China not only dominates mfg of final product & basic materials, but also increasingly the equipment. Today, I will focus on machine tools. China is world's biggest machine tool producer ($27B) & exporter (>$7B) in 2024. A thread on how China Inc has grown in machine tools👇
In trying to understand how China's machine tool industry grew, I follow this man's discussion w/ customers of Beijing JingDiao in Malaysia. How did China's mkt share grow from <20% in 2014 to 1/3 in 2019 to 45% in 2024? How did China Inc change global supply chain so fast?
Chinese machine tools are in many factories near Singapore border. How did Chinese brand change customer mind? You have to believe in Chinese quality. Customers say "Chinese rockets are in the space, NEVs & renewables are great", so I believe your machine tools are good too.
Once a company lock down customer trust, you need to keep that through superior customer service & working intimately to develop new products & processes. Customers experience Chinese advantage in supply chain, scaling, engineering, speed, response time + s/w & h/w integration.
Chinese advantage: Move toward smart/AI - greater automation, less labor Customers are not only buying Chinese machines, but also how Chinese factories automate. Speed - Delivery time for Jingdiao is 3 months & problem response time is 24 hrs (much faster than German & Japanese)
Customers need faster delivery, the only way for factories to meet those deadline is by using Chinese supply chain/equipment. Service - Engineering team work closely w/ customers to improve yield & efficiency. China is not winning just on cost, but all these factors.
Through word of mouth, Chinese machine tools have even been introduced to Japanese customers & gotten orders there. Domestic machine tools can meet vast majority of product demand based on his visits across factories in China (1 for compressor, 1 for helicopter & 1 for Bearing.
China's machine tool orders across Thailand, Vietnam & Malaysia have really picked up recently. Even though labor is cheap there, but many ppl don't want to do factory work, so factories still need automation equipment. They are working w/ Chinese machine tool producers to get
See below for biggest machine tool importers. China only imports a fraction of tools it uses. It now exports them to US, Mexico, India, Vietnam, Russia, Thailand & Brazil. Its mkt share in global south countries here is really high, but even Germans & Koreans are buying.
In Kede's 2024 report (biggest listed Chinese machine tool maker), it reported 34% increase in revenue, including the usage of its large & medium 5-axis CNC machines in aeroengine production. You cannot be the best in aerospace w/o most advanced material science & machine tools.
As you see chart of China's CNC machine tool mkt grow from 326B RMB in 2020 to 451B this yr, remember that domestic companies are winning > 50% of this mkt now, even in the top end 5-axis category. + This is the China shock.
Since 2021, China Inc brand has quickly elevated for low end mfg to global leading for many consumers. Is this because of EVs & drones? Unclear. But once ppl start to believe in "Chinese quality" like "German engineering", they are willing to give Chinese equipment a chance.
@tphuang What are the lists by category of machine tools China 🇨🇳 actually manufactured?
@tphuang You can’t even make your own bearings.
@tphuang Most of Chinese machine tools are large plano millers, and very few high-end n-axis CNC
@tphuang Average export price of Chinese CNC machines is $300. The average price ofCNC machines China imports is $76,000.
@MindlessSelfIn do a little calculation. They exported > $7B. do you honestly think they exported 20m CNC machines?
@tphuang Panel talks in DC, machine tools in Dongguan. Tells you everything about who's actually running the game now.
@tphuang Impressive industrial progress! Future looks bright for manufacturing talents.
@tphuang Love this thread! A big fan of your writing :) China also produces and consumes the most number of industrial robots too: https://x.com/alysha_lobo/stat...
@tphuang In war, manufacturing & being able to replace equipment is as important as winning a battle. US should know this. It's how we beat the Japs.
@tphuang I wrote in 2012 that the Chinese machine tool industry would change the world market. It took a bit longer than expected and it is private companies shaping this development instead of the SOEs dominating the field back then. But it's happening.
@GeorgStieler yeah, sometime this does take a while to happen. Market doesn't change overnight.
@tphuang thats just quantity and mass which china is known for, but how many are made by chinese companies instead of western/japanese one?
@SMITHGAEL12614 the video in question is about Chinese companies.