Toronto, ON — China is firmly on the radar screens of machine tool companies around the world. Not only has China overtaken the U.S. and Germany to become the largest machine tool market in the world, China’s skilled labour force and low cost base also make it a viable base for sourcing or manufacturing.
Information and insights on this market are difficult to come by however, and the pace of development in China presents companies with a constantly moving target. As a result, consulting firm KPMG has prepared China Machine Tools Market to provide a better understanding of the market and the issues of concern to industry participants.
In its analysis, KPMG has drawn on a number of public sources of information and spoken to both local and foreign industry participants in China. It also conducted a survey of leading machine equipment industry participants in Germany to shed light on how they are responding to the opportunities in China. Most respondents are already trading or manufacturing in China and provided their first hand views on the issues of greatest concern to their business there.
The analysis shows that there will continue to be a sizable market for imported high-end machine tools in China, but that local firms are rapidly closing the technology gap and improving quality and performance. Multinational players will need to carefully assess how to participate in China effectively in light of the rapidly changing competitive landscape and market conditions.
Here are some details from the report.
– China is now the largest machine tool market in the world, with a sales of US$5.7 billion in 2002.
– Fuelled by a large influx of foreign investment, China’s machine tool market is expected to continue to grow
– Automotive-related manufacturing has accounted for half of machine tool consumption in recent years; aircraft-related manufacturing, in particular the repair and maintenance sector, is likely to become another significant market in China
– In line with the upgrading of key sectors in China, demand for numerical controlled (NC) machine tools has been increasing
– Continued imports of high value numerical controlled machines can help ensure China continues to be an important export market; imported machine tools account for over half of the Chinese market
– With a population of 1.3 billion, China has quickly become one of the most important manufacturing centres in the world
– Manufacturing is scattered throughout China; most Chinese machine tool manufacturers are small in term of revenues when compared to overseas competitors
– Competition in China is intensifying as China further integrates with the world economy; Chinese manufacturers have become increasingly sophisticated in their choice of machine tools, leading to growth in demand for NC machine tools
– The low-end market is crowded with domestic players, which has resulted in significant pressure on prices; foreign equipment still dominates the middle to high-end market with superior technology and quality
– To stay competitive, domestic companies are becoming more active in new product development and more willing to use Joint Ventures (JVs) and cooperative arrangements to acquire new technology
– Outsourcing of some manufacturing activities is becoming more common in China as domestic machine tool companies take steps to become more nimble.
SURVEY IN GERMANY
Given the fact the Germany is the second largest machine tool consuming country and one of the leading machine tools exporters in the world, KPMG conducted a survey of machine equipment and machine tools companies in Germany between August and November 2003. A structured questionnaire was distributed to 330 companies; a total of 50 were completed and returned. Out of the 50 respondents, 98% are currently doing business with China either through export (52%), established production facilities (36%), or licensed production (15%).
Findings confirmed that:
– A large majority of survey respondents viewed China as an important end market
– Most of the respondents in the survey already in China are likely to expand
– Intellectual property is seen as the most critical business factor for respondents
– Over half of respondents indicated that recruitment and the regulatory environment were two major business issues when doing business in China.
For more information on the study, visit www.kpmg.ca.