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Manufacturing’s future: The view from Shenzhen
AI-enhanced design and production processes will lie at the heart of China’s high-tech manufacturing future, says Chadwick Xu, CEO of engineering technology firm, Shenzhen Valley Ventures (SVV).
Shenzhen has built its wealth and reputation above all by being a high-tech manufacturer – producing information and communications technology (ITC) goods for the world. Is this its future?
High-tech manufacturing will be just one part of Shenzhen’s industrial future. Market-size wise, manufacturing likely won’t account for anywhere near as high a percentage of GDP as the around 40% it amounts to today, as services grow in importance.
But manufacturing isn’t going to go away, either. If you look at the history of Shenzhen’s development, you find very diversified categories, from its high-tech giants like Huawei and drone-maker DJI to tiny family workshops. Its success has come as a result of a vigorous eco-system in which all kinds of business can fit in and flourish.
So how do you see Shenzhen augmenting its role as an ITC manufacturing base?
In the larger picture, what drives evolution is better products in general, not just high-tech ones. Because of this, quality will become the dominant characteristic of Made in Shenzhen products. By quality, however, I don’t just mean the quality of the final item, but everything that goes into them – their materials, workmanship, durability and reliability, external aesthetics, their ergonomics and their UI/UX (user interface/user experience), and the processes used to make them.
On the demand side, the further development of automation and streamlining of manufacturing processes will make the C2M (consumer-to-manufacturing) model reachable. Consumers and manufacturers will be able to directly connect with each other for the production of low-priced customised products.
And on the supply side, C2M – perhaps better expressed as M2C – will create a space where niche brands can target precise groups of consumers. Volumes may be low, but so will production costs, leading to the creation of a whole new manufacturing business model positioned between mass production and one-off tailored goods.
ITC goods will be one of the backbone sectors in this future as local firms continuously create new tech electronic products. But with the help of artificial intelligence (AI), we’re also going to be able to provide more machinery, equipment and tools for other industries to accomplish processes that can’t be achieved today, at a much higher efficiency.
This increased efficiency means that in the not-so-distant future, we’ll be able to produce the materials and inputs for all industries in a truly sustainable manner. For the first time in our history, having enough material will not be a problem any more.
What are you doing at Shenzhen Valley Ventures to help realize this future?
SVV’s main focus is providing AI-embedded equipment and machinery for traditional industries that lets them improve their efficiency and generate better outputs. A lot of what we do is about system integration, reliability testing, supply chain control, assembly and after sales maintenance. But what makes our model unique is that we’re trying to build and operate a platform. We have our own engineering team, but instead of designing things by ourselves, we invite startups and universities to join us with their new technologies. In this way, we expand our technology boundaries while creating application business for our startup and university research partners.
“In the larger picture, what drives evolution is better products in general, not just high-tech ones”- Chadwick Xu
What role do you see multinational businesses playing in this future?
I see MNCs having three roles. First, they will be a key force providing the niche applications and products coming out of the C2M/M2C world with the resources and new business models they need to develop. Second, as the number of consumers caring about quality and user experience grows, they will have to find ways in which aesthetic design and its incorporation into manufacturing process can be made into a core competitive capability. And third, because of their knowledge of global markets, they will be businesses that find the best opportunities for exponential growth of the C2M/M2C model.
What are the biggest obstacles to this future – and how do you see them being overcome?
Under the current atmosphere, there is a tread of decoupling and anti-globalization which could hold back the cooperation that’s going to be needed for these new ways of manufacturing to take off. However, I still strongly believe in globalization. It greatly improves the overall efficiency and create opportunity for under-developed countries to get an entrance into the global supply chain and gradually to escalate their position. Globalization’s major down side is the wealth distribution model in developed countries, where the money that globalization has made is not shared across the population, especially with those who lost their jobs when production was relocated to countries with lower labour costs. But this isn’t a problem of globalization itself — it’s the internal wealth distribution model.
COVID-19 also looks like it will remain a problem for longer than we had expected. We might be getting used to video conferencing and working from home, but the pandemic is dramatically holding back the cross-border flows of talent and person-to-person meetings our economies need to flourish.
Expert
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