CHINA’s NEW GREAT WALL OF …..

[Anonymous]

Chinese Growth Hurdles toward a New Great Wall
China’s
unique capitalist/marxist hybrid manufacturing-based economy has grown
at an eye-watering rate for the last three decades. While economists
have predicted a leveling off in its awesome rate of growth for a
multitude of reasons, viz, infrastructure, rising labor costs and the
like the Chinese miracle has continued completely oblivious to such
warnings. Serious trouble for China is on the way, though, from a
completely unexpected direction created by hacker technologists who had
no intention of causing it.
The “capitalization” of Chinese industry
during the last quarter of the 20th century is strikingly similar to
what occurred in the American agricultural sector a century before.In
the last quarter of the 19th century America’s rapidly expanding
railroad network put vast areas of new farmland in cost-effective range
of both expanding metropolitan areas in the US and its export harbors
serving European markets. This was very fortuitous for Europeans in
that their farmland was largely exhausted and it would be some time
before German chemistry invented inexpensive, ammonia-based
fertilizers.It was at that time that corporate farming in the sense
that we know it today first appeared in the US. These large-scale
farming operations were predominately found in the new lands of the
Dakotas and Iowa which were possessed of rich topsoil hundreds of feet
thick deposited there by the glaciers of the last ice age. These
corporate farms were vast in extent, heavily mechanized and employed
hundreds and sometimes thousands of laborers. The Dakotas and Iowa were
that era’s Saudi Arabia of food production. They could put grain and
meat on European tables for pennies on the dollar of what it cost
European farmers to produce. Exported American foods let Europe avoid
famine and poverty and might have staved off Europe’s collapse as a
civilization.Rich, hitherto untilled soils were not the only reason for
American corporate farming’s economic success. Its emergence and market
domination was also made possible by the invention of steam-powered
farm machinery. These machines were huge for that time and capable of
efficiently farming very large tracts of land. This machinery was also
expensive and its sassy steam technology required skilled personnel to
be operated safely. Its very nature demanded large, well-organized
operations, the antithesis of small family farming enterprises.It is
shocking, therefore, to discover that within thirty years these large,
highly profitable corporate farms had almost completely disappeared.
Why? The answer lay in the development of practical, internal
combustion engines coupled with the opening of American oil fields that
provided their liquid fuels. Their horsepower/lb ratios were immensely
better than equivalent steam engines. Internal combustion was much
cheaper, safer and less technically demanding of farmers than steam had
been.The most important advantage, however, lay in their scalability.
The technology of soils preparation, tilling and harvesting had been
developed around the horse and a power supply. These technologies had
been scaled up for steam and readily scaled down when smaller internal
combustion engines came on the market. Internal combustion engines
largely eliminated the economic advantages that large farming
corporations over family operations. They disappeared for many decades
thereafterChinese manufacturing will be facing in the next decade or so
much the same problem that late 19th century American corporate farms
faced. Its success thus far has been a result of having access to a
large, disciplined and relatively inexpensive labor force and access to
international capital to invest in large, expensive manufacturing
production lines. That is about to change in a rather dramatic
fashion.When you look at a typical “high tech” consumer item coming out
of a Chinese factory dispassionately you quickly discover that it is
mostly air and enclosure. Take a laser jet printer, for example. Over
90 percent of it is plastic and air. The actual “high tech” parts of it
will fit nicely in a small, zip-lock bag. The cost of those “high tech”
parts will typically be less than 20-25% of the cost of the printer.
What you are buying is mostly volume and appearance.The Chinese
economic miracle would have been impossible without the transportation
revolution made possible by containerized cargo carriers. This
technology made it cost-effective to move such low-density cargo as
consumer appliances.When you visit a factory that makes such consumer
items what strikes you most forcefully is the sheer size and power of
the injection molding machines that make the housing for those
appliances. An injection molding machine capable of producing an ink
jet printer’s plastic housing will fill the better part of your home.
It draws hundreds of kilowatts of electrical power and requires skilled
personnel to operate and maintain. It can product many thousands of
such housings per day. They can cost millions of dollars. Is this
beginning to sound familiar?What are known as 3D prototyping machines
are rapidly becoming a David to large injection molding
machines’Goliath. 3D prototyping machines began to be seen some thirty
years ago. At that time you typically saw them in the aerospace
industry making models of complex parts in critical parts of aircraft
such as turbines. The machines were expensive as was using them. Since
then, however, the technology has leveraged CNC (computer numerical
control) technology and gradually come down the market pyramid to the
point that you can now buy a full-blown system for about $30,000 that
can produce prototypes for under US$2.00/cubic centimeter (US$30/cubic
inch). While this sounds rather expensive, it is worth noting that the
famous Lockheed “Skunk Works” that produced such aircraft as the U-2
and the SR-71 spy planes and the F-117 stealth fighter has recently
adopted 3D prototyping in a manufacturing mode to produce their newest
unmanned spy plane, the Polecat at a fraction of the cost that it could
be built on a conventional production line.All this would be a bit too
up market for such everyday items as your ink jet printer save for one
thing. When someone mentions “open source” thoughts inevitably go to
software like Linux. While products like Linux get the press thousands
of hackers have quietly been building quite a respectable open source
hardware presence. One such team of hackers are busily producing an
ultra cheap, open source 3D prototyping machine. The RepRap (Rapid
Replicator) project directed out of the University of Bath in the UK.
RepRappers are currently in an advanced stage of working the bugs out
of their first open source prototyping machine in New Zealand. Their
machine is on target for a build price of about US$400 and will be
capable of making objects for about US$0.02/cubic centimeter. That
represents a considerable slide down the market pyramid from their
current commercial competition. Their development systems will easily
fit on the top of your kitchen table.The truly revolutionary aspect to
the RepRap 3D protyping machine is that it can more or less make copies
of itself save for that small Ziplock bag of “high tech” items like
small motors and cheap integrated circuits all of which have long been
commoditized. This means that you do not need a conventional factory to
make it. It can make itself. It can diffuse over a society in a viral
manner like peer to peer file sharing rather than a serial manner like
conventional consumer appliances. It also means that anybody can start
a manufacturing company for US$400 and scale it up and down to match
their production levels.While a RepRap protyping machine can not reach
production levels of a conventional production line such as those that
China has invested so heavily in during the past few decades it can,
for example, make the parts for five very different appliances one
after the other with no retooling or setup time whatsoever. Short
production runs now means one-of-a-kind rather than several thousand.
The concept of the RepRap machine is not known as the “Santa Claus
Machine” for nothing.Open source consumer technology can be expected to
share the same characteristics as its software cousins such as Linux.
Can you, for example, imagine an open source ink jet printer that
requires ink cartridges that cost nearly as much to replace as it would
cost to buy a new printer? More than a few industrial business models
are in for some very hard times.China, with its heavy emphasis on low
cost manufacturing is headed for big trouble economically. So are
consumer appliance manufacturing industries elsewhere.

[Author]

July 27, 2006 at 11:51 AM