The new industrial revolution brings both opportunities and challenges to Shunde. On the one hand, opportunities allow Shunde to adopt new disruptive technologies to maintain leadership in key manufacturing sectors and to leapfrog its competitors. On the other hand, it faces challenges from competitors who might use the new technologies creatively to beat Shunde manufacturers.
Shunde’s district government give priority to several emerging industries. Among them are smart manufacturing and robotics, industrial design, tourism, modern conventions and exhibitions, and e-commerce. These industries are related to Shunde’s current industrial base and can be considered as extensions of the existing industrial chains. Working on industry extensions rather than creating new ones not only lowers the inherent risk of building new industries, it also cuts the learning curve and improves the chances of success. Shunde’s smart decision has been beneficial to the initial development of these emerging industries.
Smart manufacturing and robotics
Developing the smart manufacturing and robotics industry is the most essential aspect of Shunde’s industrial upgrading. It is the key to building a high-tech Shunde.
There are currently more than 80 companies in Shunde’s robotics and smart manufacturing industry. Five of them (Jaten, Lixunda, Longsheng, Sanhe and Yaskawa Miyuki) have annual sales of more than 100 million yuan. They work in the mid-stream robot manufacturing and the downstream system integration part of the robotics industry value chain. Top robotic companies like Germany’s KUKA and China’s Efort have set up operations in Shunde, and emerging local companies like E-Deodar, Tiantai and Longsheng have developed their in-house robots for specialized operations. Most Shunde robotics companies work on the downstream system integration part of the industry — they adopt robots purchased from mid-stream robot manufacturers for the end-users’ factory operations.
Among the five companies with output value exceeding 100 million yuan, Jaten’s main business is the manufacturing of the automatic guided vehicles (AGVs) used in smart warehouses, while Lixunda’s business is manufacturing polishing robots for the home appliances industry. Sanhe’s primary market is also in AGVs. It buys key components such as servomotors, speed reducers, and controllers from upstream component suppliers, and assembles the parts and add features specially tailored for the local market.
Longsheng and Yaskawa Miyuki are partners of Kawasaki and Yaskawa. They buy their partners’ robots and modify them to fit local customer requirements.
Regarding their position in the industrial value chain, Jaten, Lixunda and Sanhe are mid-stream robot manufacturers while Longsheng and Yaskawa Miyuki are downstream system integrators. Of the five, Sanhe is the only one which has the reducer production capability. Shunde’s robotic industry has few upstream precision parts manufacturers.
Smart manufacturing and robotics are usually considered a single industry and most of the significant players have them as separate divisions in the company. The ability to integrate robots in an automated production line is a key competitive advantage for any major industry player. Shunde is banking on some of its foremost manufacturers to innovate, so as to accumulate experiences in smart manufacturing and robotics. The latest air-con manufacturing plant owned by Midea (built with KUKA’s technical input) is known as one of the most advanced factories in China. Galanz Group has also built a fully automated washing machine and microwave oven production line, and China’s first smart water basin production facility, for Sakura Kitchen, is developed by ABB and Lixunda.
In recent years, the district government launched a series of measures to promote the development of the smart manufacturing and robotic industries.
1. A robotics industry development fund is established to support companies in substituting humans with robots.
2. The government encourages the setting up of smart manufacturing industry clusters such as the Guangdong Province Smart Manufacturing and Innovation Park in Beijiao. Phase 1 of the park will focus on attracting mid-stream robot manufacturers as well as upstream component manufacturers in control systems, servomotors and high precision speed reducers. Phase 2 will house robotic start-up incubators, shared laboratories and R&D facilities.
3. Industrial upgrading is accelerated through cross-border cooperation and M&As. The most classic case is the joint venture between Midea and Yaskawa, which formed the Midea Yaskawa Service Robot Company as well as the Yaskawa Midea Industrial Robot Company. Midea also acquired KUKA and formed a joint venture with it to invest in Shunde’s robotics industry. Midea also acquired the Israeli intelligent control software company Servotronix.
4. Local industry platforms are built to strengthen the robotics industry. The district government set up the Hannover Foshan Robotics Institute, South China Intelligent Robot Innovation Institution, National Industrial Robot Quality Supervision and Inspection (Guangdong) Centre, and Guangdong Intelligent Manufacturing Industry Demonstration Base. The joint Midea and KUKA intelligent manufacturing base is currently under construction, and the project includes a robot manufacturing centre, research centre and training centre.
5. Shunde government has sent investment missions to Germany to entice German robotics companies to set up operations in Shunde. Likewise, it has sent teams to domestic regions that are advanced in robotics (for instance, Beijing, Shanghai and Shenzhen) to promote the relocation of their firms to Shunde. Shunde government promises to provide special tailor-made incentives to attract qualified robotics and smart manufacturing companies.
Smart manufacturing and robotics involve many different disciplines and are very complex production processes. The multidisciplinary and high-tech nature of the industry requires a robust and comprehensive industrial supporting base. China is a late-comer to the industry as it went into robotics and automation only 10-15 years ago, while other advanced manufacturing economies had gone into robotics and factory automation in the 1980s. Therefore, China’s industrial position in robotics and smart manufacturing businesses remains relatively weak.
In the robotics industry, upstream core components make up more than 70% of a robot’s cost. At present, most of the local Chinese robotic companies operate in either the middle or downstream ends of robot assembly and systems integration. Weaknesses in the Chinese robotics industry include importing most of the core components, inadequate core technology, and products at the low- to mid-end of the market. More work needs to be done to upgrade Shunde’s smart manufacturing and robotics industry. (For more information, please refer to “Shunde’s Industrial Parks.”)
In 2008, the National Intellectual Property Office approved the construction of a National Industry Design and Creative Industry Base in Shunde. The move marked the start of Shunde’s industrial design industry. The district government was quick to promote the establishment of three major industrial design clusters: Guangdong Industrial Design City at Shunde, Shunde Creative Industry Park, and SKG Silicon Valley Incubation Park. These clusters successfully meet the industrial design requirement of Shunde’s substantial industrial base.
The three parks progressively became national-level incubators and currently have nearly 40 high-tech design companies. Shunde is now Guangdong province’s largest high-end, professional and international industrial design zone, attracting almost 10,000 designers from mainland China and overseas. Design institutes from Tsinghua University and Hong Kong Creative Design Centre have also set up offices in Shunde. The annual number of design patent applications has exceeded a thousand, and the yearly industrial output using industrial design produced at Shunde has run into tens of billions of yuan. Guangdong Industrial Design City is particularly outstanding; in 2018, it was awarded five stars for its high development quality. It is the only demonstration base in Guangdong Province that has been awarded five stars and it is the pillar of Shunde’s industrial design industry.
Guangdong Industrial Design City officially opened in 2009. It currently houses thirty high-tech industrial design companies, three of China’s top ten industrial design companies, three of Guangdong’s industrial design centres, and 8,195 technology R&D staff. It has developed more than twenty local brands and introduced more than 6,000 new products to the market. It has also produced 3,191 patents. The successful conversion rate of the industrial park’s output is particularly impressive—85% of its designs have been put into production and turned into marketable products. The park had generated an accumulated revenue of nearly 3 billion yuan from 2009 to 2017. In 2017, it won 21 domestic and international design awards.
It also provides marketing research, industrial design, prototype development and manufacturing incubators, R&D, exhibitions and conventions, training, and many other services for the manufacturing industries in Shunde. Recently, it has expanded its service to support smart manufacturing, smart home, healthcare and other emerging industries.
It also houses the Guangdong Shunde Innovation Design and Research Institute which pairs graduate students and application-oriented research projects, providing talent support for local high-tech companies. As of June 2018, the research institute has 127 teaching staff with 118 of them working full-time. In 2017 it partnered with more than 50 Chinese universities to train 413 graduate students, carried out 21 research incubations projects and applied for 108 patents. The Institute has agreements with 69 local colleges and universities to train graduate students in industrial design. It is the only education institution in China accredited by the government that does so.
The Design City has gain reputation both at home and abroad, In the first half of 2018, it received 234 groups of visitors with more than 5,000 people.
Shunde used its strong industrial design capability to come up with an innovative “technology–design–industry” development concept. In recent years, the district government launched the “Design Shunde” policy to support its manufacturing industry to move upscale using industrial design.
The “Design Shunde Three-Year Action Plan (2018-2020)” was announced in September 2018 by the Shunde government. It involves spending 1.5 billion yuan to implement six projects and establish Shunde as a world-class industrial design centre.
The first project will double the space in Guangdong Industrial Design City to 200 thousand square metres in three years and establish the design city as a key component of the Belt and Road Initiative and the Greater Bay Area.
The second project aims to enhance the creative capability of the Design City and set up advanced industrial design research institutes there.
The third project aims to launch an industrial pairing project to link 1000 traditional manufacturing companies with creative industrial design firms. The linkage is designed to help traditional manufacturing firms move up the value chain.
The fourth project relates to introducing favourable policies to attract talented industrial designers to work and live in Shunde.
The fifth project aims to set up a platform to attract overseas high-tech industrial design companies to set up offices in Shunde and to attract more international industrial design events be held at Shunde.
The last project aims to create a good design industry ecosystem by providing a holistic living environment for design talents, a good business environment in intellectual property rights, high technology integration with design, minimal regulation, and so on.
Tourism and modern exhibitions & conventions
In recent years, Shunde’s water town and culinary culture tourism have developed rapidly. Tourism has become a significant driving force for the economic transformation of Shunde. In 2017, tourism revenue in the region was 15.53 billion yuan, a year-on-year increase of 8.3%. The hotel accommodation industry recorded revenue of 1.448 billion yuan, a year-on-year increase in 12.6%. The number of overnight visitors increased by 20.03% to 5.35 million, and visitors to A-rated scenic spots increased by 6.24% to 11.44 million.
Shunde has several A-rated tourism spots. Changlu Tourism Leisure Park is a national 5A tourist scenic spot. Qinghui Garden, Chencun Flower World, Louvre International Home Expo Centre, Lecong International Convention and Exhibition Centre, and Snoopy World are national 4A scenic spots. Fengjian Water Town, Chow Tai Fook Jewellery Cultural Centre, Bijiang Golden House and South China Silk Museum are national 3A scenic spots. There are also many unrated spots such as Shunde Museum as well as Bruce Lee Park which is popular with tourist.
Shunde actively leverages on its manufacturing success as a special tourist attraction. For Guangdong Industrial Design City, tourist attractions such as leisure parks for designers, industrial design exhibition halls as well as dining facilities have been added, and the result has been promising. The Louvre International Home Expo Centre skilfully combined elements in home interior design, furniture, Shunde food culture and first-class hotel accommodation and attracts more than 2 million tourists every year. Chow Tai Fook Jewellery Cultural Centre uses a jewellery culture showcase concept to integrate jewellery processing and tourism, providing tourists with a unique cultural and shopping experience. The Cultural Centre is an innovative development strategy to combine jewellery processing, sales and tourism.
The traditional dragon boat race, water town tour and culinary tour have all proven successful in attracting tourists. In particular, the annual food festival consistently draws tourists in. Since 2006, the food festival has been held successively for 13 years., and activities include food exhibitions, cooking competitions, food and beverage R&D demonstrations, and so on.
International conventions and exhibitions are also promoted to further integrate tourism and industry. Following the opening of Tanzhou International Convention and Exhibition Centre, the government has been supporting the Meeting Incentive Convention Exhibition (MICE) businesses for the joint development of high-end industries and tourism.
Tanzhou International Convention and Exhibition Centre is the core of developing the MICE industry. The centre occupies 300,000 square meters and has a total planned floor area of 400,000 square metres. The project comprises exhibition, conference and other facilities, and is Foshan’s largest and most modern professional exhibition complex. The maximum floor loading weight is 10 tonnes, the highest among all exhibition centres in China, and allows almost all industrial exhibitions to be held in Shunde.
Phase one of the Tanzhou Centre has 50,000 square metres of exhibition space, and phase two involves doubling the show area to 100,000 square meters. The centre can meet the diverse exhibition needs of different industries and will be the permanent exhibition centre for The Pearl River West Coast Advanced Equipment Manufacturing Exhibition, and the China Equipment Manufacturing Exhibition.
The Centre took in German exhibition giant Hannover Messe as a partner for the project. The German element, which is of high international standard, is apparent in the design, construction and operation of facilities. At present, China (Guangdong) “Internet +” Expo and Pearl River West Coast Advanced Manufacturing Investment Exhibition are held there annually. Large-scale exhibitions for home appliances, furniture, and others are being launched, and some international exhibitions hosted by Hannover Messe are in the process of opening its Asia show at Tanzhou.
In addition to consumer goods manufacturing, Shunde is also a well-known home appliances centre in China. Shunde businessmen capitalize on this reputation and use it to build the emerging e-commerce industry. Shunde is designated as Guangdong’s first e-commerce innovation zone. The Shunde government continually innovates and promotes e-commerce by implementing supporting policies, fostering the development of an e-commerce ecosystem and building e-commerce parks to draw in key businesses and platforms.
There are more than 15 e-commerce platforms at Shunde, and the number of online merchants engaged in B2B and B2C transaction has exceeded 10,000. The district has twenty e-commerce parks, each with a distinct focus, in operation or under construction. Among them is Longjiang Furniture Industrial Park which was recognized by the Ministry of Commerce as the country’s e-commerce demonstration base.
Shunde is home to 25 of Guangdong province’s top 100 e-commerce companies, second to Shenzhen, the well-known innovation centre. It has 118 e-commerce companies that are considered leaders in their respective fields.
According to statistics, Shunde’s e-commerce transaction volume reached 234.017 billion yuan in 2017. During the 2018 Singles’ Day shopping festival, Shunde e-commerce clocked a 9.2-billion-yuan turnover on just that day, a year-on-year increase of 20%. Companies that recorded more than 100 million yuan of sales on that day included Midea, Merid, Pingo International, China Macro and many more. Many companies also became champions in their industry category, for instance, Pingo International in the home furniture section and Midea in the small household appliances section.
Home appliances e-commerce has always dominated Shunde’s e-commerce industry. In recent years, however, e-commerce has diversified and included house paint, food, furniture and other areas. The industry is rapidly expanding, and large companies like Midea, Galanz and Pingo International are shifting their marketing efforts to online.
Leveraging the strength of its manufacturing industry, Shunde has chosen to focus on developing e-commerce platforms in home appliances, furniture, steel, plastic, hardware and construction materials, and machinery. The synergy works well, and most of the platforms in e-commerce are thriving.
Many companies from neighbouring Zhongshan, Nanhai and Nansha have moved their e-commerce operations to Shunde to take advantage of its holistic and evolving e-commerce environment. Some companies like Jinzheng even moved their manufacturing operations to Shunde as their online sales grew to a significant portion of total sales.
Shunde’s original biomedicine industry is relatively weak. Currently, only six pharmaceutical production companies are located there; two of them are domestic companies, and four are foreign companies. Leading companies like Guangdong Global Pharmaceutical and Guangdong Kangfulai Pharmaceutical mainly develop Chinese herbal medicine products.
There are 125 biotechnology companies, mostly domestic (107); leading companies like Foshan Shihezhong Biotechnology, Guangdong Houde Biotechnology mainly develop biological research reagents and clinical diagnostic products as well as monoclonal antibody drugs. Twenty-two companies focus on medical devices, and leading companies are Hisense Rongsheng (Guangdong) Freezer, Intesheng Medical Devices and Foshan Shunde Changxing Ultrasound Equipment. Twenty-two companies focus on health care products, and leading companies like Guangdong Yongzhengda Biotechnology, Foshan Shunde Heshengyuan Biotechnology and Huapeng Pharmaceutical Consulting focus on developing nutritional supplements and vitamins.
Shunde has two strategies to develop the biopharmaceuticals industry. The first involves the medical device industry and includes medical equipment, bio-pharmacy materials and diagnostics reagents. The second involves pharmacy production and consists of the production of drugs, antibiotics, vaccines and so on. Since October 2015, 65 hectares of land in Lecong Town has been allocated to build Guangdong Province’s biopharmaceutical industrial park. The focus of the park is on attracting outstanding biomedical companies and institutions to settle there, introducing biomedicine talents, and creating a conducive environment to develop the industry.
During the first three quarters of 2018, five biomedical projects were brought into the area, and 25 projects were under negotiation. Projects range from medical devices, new drugs, biotechnology, big data projects and so on. At the time of writing of this article, 35 biomedical projects have been set up and total investment has exceeded 6.5 billion yuan. Some of these projects include a listing of a subsidiary company (Guangdong Anke Huanan Biotechnology), formation of two provincial innovation companies (Guangdong Bikang Biotechnology and Hanteng Biotechnology), and formation of three Foshan innovation companies (Foshan Hanteng Biotechnology, Shengmei Medical Technology (Guangdong), Guangdong Aishidai Biotechnology, and Guangdong Micro-decoding Biotechnology. Two companies are set up via a partnership with Germany (Foshan Hanteng Biotechnology and Foshan Pujin Biotechnology), and two with the United States (Foshan Baiao Express Medical Technology and Guangdong Shunde Xinnuo Wansi Biotechnology). There are also five Chinese academy projects.
Several biomedicine incubators have already been set up in Shunde. These include Jinan University Science and Technology Park (Shunde Park), Southern Medical University Science Park, International Innovation and Transformation Bio-industry Incubation Centre, and others. The current priority in the area is to attract talents and projects into the incubator.
Among Shunde’s emerging industries, industrial design, tourism and modern exhibitions and e-commerce have made considerable progress.
Biopharmaceuticals, smart manufacturing and robotics remain in the nascent stage. However, Shunde will be working more closely with Shenzhen, a recognized leader in these areas, under the Greater Bay Area project. This collaboration will help in the development of these nascent high-tech industries. Bringing in KUKA as a strategic partner in robotics and smart manufacturing will also help.
In the past, Shunde successfully used its strong industrial manufacturing base to develop a foothold in the smart manufacturing and robotics industry. (For more details see “Shunde and the World Economy.”) Now, it is trying to repeat that success and continue building these strategic industries amid heightened competition and high barriers.