Don’t think that Chinese technology is still imitation-based – innovation has become the norm!

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Tony Chen has a model airplane parts factory in Dongguan. During the 2008 financial crisis, he lost most of his orders in the United States. Just as he was disheartened and about to close the factory, he received an order from DJI. 　　DJI’s competitors also placed orders one after another. Tony Chen said that his current revenue has doubled compared to 3 years ago, and his profit margin has also increased. “If I were still doing the old business, I would be in a terrible situation right now. ”He said. 　　20 minutes’ drive from his factory lies Shao Chunyou’s mold factory, which is also thriving. He had almost closed down this factory, which employed 300 workers, until Jia Yilianchuang approached him; it was a startup company that specialized in developing headphones for Xiaomi. Soon after, Xiaomi’s competitors also began placing orders. 　　However, it was not just new orders that truly brought these two factories back to life. China’s new wave of electronics startups is providing innovative production systems to meet their manufacturing needs. These new electronics manufacturers and established factory owners hope to work together to create a completely new business model based on innovation, rather than relying solely on cheap labor for competition. 　　“Although this trend has not yet been fully implemented, it is likely to become the future of Chinese manufacturing. ”said Xie Guanhong, CEO and co-founder of Jia Yi Lian Chuang. 　　The task is indeed very difficult. The ‘Made in China’ trend has been on the decline for over 40 months, and the new Trans-Pacific Partnership agreement will also provide cost advantages to competitors in Southeast Asia. To help China’s manufacturing sector achieve upgrading, the central government introduced the \"Made in China 2025\" plan earlier this year, with the aim of fostering innovation and providing subsidies. 　　The McKinsey Global Institute believes that if China’s GDP is to maintain a growth rate of 5.5% to 6.5% by 2025, then 35% to 50% of that growth must come from improvements in productivity—in other words, it must be achieved through innovation. 　　Dongguan is a typical example. After China’s reform and opening up in the 1980s, this place grew from a small town into a large city with various factories and a population of 8 million people within just 20 years. However, due to rising labor costs and overcapacity in China, many factories closed down or moved to other locations with lower costs after the financial crisis. 　　Dongguan’s recently sluggish economic conditions have given startups in Shenzhen greater bargaining power, as it was previously difficult for them to reach agreements with these factory owners. For example, uArm, a manufacturer of robotic arms, was rejected by several factories before it met Tony Chen. However, industry insiders say that these factory owners are now more willing to take on small-scale orders, and sometimes even approach startup companies on their own. 　　Xie Guanhong said that the traditional model of Chinese manufacturing involved entering into contract manufacturing agreements with foreign brands, then extracting more costs from workers and suppliers, but this approach is not sustainable. Xie Guanhong used to be a senior executive at Foxconn; when he saw that China mainly sold expensive foreign brands as well as counterfeit products priced at $2, he founded Jia Yi Lian Chuang in 2013 with the aim of producing products that fell somewhere between those two categories. 　　The product prices of Jiayi Chuang are less than 100 RMB. In just 2 years, they managed to sell 17 million pairs of headphones to China’s emerging consumer base through Xiaomi and their own brand. Xie Guanhong also developed a WeChat platform to enable his suppliers and manufacturers to share ideas, feedback, and customer complaints. “Everyone has their own role, and everyone’s contribution is valuable. ”He said. With costs and sales data being transparent, all partners can work together to achieve greater efficiency without undercutting each other’s prices. 　　This is completely different from the traditional model of manufacturing for Western companies. Tony Chen said he had never met anyone sent by the American companies he worked with, and that all orders were highly standardized. And now, he is working closely with several startup companies, providing them with advice on design and production feasibility; in return, his factory’s manufacturing skills can also be improved. 　　It is still far too early to determine how many manufacturing companies will be able to complete their transformation, or how many startups will survive the capital crunch. Tony Chen said that most of the factories he knows are either unwilling to take on orders from startups or move too slowly to adapt to changes. 　　For Xie Guanhong, a cooling down of the capital market is actually a good thing. He said that in the past two years, too many young people have started their own businesses, but they have wasted a lot of resources. Now, some of them might want to consider working for manufacturing companies. 　　This is exactly what Tony Chen hopes to achieve. He is working with two engineering students from Oxford University and Tsinghua University to improve the performance of motors. 　　“I hope to create something that can lead the market and not be easily replaced. ”He said.