By on November 20, 2009

Picture courtesy TedHobgood at Flickr.com

On Wednesday, German German tire and car parts maker Continental AG joined the long line of multinationals who opened a R&D facility in China. The multinationals are way ahead of popular wisdom that technology is developed in the West and ripped off in the East. In reality, development has long left the building and has taken up shop in China.

Continental’s R&D center in northeast Shanghai will have 900 engineers working away by early next year. They will focus on the design and development of vehicle electronics. Shanghai Daily reports that Continental plans another technical center in the Jiading District if Shanghai which will do vehicle development and system testing. Not the stuff you do with a sledgehammer.

Automakers such as GM, Toyota, or (gasp) Mercedes have moved or are in the process of moving R&D and even design centers to the Middle Kingdom.

Actually, they are late. Other multinationals, such as Microsoft, Motorola, GE, Honeywell and a host of others have long moved large parts of their R&D to China. In 2003, the city of Suzhou already hosted 67 transnational R&D centers. The mouse you use to click this story, the screen it appears on, and the mainboard that processes the info most likely has not just been made, but developed in China.

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12 Comments on “Multinationals Move R&D To China...”


  • avatar
    mpresley

    This simply underscores the decline of, if not the entire West, certainly the US.  When ostensibly American companies such as GE, Microsoft et al abandon the US, what is the plan?  They know that the US is not growing, but that China is the likely future.  And as we watch our own country approach a curious hybrid Third World status, for most Americans, if they think of it at all, China is simply viewed as a place where cheap goods can be made in order to satisfy an insatiable American consumption for products, most which are superfluous non-necessities.  The sad irony is that in our quest for cheaper throw-aways, our own economy is essentially shot.  We produce very little but consume everything we can.  We live on debt that likely cannot be paid, and must beg our producers (the Chinese) to loan us money that we may continue buying in order to feed a consumerist habit.  At the same time we continue to act like nothing will ever change in our lives, and in fact are insanely planning on even more and more debt as we turn over our very lives to the government in the guise of “free” health care.   I’ve seen skid row drug addicts with more insight than Americans.  Oh well, what does it matter?  Maybe we can one day drive a Chinese Buick with some Microsoft controlled GE electronics.  Then we’ll be happy.

  • avatar
    drifter

    Capitalism on last throes

    • 0 avatar
      dwford

      Nonsense. This is pure capitalism. Money follows the money. That the US is too expensive to produce in and its workers too uneducated to design the next generation of products, it only makes rational sense for companies to go where the action is. Government policies over the last 40 years have lead to this decline.
      Should “American” companies make the irrational decision to deploy capital in a wasteful way? There would be a shareholder revolt.

  • avatar
    PeteMoran

    Nonsense. This is the Chinese Government saying to business; “if you want to sell in China, invest, employ our people and/or joint venture with our business”.

    Western nations could (and should) do this too, and in the meantime they should be concentrating on innovative new business/industry.
     
    This will go full circle; China might very well end up manufacturing “everything”, but no-one will be able to buy it! A re-balance of relationships is coming, unfortunate as it might be, but driven by a desire to hang onto a higher standard of living. That might have to take a hit for a while thanks to the excess of the 1990s/2000s.

  • avatar
    YZS

    America approaching third world country status?  That is way too Fox news man.  We have the defacto largest economy in the world, Japan is miles behind, our military is again, first by a long shot.  China may be catching up fast, but we will not even see US-China parity in our life time, much less the US being relegated to effing third world status. 

    When people make those crazy statements, you know what we have is being taken for granted.  Go to Mexico and live like the locals for a month, it will probably kill you.  But you know what?  It’s not a third world country, not by far. 

  • avatar
    mtymsi

    It is understandable that multi national companies would be making large investments in China for both production and R & D given the size of the Chinese market. What is completely lacking in the U.S. is any coherent trade policy to address the differences in labor costs. Without such policy ongoing large trade deficits can be the only result.
     
    In China foreign manufacturers must partner with a Chinese company to sell in the Chinese market. In the U.S. there are very few restrictions on what Chinese companies can import and no restriction on partnering with a U.S. company.
     
    The inevitable result can only be one of two things; 1) U.S. wages are continually lowered to be able to compete with low wage third world countries or 2) technology continues to progress providing new high tech jobs to U.S.  workers.
     
    I have thought for years the U.S. trade policy needs to protect U.S. workers yet to this day the issue remains unaddressed. From the results we have seen thusfar the imbalanced trade policy has resulted in many industries relocating offshore and the resultant U.S. job losses. Obviously U.S. workers can not work for third world pay scales thus the only way to address the issue and level the playing field is through trade barriers and tariffs.
     
    The only reason this issue is on TTAC is because it now effects the U.S. automobile industry just like the steel and textile industries to name two before it. The major impact will be when Chinese vehicles are imported and that day is rapidly approaching. If nothing is done to level the playing field the only result can be a continually contracting U.S. economy from a manufacturing standpoint. Apparently the federal government hasn’t grasped this concept and until it does and enacts trade policies beneficial to the U.S. just as China and Korea for example long ago did the future doesn’t bode well for either the U.S. worker or the economy.

  • avatar
    sean362880

    Perspective.  Continental’s ’09 earnings to date were over 14 billion euro.   9-month R&D spending is over 1 billion euro, and they’ve invested 0.06 billion euro in Chinese R&D.  That tiny fraction represents expansion into an emerging market, not an abandonment of the West.
    http://www.conti-online.com/generator/www/com/en/continental/pressportal/themes/press_releases/categoryNavigation_overview_press_en.html

  • avatar
    jet_silver

    The headline’s a bit hysterical.  “Multinationals add R&D centers in an important market” would draw fewer readers but it would be more accurate.
     
     

  • avatar
    psarhjinian

    America approaching third world country status?  That is way too Fox news man.  We have the defacto largest economy in the world, Japan is miles behind, our military is again, first by a long shot.  China may be catching up fast, but we will not even see US-China parity in our life time, much less the US being relegated to effing third world status.
     
    What you will see is an equalization of economies as the easy transfer of money and skills facilitates the race the the bottom.  We’re seeing this now as India bleeds jobs to lower-cost countries.  “Third world” is probably pushing it—the real third world has problems (endemic malarial infection, systemic malnutrition) that lock it into it’s current state—but the decay of the middle class is real.
     
    This is a shame, really, because it’s the rise of a broad-and-deep middle class that really enabled innovation and progress.  You end up with a large pool of talented people who aren’t tied down into subsistence living; blooms in the size and power of the middle classes are historically in lockstep with leaps in social, technological or economic growth.
     
    Conversely, when the middle class is significantly reduced (the plague,  the rises of absolutism) we get little dark ages where growth slows.  Yet, despite the numerous historical examples, the upper class never seems to get the hint—probably because they’re the last still living the good life when the Visigoths are coming over the hill.

  • avatar
    bryanska

    Nobody’s mentioned the huge imbalance in engineering degrees between the US and China! If information and processes can be codified and made modular, that task will then go to whomever can do it cheapest. China has a glut of engineers, so does India, therefore the work will go there.

    When the US gave everyone a high school education, that really meant something IN THAT ERA. Then we all had bachelor’s degrees. And then, master’s degrees. Now other countries are closing the knowledge gap. Why shouldn’t they get the work?

    It’s time for the US to ask itself what it wants to be. Are we consumers, or creators? If you ask me, we’re great entrepenuers. Americans are very good at creating businesses. If you want your child to make it in this world, they have to know how to create value by leading people independent of anybody’s location anywhere in the world. Global economy (eventually). Whatever CAN happen WILL happen, to paraphrase Thomas Friedman.

  • avatar
    stuki


                China has 4 times the population of America. Ergo, unless one is committed to racial stereotyping, 4 times the number of potentially talented engineers. Opening a research center in China does not mean closing one down anywhere else. If you want world class engineering, you just have to go where the engineers are. And, as China grows, there will be 4 times as many of them there as in America.
     
                The whole “China is going to relegate us to third world status”, “race to the bottom” fear mongering is pure bunk, and makes no sense whatsoever. If some geek in China comes up with something nice, Americans will benefit as much as the Chinese does, as long as there’s no barriers to trade. And if the Chinese can produce something cheaper than Americans are willing or able to, Americans benefit as much from the lowered costs as the Chinese does. If the Chinese do so by spending their lives inhaling toxic fumes and drinking poisoned water; well, I guess it sucks to be Chinese. Sad to hear huffing poison is the best alternative you have over there, but, if it makes a difference, thanks for sacrificing your lungs to get me a bigger flat screen.
     
                The sole reason most manufacturing employees in America are not seeing the advantages brought about by off shore manufacturing, is that we have a central bank, and a myopic “economics” establishment, who feel they have to react to the cheaper prices of imported goods by pumping newly printed money into the economy until the newly lowered prices are brought back to where they were (+2-5% annually) again. And the only mechanism they have for doing so, is to funnel all this newly created money to bankers, relying on the bankers to do all the price restoring bidding. So, from the point of view of the manufacturer, he gets to experience the full brunt of the lowered manufacturing salaries, but benefits not at all from the lowered goods prices that naturally would result from it. While the banker, of course, just gets lots and lots of new money to “increase aggregate demand” with.
     
                In other words, free trade and China is not the problem. Not at all. Instead, the problem is inflationary monetary policy, which could easily be solved by simply once and for all getting rid of the Fed and going back to a metals based currency. Then, everyone would get to experience for themselves the benefits of increased international competition on the prices of goods and services they consume.
     

     

     

  • avatar
    derm81

    So, who is going to manufacture cheap goods for China when the dragon grows into a semi-US? Guess they will turn to Africa for cheap labor.


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