‘Made in China’ conundrum
23 October 2007
Anand Sethi believes that the reputation of Chinese manufacturers is still poor in India, and that they must pay more attention to quality if this is to change.
My office is just the floor above one of New Delhi’s largest outlets of Nokia Mobile Phones and accessories. This means that when I am either climbing the stairs up to the office or going down, I inevitably have to cross several shoppers for Nokia, the leading cellular phone handset brand in India by a long margin.
During the height of the BL – 5C battery overheat problem (when Nokia had to recall some 46 million of these batteries) the numbers going in and out of the Nokia outlet had multiplied manifold largely due to those who wanted to have their handset batteries checked and, if required, replaced. Walking past these minor crowds, and overhearing animated discussions about the Nokia battery problem was for me quite a unique experience.
The major grouse was against China where the batteries in question were manufactured, with nary a word against either Nokia or Matsushita, the actual manufacturer of the batteries. Admittedly, this was also the time when other Chinese manufactured (Made ‘in’ China or Made ‘by’ China) goods were under the International scanner so a bit of ‘China bashing’ was inevitable.
This attitude of these average Indians made one seriously ponder about the recent trends in the global EMS equipment business where many of the leading production equipment companies do the assembly / manufacture of several of their product line items in China so as to be cost competitive.
For some years now, ‘Made in China / Made by China’ consumer and white goods have had a rather dubious reputation in India. So much so that some of the leading Chinese brands, with very successful sales in other countries had to eat humble pie in India and close down or do a major revamp of their India operations. Whilst ‘image’ was certainly an issue, the reliability and service back up were even bigger issues. Printed instruction manuals and guides that came with some of these equipment, including those sold by non Chinese companies, were downright hilarious, and in an English speaking country like India this was close to blasphemy.
One wondered why many of these companies spent good money getting their software written in India or used Indian designed chip sets but were reluctant to outsource the job of putting together quality instruction manuals to Indian entities.
And the problems are not just with consumer and white goods. It has now been reported that the Indian Central Electricity Authority (Ministry of Power) has raised major concerns about the quality of Chinese made equipment such as steam generators, turbines etc. for Electrical Power Stations have started giving major problems in under two years of commissioning resulting in major Indian companies blacklisting Chinese suppliers.
The list of Chinese made products giving major problems in India is now ever increasing. Most recent additions are elevators, escalators and even bus and bus and truck tyres (that have burst causing death and /or serious injury). And it is not just manufactured items. A recent survey found that most, if not all, the Chinese contractors who were successful bidders (singly or jointly) in the National ‘Golden Qudrilateral’ highway construction program have abandoned their work and left after doing only a part of their assigned tasks and that too at quality levels well below par!
Avid fans of ‘You Tube’ have also spread the word around about this video of a crash test carried out on the Chinese made ‘Chery Amulet’ car which , according to ‘The Economist’, “…collapses as if made of cardboard.” Even a sub $ 10,000 car should certainly do better than that!
It would therefore appear that the strategy of very low up front prices of Chinese made goods to capture developing markets is now rapidly becoming counter productive. Many companies, both from the private as well as public sectors have begun to take purchase decisions on the basis of all in ‘ Cost of Ownership’, over a decade, inclusive of cost of down time, cost to repair, availability of spares and proper support. There is also a very strong move to persuade the Government of India authorities and organisations to stop selecting the supplier of choice as the lowest bidder in open tenders but move towards the ‘cost of ownership’ model.
So what has all this to do with EMS production equipment you may well ask?
The answer of course is in the recent trend towards setting up assembly and manufacture of EMS production equipment in China. Even more disturbing is the trend towards replacing proven and reliable components and supplies from long established vendors with items locally sourced in China from suppliers lacking a long term track record of reliability and repeatability. During a visit earlier this year to China I noted that many if not most of these suppliers had no internationally recognized quality certifications.
Readers of my vintage may recall that many years ago, Japanese origin goods had a very similar reputation. Anything cheap and plastic with questionable moving parts was automatically assumed to be ‘made in Japan’, fit only to last a few months at best. The country licked that problem by getting the Japanese Union of Scientists and Engineers (JUSE) to invite Dr. W. Edwards Deming, the recognised quality ‘Guru’ to advise and re-orient Japanese industry. As I recall, Dr. Deming’s simple but forthright message was, “Improving quality will reduce expenses while increasing productivity and market share.”
Dr. Deming’s work struck the right chords in India especially in two sectors where the country is recognized as a world leader in high quality exports viz. software and auto parts. According to the India business paper ‘Mint’ (a joint venture of the Wall Street Journal), “By focusing on quality, Indian software firms managed to build a differentiator on top of cost and labour arbitrage. “ ….. The very fact that all major Indian software firms have SEI CMM Level 5 quality certifications, makes it a huge country differentiator.” Similarly, the now much acclaimed Indian auto parts industry did not venture into any significant exports until such time as the companies could conform to globally recognized quality levels, with several firms going on to win the Deming prize for quality before entering the international market. ‘Mint’ goes on to say that “China and Chinese firms, haven’t done this in the area of soft manufacturing. While Chinese firms have focused on building scale and improving process efficiency, they have not focused their energies on acquiring international quality certifications relevant for the soft manufacturing industry.”
Buyers of EMS related equipment in India, including many of the internationally recognised industry leaders, invariably ask those quoting for equipment whether the items are made / assembled in China. Try what you may about convincing the prospective buyer about how the good name of the manufacturer should be adequate to inspire confidence, scepticism abounds. I am personally aware of several leading Representative Companies who shudder at the very thought of quoting any equipment with a China linkage and are even more worried about ensuring that the equipment, if sold, works at least through the warranty period without any major glitches, let alone performing to six sigma quality levels.
A very recent and apt cartoon (which cannot be reproduced here due to copyright reasons) carried in the leading newspaper “The Times of India” depicted this businessman standing before an array of Chinese exhibits telling a friend next to him that CHINA is now the short form of “CHEAP HAZARDOUS IMPORTS NOW AVAILABLE”.
So the conundrum that faces several of the EMS equipment companies is the following. Should they, in pursuit of lower up front prices, continue with their policy of getting equipment made or assembled in China without the supply chain having reached appropriate and repeatable international quality levels, or should they promote high quality products, but with higher up front prices, on the basis of lower cost of ownership over a realistic time frame.? After all these machines are not your typical superstore inventory!
Are people out there listening!?
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