Manufacture for Control

One big difference in the strategy between India and China is that while
India is chasing only one slice of the pie, China is going after the whole. And
it starts with manufacturing.

China’s is an interesting approach, one that I am sure will take it towards
global dominance. Manufacturing, according to Chinese experts, is the name of
the game: China thinks that manufacturing is the most vital and the culminating
point in the life cycle of any product. If manufacturing can be controlled, you
can control product design, outsourcing, and costs on the pre-production side,
and pricing and distribution on the post-production side. Effectively, if China
gets control over manufacturing, it will have control over everything.


By controlling manufacturing, China could control product design, outsourcing, and costs on the pre-production side, and pricing and distribution on the post-production side

To illustrate my point further with an example. One of the world’s biggest
mobile phone companies has a huge manufacturing base in China. Because of this,
lots of ancillary units, which provide handset components, are also starting up.
This mobile phone company is now seriously looking at getting design and
development work done from the Chinese, because this country is also getting
stronger in embedded software skills. Since China is a huge market in itself,
this becomes a deadly combination-design, outsource, manufacture, sell-all
in the same place. In the case of India, it would be just design, and then we
get out of the loop.

The Chinese USP will thus be-good design skills, reliable and
cost-effective outsourcing options, global manufacturing strengths, huge home
market, and so on. India will just have software designing, and after that, BPO
to offer. And the way China is now encouraging and promoting education, their
grip over the entire design-to-manufacture-to-support cycle will only get
stronger. And India may be reduced from the position of producer to consumer.

China has already established itself as a manufacturing giant. The way it is
now encouraging its masses to learn English, adopt English names, only goes to
show that it is serious about exposing its people to global values and
practices. If China could have a huge English-speaking population in the next 15
years, India’s BPO industry would be under siege. The way they are setting up
engineering colleges clearly shows that they want to produce more and more
engineers, specially software engineers and be globally big. Similarly, given
the way China is investing in enhancing its communications infrastructure, it
could very soon be one of the world’s best.

India’s approach currently is to identify a niche, and focus on that. As a
result, we have been able to make a mark in software development and BPO. The
lobbyists, the government, and the industry are very happy that we are world
leaders here. The point they seem to be missing is that somebody who controls
more processes in the production of an item will want to control the whole
process. It is natural, therefore, for China to work on plans, which will give
them control over other processes, and it will also be easier since they control

Those of us who believe that BPO will be our answer to China should remember
that the world is moving BPO to India because of low costs and English language
skills. However, China as a destination offers not just lower costs, but
stability, a fast-growing domestic market, unlimited government support, big
investments in education and infrastructure. For instance, India is today
desperately short of people who can join BPO companies.

I do not think the Indian IT industry is even thinking this far ahead. The
government I know is not capable of thinking long term, especially in IT, which
will be of great strategic import in the years to come. If India does not want
to lose software and BPO to China, it should try to develop vision. Remember how
the West and the US always thought that manufacturing would remain with them.
China, working single-mindedly and silently, now owns manufacturing.

The author is Editor of Dataquest IBRAHIM

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