Motorola In China: A Great Leap ForwardPete Engardio
Taking a cautious approach, Motorola last year put together a makeshift plant in the northern port city of Tianjin to crank out its first made-in-China paging devices. The company figured local demand would be small and that it would have to find export markets to make the investment pay off.
Wrong. Motorola Inc. now sells the entire weekly output of 10,000 units in China, where a pager with one year of service retails for $200. Indeed, annual demand for pagers in China has zoomed from 1 million in 1991 to a projected 4 million this year. "We no longer talk of the `potential' Chinese market," says Lai Chi-sun, general manager of Motorola-China Ltd. "That market has arrived."
Convinced the boom is for real, Motorola is laying the groundwork for what will be Corporate America's biggest manufacturing venture in China. By yearend, it will complete a $120 million first-phase plant in the Tianjin Economic & Technology Development Area to make pagers, simple integrated circuits, and cellular phones. A second-phase plant, which could include automotive electronics, advanced microprocessors, and walkie-talkie systems, will come on-line in three more years. Motorola is also looking at building a plant to fabricate silicon wafers. Overall, it could spend more than $400 million.
TECH GAP. Other international biggies such as Samsung, Eastman Kodak, and Heinz are also moving into Tianjin, which boasts savvy officials and good infrastructure. But the Motorola venture symbolizes a huge leap in commitment to China. It goes well beyond setting up factories to take advantage of low-cost labor or get a foot in China's vast market. Motorola executives expect that, over time, Chinese technicians will play a big global role in the design and engineering of products, much as locals already do at the company's plants in Singapore and Malaysia.
Alcatel, Siemens, and Philips are now moving in the same direction, and in February, AT&T signed a sweeping accord with the government that could lead to a similarly deep involvement in everything from switching systems to semiconductors. "There is a conceptual change among major multinationals," says John Frisbie, director of the U.S.-China Business Council office in Beijing. "Now they are looking at an integrated approach that involves manufacturing, sales, and research and development."
Of course, with China's high inflation and political uncertainties, Motorola knows the ride won't be smooth. The company has been selling telecommunications gear and semiconductors in the country since 1984 and now has 600 employees there. One big problem will be finding enough engineers to carry out its ambitious agenda. Of the 1,200 workers to be hired over the next two years, Motorola will need 250 engineers. China has hundreds of thousands of engineers. But because higher education from 1966 to 1976 was devastated by the Cultural Revolution, most in their mid-thirties and-forties lack the training to adapt to a modern high-tech plant.
Another shortcoming of Chinese academics is that students don't learn how to turn principles into innovative new products. "Their knowledge of basic science is very strong, but they don't know how to apply it," says Ko Ching-wen, Motorola's personnel director in Tianjin.
CADRES. Since Motorola will recruit heavily at China's colleges, it's building an inside track. The company is providing hundreds of scholarships to students and faculty in eight universities. Motorola also is donating computer equipment and staff so that schools can set up chip-design laboratories. And it plans to offer working internships to college students and dispatch managers to Chinese high schools to explain uses of technology.
At the same time, Motorola is spending millions on in-house training programs, preparing for the startup of its design centers for integrated circuits and telecommunication products in China. It already is sending 30 engineering recruits to its facilities in the U.S., Singapore, and Hong Kong. And for the Chinese executives who will eventually head the Tianjin complex, Motorola has a career management track called "Cadres 2000." Each year, it plans to put up to 20 top recruits into leadership training programs and rotate them through Motorola operations worldwide. The first batch of seven cadres, hired in 1989 to be middle managers for its future semiconductor plant, already have visited almost every Motorola chip plant in the world.
So far, Motorola says it's delighted with its Tianjin venture. In terms of both quality and productivity, officials say, the paging devices assembled in Tianjin already are close to the standards of its Singapore plant, where Motorola designs its pagers. "We could be exporting them competitively right now," says Tan Yik Fay, manager of the Tianjin paging factory. But with China's voracious demand, that's one idea that may have to wait a whilelonger.