Automakers and Device Makers Face Chinese “Day of Reckoning”

Sergio Marchionne, the hard-charging head of Fiat and Chrysler, warns that automakers face a “day of reckoning” down the road from Chinese competition. Transfer of intellectual property from US manufacturers to Chinese affiliates and subcontractors is cited in a NYTimes article as a substantial risk for creating strong competitors who, in turn, will export to Western markets.

In the current era of slow economic growth, Chinese manufacturers are moving up the value chain and producing more and more sophisticated products. Earlier this year, I cited a WSJ article that described how Chinese manufacturers had reverse-engineered a soviet fighter jet and were selling it at a huge discount…if the Chinese can do this with jet fighters, they can certainly do it with medical devices. In fact, China has a state-sponsored program devoted to “accumulating” IP in targeted sectors like military, communications…and advance medical technology.

Device manufacturers who only look at the revenue upside of the Chinese market may be forgetting one important fact: products sold into China today will most certainly be back (at substantially lower cost) – produced by Chinese companies and displacing revenue of US device manufacturers.

Advertisement