Following our recent Webinar event, Manufacturing Opportunities in the New Industrial Revolution, London-based speaker and author Peter Marsh took time to answer additional attendee questions submitted at time of registration, or during the event, which the speaker did not have time to respond to due to event time constraints and the speaker losing Internet connectivity. Questions and answers follow:
1. Do you feel India can eclipse China in the Indian continent’s ability to manufacturing/assemble electronics on a similar volume, thus displacing China’s capabilities as the destination for high-volume manufacturing?
Right now, China accounts for roughly 20 percent of world manufacturing output. According to the best way of measuring this is by value-added output (the same way as GDP is measured). India’s share is just over 2 percent. In other words China outperforms India by a ratio of almost 10:1. It’s difficult to put a figure on the percentage of world electronics assembly done in China compared to India. But the ratio is probably more like 20:1. For a country of similar size to China by population, India is a long way behind in manufacturing. India certainly has lots of opportunities to expand in production activity but over the past 5 to 10 years India has failed, dismally, to make the most of the opportunities. I cannot see India even beginning to rival China in manufacturing (whether for electronics or anything else) for a very long time. Perhaps it never will.
2. Do you think Apple’s recent announcement to manufacturing some product in the US is more political than strategic given the markets for a lot of Apple product is in Asia?
Apple assembles outside the US (especially in China) a lot of goods ultimately destined for US markets. Certainly Apple will gain some political kudos for changing its strategy somewhat and doing more manufacturing in the US. There’s been so much negative sentiment attached to manufacturing “offshoring” from the US that any company with a chance to do more in the US in production knows the move will be popular. In the case of Apple, the decision to do a little more manufacturing in the US will play well with consumers and may lead to extra sales.
But I don’t think the decisions over “reshoring” are primarily politically driven.. There are concrete economic reasons for companies such as Apple putting more of its production in the US (when the goods concerned are liable to be sold in the US). It would not make sense however for Apple products destined for China or other parts of Asia to be made anywhere else than in Asia.
3. Do multinational corporations have a duty to maintain a strong presence in their home countries?
No. They don’t have any duties whatsoever to do this. As long as they operate lawfully and ethically they should base their operations wherever it makes sense from a business perspective.
4. What will be the impact of 3D printers in 10 year’s time?
World sales of 3D printers now are a bit less than $1 billion a year, compared to 100 times this figure for sales of computerized machine tools – the workhorses of the manufacturing world. 3D printer sales will grow, of course, but they won’t take over as the dominant sort of industrial machine for many years (if ever). In the next 10 years, 3D printing will become increasingly useful for all sorts of one-off, highly personalized products (e.g., jewelry, body parts) and also for rapid prototyping and making specialist moulds / fixtures. But it won’t within this time frame become a mainstream tool for use in industry.
5. What types of technology is transforming manufacturing during this new revolution and what is the future of open-source design?
I think the biggest factors involved with technical changes are the ways in which more different technologies can be combined and integrated in a way that was difficult to manage in previous years. In this way, cell biologists and electronics experts can collaborate to make new sorts of gadgets for medical diagnosis, such as “gene chips” or automated assaying equipment.
To create a complex product such as a new passenger jet with costs and development times minimized requires companies to be good at a great many technologies – including new materials, 3D computational design, aerodynamics, avionics hardware, manufacturing automation – and to be able to combine them as adeptly as possible. This requires new cadres of technological / management experts capable of working out ways in which groups of engineers and production workers skilled in specific disciplines can collaborate.
On open-source design I don’t think this will necessarily lead to big changes in industry. It seems to me that – in most industries – if companies feel they have created world beating designs they will want to keep it to themselves rather than share it.
6. What are the manufacturing megatrends we should be aware of?
I am not sure what you mean by megatrends. The main factors behind the new industrial revolution were all discussed in my talk. I’d say the most important of these are the drive towards customized / configured goods. Manufacturers of just about every sort of item, from cars to toys, are seeing the need to introduce variation into their products, to cater for individual tastes as well as to allow them to introduce technology / design changes to take advantage of new ideas and to enable them to “refresh” what they offer consumers and business customers.
7. What affect will China’s relaxation of it’s 1-Child-Policy have on winning back manufacturers who left because of rising labor costs due to an aging population?
It will take 20 years for the relaxation in policy to have an impact. So the amount of change in terms of labor costs and supply of labor will be tiny over the short term. China faces many pressures of different sorts (see the next question) and it will need to do a lot more to change other than to reply on the shift in policy you refer to.
8. Some China critics say China can no longer rely on just making lots of stuff. China has to invent things, design them, brand them and market them. Instead of following the leaders of global industry, China has to produce leaders of its own. What are your thoughts on this happening? If positive, in what timeframe?
The critics of China are right. China has to show that in manufacturing as well as in other fields, businesses can innovate in design and technology. They need to be able to create products where they own the intellectual property and which can be branded as indisputably belonging to them.
Moreover the products from these businesses will need to have specific characteristics that mark them out as more useful or attractive than similar items made by international rivals. The companies will also need to show they can create a worldwide presence so they become true multinationals accepted in many other countries.
How much Chinese companies can move in this direction will be a true test of the maturity of Chinese manufacturing. For all its success in manufacturing, few Chinese companies have evolved very far in this direction. This is not surprising since only 15 years ago Chinese manufacturers were a long way behind rivals elsewhere in just about every area. China will produce some world beating manufacturing companies but I think it will take the country 10 to 20 years to create even a handful of businesses that achieve success in the areas I’ve outlined.
I’m not sure the Chinese political and social fabric is conducive to boosting the sort of innovation I am talking about.
If any Chinese companies are to evolve in this way the most likely businesses are the ones to have shown a serious intent in moving in this direction (and also developed some truly innovative products).
Companies in this camp include Galanz, Gree, ( air conditioners/ microwaves); Geely (cars); Zhejiang Lide Electric (lighting); BYD (energy storage, electric cars); Pantum (printers) and Anshan Iron & Steel (steel), Haier (large kitchen appliances); Huawei, ZTE (telecom products); Xiaomi (mobile phones); Mindray, Alltech (medical devices); Sinovac (vaccines). But don’t expect anything big, too quickly.
9. Is the European Union all positive or negative for UK manufacturers who wish to export to the global marketplace?
In spite of the serious economic problems for much of Europe, the EU is still by a long way the most important international market for UK manufacturers. The requirements of consumers and businesses across Europe remain astonishingly complex and challenging. So there will continue to be many opportunities for UK businesses to develop and supply innovative products.
10. What transformations will be required for supply chains to support the new Industrial Revolution?
I’m not sure that supply chains will have to be transformed to meet the new ideas. It seems to me that supply chains in many industries are already quite flexible . They can be altered to allow for changes in the way products are designed and created. A key factor will be to encourage even more flexibility and build in more transparency (within the networks) to allow for more information to flow efficiently among participants.
11. How can we innovate more in manufacturing, perhaps around combination with services, ICT, and design.
Clearly innovation in manufacturing is a necessity for just about every company in this field. There’s nothing new here. The same has been true for the last 300 years. But because the number of players in world manufacturing – across virtually all product fields – is now a lot higher than before, the amount of competition is extremely high.
The need for companies to stand out from rivals in innovation (whether in technology or how they operate their businesses) is, as a result, higher than before. How to devise strategies for innovation to flourish is clearly a huge topic.
The key thing is for the people at the top of manufacturing companies to think constantly about international opportunities and rivals and be open to new ideas and different thinking. They need to employ people who have such traits too.
12. How will the discovery of domestic energy source in the US and Canada effect the viability of manufacturing in North America?
The new energy sources will have a huge positive effect in boosting the capabilities of US and Canadian manufacturers. This will be particularly the case for energy –intensive industries such as steel, chemicals, paper. But there will be other benefits for other businesses further down the supply chain and which require products such as steel or chemical ingredients for their own manufacture. New energy supplies will be an important factor helping to stimulate the effects of the new industrial revolution in North America.
13. Will cheap domestic energy combined with rising labor costs / shortages in China lead to more manufacturing opportunities in the US and Canada?
The answer is, Yes.
Rising labor costs in China are bound to reduce the attraction of doing certain sorts of manufacturing in China , especially where the goods being made are destined for sales outside China, and where other factors (such as the closeness of suppliers, the availability of special technology and specific tariff barriers) are not at the same time pushing the manufacturer to locate its production in China.
But the impact of rising labor costs should not be over-exaggerated. Even with these changes, labor costs in China will remain a long way behind those in North America and Europe for a long time.
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