China offers Dutch companies a large part of the market, but then they have to become ‘Chinese’

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If you can’t beat China, join it, say Dutch people working in the Asian country. For a small trading nation like the Netherlands, which has a deeply rooted awareness of dependence on foreign countries, this step is certainly feasible. And that offers numerous opportunities. Dutch companies can seize them by becoming ‘Chinese’.

‘Chinese competition delivers same quality, but works much more efficiently’

‘Copying Western technology? The Chinese feel that you should actually be happy when that happens, because copying your technology means they respect you. Ten years ago, it was still common practice here. And it still is, but to a lesser and lesser degree. Because they don’t have to do so anymore. China is leading the way in many areas. In battery technology, in fact in everything needed to build an electric car, they are way ahead of the rest of the world. Europe and the US do not yet realise it, but the automotive industry will see a radical shift in the balance of power the next few years. China has also built up an enormous lead in solar, as it has in robotics, drones and AI. And in 5G, the technology that allows the government to track everyone. As a matter of fact, the TNO-like research institutions here are already working on 6G.’

Thomas Pehrson

Planned

Thomas Pehrson has now – with a one-year break – spent 4.5 years working for Festo in China, the last 2.5 years as executive managing director of the complete organisation (R&D, purchasing, logistics, production and sales) of 2,500 employees in China, Taiwan and Hong Kong, with its head office in Shanghai. In that period he has come to really appreciate the country. Both private and business. ‘The people here are less individualistic, care more about each other and 90-95 percent don’t mind at all that they can’t say everything. They see Europe as a region with a great deal of unrest and terrorism, where many things are poorly organised. And from a business point of view, with a government that has worked in a highly planned way, they have built up a top position in many areas of technology. Yes, the Netherlands has lost its leading position in wind energy, precisely because it has no plans. Semiconductors, the production of 5nm chips, is the only thing that China has not yet completely mastered. But Taiwan, with TSMC, is seen as part of China. Of course a great deal of knowledge is exchanged between these two countries. However, ASML’s EUV technology is the only thing don’t have yet. This would be useful for the rollout of 5G, for example, but now they simply engineer around it.’

Local for local

This raises the question of how Dutch companies can do business in China? The possibilities are certainly there, Pehrson says. ‘But if you want to achieve growth and profit, you have to work local for local. You need to build your supply chain here as much as possible. Festo already does 60 percent of its production and purchasing in China and that will only increase in the coming years. Quality is absolutely no longer an issue here. The level of automation of private companies is higher than elsewhere in the world. For example, fully automated laser-guided cutting machines and industrial 3D printers are already widely used here. They take those steps so quickly because here it is a matter of learning by doing; It doesn’t have to be right the first time, contrary to what the development philosophy in Germany and the Netherlands propagates.’ Festo has also invested heavily in R&D in China. ‘The level of universities and government-affiliated knowledge institutions is world class; we work intensively with them.’

Large market share

Precisely because of this high degree of industrial automation, industrial automation company Festo in China has access to a large part of the market: ‘2020 was a good year for us with profitable growth, and in the first two months of this year we grew by more than 100 percent. We currently supply a large part of the consumer electronics market, but also food, packaging and life science tech. And also the fast-growing solar industry. For example, solar cell factories are being set up here where 1,500 production machines will be installed in a month. We supply the electric axles, actuators and motors for them. But the electric car and battery production market is also growing enormously for us.’

Become ‘Chinese’

Dutch companies can also benefit from this growth, provided they become ‘Chinese’. ‘For example, tyre production machines or welding robots that are largely engineered in Europe and contain many European components are 40 to 60 percent more expensive than those of the Chinese competitors. They have the same level of knowledge and deliver the same quality, but work much more efficiently. There are still some Dutch system suppliers in China that can make a reasonable profit by working exclusively for Western companies here. But they will face increasing competition from local companies. If you want to be successful here, your company has to become Chinese. Which Festo is: a Chinese company with German roots. Then you can profit from your brand name. Because they do like “European quality” here.’

‘China’s huge home market is paramount’

Theo Kneepkens
(KLA) about supercycle of growth: Í hope that supply industry expands its capacity’. Read this edition of link magazine digitally via this link

Since 1 October Bas Kuper has been managing director of global sales customer service for the Asia Pacific region of Siemens Digital Industries Software in Hong Kong and has already gained a thorough understanding of the Asian perspective on the world. ‘By 2028, China will be the largest economy. Because the country has the largest home market and the huge Asian market. That’s paramount.’ Seeking cooperation would be a much better choice, but for now the US is doing its best to prevent China from finding partners in other countries. It will slow down but not stop China’s advance, he believes. The same goes for the semiconductor industry. ‘ASML is not allowed to export the EUV. So China needs to build not only the fabs for the 5 nanometre node, but also the complete supply chain. And it will.’

As far as Kuper is concerned, there could be huge opportunities here for the ecosystem in the south of the Netherlands. ‘For the VDL ETGs that have their complete R&D in the Netherlands. If direct supply is not possible, then joint ventures with Chinese companies can offer a solution.’ And if China cannot be supplied because of trade restrictions, then neighbouring countries such as Vietnam are a good alternative.’

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