Not long ago Stuart reported that Boeing and Airbus face competition from aircraft maker Comac (China’s Commercial Aircraft Corp) of China. Just yesterday, Comac awarded a significant contract to GE Aviation and China’s Aviation Industry Corp (AVIC) a 50-50 joint venture for control equipment. The deal is significant from a number of perspectives particularly the fact that US companies recognize the need to participate in the fast growing China market. The second interesting aspect of the deal, “marks the first foray into the integration and supply of such control equipment by GE Aviation Systems, part of the world’s biggest jet-engine maker, and AVIC, according to a Business Week article. In addition, the partnership will focus on using new open-architecture software, “One of the benefits of this system is that you can replace dozens of traditional stand-alone computers with less weight, better reliability, lower complexity, said Lorraine Bolsinger, who runs GE Aviation Systems, according to the article. This new partnership will put the two organizations in direct competition with companies such as UTC, Honeywell International and Rockwell Collins.
And as GE acknowledges the growing importance of “being at the table so to speak to compete in the Chinese market, other US manufacturers have recently announced key wins in China including Honeywell with a $3b contract for brakes and other plane parts, Rockwell Collins with communications and navigation systems (also through a Chinese JV) and Eaton via a JV for fuel and hydraulic system parts.
This news story combined with a second one involving Nissan Motor Co., and China’s second largest steelmaker Baosteel, may mark a turning point for some of China’s largest companies. Baosteel Group announced it has been selected to take part in a supplier evaluation process by Nissan as an auto sheet supplier. This marks the first time that a Chinese steel company has been asked to participate in this kind of evaluation, according to a recent Reuters article. According to the article, “Beijing is encouraging top steelmakers to develop more high-end steel products to increase the market share of larger producers and filter out inefficient capacity, with Baosteel leading the way. One of Baosteel’s plants has received regulatory approval to produce high grade steel products.
Will we hear more news reports of some of China’s key manufacturers and producers “stepping it up so to speak to compete on the world stage? The obvious answer is yes. Like South Korea and Japan before it, Chinese firms will undergo massive supply chain process transformations to play competitively both from a cost perspective (for which Chinese firms often do anyway) but more importantly, from a quality perspective, on the global stage. In the case of Baosteel, it’s a welcome development particularly if the Chinese government really prioritizes removing inefficient, uncompetitive or low quality supply from its steel-producing base. Should Baosteel fail to achieve Nissan approval, it will probably only be a matter of time before it will have the opportunity to do so again. China will undoubtedly become a global player eventually rivaling the quality of other Asian and Western producers.