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Designed in China to Rival ‘Made in China’

By David South, Development Challenges, South-South Solutions

SOUTH-SOUTH CASE STUDY

Harnessing the power of design to improve products and the way they are manufactured is a critical component of successful economic development. And the high export value of designing and making “computer equipment, office equipment, telecommunication equipment, electric circuit equipment, and valves and transistors” was flagged up as a priority for developing nations back in 2005 at a meeting looking for “New and Dynamic Sectors of World Trade” (UNCTAD).

One country taking up this challenge is China. It now boasts twice as many Internet users as the United States, and is the main global maker of computers and consumer electronics, from toys to games consoles to digital everything.

China is also on course to become the world’s largest market for Internet commerce and computing.

The centre of gravity is very much moving China’s way: One study of 769 firms investing in 2,203 Chinese companies by Stanford University in California, found “the same firms that were successful in Silicon Valley … have transplanted their expertise to China,” according to Marguerite Gong Hancock in The New York Times.

But the country wants to move from ‘Made in China’ to ‘Designed in China’. This is critical because the majority of the profits to be made are actually in the designing, patenting and marketing of products. Manufacturing, as has been shown in the recent media controversy over the products made by Apple (apple.com), is not the main profit centre.

Apple employs 43,000 people in the United States and 20,000 overseas. But through its network of sub-contractors,the number employed overseas in Asia, Europe and elsewhere is around 700,000 (The New York Times). This includes around 200,000 assembly jobs in China. These workers can make US $17 a day or less.

Apple makes hundreds of dollars in profit for each of its iPhones. Apple can do this because it is the designer of the phones and holds the copyright, and it is the branded company that has built up its reputation and developed a highly sophisticated marketing and distribution network around the world. Through clever use of design, Apple created products that look distinctive in the marketplace. And those are the factors that determine the ability to make this profit. As has been noted, it isn’t just cheap wages that keep Apple’s profits high.

Getting consumers to desire and buy your products is a challenge for any company. Design plays a major part in understanding the unique demands of countries and markets, and what people find appealing or repellent.

A product that has both a successful design and is produced efficiently will generate a good profit.

The classic example from the past is Japan. Devastated during World War II, Japan set about re-building its manufacturing prowess from scratch. It brought in American innovators to introduce new concepts in manufacturing.

Japan’s openness to the new ways enabled it to re-fashion its manufacturing industries to exporting to the developed Western nations, in particular the United States. At first, quality control was an issue and Japan was mocked for making cheap quality trinkets, toys, automobiles and motorcycles. But it quickly changed from this to a reputation for making quality, affordable products and moving quickly into the burgeoning micro-electronics and consumer products markets. It also was a pioneer in computer gaming and entertainment.

The recent achievements in supercomputing in China are pointing to where things can go. China has developed the Sunway Bluelight MPP supercomputer (http://en.wikipedia.org/wiki/ShenWei). It is able to do a quadrillion calculations per second: making the Sunway Bluelight one of the 20 fastest supercomputers in the world. It was built with a Chinese-made microprocessor, and importantly, uses lower amounts of power than other supercomputers.

The clever bit is the ratio of computing power to wattage used. Energy-efficient computing is critical if computers are to make the jump to the next level in processing power.

All these trends coming together hint at big changes in the coming years.

In the past two decades, the electronics sector has enabled a number of developing countries to improve trade performance, in particular East and Southeast Asian nations.

Improving education is critical to the growth strategy. Improving education, like encouraging the pursuit of engineering as a profession, as China has done – it now has more than half a million estimated graduates, the most in the world – means new skills and ideas are coming to the industry (engineeringinchina.net).

But this is not enough. New ideas are essentially a creative process and this needs connections to business and the ability to experiment and play with ideas. Start-up incubators have proven a successful way to do this.

Thailand is a good example: Around US $4.5 billion was invested in the country’s electronics industry between 1986 and 2001. This created 300,000 jobs. The sector became so important it made up a third of the country’s exports.

Realizing that much of the work was assembly manufacturing, the government set up the Thailand IC Design Incubator (http://www.nectec.or.th/rd/electronics/be204-45/be204-45.php) to work on hard disk drive development and move up the value chain.

“In 1978, I saw workers stringing together computer memories with sewing needles,” Patrick J. McGovern explained to The New York Times. McGovern is the founder of the International Data Group, which invests in Chinese enterprises.

“Now innovation is accelerating, and in the future, patents on smartphones and tablets will be originated by the Chinese people.”

In the past, China was not able to make significant progress on this development for two main reasons. The first is copyright piracy and theft of intellectual property rights. During China’s economic rise, this theft was rampant and the country developed a reputation for being home to a vast marketplace of knock-offs of major Western brands. And the second reason was the heavy hand of the government, which scared off many entrepreneurs.

But China is re-structuring its industries to focus on innovation. In 2011, China surpassed South Korea and Europe in total patents and was in a neck and neck race with Japan and the United States. As fuel for the innovation rocket,venture capital is critical. And China is now the world’s second largest venture capital market, with the total jumping from US $2.2 billion in 2005 to US $7.6 billion in 2011.

It is this journey up the manufacturing ‘value chain’ that many countries look to with admiration and jealousy. And the secret to being able to move up this value chain is design – savvy product design combined with savvy design of manufacturing methods to continually drive down costs and drive up quality. How long until China has its own Apple and not just an Apple knock-off (http://www.bbc.co.uk/news/technology-14503724)?

Resources 

1) Red Dot: The red dot logo stands for belonging to the best in design and business. The red dot is an internationally recognised quality label for excellent design that is aimed at all those who would like to improve their business activities with the help of design.Website: http://www.red-dot.de

2) Dutch Design in Development: DDiD is the agency for eco design, sustainable production and fair trade. They work with Dutch importers and designers and connect them to local producers in developing countries and emerging markets. Together products are made that are both profitable and socially and environmentally sustainable. Website: http://www.ddid.nl/english/index.html

3) C3: C3 offers product design and product engineering services in Shanghai, China. Their strong point is managing innovative design processes from scratch (market research) until production: a one shop service: Website: chinacreativecompany.com

4) Dahua: Zhejiang Dahua Technology Co., Ltd. is a partially state-owned publicly traded company based in Hangzhou which sells video surveillance products and services.  Leading video surveillance product and solution provider in IP camera, NVR, HD cctv camera, Analog, PTZ and other vertical solutions. Website: https://www.dahuasecurity.com/uk

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The NEEMIC brand, founded in 2011, makes sustainable fashions and champions green production methods in China. 

Read more here: Creating Green Fashion in China

ORCID iD: https://orcid.org/0000-0001-5311-1052.

© David South Consulting 2021

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Archive Blogroll

Cyber Cities: An Oasis of Prosperity in the South

By David South, Development Challenges, South-South Solutions

SOUTH-SOUTH CASE STUDY

The future is arriving in the South even faster than many think: so-called “cyber cities” are being created to become this century’s new Silicon Valleys. Well-known ‘cyber cities’ like India’s Hyderabad and Bangalore have been joined by many other cities across the global South. But two places are set to make big waves with their ambition and drive in 2008: Mauritius and China.

Mauritius, an island in the Indian Ocean strategically close to Africa, better known for tourism and luxury hotels, wants to become the world’s “cyber island”. Armed with the first 3G network in Africa (the third generation of mobile phone technology – offering high-speed internet access and video telephony), Mauritius is moving fast to make good on this advantage. And it is even moving to the next level of mobile-phone speed, something called High-speed Download Packet Access (HSDPA) – allowing even greater quantities of information to be exchanged.

Mauritius joins a select few countries, including Japan and South Korea, at the forefront of access to 3G. Wireless – or wi-fi – computer access is available in three-quarters of the island.

Outside the capital of Port Louis, former sugar cane plantations are being turned into a “cyber city”. The centrepiece of the development is the 12-story Cyber Tower, home to young technology start-ups. The country is also investing heavily in education from primary school to university, to make sure the country’s 1.2 million people are cyber-ready.

Computer novices in remote villages are being visited by a Cyber Caravan with a classroom teaching housewives, children, the unemployed and the disabled basic computing and world processing.

Mauritius built its wealth on tourism, sugar plantations and textile manufacturing. But it is worried that trading arrangements that helped the sugar and textile industries to flourish, will be taken away. So it is focusing on the future: it sees itself as the world centre for disaster recovery computing services for the world’s companies in event of a disaster in their own country that destroys computer networks.

In China, its largest Cyber Park is under construction in Wujin New and High-tech Development Zone of Changzhou. It will be a technology incubator, a research and development centre, and a place for small and medium-sized enterprises to innovate.

What is truly making people stop and think is another far-reaching project: the Beijing Cyber Recreation District (CRD) – China’s most ambitious digital media industry development: a virtual worlds’ initiative with digital media academies and company incubators. It is spread over 100 square kilometres, creating the world’s largest virtual world development. It is already home to more than 200 game and multimedia content producers in western Beijing.

The CRD says its goal is “to create a virtual economy providing infrastructure and platforms through which any business – not just those based in China – can come in and sell their real-world products and services. While a concerted effort will be placed on bringing Chinese businesses and consumers in, the effort is worldwide and open to businesses and consumers from any country.”

The idea is to create a vast virtual economy for commerce where manufacturers can directly connect with billions of customers – bypassing middlemen.

It claims it will be “the world’s one-stop shop for customers and producers.” It will host billions of avatars – or virtual people – surpassing the capability of the very popular Second Life virtual world game’s 40,000.

Resources

  • The Atlas of Ideas is an 18-month study of science and innovation in China, India and Republic of Korea Korea, with a special focus on new opportunities for collaboration with Europe. It is a comprehensive account of the rising tide of Asian innovation. Special reports on China, India and Korea, introducing innovation policy and trends in these countries can be downloaded for free.
  • The Cyber Cities Reader: the first book to bring together a
    vast range of debates and examples of ICT-based city changes.
  • Entrepreneurship Development Institute of India
  • Innovation China: A website linking all stories on the fast-breaking world of Chinese innovation.

Check out award-winning cyber and digital work here: http://www.davidsouthconsulting.com/blog/2020/2/26/awards-1998-2003-february-2020.html

More stories on cyber innovation from e-newsletter Development Challenges, South-South Solutions and Southern Innovator

China Sets Sights on Dominating Global Smartphone Market

China Looking to Lead on Robot Innovation

Crowdsourcing Mobile Phones To Make The Poor Money

Mobile Phones: Engineering South’s Next Generation of Entrepreneurs

By David South, Development Challenges, South-South Solutions

Published: January 2008

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP’s South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South’s innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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Google Books: https://books.google.co.uk/books?id=dKaXBgAAQBAJ&dq=Development+Challenges+January+2008&source=gbs_navlinks_s

Slideshare: http://www.slideshare.net/DavidSouth1/development-challengessouthsouthsolutionsjanuary2008issue

Southern Innovator Issue 1: https://books.google.co.uk/books?id=Q1O54YSE2BgC&dq=southern+innovator&source=gbs_navlinks_s

Southern Innovator Issue 2: https://books.google.co.uk/books?id=Ty0N969dcssC&dq=southern+innovator&source=gbs_navlinks_s

Southern Innovator Issue 3: https://books.google.co.uk/books?id=AQNt4YmhZagC&dq=southern+innovator&source=gbs_navlinks_s

Southern Innovator Issue 4: https://books.google.co.uk/books?id=9T_n2tA7l4EC&dq=southern+innovator&source=gbs_navlinks_s

Southern Innovator Issue 5: https://books.google.co.uk/books?id=6ILdAgAAQBAJ&dq=southern+innovator&source=gbs_navlinks_s

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This work is licensed under a
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