This is a sample article from the October 2011 issue of EEnergy Informer.
Western turbine manufacturers brace for stiff competition
China may not be where cutting edge research takes place or innovative technologies emerge, and Chinese manufacturers are not usually the first to develop and market new products. But, once they identify a product as globally marketable, Chinese manufacturers typically copy and apply reverse engineering techniques and then undercut their Western competitors in their own markets. With substantially lower wages, they can be fierce competitors. This pattern is repeated to one product after another, and in one market after another.
Another article in this issue describes how China has cornered the mass manufacturing of photovoltaic (PV) panels, now flooding global markets at costs that drives their Western rivals out of business. The same appears to be happening in the market for utility-scale wind turbines where China has made impressive progress in the last few years.
A mere 5 years ago, there was not a single Chinese wind turbine maker among the top 10 global players. By 2010, there were 4, including #2 Sinovel, closing on the #1 Vestas of Denmark, and already ahead of America’s GE Wind and Germany’s Enercon (see pie chart), according to BTM-Consult, a market research firm. If this growth pattern continues, Chinese can be expected to dominate the manufacturing of wind turbines, reducing their Western rivals to secondary niche players.
This would not be a big deal if it were not for the fact that the market for wind is projected to grow at double digit rates over the coming decades in a number of key countries. Chinese manufacturers are thus poised to gain a growing slice of a rapidly growing pie.
For example, European turbine manufacturers, who currently enjoy 89% of the European, 32% of the US and 37% of the global market, according to the European Wind Energy Association (EWEA), may end up losing considerable market share to Chinese, Indian and other low-cost rivals.
Henrik Stiesdal, Siemens Wind Power’s Chief Technology Officer was quoted in an article in the Financial Times (29 Aug 2011) saying, in part, “… you have to take the challenge from China and other low-cost countries seriously,” an understatement given the recent experience with PV manufacturing.
China’s state-owned banks, who follow official government policies, have deep pockets and can be patient investors while their Western counterparts are accountable to impatient private investors. It is not just low wages.
The same fate awaits GE, currently the dominant player in the US where India’s Suzlon has established a foothold, despite sporadic quality problems.
Advanced technology and know-how still matters but Western manufacturers simply cannot compete with the developing world’s low wages, and that is not going to change unless their wages rises to the Western levels — or God forbid — the Western wages drop down to theirs.