Chinese manufacturing companies can serve as inspiration for local companies: China's companies do not have an IT legacy of four to five decades. Bold entrepreneurs encounter less resistance when they want to realize their radical visions of intelligent, networked production concepts. A good example of this is the Chinese household goods manufacturer Haier.

Closely linked to this is the fact that Chinese companies have understood the concept of 'customized manufacturing at mass manufacturing prices'. Han's Laser, the largest Chinese laser manufacturer, has bought three system integrators in the last two years. Its vision is for industrial customers to order their spare parts using their smartphones and for the process to run automatically from the delivery of raw materials from the warehouse to processing and delivery. With these competencies, Han's Laser in China can offer more complex system solutions than Trumpf, its established competitor from Germany, for example.

Chinese companies are open to new business models: robot manufacturer Zhi Jui Robots, for example, offers 'robots as a service'. The company's logistics robots are paid according to the number of orders processed in their customers' warehouses. Domestic system integrators set up joint ventures with industry leaders from the manufacturing sector and subsequently share the profits or savings from automation with them. Both models increase the willingness of inexperienced, skeptical customers to try out such solutions.

Chinese companies have not only internalized the cost-down approach in automation. A Chinese system integrator recently presented its own machine vision solution. He developed the software and the control system himself and only buys the camera from Germany. The entire system costs only a fraction of the Cognex system often used in similar cases. Similar developments can also be observed in other areas, such as collaborative robots. Falling prices will open up a multitude of new application possibilities!

Another plus point for China: there are still hard-working Chinese people. Some companies in the digital economy are proud to work six days a week from nine in the morning to nine at night. That makes a total of 72 hours a week, which is enough time to catch up with the competition from the West.

Last but not least, the pace of work in China is often faster than in Germany or even Silicon Valley. The time windows to exploit a business opportunity in China are shorter than in early industrialized countries. Constant change and adapting to it is part of the modern Chinese cultural DNA.

Blueprint for the Industrial Internet?

The two companies JD.com and Siasun are regarded as examples of cooperation between Internet companies and traditional robot manufacturers promoted by the Chinese government.

© STM Stieler Technology & Marketing Consulting

Under the label 'Internet Plus', the Chinese government is actively promoting cooperation between internet companies and traditional robot companies. The most recent example is the collaboration between JD.com, one of China's leading online retailers, and the largest Chinese robot manufacturer Siasun. In September last year, they presented the prototype of a driverless transport system for delivering orders.

Industry 4.0 is ultimately a competition between platforms. This is because the provider with the most available data has an important competitive advantage if it wants to create the most powerful solutions. In China's consumer internet, over 730 million internet users generate huge amounts of data that artificial intelligence (AI) needs to identify patterns. As the 'factory of the world', China is currently responsible for almost 25% of global industrial production. Could this starting point be a starting advantage when it comes to improving industrial processes through the use of smart algorithms? What is certain is that the Chinese government wants to retain control here. IoT platforms such as Siemens Mindsphere or GE Predix will not be possible without local partners in China.

Foreign automation technology in China

China's industry must modernize in order to remain internationally competitive. Technical equipment is an integral part of the Chinese government's Made-in-China 2025 strategy. Despite some difficult political and regulatory conditions, this development offers great opportunities for foreign companies in the automation sector. Many of them are also deploying their latest technologies in China.

The Bosch plant in Suzhou, for example, was initially planned as an 'extended workbench'. Today, it sets global standards in terms of quality. The Group's Industry 4.0 solutions are used there and presented to interested visitors. A glove equipped with sensors that can be used for training and monitoring assembly processes, for example, was developed on site. China is the only market in which Bosch acts as an engineering consultant. The German company is supporting two Chinese machine tool manufacturers in the networking and digitalization of production facilities. By setting up smart production lines with deviation and error management, their production efficiency can be increased.

Both ABB and Kuka are cooperating with the Chinese telecommunications supplier Huawei in the development of applications for smart production in the industrial sector. In June 2017, Kuka and Huawei announced a further intensification of their cooperation. Smaller foreign suppliers of automation technology are cautiously following these examples.

Outbound M&A

Finally, the aggressive M&A strategies of Chinese companies should not be forgotten. Stricter capital controls will lead to a decline in cross-border transactions from China this year. Takeovers that are in line with the long-term goals of the government in Beijing will continue to be approved.

Following the spectacular takeover of Kuka, the Chinese household goods group secured a majority stake in the Israeli motion control specialist Servotronix last February.

Against the backdrop of all these aspects, it is not far-fetched that China will establish itself as one of the leading global markets for smart manufacturing - despite hurdles such as the widespread lack of local expertise and suitable specialists or the obscure new cybersecurity law. In this context, it would be helpful if the Chinese government actually pushed ahead with market-based reforms, supported free trade and provided a reliable legal framework. This would help to win back the trust of international technology providers.

Author:
Georg Stieler is head of the Stieler Technology and Marketing Consulting office in Shanghai, China.