Future tech giants…. Made in China?

In this article, I will try to outline key reasons I believe were the root that prompted their breakout and suggest improvements for the future for Chinese companies. 

From a supplier to a player

For years, Asian countries, particularly China, have been known as a target for multinational companies seeking cheap labour and low-cost manufacturing. The effect of that is that they are able to lower production costs, hence able to position their products more competitively on their home markets. However, in light of their effort to cut down costs, they have been, perhaps knowingly, creating a new competitor. And this is how the Chinese technology industry came into inception.

Academic literature has long discussed the possibility of knowledge dissipation in the process of outsourcing (Young & Lan, 1997). While companies outsource their production overseas, they often have to provide the assets, knowledge and information that are required to make a product, making a certain degree of spill over of information inevitable. With sufficient information, a supplier is able to manufacture its own product, which, albeit similar, is able to compete with the original product.

The Chinese are, with all due respect, masters at copying products and branding them as their own. Take, for instance, the Huawei Ascend P1. It’s shape is reminiscent to Samsung’s Galaxy S2, yet, it is a Chinese- manufactured handheld and it directly competes with the Samsung device. Is that it, though? Is information from western companies everything that is needed to create and build a new technology superpower in the world? There is more behind it.

First of all, outsourcing activities have led to a high degree of Foreign Direct Investment in form of building manufacturing facilities and innovation facilities. A result of this is creation of job opportunities, not only at a factory level, but also at the R&D level, which saw an increase in demand for science and technology graduates (Mol, 2007). An indicator of that is that the number of science and doctoral degrees in engineering increased by 15% between 1995 and 2001 (Preeg, 2005). This number does not include the number of graduates that obtain their degrees abroad in western countries.

The second important factor is the Government restructuring, which focused significant resources in the investment in R&D. According to the OECD (2011), growth in R&D expenditure of China has increased 18% per year.

Both of this factors are indicators that China is slowly becoming a technology superstate.  

Taking the products across the sea

Let us look at it from a more consumer perspective. While Chinese companies have gained a significant market share in their home market, they still fall behind in the international market. I believe there is one key issue and that is a problem concerning consumer perception. Chinese products are still considered as low-quality, often copied products and the fact that most of them are sold at lower costs does not help. IBM Computer division used to be legendary for the build quality and reliability of their products, however, since its acquisition by Lenovo, it has faced heavy reliability issues. Haier, a Chinese white appliance manufacturer, is generally seen as a brand purchased only by those on budget. Adding to this is the amount of fake items and knock-offs that are available for purchase on eBay, which, although cheap, have little to no durability and are able to frustrate and discourage customers easily.

What’s next for ‘Made in China?’

The development of China as a technology state is only at its beginning stage and it certainly has great potential to overcome both Japan and Korea.

Despite having a strong foothold in the national markets, in order to succeed in the companies definitely need to step it up.

I believe certain standards are necessary at production factories, as well as a better copyright and proprietary control in order to reduce the number of fake and low-quality items.

And then, marketing, marketing and a lot of marketing, which is crucial in attempt to improve the general perception of Chinese manufacturers. Their products need to be known and distinctive, their customer service ought to improve (and be local, if possible) and consumers need to trust them. They need to be accepted for being ‘Designed in China’, not rejected because of being ‘Made in China’. Only then can they be successful on the international market.

I think it’s going to be very interesting to see the development of the Chinese technology market in the next few years, as they gain in competitiveness. I am aware the issues I have drawn up are only a few of those they face (Such as CSR), nevertheless, expanding on all of them would make this article too long. Having said that, this is my first article and I hope you liked it! Feel free to leave a comment and I would be more than happy to discuss the topic further there.