Chinese contract manufacturer and injection molder Guangzhou Echom Science & Technology Co. Ltd. thinks it has found a way to combat plummeting sales and mass layoffs hitting Chinese factories these days — focus on industrial design.
Echom, which employs 5,000 and runs about 100 presses, believes that emphasizing industrial design improves quality and gives it an advantage in the brutally competitive world of making components for consumer electronics products. Chairman Xian Ran, who began his career as an industrial designer, describes design as the engine of the firm.
That approach, using design as a business strategy, took center stage at a conference in Guangzhou on industrial design capabilities of small and midsized Chinese manufacturers. The conference was held during Guangzhou Design Week, Dec. 1-5, and included talks by Echom and other companies, along with presentations from professors who have studied the industrial design capabilities of local firms.
Design is not a cure-all for every company or an easy strategy to implement, however, and experts said too many Chinese firms mistakenly think it means focusing on superficial elements such as making a product look better.
Instead, conference speakers said, design should mean attempting to understand consumer needs as a way to improve product development, leading to more profits.
Tong Huiming, head of the College of Design at Guangzhou Academy of Fine Arts, said the global financial crisis and China's rising costs are posing challenges for that country's economic model for the past 30 years: exporting and serving as world's low-cost manufacturing workshop.
Competing on price has been the traditional strategy of manufacturers in South China around Guangzhou, Tong said. Instead, Chinese firms should look to their own innovation and design for future growth, he said.
Tong and an industrial design professor from Hong Kong Polytechnic University, John Heskett, expect to complete a study in mid-2009 looking at how 25 South China small and midsized manufacturers use industrial design, and will offer recommendations to interested local firms.
Moving into design is crucial to making profit, Tong said.
Only a very small portion of the value of a product is in manufacturing, where China has thus far focused, he said. Using the Apple iPhone as an example, Tong said most of its value — from design, marketing and branding — remains in the hands of firms in developed countries.
Industrial design capabilities are improving in China as part of a government policy in Guangzhou and Guangdong province to upgrade local manufacturers, he said.
South China's toy and furniture industries have been particularly hard hit, and companies need to change strategies, he said.
Xian said Echom has seen competition starting to develop from lower-cost locations like Vietnam, and that also is pushing the firm to do more with design.
Echom wants to develop its own branded products, but believes it will take several years to do that, Xian said. The firm will develop niche products that do not compete with its existing customer base, he added.
Xian worked as an industrial designer at Chinese television and cell phone maker Konka Electronics Group in Shenzhen before taking various executive posts at Echom, beginning in 1996. He said developed economies like Germany, Japan and the U.S. have long focused on industrial design.
He claims design has allowed his firm to weather the global financial crisis better than most Chinese competitors, with only a handful of layoffs and a very small decrease in sales. “We provide unique design, so those products are better,” he said.
An official with a Chinese firm that recently established a design department said made-in-China design faces hurdles, however. Li Xiao Yan, manager of the Creative Center at Guangzhou Shiyuan Electronic Co. Ltd., said Chinese designers may have less knowledge of broad topics than foreign designers, with more of a focus on one specialty, and they tend to have traveled less, limiting exposure to other ideas.
Chinese designers also do not have as much intellectual property protection for their work as foreign designers, she said.
Shiyuan has begun employing European designers, and Li said it has made her aware that Chinese designers need to work harder to bridge the gaps in capabilities.
Chen Wen-Long, president of Taiwanese design firm Nova Design, said the intense price competition in China's domestic market hurts design development, because consumers don't often shop for quality.
Hong Kong Polytechnic's Heskett said his study of design capabilities of small and midsized local enterprises has convinced him that many Chinese firms are investing time and money in using design to move up the value chain.
“What has surprised me is there are some [original equipment manufacturing] companies that are really making strong efforts to break out of that dependence on overseas clients and they are trying to use their experience to develop their own products, their own brands, and essentially to gain control of what they do,” said Heskett.
Still, he said many Chinese firms in the study are not well-positioned to use design. Top management too often regards it as a cost, used only to make products look better, and designers may not be capable of doing more.
“The biggest problem is changing management attitudes to design,” he said. “Most [Chinese small and midsized enterprises] are not well-equipped because of this management deficit, and because designers are not equipped to take on the responsibilities and decision-making that comes with a managerial role.”