The truth behind the collapse of manufacturing companies: they are only engaged in the assembly industry

At the beginning of 2016, I was very worried. In towns and villages during the Spring Festival, in addition to firecrackers, there is mahjong; in cities after the Spring Festival, real estate is booming, and stocks that millions of people are looking forward to, impetuousness is like the haze of last winter, thousands of miles away, and penetrates into the heart.

I want to turn a blind eye, but I am always around. Once upon a time, the bosses of Shunde Manufacturing Industry introduced themselves to the outside world with confidence and pride. Because they had made money, Ben Ben changed into a Mercedes-Benz. But in the past two years, especially in 2015, some business owners in the home appliances, electronic products and other industries that I have come into contact with and know have completely lost their confidence in the past. They are as confused and helpless as they were after several bowls of Hongli brand red rice wine. I want to say something like "the moon waxes and wanes," but it always seems far-fetched. There is a reason for Zen change. What situation triggered the circuit breaker mechanism of Shunde's manufacturing industry?

Lovely Chinese

Looking back on history, a group of Shunde farmers washed their feet and went to the fields. Starting from dismantling and imitating a Hong Kong Lucky Fan, starting from "Midea", they seized the strong market demand and profit opportunities, reaped the dividends of China's manufacturing industry and foreign trade, and laid the foundation for the global home appliance capital. According to the official summary, the 1980s was the imitation stage, the 1990s was the introduction stage, and the 21st century is the innovation stage.

In the era of shortage economy, the needs of the Chinese people are cute and simple: as long as basic functional needs are met. As long as the rice cooker can cook rice, as long as the water heater can produce hot water, and as long as the range hood can discharge the oil fumes, if the appearance can be different (looks better) and the price can be cheaper, this product may sell well. As long as smart people follow other people's models, even if they cut corners and compete at low prices, China's vast rural market will still have great potential.

China Manufacturing (zu) Manufacturing (zhuang) Industry

The 11-year-old Shunde Kitchen and Bathroom Electrical Appliances Procurement Exhibition is held in mid-March every year. Under the huge pressure from OEMs and brand owners, the opening in 2016 was advanced to February 27. 800 companies gathered together to participate in the exhibition. Many small and medium-sized manufacturers did not receive enough orders a year ago and hope that participating in the exhibition will change their destiny.

A considerable part of these small and medium-sized manufacturing companies are essentially "assembly industries"! There is no R&D investment, no mold investment, no equipment investment, only rented factory buildings and workers with simple operation training. In terms of research and development, we look for outsourced industrial design, buy a public prototype solution at a low price, or even blatantly steal it, and purchase accessories according to the component list. Is this a manufacturing company?

The most ideal manufacturing industry is of course in Germany. The German manufacturing industry has a perfect combination of specialized manufacturing and high-end manufacturing. Specialized manufacturing refers specifically to small and medium-sized enterprises. Due to scale constraints, it is impossible for them to develop economies of scale and conduct diversified operations. If they want to have a competitive advantage in industry production, they must possess proprietary production technology and R&D capabilities and become highly specialized producers. Even if a single company cannot become the leading company in the entire machinery and equipment manufacturing industry, it can still achieve the ultimate level of industry production starting from technology and quality. It is this idea that created today's German Industry 4.0.

Back in China, the simplest point of view of consumers is that real manufacturing must have good quality, good technology, low cost, and good economies of scale. A large number of small and medium-sized manufacturing companies, especially those in the "assembly industry", whether they are parts suppliers or finished product suppliers, must improve production processes, improve product functions, optimize product appearance, etc. This is a long investment cycle and trial and error process. Only when the appearance of the product conforms to or guides consumer trends, has functions that make people put it down, and quality that makes people praise it, can it occupy a place in the market. If the product cost can also be reduced through large-scale procurement and large-scale production, the product and the company will be invincible.

Using this as a standard alone, how many companies dare to say that they are manufacturing companies?

Manufacturing is the anchor, innovation is the antidote to stainless steel

The consumer market dominated by the post-80s generation has become increasingly obvious: pay for quality! The trend shown by the post-90s generation is becoming increasingly clear: Don’t settle! But there are still people who think they can fool the past and follow the trend to find popular products. A lot of accessories and finished products with no competitive advantage are piled in the warehouse. It is not uncommon to see cases where a million-dollar mold was invested to make an air purifier, but when it was put on the market there was no reason to convince consumers to buy it, and in the end the company lost money and closed its doors and became an apartment building.

Three questions to clarify first: What did you invest (nothing that money can solve is a problem)? What do you undertake (disruptive innovation, or rapid iterative improvement)? What did you create (a product or feature that makes people scream)? If not, why do you make money?

Information 1: According to the "2012 China Valid Patent Annual Report", China's utility model and design patents respectively account for 49.5% and 36.6% of the total number of domestic valid patents. Utility model patents, also known as small inventions or small patents, do not require high levels of inventiveness. They basically no longer exist in Japan and the United States, and they are also considered low-quality patents in the Chinese patent system. What can really be used to compare innovation capabilities is invention patents.

Information 2: Quality consumption. As the income level of residents continues to increase, consumers, especially middle-income groups, have put forward higher requirements for consumption quality. There is huge potential for the development of branded goods that are safer and more practical, more comfortable and beautiful, and more tasteful. This type of consumption involves almost all traditional consumer goods and services and will drive the transformation and upgrading of traditional industries and product upgrading.

When the speculative atmosphere fills the crowd, value creation is the best differentiated competition. The stock market has never been a guaranteed win for retail investors, and sex has never been a bullish trend. Manufacturing is the backbone of the modern national economy. China's manufacturing industry is not simply overcapacity, but cannot meet the increasing consumer demand; industrial upgrading is not about refreshing chimneys and turning them into churches. It requires continuous accumulation of micro-innovations until the final qualitative change. Innovation is a good recipe for stainless steel. China's manufacturing industry needs to make up for the past 30 years of inattention and invest manpower and funds in innovation or improvement in information consumption, green consumption, fashion consumption and quality consumption.

For those manufacturing companies that are about to die, there is only one truth: they are actually only engaged in the assembly industry.