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Battery industry puts charge in Pearl River Delta development

Release Date:2019-08-21 16:04:29     Source:China Daily     Author:Chai Hua

The rise of electronics industry tycoons in the Pearl River Delta area has been buoyed by a band of behind-the-scenes component suppliers whose high-quality development exemplifies the overall upgrading of the region's manufacturing industrial chain.

Though the region's manufacturing power has impressed the world, numerous small-and mid-sized factories with uneven levels of skill and quality appeared to be the main force of the development. However, the situation is changing.

Leading firms along the industrial line are rising up. They provide reliable products for terminal giants and also explore technology innovation together, resulting in a wave of quality improvement and technical progress.

These industrial heroes are similar to "hidden champions", a term coined by German author Hermann Simon to describe small but highly specialized world-market leaders that are almost unknown to the outside world.

While the small suppliers often go unnoticed in the industry, Hermann deems their roles to be irreplaceable.

In an interview with China Daily through email, Hermann explains that "the giants typically depend on a deep value chain or supplier infrastructure with very close relations and they cannot dominate the smaller suppliers, because they need them".

He stresses that "The relationships are almost always long-term, replacing a critical supplier is often very difficult".

Modest partner

The battery is one of the industry milestones. Huizhou EVE Energy, established in 2001, is a leading lithium primary battery producer in the country and is among the top three manufacturers worldwide in lithium thionyl chloride battery manufacturing.

In 2015, it teamed up with Huami, a US-listed wearable devices maker. According to the Frost & Sullivan Report, Huami overtook Apple Inc in 2018 in terms of world shipments.

EVE provides safe, stable and low-energy consumption batteries for Huami's wristbands, smart watches and other wearable gadgets. In April, when Huami held its first supplier meeting in Shenzhen since its establishment, EVE won the Best Quality Award.

Huami Vice-President Han Yangtuan said the company's relationship with suppliers is not simply one of buyers and sellers, but of strategic partners. EVE said its cooperation starts at the very beginning of product design and new material development.

Yuan Zhongzhi, EVE's chief technology officer, said the company attaches great importance to product quality and technology development. Its investment in technology development is increasing every year, and in 2018, it poured over 9 percent of its revenue into research and development.

Another major application of batteries is in new-energy vehicles. On the Chinese mainland, the new energy vehicle (NEV) market has been booming, with sales increasing by 48 percent in the first half of this year from the same period a year ago, and Guangdong accounted for about 11.5 percent of the nation's total NEV output in 2018.

EVE jumped in the new business in 2010 to develop lithium-ion batteries for NEVs, and so far its installed capacity of power batteries in new-energy buses has been among the top three in China since 2018.

Though there is still a long distance between EVE and the top two suppliers - Contemporary Amperex Technology, known as CATL, and BYD - EVE is definitely a rising star.

In addition to independent startups, some potential champions are hidden under the guise of business mammoths whose subsidiaries have unexpected leading power in certain specialized manufacturing sectors. These branches are rapidly growing and become a formidable advantage for parent companies in return. More importantly, they are also bolstering the overall industry's advancement.

Subsidiary relationship

Consumer electronics giant TCL Corp set up Shenzhen China Star Optoelectronics Technology Co Ltd in 2009 to develop large- and high-definition screen production lines in China, aiming to make headway against overseas competitors' long-term domination.

Nowadays, CSOT is the world's fifth-largest LCD panel manufacturer, servicing six major TV manufacturers in China. Meanwhile, about 60 percent of its products are sold to clients other than TCL Electronics.

But their partnership is becoming closer. In Huizhou, a city in the southeast of Guangdong province, the two parties are building the world's largest intelligent and integrated manufacturing base of module and terminal machines together.

In the Huizhou base, the factories of the two companies will be connected by a large corridor with automated guided vehicles to transport products from one side to the other.

"The facility will help us save time and transportation and storage costs. More importantly, we can cooperate more closely in product design and technology development in the integrated factory," said Martin Chen, general manager of CSOT Huizhou.

Upon completion in 2021, its annual capacity is expected to reach 60 million modules and 35 million display terminals.

Another industry magnate, Chinese carmaker BYD Co Ltd, is renowned for its new energy vehicles, while its manufacturing power in electronics is often neglected.

BYD Electronics (International) Co, one of BYD's subsidiaries, in 2018 shipped 200 million units of its cellphone seamless metal cover, accounting for one-third of the world's total.

As the 5G era approaches and metal becomes unsuitable for phone covers, the company has launched new phone covers with three-dimensional glass and ceramic varieties.

According to China Merchants Securities, BYD Electronics' capacity for 3D glass rear covers could reach 200 million units in 2019, supplying mainstream phone makers such as Huawei.

Due recognition

Economic experts believe these hidden champions play a decisive role of giant companies' development. "It is usually these midsize companies standing in the very front line of technology, and their core technology decide the terminal product. But they are usually unnoticed," said Feng Xiaoyun, a professor at the College of Economics at Jinan University.

She said that hidden champions are mostly producers of precise consonants, which are not directly presented to consumers. For example, people use smartphones every day, but few notice the technology provider of its screens or other core parts.

The development of hidden champions is also supported by the government. Last year, the Ministry of Industry and Information Technology issued a document to cultivate 600 small and highly specialized world-market leaders in three years. In June, it announced its first list of 248 firms, and about a tenth of them are in Guangdong.

These firms, nicknamed "little giants," are similar to "hidden champions" and the country's top industry regulator promised to help them improve innovation capabilities, boost corporate management and accelerate digital transformation.

 

Editor:Cherie

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