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The trend of manufacturing transfer is closely related to the future and destiny of the country. There have been four large-scale manufacturing migrations around the world, and innovation factors are an important driving force for the migration of manufacturing. At present, the biggest reality facing manufacturing upgrading and migration is the decline in total factor productivity.

It is generally believed that there have been four large-scale manufacturing migrations around the world: the first time in the early 20th century, Britain transferred part of its "excess capacity" to the United States; the second time in the 1950 s, the United States transferred traditional industries such as steel and textiles to defeated countries such as Japan and Germany; the third time in the 1960 s and 1970 s, japan and Germany transferred labor-intensive processing industries such as light industry and textile to the "four little dragons" in Asia and some Latin American countries; for the fourth time, in the early 1980 s, developed countries such as Europe, America and Japan and newly industrialized countries such as the "four little dragons" in Asia transferred labor-intensive industries and low-tech and high-consumption industries to developing countries, China has gradually become the largest undertaking and beneficiary of the third world industrial transfer.

Professional institutions such as McKinsey and the Boston Consulting Group, as well as various economists and media, analyze the transfer of global manufacturing from the perspective of "cost structure" (including comprehensive costs such as manpower, land, energy, and institutional transaction costs). And then study and judge whether the future manufacturing industry will flow to low-cost countries such as India and Vietnam, or return to Europe and the United States from China. The important role of innovation factors in the process of global manufacturing migration has not received enough attention.

 

United States: To undertake global manufacturing process innovation, manufacturing transfer.

 

The process of the United States undertaking global capacity transfer and realizing the rise of manufacturing industry is very long. Even if the United States had 7 of the 10 largest industrial enterprises in the world around 1850, it does not mean that the United States has truly become a manufacturing power. In the industrial and technological competition, it was not until around 1920 that the American manufacturing industry stood on the top of the undisputed world. This was mainly due to the comprehensive innovation of the United States in the manufacturing and product ends.

In the United States in the early 20th century, great inventions and great enterprises were flashing everywhere. Ford's Model T and Cadillac's electronic starting devices opened the era of human cars. Warner Bros.'s "Jazz Singer" led to the prosperity of sound movies. Stainless steel and artificial gum reshaped American manufacturing, and telephone and electrification upgraded the industrial infrastructure of the United States in an all-round way.

In particular, the large-scale promotion of assembly line production mode and large-scale mass production can not only dilute the fixed cost, but also make a large number of engineers gather together to engage in technological research and development, which greatly promotes scientific and technological innovation. At that time, the organizational form of British factories was relatively traditional, and small and medium-sized workshops were the favorite of British society, but such enterprises could not achieve economies of scale and systematic R & D innovation.

By the 1920 s, the gap between Britain and the United States in the manufacturing sector was huge. At that time, official data showed that the proportion of R & D expenditure in the national output value of the United States was as high as 2.5, while that of the United Kingdom was only 2 per cent; the proportion of American civil engineers in the total employment population was as high as 13 per cent, significantly ahead of the United Kingdom's 5 per cent. In 1929, the three pillar industries of the British economy were railway shipping, tobacco and alcohol, and textiles, while the top three dominant industries in the United States were agricultural equipment and construction machinery, vehicles and aircraft, steel and non-ferrous metals. Britain, an industrial power that aspired to global competition, has sunk to the point of relying on tobacco and alcohol to survive.

 

Japan and Germany: Undertaking Global Manufacturing Transfer with Collaborative System Innovation

 

After the end of World War II, the United States made Germany and Japan give priority to the development of traditional industries such as steel, textile and light industry in the implementation of industrial planning for the revival of Europe and Japan. However, Germany and Japan are unwilling to accept this industrial arrangement. If they passively accept the transfer of low-end manufacturing, they will always lose out to the United States in future industrial competition. Since then, Germany and Japan have not only focused on the development of high-value export industries such as automobiles, machinery, and electronics, but more importantly, they have undertaken the transfer of global manufacturing with an efficient and complete national industrial cooperation system.

Why can Germany and Japan have the most powerful small and medium-sized enterprises in the world? Germany calls this "hidden champion enterprise", and Japan calls this "tiny world top enterprise". The industrial structure of Germany and Japan is becoming more and more refined. Many companies have only studied one part and only made one product for decades. They are world-famous and the benefits are very good. The products they make are unique technologies honed based on the market they are looking for. These "invisible champion enterprises" do not pursue to be bigger, but strive to become the "only enterprise" with some kind of world first ". So far, if many high-end manufacturing industries in China do not use key materials and core components from Germany and Japan, such as aviation glass, chips, bearings, and optoelectronic products, their competitiveness will be greatly reduced.

Germany and Japan are world-leading in basic industrial technology, which is a major foundation for the two countries to remain winners in the global manufacturing migration. To give two examples, China has the world's largest rare earth reserves, but lacks the technology to turn it into materials. These material technologies are developed with decades of accumulation. These materials can be nano-sized and placed in mobile phone chips. These all require special machine tools, which the United States does not have, but Germany and Japan do.

Semiconductors are called "information food", the manufacture of semiconductor chips to use advanced lithography machine, and 70% of the world's semiconductor lithography machine made in Japan, Germany supplies one of the core optical components. Lithography machine is the most precise, critical and expensive equipment of all machines that human beings can manufacture so far. When lithography is performed on wafers, the positioning accuracy reaches 0.01 microns, which is equivalent to one hundred thousandth of a hair.

 

South Korea: Undertaking Global Manufacturing Transfer with Industrial Chain Integration and Innovation

 

In the process of transferring manufacturing capacity to the Asia Pacific region, Taiwan and South Korea have played an important role. Among them, Taiwan is good at OEM, and South Korea is better than industrial chain integration. However, we should not ignore the role of innovation factors. Taiwan's semiconductor manufacturing level is world-class. Hon Hai Precision (called Foxconn in mainland China) has assembled almost all Apple iPhone and iPad, while TSMC and MediaTek are world-class giants in chip manufacturing.

Beginning in the early 1990 s, American companies were responsible for the design, and Taiwan, China, was responsible for the foundry. The investment was huge. From 4 inches, 6 inches, 8 inches to 12 inches now, from wafer manufacturing to cutting, packaging, and testing, Taiwan's different companies are doing it, forming an unprecedented huge industrial chain, accounting for more than half of the global chip manufacturing market share. At present, TSMC has already achieved a 16-nanometer process. Mainland China's Huawei Haisi and Spreadtrum must adopt TSMC's process in order to realize batch manufacturing of designed high-end mobile phone chips.

The iPhone and iPad are only "laboratory products" at Apple. There is a big gap between whether they can become mass consumer goods-whether anyone can produce this product on a large scale. It is not too difficult for a laboratory to design a product and then spend a long time making a sample. However, large-scale manufacturing, and to those who have no technical background to manufacture, which requires the planning process is very reasonable, the design of the mold is very accurate. This involves a lot of patented technology, these molds are designed by Hon Hai itself, and Apple is a "cross-licensing" relationship. In other words, to achieve mass production of a product, these patents on the production process must be used.

Samsung Electronics is the pillar of South Korea's manufacturing industry, and its international competitiveness is based on the "whole industry chain" model, that is, all-round investment in chips, flash memory, LCD panels, flat-panel TVs, and mobile phones. Samsung's "whole industry chain" model pursues not only cost advantages, but also technology accumulation and innovation breakthroughs.

The "whole industry chain" model enables Samsung to have a deep understanding of technology and achieve efficient technological innovation and product innovation. After successfully mastering storage and non-storage chip technologies, Samsung Electronics has successively mastered core technologies such as TFT-LCD, PDP, organic light-emitting display (OLED), mobile chips, and flash memory chips. In fact, these technologies are all semiconductor technologies from the root. To a large extent, these semiconductor chip technologies benefit from the deep mastery of memory chip technology in the front, and it is much easier to expand to other chip technologies.

 

China: Undertaking global manufacturing transfer with system strength

 

Mainland China really began to undertake the global manufacturing transfer, should be after 2000. At present, the well-known BAT (Baidu, Tencent, Alibaba), as well as hardware manufacturing-related manufacturers and brands such as Haier, Lenovo, Huawei, ZTE, Xiaomi, Foxconn, etc. are gradually maturing, and China's manufacturing industry has formed a self-sufficient and self-sufficient. A huge system that can also launch its own products for overseas brands. This system was first collectively referred to as the "red supply chain" in the September 2013 edition of the Financial Times ". At present, the profit margin of China's manufacturing industry as a whole is still relatively low, but the system advantage has been formed.

The profit margin of many smart phones, home appliances and PC products exported by China is less than 5%. People take it for granted that 95% of the profits are earned by others. Entrepreneurs worry all day long, workers work hard, the country consumes resources and leaves behind pollution. In the end, they can only make a little money from it. Many people do not understand that behind this profit margin is China's strong industrial system and market system.

In addition to the introduction of some core and high-end electronic components, the 95% part is more that the enterprise needs to pay several yuan to the workers, several yuan to pay the factory rent, several yuan to pay utilities, several yuan to pay various taxes and fees, several yuan to pay the agent commission, several yuan to pay the logistics cost, and several yuan to the accessories supplier... This is the largest part of the product cost.

After that, the cost will not disappear for no reason, but only represent the transfer of RMB from some people to others. If accessories suppliers want to supply accessories, they undoubtedly need their own labor, management, factory rent, water and electricity, logistics, storage, etc. To supply power, the power supply bureau needs power grid construction, power station construction, even coal mining and power equipment manufacturing. Logistics companies need vehicles, drivers and highways to provide efficient logistics. Then the next step is to build roads and need reinforced cement, on the surface, the profit margin is less than 5%, but in essence, it needs the strong support of the raw material industry, energy industry, infrastructure, logistics network, supporting industries and market system of the whole country.

The reliability and speed of manufacturing are more important than price, and out-of-stock is definitely more costly than high prices. Relying on China's investment in large and integrated supply chains and infrastructure, Chinese suppliers are seen by foreign companies as faster and more reliable.

For manufacturing powers such as Europe, America, Japan and South Korea, the "red supply chain" is a system of friends and enemies. Without it, many emerging products such as the iPhone may not be available in a short time, nor will they be at the current price. However, the Chinese mainland's own products launched through this system also have speed, flexibility, low cost and some creativity, making it difficult for traditional industrial powers to compete with them in certain markets because they lack this system and conditions.

 

The biggest obstacle to innovation

 

The biggest reality facing manufacturing upgrading and migration in today's world is the decline in "total factor productivity. The media and economists pay more attention to the changes in domestic labor conditions, such as the implementation of the "five social insurance and one housing fund" system, the increase in hot money, etc., which led to rising wages and prices, as well as the replacement of the market and industrial structure, resulting in the gradual loss of early Chinese mainland. Cost advantage. "Factor productivity", on the other hand, pays more attention to relative changes, such as the fact that domestic labor costs have risen nearly fivefold in the 10 years since 2006, which does not necessarily mean that cost competitiveness will be weakened, if the degree of automation and organizational efficiency is greater.

In the past, we habitually viewed Latin America, Eastern Europe, and most of Asia as low-cost regions, while the United States, Western Europe, and Japan as high-cost regions. Today, this is an outdated worldview, and small changes in wages, technological efficiency, energy costs, interest rates and exchange rates, and other factors from year to year, quietly but greatly affect the "global manufacturing cost competitiveness" map.

Over the past decade, factor prices have risen to varying degrees around the world, but the numbers are not the key; what matters is whether they are linked to performance and whether the rise in factor prices is reasonable compared to profits. Unfortunately, the decline in "total factor productivity" has led (and continues to lead) to pessimistic returns on investment in manufacturing. Coupled with the glass wall between technological innovation and market returns, the global manufacturing industry will continue to face a pessimistic outlook.

Nowadays, the mainstream society of the United States has paid little attention to the competition from China, believing that China cannot win with the new generation of manufacturing industry, and gradually formed a complete discussion on "why China cannot have the next generation of manufacturing industry. With the maturity of technologies such as smart robots and 3D printing, China has no advantage to speak of, and multinational companies are looking for ways to move their high-value-added manufacturing back to the United States and Europe.

China has launched the "Made in China 2025" 10-year plan, which aims to use advanced manufacturing technologies, such as robots, 3D printing and industrial Internet, to achieve efficient and reliable intelligent manufacturing. At the same time, China has launched another national plan-"Internet", which seeks to combine mobile Internet, cloud computing, big data and Internet of things with modern manufacturing. Even if the transformation and upgrading of China's manufacturing industry in hardware can be successfully realized, it still faces three practical challenges:

The first challenge: robots in Europe, the United States and China use the same amount of electricity, work exactly as they are ordered, and do not complain or join unions. Is it necessary for European and American industrial enterprises to transport raw materials and electronic components from all over the world to China, let robots complete the assembly of finished products, and then ship them back to the United States. European and American companies can produce locally at almost the same cost, eliminating the transportation link.

The second challenge: Most of China's robots are also not produced domestically, and even if some are assembled domestically, it still relies heavily on imported core components from abroad.

The third challenge: European and American industrial enterprises have great difficulties in recruiting skilled personnel in China, because advanced manufacturing requires management and communication skills and the ability to operate factories based on complex information. The lack of professional and technical personnel has become a weakness for China to promote advanced manufacturing and service industries. What's more, China's manufacturing industry is already facing unconventional competitive pressure from its main rivals.

China's economy, with manufacturing as its pillar, has reached the most critical moment, and every step taken now will have an extremely profound impact on the future.

The ''Made in China 2025 Blue Book (2016) ''authoritatively released by the official agency in September pointed out that under the influence of factors such as the application of intelligent manufacturing technology and changes in the overall cost of the manufacturing industry, the global manufacturing layout has gradually adjusted: the manufacturing production of multinational companies has shown a trend of developed countries. At the same time, the global manufacturing industry is accelerating its transfer to cheaper regions such as Southeast Asia, South Asia, and Africa. The former is the cost dividend derived from technological innovation in developed countries, while the latter is the attractive advantage of cheap labor in low-cost countries. China's manufacturing industry, sandwiched between the two, is losing its labor cost advantage, while technological and industrial upgrading is facing considerable challenges.

 

Global manufacturing migration trend

 

China is already seeking to reduce the comprehensive costs of Chinese enterprises, that is, factor costs, transaction costs and institutional costs, and keep as much manufacturing capacity as possible in China. At the same time, the national innovation system is stepping up its construction, and the change of cost structure is not the core of the problem, because the real driving force behind the global manufacturing migration is technological innovation and industrial upgrading.

In the past, traditional industrial powers generally tended to outsource manufacturing to low-cost areas. This is not to withdraw from the manufacturing industry, on the contrary, it is precisely to strengthen the control of the industrial chain. Google's acquisition of Motorola, high-profile entry into the field of robotics and research and development of self-driving cars, Google's vision is that Internet technology continues to integrate into the manufacturing industry, can establish a dominant position. Once all aspects of the manufacturing industry are taken over by "cloud computing", it will be able to have enough influence and even control over the manufacturing industry.

The trend of manufacturing transfer has a great relationship with the future and destiny of the country. The United States has now withdrawn from many manufacturing fields, but it has not withdrawn from the industrial chain, but specializes in standards and technology. At present, Japan is also following this path. Technologies such as 3D, 4k and quantum dots are all developed by Japan and carried forward by Chinese enterprises. Today, sharp, Panasonic, Toshiba and other transformation of medical equipment, energy, Tesla's TV is provided by Panasonic.

Cutting-edge technologies and key innovations are still the main battlefield of traditional industrial powers, and Chinese manufacturers still need to track their technological routes. China's "demographic dividend" is disappearing, while the "technology dividend" has just begun. China's manufacturing industry as a whole still has insufficient technology and capital accumulation, and original innovation faces high costs and unpredictable risks.

The real driving force of industrial innovation is the market. China's manufacturing industry still needs to start with small things and small innovations. Many small innovations may inadvertently pry the big market. China's manufacturing industry is fully able to rely on a unique market and supplier system to create advantages in the global manufacturing migration process, and master the complete ecosystem from manufacturing materials to sales channels.