Tag: China in hightech

Ralf HallerRalf Haller June 5, 2011

The “new” Chinese opportunity – and THREAT

This last week I came across twice when people talked about China and how it booms, how it will be soon the leading economy in the world and how great it is to invest there and do business there.

One of these China lover encounters was on Swiss TV where they showed a student group from St. Gallen Fachhochschule visiting China and doing some business research work for Swiss companies who are investing and doing good business in China. All of the managers of these Swiss companies and the professor of the St. Gallen Fachhochschule had this excitement in their eyes.

I was in China more than ten years ago for about two years and did lots of business then at a time where all of the excitement that these students now talked about was built up from scratch. Shanghai was full of bikes (they are now banned) and there was only one tube line partly finished and in use. Pudong area had the Pearl Tower already but nothing else. They started tearing down the settlements and relocating the people to some other places. People said there were more construction cranes in Shanghai alone than in all of North America. Hard to believe but I think this was indeed true.

Now more than ten years later it is a bit funny to see these managers, professors and students talk about China as if they discovered anything new. Of course excitement is good and one should not argue with it. But the point I want to make here is that what more than ten years ago was quite obvious would happen and is happening now, China becoming the world economic power, one has to deal with what that will mean as well.

I am for some of my clients facing stiff Chinese competition leading to consolidation of entire industries. The mobile infrastructure market has changed forever and two Chinese companies, Huawei and ZTE (plus 2-3 others who are als coming up but hardly anyone ever heard of) ¬†are taking over this high-tech industry by storm. Results: Siemens sold out to Nokia what is now still called Nokia Siemens, Alcatel merged with Lucent, Motorola sold to Nokia Siemens and Ericsson still enjoys protectionism in the US winning a 6 billion USD LTE deal with Verizon Networks against Huawei offering it for less than half because of US politicians being afraid of Chinese companies possibly controlling an important American infrastructure. Of course that is nonsense, but – lucky for Ericsson still – is what happened. It won’t happen again though.

Now back to the Swiss managers, professors and students: the exact same will happen to all of these companies and all of these industries will be dominated by Chinese. Difference will be though that it will happen even faster.

For clients I have to now compete with these Chinese so have quite changed my attitude as I know it is not easy. Strange I find though that all these other industries do exactly the same and do not see the short and mid-term dangers on the horizon. Or if they see it do not want to think about it as they enjoy the current ride too much. The industries that were shown on TV will be much easier to copy and dominate in fact than the mobile infrastructure. They require much less technology and are much easier therefore to copy. So what will happen to all of them? Once they transferred the know-how, stiff competition will arise and they will import the same back to Europe and the US for less than half the price.

I think it is time now to think about this and be aware of it. Most importantly do not fall into the same trap that others already fell into. The only way to compete – I am convinced – is by being creative, innovative and by including all stakeholders in the innovation process. This requires new ways of collaboration and company cultures. We should have it easier to do that than the Chinese I would think, which still has to be proven though and maybe also here they are faster than we are…