynamic, young and educated population. The challenges don’t come from Asia alone.
Eastern Europe and Central America have plenty to offer and are getting close to wage cost parity as Chinese incomes rise more quickly than theirs and currency fluctuation moves in their favor. China’s exploration and development of its in-
terior seems the most practical way to tackle this threat. Perhaps interior China is the “next China”. As costs have risen in Shanghai and Shen- zhen, Chengdu and other locations further from the coast are come on- stream, with lower costs, but the same killer supply chain and infrastruc- ture. And now they come on stream faster. Once the Chinese government
has decided it wants automotive man- ufacturing in a region, it will create the ideal scenario for that to happen, from infrastructure and investment to incentives.
Too Much Automation I know this seems counter-intu-
itive and there is a great deal of talk around the need and desire for au- tomation right now. We have heard the stories of the iPhone 6 being built by Foxbots but we have to remember that Foxbots, like other robots, don’t consume. China’s consumers, along with
huge infrastructure investment, helped sustain the economy well through the global economic crisis of 2008 because of a swelling middle class and the increasing affluence of the working class. Replace those con- sumers with robots and the danger of lack of income to consume rears its ugly head, as well as the risk of mass unemployment and the consequent civil issues. Foxconn alone employs more
than one million people in China. That’s close to one in every thousand of the population. Then there are all those employees at their competitors, in their supply chains, at their cus- tomers and even in other manufactur- ing sectors. When it comes to automa- tion, we have to be careful what we wish for.
Talent Shortages All industries are dependent on
those that work within them and elec- tronics is no exception. Recruiting, de- veloping and holding onto talent is now key for any business wishing to sustain or grow in China, and it has to be priority for China itself. Education is one part of the
strategy, but valuing engineers in manufacturing is another important element. The West has seen gradu- ates drawn to careers in law, medicine or the media in preference to engi- neering and science, resulting in some real skill shortages. It is indicative that Germany,
the country in Europe that values en- gineers most highly, has been the na- tion that has had the most success in
maintaining its manufacturing industry and its manufacturing excellence.
Technology Leadership China entered the competition as the low-cost
technology follower, but it can be and is starting to become a technology leader, a leader in product de- velopment and a leader in process excellence. It now has the critical mass to do just that, and we are seeing growing success for locally manufac- tured capital equipment, consumables and knowhow. Investment in R&D is growing and that will also contribute. Perhaps what we need is an- other space race to get some real blue-sky research underway.
Domestic Brands Haiwei is just one example of a recent crop of
truly innovative global brands and this week I heard about two startup incubators in Hong Kong called Cocoon and Dim Sum Lab. This growth in brand awareness, creativity and entrepreneurism can only be good news for the nation going for- ward. In addition, these brands are now enjoying
growing success on the world stage and will sup- port further growth in domestic manufacturing. In conclusion, China has many things in its
favor, and, as you’d expect with a world leader, plenty of competitors snapping at its heels looking to grab a little market share. In my opinion the most important and robust
advantage it has is its unrivaled supply chain built on excellent infrastructure, supported by, but not surpassed by, low cost labor. It is this last element that it is hardest to replicate. r
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