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Asian companies step up innovation efforts

By: Steve Toloken

November 8, 2013

Like all the global plastics shows, Germany's K fair this year saw a big increase in the number of mainland Chinese companies exhibiting, with 340 — making them the third-biggest national group, up from 247 companies at the last K show, in 2010.

The growth of Chinese and other Asian companies at major shows is not news, but after spending eight days reporting on K's Asian participants, I think there is something different this time around — the Chinese and other emerging-market Asians are getting more forceful about climbing the technology ladder. Two Chinese extrusion equipment manufacturers, for example, told me they want to establish international R&D centers, probably in Germany.

In the past the default for Chinese firms looking to build up technology was to partner with other companies or license new designs, trading their access to low-cost labor and markets for a chance at global technology.

But hiring researchers in a top-level market like Germany shows money and growing confidence.

"Before, our way to improve our technology was to work with companies and consultants, to license," said Kelvin Wang, a member of the board of Chinese extruder maker Guangdong Jinming Machinery Corp. "I think the next step is to develop our own technology."

Jinming plans to put its international R&D center either in Germany or in its headquarters in Shantou. But the company recognizes it could be tougher to recruit international-level research talent to its main office in a smaller city in China.

The second extrusion company to tell me of German R&D plans was Guangdong Simcheng Plastics Machinery Co. Ltd., in the city of Foshan. It is definite about going to Germany. The company was coy about naming opportunities it saw, but said it clearly believes there's market potential to add product-development capability in Europe.

China is the world's largest market for plastics machinery, and that — plus the growth Chinese firms are experiencing in other emerging markets around the world — gives the best of them cash to make a reasonable try at going global.

Innovation is not new for these companies, but to date I think a lot of Chinese development has focused on how to meet the incredible price pressures in its domestic market. Now there seems to be a conscious choice to innovate more with global technology in mind.

Jinming's Wang told me the industry has watched carefully how China's Haitian International Holdings Ltd. benefited from the research and production base it set up in Germany. Haitian has seen its sales triple since 2005 and it's now one of the world's largest players in plastics equipment.

"We also consider, like Haitian, to establish a partnership outside of China," he said. "Haitian used to be a similar company like Jinming many years ago.

"China started its competition in the industry selling on price," Wang said, but "you can no longer compete on cost."

According to Wang, the company values partnerships — it announced a worldwide sales deal with Davis-Standard LLC in August — and it is very aware that there are companies globally with better extrusion technology than it has.

You could say, this is only two companies, and doesn't mean so much. But it fits larger trends, like China's Yizumi Precision Machinery Co. Ltd. buying the intellectual property of bankrupt U.S. machinery company HPM, or India's Kabra Extrusiontechnik Ltd. purchasing part of the U.S. equipment firm Gloucester Engineering Co.

The dry facts and figures of K 2013, the world's largest plastics fair and the industry's most global technology platform, show the emerging muscle of Asia.

Companies from Taiwan (with its 23 million people) had more square meters of space, 6,120 (65,875 square feet), and more exhibitors, 131 companies, than the U.S., with its 5,350 square meters of space and 111 companies (with its 315 million people).

India grew as well, to 5,370 square meters and 145 companies, surpassing France, with its 4,480 square meters and 123 companies. The two countries basically reversed numbers from K 2010.

Of course Germany and Italy remain the largest participants, with 66,490 square meters and 26,090 square meters of space, respectively.

But most of the increases came from Asia. Japan (not traditionally a big player at K, even though it is a technology leader), South Korea and Turkey were all up substantially.

For the record, mainland China led the Asians with 9,420 square meters, 40 percent more than it had in K 2010.

To quote Soumitra Dutta, co-editor of the 2013 Global Innovation Index, "Innovation today clearly has become a global game."

Thanks to a skilled base of talent, the highest-ranking countries in the index are still in the developed world — Switzerland, Sweden, the United Kingdom, the Netherlands and the United States.

China came in at No. 35, and India at No. 66. By that measure, emerging Asia doesn't look much like the game changer.

But judging from the halls of K, the playing field is leveling and innovation is becoming a global game.

Steve Toloken is Plastics News' Guangzhou, China-based Asia bureau chief.