Stung by the collapse of their export markets, Chinese manufacturers should not look for that big-volume business to return. Instead, they should explore new areas such as niche manufacturing markets, using better industrial design and looking to Chinese culture for inspiration.
That, at least, was the advice of manufacturers and industrial designers at a Hong Kong forum on reinvigorating the manufacturing industries in the Pearl River Delta. That heavily industrialized area around Hong Kong is sometimes dubbed the workshop of the world.
It's a hot topic in Chinese manufacturing circles these days, how to cope with the export drop a 26 percent decline in May, for example. It is a challenge for a region that grew strong specializing in making the world's iPods, TVs and microwave ovens, but since has seen thousands of factories close.
The majority of the PRD makes 'me too' products and its ability to add value is poor, said Victor Lo, chairman of Hong Kong-based battery maker Gold Peak Industries (Holdings) Ltd. and chairman of the Hong Kong Design Centre, which sponsored the June 17 forum. Even before the financial crisis started, China had too much manufacturing capacity.
In mid-2008, before the crisis, overcapacity was roughly 15 percent, Lo said. But now he estimates it at 30-40 percent. The pressure is just enormous, said Lo, adding that manufacturers should not simply wait for a rebound. It means 25 percent of the capacity should be shut down for good, he noted.
The changing global manufacturing situation can mean opportunities, however, one speaker said.
Eric Chan, a native of Guangdong province and president of New York industrial design firm Ecco Design Inc., said Chinese firms should think less about the export model of mega-factories and put more attention on developing niche products and using the Internet to open sales channels. For example, the popularity of Apple's iPhone and similar technologies demonstrates there is a lot of untapped demand for hand-held electronic devices for all kinds of uses, especially in health care and education, he said.
There is a lot of unfulfilled desire out there; many people are not satisfied with the mediocre, he said. The niche product could be very environmentally sensitive and the manufacturing process could be relatively unique. That niche market used to be very difficult, but now it is natural.
Chan said China also should look to its own culture for ideas, echoing comments from other Chinese designers at the forum. China's focus on becoming the world's factory for the past 20 years has built the country but suppressed local culture in some ways, he said.
We have been losing that consciousness for the last 20 years, he said. It is all imported culture. It is not natural for the Chinese.
He suggested that the changing manufacturing picture brings opportunities to new players, even if it's not clear if China is ready to take advantage.
We know what happened to the car industry [in the U.S.], he said. Does it mean we can do a better car here? We don't know, but definitely there is big trouble in the big car companies.
One Hong Kong industrial designer who set up a studio in the Shenzhen, China, last year said there is more interest in design among Chinese firms, though most Pearl River Delta manufacturers still are oriented toward making things for other firms, not toward developing their own products.
It is very difficult for them to understand why they need design, said Alan Yip, director of Yip Design Ltd.
A recent study of industrial design among about 250 Pearl River Delta manufacturers indicated that though most consider design important, they don't give enough weight to decisions of industrial designers and often consider design a visual skill, not an integral part of product development.
A lot of companies in the PRD and the [Yangtze River Delta] think about brands as a visual image, not the bundle of qualities involved in being a brand, said John Heskett, design professor at Hong Kong Polytechnic University, who is involved in the PRD design study.
Some, like Guangzhou Echom Science and Technology Group Co. Ltd., do emphasize design, however, and have found that it is important in improving profit margins, he said. That emphasis helps Echom, which makes TV components and plastic auto parts, produce better-quality goods that do not have to compete so much on price, Heskett said.
Well-known Chinese appliance and electronics maker Midea Group, which started in 1968 as plastic bottle cap maker and now uses design extensively, credits that focus for getting it to 91.5 billion yuan ($13.4 billion) in sales last year, said research director Wilson Deng.
Andreas Schupp, who heads the Hong Kong design center for Chinese computer maker Lenovo Group, said the firm is looking more and more to Asia and China for product inspiration.
We don't necessarily need to look for inspiration coming from the West, Schupp said. I think there is a lot of inspiration coming from China and greater Asia that we want to put in our products.
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