China exports reached US$2.119 trillion in 2016, up by 76.3% from 2009. China’s top 10 exports account for about two-thirds of overall value of global shipments representing almost 20% of total Chinese Gross Domestic Product. 50% of Chinese exports by value are delivered to other Asian countries while 21% are sold to North American and 18.5% to Europe.
With mobile phones being China’s number one export the breakdown of other significant precision manufacturing export categories are:
- Electrical machinery, equipment: US$557.1 billion (26.3% of total exports)
- Machinery including computers: $344.8 billion (16.3%)
- Optical, technical, medical apparatus: $67.9 billion (3.2%)
- Vehicles: $60.4 billion (2.9%)
One reason behind the increasing quality of Chinese manufactured precision products over the past decade has been the increasing use of Coordinate Measuring Machines (CMM) by its manufacturing companies. Such has been the uptake China has now become the largest global market for CMMs and is estimated to be consuming more that 3000 units annually, almost double the consumption of the markets of Europe and North America individually.
A design characteristic of almost all bridge style CMMs offered by the local China suppliers is the use of the ‘slant bridge’ design introduced to the market by Italian manufacturer DEA (now Hexagon Manufacturing Intelligence) in the early 1990’s. This phenomenon demonstrates the Chinese mindset to copy the intellectual property of others without necessarily a full understanding of the original design intent.
While China has demonstrated its ability to assemble precision mechanical CMM structures, no CMM builder has yet developed the critical CMM technology components such as CNC controller, CMM probing or metrology software, all instead purchasing these critical components from suppliers external to China. In-fact even core precision motion components, of servo motors and measuring scales, are also predominately sourced outside of China leaving very little product differentiation between the numerous CMM suppliers. Indeed CMM prices are very competitive between suppliers since they are all offering almost identical products.
With aggressive market pricing prevalent, and companies starting to struggle with profitability, its inevitable that an industry shake-out and supply base consolidation, similar to that which occurred in the Europe and USA, will occur in China. Since the barriers to CMM market entry are low, the industry has continued to fragment with new suppliers still entering the market. Another interesting characteristic of the Chinese CMM market is that many builders are clustered in the cities of Qingdao and Xi’an, the home of some of its original domestic CMM companies, that have fragmented with employees leaving to start their own CMM manufacturing and service operations.
Almost all Chinese CMM builders supply machines with RationalDMIS software, developed by External Array Inc, which has carved out a significant market share in China (RationalDMIS is marketed as OpenDMIS in USA), and minimizes further the differentiation between suppliers.
It is estimated that the Chinese CMM market is held approximately 50/50 between the domestic and western CMM brands. Hexagon, with its extensive CMM manufacturing operations in Qingdao, also owns a leading domestic manufacturer Serein in Shenzhen and therefore operates across the complete market sector.
Unusually for China, no single CMM builder has managed to gain significant traction in the export markets of Europe or USA selling few machines annually. There may be many reasons for this lack of CMM export success including; market reluctance to purchase such a significant piece of high profile manufacturing equipment from a ‘no-name’ Chinese manufacturer, price advantage not significant enough to ‘tempt’, few established re-sellers and in themselves too small for serious consideration. Whatever the reason the Chinese CMM builders have to fight over their domestic market only to grow business which in itself is an issue since many Chinese manufacturing companies prefer to trust strong global brands – as indeed do the wealthy Chinese population when buying cars, fashion products etc.
One leading Chinese CMM builder AEH, located in Xi’an, has taken an alternative approach to its competitors by acquiring the bankrupt German horizontal-arm supplier Mora in 2009. In addition it acquired the French CMM software company INSPECT 3D providing it with its own metrology software and a CMM distribution channel in Europe.
With the surge in Automotive manufacturing in China the horizontal-arm market has also been buoyant; this market has been declining in Europe and USA in past years due to the penetration of optical metrology and portable arm CMM solutions. The leading Chinese domestic manufacturer of horizontal-arm CMMs API-ZC was acquired by the American Laser Tracker company, Automated Precision Inc (API), and in addition to traditional manual layout, CNC duplex horizontal arm CMMs also offers clay milling and dizitizing solutions for automotive styling studios – a growing market in China as domestic manufacturers enhance the styling of its products to consumers to better compete with European, Japanese, Korean and American brands.
Environmental pressures in China is forcing the closure of some granite quarries and pushing up raw material prices. In addition, the labor intensive process of producing complex precision granite components is pushing up prices further, as Chinese labor rates rose to average $3.60/hour in 2017 up 64% since 2011 which is rapidly closing the Chinese cost advantage. With more than 30 CMM builders only a few manufacture more than 100 units per annum and, such is their product range diversity, economy of scale eludes Chinese CMM builders with their ‘cottage industry’ manufacturing processes providing poor manufacturing economics and thus questionable long-term survival.
In Qingdao, one local CMM builder, Metro 3D, has already ‘bucked’ the granite trend and has started to produce bridge CMM structures from aluminum albeit its CMM design remains a ‘slant bridge’. With the trend for faster shop-floor orientated automated measurement the slower heavy granite structure CMMs are struggling to keep pace with the lighter aluminum and ceramic structures now the favored build material by most western CMM producers.
Whatever the future of Chinese CMM builders one thing is sure they will need to change their product naming strategies to attract western customers since most are unlikely to install a CMM with the product name Miracle, Rabbit, Enjoy, Daisy, Wealth, Fly, Sword or Leopard emblazoned on the machine covers!!!!
Note: The author was involved in a CMM joint-venture in Qingdao, China in 1994-1996, imported manual CMMs from China into USA from 2005-2011 and has traveled extensively in China visiting many Chinese CMM builders in past years.
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