Question: What do Chinese turbine manufacturers need to do to prosper in established markets?
Pan Yantian, CEO, Goldwind International
As a participant in the Chinese wind energy industry, for Goldwind to expand in the mature international market, the management level must be improved to international standards while learning from top international firms.
Secondly, Chinese companies must adopt a deep understanding of the targeted community's law, commerce, taxation, and other environmental factors in order to have an open mind while building a local team.
Thirdly, Chinese companies should be fully prepared to meet the specific local industry standards, customer demands, and project requirements as these will be vital prerequisites for establishing business.
Philip Totaro, CEO, Totaro & Associates
Historically, some Chinese original equipment manufacturers (OEMs) have self-financed their international expansion because their turbines were not considered as bankable as those developed by the global tier one OEMs. A focus on quality and improvement in availability will allow Chinese OEMs to unlock their competitive advantage of lower turbine capital expenditure (CapEx).
In today's global market, CapEx may be lower for a Chinese turbine, but the industry assumes extra cost for operating expenditure (OpEx) and a higher insurance premium for projects with Chinese turbines. As a result, total cost of ownership is comparable to non-Chinese developed technology.
Additionally, cultivation of in-house technology will improve the contribution margin of Chinese manufactured turbines. The technology and IP in-licensing strategy used by many Chinese OEMs in the past was a good way to ensure technology proliferation and knowledge exchange.
Now, the royalties hurt more than the knowledge exchange helps in a global market with low demand, and those royalty fees are putting a noticeable dent into some of the publicly traded Chinese OEMs. The dependency on licensors who are not true technology partners can be overcome by cultivating new in-house innovations and designs now that an understanding exists of how wind technology works.
Dan Shreeve - partner, Make Consulting
I can recall being asked how significant the threat was from Chinese turbine OEMs back in 2007, and answering that the likelihood of success was limited, but that larger numbers of Chinese wind turbines would find their way into the United States in the 2012 timeframe.
Obviously this dynamic has yet to materialise in the US or any other major Western wind market for that matter. In order for Chinese OEMS to find success in established Western markets they must embrace three major concepts:
Trust and track record trump everything else. The merits of the most advanced technology are lost when questions linger on how OEMs address contractual obligations regarding turbine reliability, spares distribution and technical support.
Local market leadership starts with hiring and empowering the right regional leaders. The wind market remains a closely knit community where relationships matter and an autonomous local presence is critical (some European OEMs still struggle with this in the US).
Technology leadership is critical. The low capital cost leadership business model is a losing one, even in China where OEMs adopting western technology such as Envision have climbed the Chinese OEM rankings.
I expect that one or two Chinese turbine OEMs will emerge as global powers over the next five years, attacking emerging market opportunities at first, advancing their technology positioning and even acquiring existing western turbine OEMs.