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China Produces. Are we the Hairdressers of the Future?
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by bloggi | March 26, 2007 at 07:19 pm
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My recent trip to China was instructive in more than one way. I have already reported on my first impressions of Shanghai.
One of the first things I did upon arrival was to dive into the brawl of a China Mobile store to get myself a prepaid SIM card. It would have been hard for me to do on my own, as all manuals are Chinese only. But with what little Chinese I could go on and what little English the ladies in the store went, eventually with a 1,000 words dictionary, sign language and a lot of patience amidst well over a hundred other clients waiting in line - we succeeded and I had a chinese phone number.
The next day I went to Suzhou, a medium sized city, by Chinese standards that is, and bumped into the storefront of the local China Mobile, now the world's largest mobile operator anywhere, boasting well over 100 million customers.
That amount of customers might be due to the fact that China Mobile offers moderate rates for most services like calling and data which undercut the cut-throat greed of western operators to the tune of Vodafone, even by Chinese purchasing power standards. Chatting via GPRS-mail and doing my local phone calls for nine days cost me little more than 6 US$. Had I phoned abroad, I could have used an IP-access code which would have cut the long distance costs yet again significantly. In Germany, mobile operators have successfully fenced off requests for reduced rates and alternative dialin-numbers with the help of a complacent government, to put it very politely.
My surprise came when I entered the shop: Imagine the cosmetics department of a large department store with its square glass tables. Imagine ten of these. Imagine about 20 different models of mobile phones in each of these tables. Then, imagine that about two thirds of these are already Chines home brewn brands, and you may recognize how serious the situation for the so called Western World really is. Not that all of these devices would be perfect quality yet. Then again, I am under the impression that they are good enough, pragmatically built hardware with, given maybe another two years of development, will effortlessly match the European or American brands.
You may say that most of the manufacturers profit on the fact that brands like Sony Ericsson have long since have their phones built OEM in China, my T610 bears the label "Made in China" - PRC? Labelling these devices with nice Western Brand names has been the most profitable act in the value chain too long. Then again, you may also say that most of the components of phones are bought from standard manufacturers of screens, chip card readers, loudspeakers, integrated circuits anyway. The Nokias do it, the Chinese do it.
What sets them apart from the rest is their unique combination of building no-nonsense, slim products that still have a large component of inbuilt fun.
Take for example the cellular phone I decided to bring back as a souvenir the next day from Shanghai:
It is an enjoyable movie viewer, with quite acceptable playback qualities, has simple organizer qualities, and allows me to take photos and videos that will not be much worse in quality than the ones I could make with low to middle class mobile phones from western manufacturers. With two differences: A huge display, and the fact that you pull out a stylus from its back and then have a touch screen to operate with.
Not that I couldn't live without that feature. But in a phone hardly palm size this feature is plain, simple fun.
As for the quality: I discovered some unexpected limitations, but that's probably because I can't really read the manual in Chinese (the phone menus are in English). And, by the way, 140 US$ with virtually no Chinese to bargain for a lower price were not really overpriced either, given the fact that this one comes with an external load station and two batteries "on board".
Go to Shanghai Xuijahui metro station, surface there and visit one of the five or six electronics superstores we saw before we stopped counting. Each of them being football field sized with five floors and packed with merchant booths, selling everything from LEDs right to state of the art home entertainment centers, some of them already built by companies like Chinese conglomerate Haier. The sheer bandwidth of the offer, the fact that you see webcams well known to you from home, just at one third of the price, makes you stop to think.
I wondered whether in just a few years time, what we will do here in Europe and in the US will be building homes and offices (which are kind of hard to put in containers aboard vessels), will be a nation making its money from cutting each others hair, and a bit of banking and financial services, just without the industrial base to underpin the services industries with tangible goods and the know how in making these tangible goods.
Put it in another way: What can be built and shipped, eventually will be built in China and shipped from there. I wonder whether it was such a good idea to ruin our industrial base to a point where we will not be able to develop products, sell and test them on our home markets. The message I brought from China is sobering in the meantime: Unlike us, they are.
If you wish to talk to me about this or any other of my stories, feel free to chat live.
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Most RecentMost Recommended Comments (2)
at 04:46 on March 27th, 2007
I disagree with your comment on how Europe and US - as well as other countries outside Europe and US where the technology came from - will loose their know how in manufacturing the products to China. True that China is gaining knowledge on the know hows, but the knowledge itself came from these so called industrial countries. And these countries will continously reengineer the process and enrich its industrial base. The functional role shifted from full manufacturing industry into innovation industry, where the factories can be anywhere. Some of the factories already shifted to Vietnam as China is getting too expensive. And this will continue as the economy goes.
China has its benefits with potential consumer base it has. But the economic disparity among regions brings its own challenges. China would stuck with low-end, low-quality products if they are looking at its citizens as their consumer base - which mostly low income earners. That is why Haier set up manufacturing factory in Germany and US.
And the cell phone you bought - Chinese brand phone - were built for lower income consumers. I lived in Shanghai for three years and people in middle - upper economy band would go with known brand phones like Nokia, Samsung, and Sony Ericsson compared to those with local brands.
at 06:32 on March 27th, 2007
There are some reasons to believe that the dichotomy between innovation industry here and production there will only work up to a point. Take the Maglev train, Transrapid. It has been developed in Germany for 30+ years. The first system operational has now been constructed in Shanghai. You could maintain that the constructioon lab is in Germany while the building takes place elsewhere. It seems to me however, if you don't have a home market, you are going to lose incentive to develop new products. I am pretty sure we will loose the maglev technology to China sooner or later. As for the question of moving production ever further down the food chain. What when we have set up factory in (let me put it provocatively) in Darfur? Will we hope that by then Europe has empoverished enough to move production there in order to deliver to the rich Darfur market. Is this game iterative and circular? Also: This country (Germany) is being governed from two locations: Berlin for the decision making, Bonn (the ex capital) for most of the implementation at low levels. You will not find many who say it is efficient or helpful to bridge the distances. Now, imagining bridging intercontinental gaps to manage comparatively complex tasks in production, I get an idea about the friction loss one gets on the way.
As for the phone: It is an interesting question whether we will be able to implant the prestige thinking plus brand addiction to China. Maybe yes, but then again, for the time being I think that the best result we will get is a copied item instead of the expensive original being sold to China. As for the quality of technical goods - admittedly, the Chinese will move up the value chain, and they will set up factory abroad. But that may have to do just as much with circumventing trade restrictions and import taxation as anything else. In the end of the day, I have my doubts whether selling psychology and brand names will just be enough to turn a profit. If I look at my device, it seems to tell me three things: