Design is China’s best chance for future growth

Echom, which employs 5,000 and has about 100 injection presses, believes that emphasizing industrial design improves quality and gives it an advantage in the brutally-competitive world of making components for consumer electronics products. Chairman Xian Ran, who began his career as an industrial designer, describes design as the “engine” of the company.

That approach, using design as a business strategy, took centre stage at a recent conference in Guangzhou on industrial design capabilities of small and mid-sized Chinese manufacturers.

The conference, held as part of Guangzhou Design Week from 1-5 December, included talks by Echom and other companies, along with presentations from professors who have studied the industrial design capabilities of local firms.

Design is not a cure-all for every company or an easy strategy to implement, though, and experts said too many Chinese firms mistakenly think it means only focusing on superficial elements like making a product look better.

Instead, conference speakers said, design should mean looking deeply into understanding consumer needs as a way to improve product development, leading to more profits.

Tong Huiming, the head of the College of Design at the Guangzhou Academy of Fine Arts, told the conference that the global financial crisis and rising costs in China are posing serious challenges for the country’s economic model for the past 30 years – exporting and serving as world’s low-cost manufacturing workshop.

Competing on price has been the traditional strategy of manufacturers in the South China region around Guangzhou, Tong said, but Chinese firms should instead look to their own innovation and design for future growth.

Tong and an industrial design professor from Hong Kong Polytechnic University, John Heskett, expect to complete a study in mid-2009 looking at how 25 South China small and medium-sized manufacturers use industrial design, and offer recommendations to other local firms interested in the strategy.

Moving into design is crucial because that is where the profits are, Tong said.

Only a very small portion of the value of a product is in the manufacturing, where China has thus far focused, he said. Using the Apple iPhone as an example, he said most of the value, from design, marketing and branding remains in the hands of firms in developed countries.

Tong said industrial design capabilities are improving in China, and he said it is part of a government policy in Guangzhou and Guangdong Province to upgrade the capabilities of local manufacturers.

The toy and furniture industry in South China have been particularly hard hit, and companies need to change strategies, he said.

Echom’s Xian said in an interview with Plastics News that his company has seen competition starting to develop from lower-cost locations like Vietnam, and that is also pushing the company to do more with design.

The company wants to develop its own branded products, although it thinks it will take several years to do that, Xian said. Echom will develop niche products that do not compete with its existing customer base, he said.

Xian worked as an industrial designer at Chinese TV and mobile phone maker Konka Electronics Group in Shenzhen before taking various executive posts at Echom starting in 1996. He said developed economies like Germany, Japan and the US have long focused on industrial design.

He claims design has allowed his firm to weather the global financial crisis better than most Chinese competitors, with only a handful of layoffs and a very small decrease in sales.

“We provide unique design, so those products are better,” he said. “Design is the engine of our company.”

An official with a Chinese firm that recently established a design department said made-in-China design faces hurdles, however.

Li Xiao Yan, manager of the Creative Center at Guangzhou Shiyuan Electronic, said Chinese designers may have less knowledge of broad topics than foreign designers, with more of a focus on one specialty, and tend to have travelled less, limiting exposure to other ideas.

Chinese designers also do not have as much intellectual property protection for their work as foreign designers, she said.

Shiyuan has begun employing European designers, and Li said it has made her aware that Chinese designers need to work harder to bridge the gaps in capabilities.

Chen Wen-Long, the president of Taiwanese design firm Nova Design, said in an interview with Plastics News at the conference that the intense price competition in China’s domestic market hurts design development, because consumers don’t often shop for quality.

Hong Kong Polytech’s Heskett said that his study of design capabilities of the local small and mid-sized enterprises has convinced him, however, that many Chinese firms are investing a lot of time and money in using design to move up the value chain.

“What has surprised me is there are some OEM companies that are really making strong efforts to break out of that dependence on overseas clients and they are trying to use their experience to develop their own products, their own brands, and essentially to gain control of what they do,” said Heskett.

Still, he said that many small and medium-sized Chinese companies are not well-positioned to use design. Top management too often regards design as a cost, used only to make products look better, and designers may not be capable of doing more.

“The biggest problem is changing management attitudes to design,” he said. “Most [Chinese small and medium-sized enterprises] are not well equipped because of this management deficit, and because designers are not equipped to take on the responsibilities and decision-making that comes with a managerial role.”

* Steve Toloken is staff reporter at Plastics News.

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