“If we would not have done it, someone else would have done it.”
December 15, 2010 Leave a comment
Excellent story in NYT by Keith Bradsher that details how Spanish wind turbine maker Gamesa is making good money in China even after ceding most of the market share to local competitors who Gamesa helped create by handing over technology and building a local supply chain to meet local content requirements. It will be interesting to see how Gamesa fares globally when the current China boom in wind power turbines slows and the international market is saturated with Chinese competitors.
The motivation for Gamesa has been simple says Jorge Calvet CEO: “If we would not have done it, someone else would have done it.”
Nearly all the components that Gamesa assembles into million-dollar turbines here, for example, are made by local suppliers — companies Gamesa trained to meet onerous local content requirements. And these same suppliers undermine Gamesa by selling parts to its Chinese competitors — wind turbine makers that barely existed in 2005, when Gamesa controlled more than a third of the Chinese market.
But in the five years since, the upstarts have grabbed more than 85 percent of the wind turbine market, aided by low-interest loans and cheap land from the government, as well as preferential contracts from the state-owned power companies that are the main buyers of the equipment. Gamesa’s market share now is only 3 percent…
The story of Gamesa in China follows an industrial arc traced in other businesses, like desktop computers and solar panels. Chinese companies acquire the latest Western technology by various means and then take advantage of government policies to become the world’s dominant, low-cost suppliers. It is a pattern that many economists say could be repeated in other fields, like high-speed trains and nuclear reactors, unless China changes the way it plays the technology development game — or is forced to by its global trading partners.
Companies like Gamesa have been so eager to enter the Chinese market that they not only bow to Beijing’s dictates but have declined to complain to their own governments, even when they see China violating international trade agreements.
Even now, Gamesa is not crying foul — for reasons that are also part of the China story. Although the company’s market share in China has atrophied, the country’s wind turbine market has grown so big, so fast that Gamesa now sells more than twice as many turbines in China as it did when it was the market leader five years ago.
So as Gamesa executives see it, they made the right bet by coming to China. And they insist that they have no regrets about having trained more than 500 Chinese machinery companies as a cost of playing by Beijing’s rules — even if those rules have sometimes flouted international trade law. It is simply the table stakes of playing in the biggest game going.