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In reporting about other countries we tend to describe them often in terms that ascribe a lot of action to the country as a whole and treat it as a uniform entity: “Germany does this and that”, “The USA wants this and that outcome”. At the same time we all know that the places we ourselves live in, are made of a multitude of people that all have their own desires and wishes, often contradictory and not attached to a higher meaning. The outside perception shatters when you actually make contact with it. When visiting China, what I found was welcoming, kind people who all were interested in exchange and collaboration.
I was only there a week and saw a range of companies that make electronic components for robots and EVs: from smaller scale operations that are a few hundred people who machine and assemble parts, to large scale conglomerates that have been in business for decades. The trip was mainly around the Shanghai basin and ShenZhen.
So what does it take to become the world supplier for a specific part?
To be honest, the manufacturing sites I have visited reminded me a lot of SMB companies in my native Germany. The equipment and setup is what you would expect: They use german, japanese or chinese machines and are automated to varying degrees. The automation is primarily done for repetitive, high scale tasks in the form of custom built machines or a line of individual steps with a control loop. Robotic arms are used for specific tasks such as loading and unloading machines. In short, there is no surprise magic equipment that you would not expect.
What was a surprise is the attitude of the people we interacted with: they have a deep hunger to work with customers and get things done. This can be described with the Chinese expression 拼命 (pīn mìng), which roughly translates to "fight for your life". Or as founders would say, "How much do you actually want it?" Everyone is thinking about how they can serve their customers more, how they can improve, and take market share. This goes from making simple gears to chips for robotics. People are eager to go out of their way to get things done, and try to get ahead on the next technological wave. Foreign sales are critical to them as they have much higher margins.
This stems from fierce domestic competition: China is a deep red ocean, where local players erode each other's margins in order to try to take more market share. This is not confined to the private sector, but also applies to local government. We heard stories of local government officials taking calls at 10:30PM to get paperwork for a company unblocked and get them started in order to get business into their region vs another. This feels straight up impossible in the west*.
The infrastructure build out China is undertaking feels similarly impossible. Even accounting for its bigger size, China is building at a scale I have not seen anywhere in the world. When was the last time you saw a new powerline being built in the west? If you drive the Shanghai basin area on the highway you see them being built about once every 10 minutes. We referred to some of the landscapes jokingly as infinite housing. This does not mean that building for building’s sake is good. China has an ecosystem of people who know how to build houses, high speed rail and other infrastructure quickly and well. If you build a lot, you become really good at it. The debates over how we build housing or power lines in the west feel like they are happening on a different planet in terms of ambition and timelines.
All this infrastructure powers an electrification that feels a decade ahead. Nearly every car or scooter on the road is an EV and we saw a fully electric concrete mixer including the drum powered by a gigantic battery.
Shenzhen is a futuristic city that felt close to the childhood image I had of Silicon Valley before ever coming out here. Gleaming glass and steel towers surrounded by tropical vegetation, filled with robotics and hardware startups that harness a deep ecosystem. The electronics market is not what you naively expect: it is malls upon malls with neat stalls of distributors who will sell you all electronic parts from copper wire to battery pouches to drone kits. This is possible because of local demand and the industrial base. You see ads for custom PCBs that can be turned around in 12 hours. The availability of supply and people eager to work with their customers means hardware in China can be developed at a completely different pace and price than in Europe or America.
A refreshing insight was how our outside perceptions are often at odds with the inner perspectives. From a Chinese perspective the Western access to a deep capital market and leading AI chips is seen as a fait accompli. Meanwhile we see the Chinese industrial base in a similar uncritical light when it comes to the challenges of this century. One small example is that Chinese engineers lament that they probably will never have a gas-engine champion as the industry has already switched fully to EVs.
While the fierce competition is good for price and speed, it also means power law outcomes are a lot less likely in China. Profit taking is discouraged by the state. In turn margins are low and most new businesses are the subsidiary of an existing established business. For example, a manufacturer for gears and gearboxes who creates a BU for robotic motors. Venture capital also operates with a different return profile and does a lot more traditional investment. This is paired with local governments giving tax breaks and subsidies for strategic industries, for example in the form of subsidies for token cost.
I am left with the impression that while both systems have their own ways and unique strengths and weaknesses, the people working in them are more alike than they might be aware of. Their goals are the same: trying to pull the future forward and make ends meet in doing so.
I am deeply grateful for the people who shared their time and their insights with us and I want to thank the organisers of the trip. They were the perfect guides to get an insight into manufacturing in China.
*In fact it would be a big step if the local government was open for business 9-5, 5 days a week.