Digitalization and industry 4.0 are key topics for China´s Strategy 2025. Beijing seeks access to industry 4.0 knowledge from Western companies, while China and Germany are global industrial powerhouses.
China’s industry has largely expanded due to low labor costs, and German industry has pushed ahead on advanced automation, on account of high labor costs. China is facing demographic challenges and recruiting more young and skilled workers. Its labor industry must adapt to less labor-intensive manufacturing, and integrate more automated machines and robots.
China Strategy 2025 is setting the stage for the country to transform into a global manufacturing innovation center that prioritizes development of intelligent manufacturing .
Chinese manufacturers are still operating in the age of Industry 2.0 - labor-intensive phase. Industry 4.0 is about connecting machines to generate huge volumes of data to be analyzed to make machines run more efficiently, and to coordinate factories and value chains.
Skipping an entire stage of industrial development – from Industry 2.0 to Industry 4.0 - may sound attractive, but requires introducing more automated machines along with new forms of data-driven coordination, requiring new skills on factory floors for people who can operate complex machines and automated processes.
Many Chinese developers have focused more on automation of production, rather than with the integration of factories and value chains using Big Data analytics. This is where the German company Kuka - one of the world’s leading robot manufacturers - can play a pivotal role. It’s products could replace human labor on production lines.
Chinese companies are far more vertically and horizontally integrated than typical European companies, including competitors such as Midea in the white goods industry, as well as Electrolux (Sweden), Bosch-Siemens (Germany) or Arcelik (owner of Beko, from Turkey).
Imagine that one of these global players wants to build a new plant based on the latest Industry 4.0 technology. Would they contract a company owned by their competitor, which would share sensitive data with them?
Perhaps not, in European competition law, there is a criterion, known as vertical foreclosure; if a merger gives a company control over its competitors’critical inputs that could be considered an obstacle to competition.
Whether these conditions would apply to robots is not clear, and Kuka does not have a dominant position in the market. Intervention by competition authorities would seem unlikely.
There is a public debate in Germany over whether Berlin should allow Chinese companies to buy German companies with industry 4.0 knowledge, since China could obtain industry knowledge of carmakers, planemakers and other industries as their robots are linked to the network and software of its industrial processes.
Midea’s takeover bid for Kuka underscores Chinese interest in German Industry 4.0 technology. In Jan. 2016, ChemChina paid €925 million for Munich-based KraussMaffei machine tools to exploit its advances in Industry 4.0.
Recent smaller Chinese acquisitions in the German machine tool industry, which include partial acquisitions of H.Stoll by ShangGong Group and Manz by Shanghai Electric Group are motivated to partake in the latest Industry 4.0 developments.
While some experts see dangers, others think that there is no real danger, since the warnings are exaggerated. Midea only wants a 30% stake, leaving the majority to German and other investors as an indicator that this was not an unfriendly takeover, while others believe the company could raise its stakes and grab a majority share later on.
Integration across organizational boundaries represents challenges, because Industry 4.0 involves sharing large volumes of data between related enterprises. German companies are creating appropriate platforms and security procedures for inter-firm data interfaces. If a central player within this ecosystem were to drop out, this could be a concern.
Kuka is a valuable partner in Industry 4.0 but not so central that others should feel worried. The German Ministry of Economic Affairs said it can´t prevent a Chinese acquisition by law, since no real security concerns are involved. However, Berlin called for other German and European companies to issue their bids.
Bosch, Siemens and other companies have refused to do so, because they think Kuka is not important and too expensive. Swiss-Swedish ABB is thinking about an offer, though.
Some German experts say China´s subsidies and state-led industry have a systematic advantage over free competition. China´s economic system can plan strategically and globally, while Western companies have engaged in short-sighted profit-oriented goals for the benefit of their stakeholders.
The fear is that China could strategically buy out hard-core elements of German industry 4.0 knowledge. Yet, there is no large scale buyouts of German industry by China as of now, which means that alarmists in Germany are a minority.
Editor: lishouen 丨CCTV.com