“If we would not have done it, someone else would have done it.”

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.”
 
Excerpt:

 
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.
 

 

Link: http://www.nytimes.com/2010/12/15/business/global/15chinawind.html?_r=1&hp

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About James McGregor
James McGregor is an American author, journalist and businessman who has lived in China for more than 25 years. Currently, he is chairman of APCO Worldwide, Greater China. A professional speaker and commentator who specializes in China’s business, politics and society, he regularly appears in the media to discuss China-related topics. McGregor is the author of the books "No Ancient Wisdom, No Followers: The Challenges of Chinese Authoritarian Capitalism" (2012) and "One Billion Customers: Lessons from the Front Lines of Doing Business in China" (2005). He also wrote the 2010 report "China’s Drive for ‘Indigenous Innovation’ – A Web of Industrial Policies." From 1987 to 1990 McGregor served as The Wall Street Journal’s bureau chief in Taiwan, and from 1990 to 1994 as the paper’s bureau chief in Mainland China. From 1994 to 2000, he was chief executive of Dow Jones & Company in China. After leaving Dow Jones, he was China managing partner for GIV Venture Partners, a $140 million venture capital fund specializing in the Chinese Internet and technology outsourcing. In 1996, McGregor was elected as chairman of the American Chamber of Commerce in China. He also served for a decade as a governor of that organization. He is a member of the Atlantic Council, Council on Foreign Relations, National Committee on US-China Relations and International Council of the Asia Society. He serves on a variety of China-related advisory boards.

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