The Boeing 777 is a huge, hulking beast. And when you’re trying to churn out 100 of them every year, there’s only one way to pull it off: turn to the robots. These giant, spray-painting robot arms can coat one of the bird’s mammoth wings in mere minutes.
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Japanese and Korean firms have been investing in China since the early 80s and 90s respectively; setting up factories and research facilities in order to save on costs. Yet as China’s growth slows, albeit still at impressive levels above 7%, the country is becoming less attractive for Japanese and Korean companies for a variety of reasons.
Major Challenges:
Several factors are affecting the decisions of Japanese and Korean firms to continue operations, expand and in some cases pull out of China altogether.
Rising Labour Costs
As China evolves from a lower to a middle-income economy, wages and associated human capital costs are rising fast, more than 10% in 2012 coupled with the increasing value of the RMB it has become more costly to ship goods manufactured in China.
Competition from Local Firms
Chinese companies are emerging as competitors to Japanese and Korean manufacturers.
Government Regulation
Ranked 91 out of 185 counties in terms of ease of doing business (which could represent the level of red tape in China), a lack of ‘guanxi’ or connections and difficulties in understanding the rules established in inland provinces as factories move away from the coast can pose great obstacles to Japanese and Korean firms.
Protectionism
According to the CEIBS Business in China Survey 2013, 16% of foreign firms are worried by local protectionism and Korean companies in particular are concerned about the unfavorable sentiment directed at their companies.
Intellectual Property Infringements
This is a key challenge, especially for companies producing higher-end products and research, the recent claim by Kawasaki Heavy Industries that a Chinese company stole their Shinkansen or high speed railway technology is a testament to the issues with IP protection in China.
Finding and Retaining Skilled Talent
With restrictions on rural-urban mobility and and a lack of semi-skilled labour in certain sectors, foreign companies struggle to cope with the shortage of key talent despite the oversupply of college graduates and migrant workers in cities.
Political Tensions
Following flare ups of territorial disputes over islands in the East China Sea, anti-Japanese sentiment can affect overall stability of operations for Japanese companies in China as boycotts of Japanese products, worker strikes and violent protects become larger and more rampant.
Major Opportunities:
China Plus One Strategy
For years Japanese and Korean firms have been employing this strategy to set up operations in China followed by a cheaper Southeast Asian economy in order to spread risk and anticipate rising labour costs. Now in particular firms are looking to exploit newly attractive destinations such as Myanmar, India, Indonesia, Laos, Cambodia and Bangladesh.
Repatriate Manufacturing
A weaker Yen in Japan and favorable government policies in Korea are encouraging firms to relocate some of their manufacturing back home.
Focus on Higher-end Investments
Larger Japanese and Korean companies such as Sony and Samsung are taking advantage of China’s climb up the value-chain and focusing on research and higher-end manufacturing an area of which only a handful of Chinese firms can currently compete.
Sell to the Chinese Market
With an expanding middle class and rising purchasing power the Chinese market offers Japanese and Korean firms a large pool of potential consumers considering their shrinking domestic markets.
China-Korea-Japan FTA.
A Free Trade Agreement between Asia’s economic giants would present interesting opportunities for all three nations to enhance trilateral trade and boost their competitive industries.
As doing business in China becomes more challenging for Japanese and Korean companies there are also opportunities they can exploit to be part of China’s continuing economic growth.
![PCH Exterior[1][1]](http://tctechcrunch2011.files.wordpress.com/2013/05/pch-exterior11.jpg?w=100&h=70&crop=1&resize=100%2C70)
A block from the Mariposa on-ramp and in the eye-line of 90,000 cars whizzing by on 280 sits an old warehouse that was home to the San Francisco Bay Guardian, a local alt weekly, and Digg. Most of the building is gutted, and inside they are working on the “greatest enabler of hardware on the planet,” according to PCH International head Liam Casey. It will be the new home of Lime Lab, a hush-hush design consultancy that Casey bought in 2012 for an undisclosed amount and, most important, the U.S. gateway to Asian PCH’s manufacturing might that allows hardware startups to access stem-to-stern services in design, coding, manufacturing, packaging and shipping.
Casey, dubbed “Mr. China” in a James Fallows article that outlined the rising importance of Shenzhen as a manufacturing giant, is one of the biggest machers in Asia. A teetotaling Irishman, the inexhaustible Casey ostensibly lives in a hotel in downtown Shenzhen but is nearly always in the air. He and his cross-cultural team make nearly all the accessories you can imagine for multiple vendors. You couldn’t point a finger in a Best Buy without hitting a product PCH builds.
He envisions his new building as a gateway to China and a way to help clients – and the public – understand the vagaries of mass manufacturing. The space will contain a public foyer and cafe where visitors can learn about materials, design and manufacturing. C-Level training will go on in a large anteroom on the first floor with a huge video screen suspended on epoxy-sealed walls.
In short, it’s the Apple Store if the focus was all the trouble that went into products before they ever reached the consumer.
“We want it to be the most photographed building in San Francisco,” said Andre Yousefi, co-founder of Lime Lab. The company, which started in the doldrums of the recession, consisted of Yousefi and his partner Kurt Dammermann until Casey bought them and expanded the team to 25. They expect to hire 15 more engineers by October and hope to fill 80 seats in their new HQ by 2014. Not bad for a tiny, two-man shop in a run-down district of San Francisco.
Yousefi is the buttoned-down member of the group, clean-shaven and more dedicated to design than manufacturing. Dammermann is the scruffy mechanic who has seen factory floors and is at home with drill presses and band saws.
The Lime Lab vision is born of the needs of hardware startups and companies that need a full-service consultancy to help their products move from idea to packaged product in a few short months.
“What we don’t do is the high-volume accessories work,” said Yousefi. “We’re doing more up-front product development, end-to-end.” Using PCH’s retail distribution platform, TNS Distribution in Dublin, Ireland, coupled with the company’s extensive contacts in China’s manufacturing centers, Lime Lab can take a sketch of a product and bring it to fruition at a speed unimaginable for most strategic design houses.
Yousefi and Dammermann were former IDEO designers and CAD jockeys who wanted to build their own consultancy.
“You come to us with either a napkin sketch or just an idea and we do the detail design and development to flesh it out,” said Dammermann. “One we have the idea fleshed out with the design team, we work with the team in Shenzhen to take it to the finish line.”
The team was reticent to mention their clients or current employees although they have hired ex-Apple, Intel, and IDEO engineers and designers who were looking for something more rewarding. They are working on everything from audio products to mini-computers and their current offices, though small, hold CNC machines, 3D printers, and a small testing facility. The new lab on Mississippi Street will contain far more gear, as well as a situation room for describing the retail shipping patterns laid out by PCH and the design decisions made for each product – all in a building that is bathed in natural light thanks to a long bank of leadlights windows.
“A lot of engineers in the Bay Area have become more strategic. We’re trying to close that loop and create engineers that are really good at manufacturing,” said Dammermann.
“The physical-making aspect of engineering is slipping away,” said Yousefi. Lime Lab hopes to change that.
Like proud parents, the pair was excited to show off their new baby. The building is not nearly finished but already they talk about the epoxy-sealed floors as if they’ve been walking on them for weeks and the banquette style wooden stairs as if they’re getting ready to present to a group of schoolkids the next day. The space is huge and outside there is a definite whiff of marijuana in the air, as if the neighbors were enjoying the relative quietude of the neighborhood to run a grow house. One of the previous tenants left a Diego Rivera-style mural of mightily straining migrant workers on the stairs up to the second floor, an addition that the partners haven’t yet decided what to do with. The walls have been stripped down to studs and you can see the thick joists peeking out from between whiffs of insulation. In short, it’s a great place to start again.
Brady Forrest, formerly of Khosla Ventures, will run PCH’s Incubator program from the third floor of the building where two rows of desks will house ten small- to mid-level startups. These companies will have a direct line to Asia. Most Lime Labs employees will also spend three months in Shenzhen to become accustomed to working with a bi-continental team.
“People are always talking about how manufacturing expertise has moved to China. The best thing is that we’re bringing it back,” said Dammermann.
The “after” renders the team shared with me show a building that is half factory and half Prada store. The exposed brick is mostly hidden and the space is all light and air. Gone are the remnants of industrial San Francisco, replaced with a shape as form-fitting and beautiful as an iPad box.
“It took us a little while to look for buildings. When we first started, Liam was like ‘Nope.’ He wouldn’t even get out of the car,” said Dammermann. They settled on the biggest building they could find, signing a 10-year lease on the space. There is enough room to invite groups to hold meet-ups at the space and there are plans to offer engineering seminars to incubated companies as well as executives who may be interested in starting up using Lime Labs expertise. While they are looking for larger clients in the Valley – the company is also looking to help Kickstarter projects join the ranks of successful business. “Hardware makes software sticky,” said Dammermann. It’s this ethos that drives the pair to make their lab accessible to all comers.
The last floor of the new space is a roof deck dedicated to the incubator participants and engineers. From here you can see the iron belt of the highway girding the edge of the Bay. It’s windy up there, a problem the pair will have to solve down the line. Until that time comes, probably sometime in mid-2014, the team can simply focus on hiring and building.
“The junior guys are awesome. Their network is immense. They’re like pigs in shit. We send them out to China and they come back with smiles on their face. One trip alone gives you two years of experience,” said Yousefi.
“We never gave up on hardware. I’ve never started a web company,” said Dammermann with obvious pride as the sun set over downtown SF.
We’ve all spooned grub into our gaping maws at one point or another, but how about spooning a new soul into the vacant husk of American manufacturing? That’s what Spuni is doing with just a bright idea and hip-tastic technologies like crowd-funding and 3D printing. The New York Times dug into the story of Spuni’s ascent, and how it’s feeding an industry, spoonful by spoonful. More »
NPR has a nice little video feature about Herrs potato chips being made, and it’s worth taking a few minutes to watch. But the real stars are the animated gifs of the machinery at work. I can’t look away. I want to watch a machine that makes chips all day while another machine feeds them to me, constantly, forever. [NPR] More »
That $1,500 price tag for Google Glass Explorer Edition? Perhaps it makes a bit more sense considering that US labor will be used to manufacturer it. According to unnamed sources cited by Financial Times, the first run of production-quality Glass headsets will be built in Santa Clara, California. The reason? A lot is riding on the quality of Glass, and it’s likely that Google just wants to keep a close eye on every single prototype that leaves the lab. In fact, it’s not exactly uncommon — the outfit did the same for its ill-fated Nexus Q, and Apple is building some of its iMacs here in the states as well.
It’s also important to note that the initial batch of Glass headsets won’t be high yield, so there’s little reason for Google to look overseas with so few units slated for production. Whether or not the lines in NorCal will continue to hum once these things hit critical mass remains to be seen, but it is interesting that Hon Hai Precision (read: Foxconn) will reportedly manage the facility that cranks ’em out.
Filed under: Wearables, Google
Via: TechCrunch
Source: Financial Times
Sweet, More J-Robots! …Oh. Industrial Robots?
Okay, today will not be heroic rescue & recovery robots, nor life-changing assistive robots for the disabled and elderly. No, today we’re talking Japan’s industrial robots, and through profound statistics, talk of money, and wildly general projections for the future, we’re going to spice up this dry robot salad.
Now, industrial robots are basically super-strong, super-precise, fantastically dexterous multi-jointed arms that do pretty much …
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Dyson makes some of the prettiest vacuums, hand-driers, and air blower/suckers out there, so it should come as no surprise that the factory where they are born is as mesmerizing as its products. More »
Samsung has officially apologized for a leak of Hydrofluoric acid in a Korean plant in January. The leak killed one worker, and injured four others. More »
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