Move Manufacturing to China? Not For Us

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The simultaneous development by three separate companies of commercially viable domestic stirling heat engines appears on the face of it to be just commercial competition spurring technological development; capitalism at its best, one might say. But the fact from an environmental point of view, that these are all potentially game changing domestic appliances, makes them that much more interesting. The stirling engine first patented in 1816 by Reverend Robert Stirling (in the style of the day) who was both a clergyman and an inventor. Born in 1790 and after studying to be an engineer at Glasgow University, he became a clergyman in Kilmarnock, Scotland. 200 years later and the world is still trying to bring his invention of using expanding and cooling gases to drive a rotating coil and hence generate electricity to some form of widespread commercial application.

This sounds like a green or environmental technology story, and would in itself make interesting reading as such, but our interest is more in the way the three competing companies went about developing their manufacturing philosophy. As a Financial Times article explains, the rival production methods are test cases for the differing approaches towards global manufacturing networks being tried out in fields as diverse as cars and computers.

One company is owned by a New Zealand firm, but manufactures close to its European market from a single factory in Spain. Another is a British engineering firm that carries out R&D in the UK, but off-shores a crucial production element to low-cost China. Meanwhile the third, based in the Netherlands, also outsources manufacturing, but this time to high-tech Japan.

Whisper Tech of New Zealand has partnered with a manufacturing group in Spain because they feel manufacturing a new technology product close to the market in which it is being used will reduce risk and increase early acceptance. They don’t mention labor rates in Spain or the possibility of EU funding for underdeveloped regions, but these may also have been a factor. Their product has reached commercial launch and is being promoted for both the more obvious off-grid applications but also for on-grid, no doubt exploiting European feed-in tariffs that allow users to claim back electricity returned to the grid at highly favorable rates.

Microgen, the British-based firm, has produced a solely domestic heating and power generation appliance but with certain key components they don’t say which, or how large a percentage of the finished product made in China. Recognizing that cost could be a significant hurdle to widespread adoption, Baxi, Microgen’s parent, said “We think that our use of the lower costs that China promises should give us the ability to bring down prices and make the products more affordable.

The third contender Enatec micro-cogen also makes a single piston stirling engine, but instead of looking to produce close to its European customer base or access low-cost Chinese manufacturing sources, the firm has sought to overcome the technological and development hurdles by partnering with a US firm Infinia, the engine designer, and a high tech Japanese firm Rinnai for manufacturing, believing technical excellence will give them the edge in what is still an evolving technology.

It is too early to tell which of these firms’ approach will prove in the long run to be the most savvy. Figures are not available for like-for-like comparisons of sales as all firms produce a number of products of which the stirling engines are but one. Nevertheless, as manufacturers in the post-crisis world re-assess the viability of the pre-crisis “move all manufacturing to China model struggle with lower volumes, or ponder the effect of a gradually strengthening Chinese currency, the different approaches of these three firms may strike a cord. If anything good has come out of the financial crisis, it is the return of some manufacturing activities back closer to the markets in which the products are being used. As these firms’ decisions show, cost is not always the sole arbiter.

–Stuart Burns

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