Getting Rid of Being Controlled with Innovation and Collaboration

Wang Jin

Building a bigger and stronger ship power industry is an important task of realizing the goal of a shipbuilding power. The First Meeting of the China Shipbuilding Industry Association’s Ship Power Branch in 2018 and Ship Power Forum was held on April 26 at the Yuchai Ship Power Co Ltd. The meeting analyzed situations faced by the industry and studied countermeasures to accelerate structural adjustment,implement innovation-drive strategy,promote transformation and upgrading and ensure steady development of the industry. Innovation and collaboration will become the theme for the ship power industry to counter market challenge and realize transformation and development,boosting the industry to get rid of the trap of being under the control of others.

Ship Power Import More Than Half

Marine diesel engine import is the big end of China’s marine equipment import. An expert with the China Shipbuilding Industry Economic and Market Research Center said China’s marine engine and parts import accounted for more than 50% of the total marine equipment import in 2017.Marine diesel engine import was USD578 million, accounting for 40% of the total marine equipment import and import quantity was 2135 pieces; marine diesel engine parts import was USD237 million,accounting for 16.5% of the total marine equipment import.

In the case of low-speed engines, Korea and Japan are main import sources of Chinese ship enterprises. Korean capacity made up more than half of the global capacity,low-speed engine sources were large, main enterprises installed 59 units and 1.17 million horsepower in Chinese ship enterprises in 2017, making up 14% of low-speed engine loading pieces of Chinese ship enterprises and 17%of loading horsepower number in 2017. in the mediumspeed engine market, China still imports some of complete medium-speed engines from Japan, the US and Europe.

An industry expert said a considerable part of marine low-speed engines sold to the Chinese market in 2017 did not undergo application and authorization under EA Clause of the patent agreement. “Non operative constraint to the behavior according to the patent agreement renders EA Clause performing practically no function,” an attending representative noted this was “a malignant tumor” for the ship power market competition.

Effective Use of EA Claus Necessary for Maintaining Rights

“More than 160 HP orders on the Chinese marine lowspeed engine market were taken away by overseas enterprises in 2017.” To make matters worse, overseas enterprises sold marine low-speed engines to Chinese ship enterprises at prices by far lower than the current market prices, gravely disturbing the Chinese selling market and directly hindering normal production and operation of Chinese relevant enterprises.

Cut-throat competition in future market will not improve substantially. An attending representative analyzed global marine low-speed engine market demand was less than 1/3 of the 54 million HP capacity in 2017, annual average demand of global low-speed engines will be less than 20 million HP in the next three years. If the unfair competition and practices of overseas enterprises are not curbed, not only domestic patent factories will have a difficult time, but also independent marine equipment supply of some key and critical parts will also be impacted.

Countering unfair competition may give play to international trade rules, national laws and regulations and industry associations, but EA Clause remains the most practical and available tool. Against lowprice sales of foreign enterprises in the Chinese market, the meeting requested patent suppliers to strictly constrain foreign enterprises according to EA Clause to protect legal rights of Chinese patent factories.

“According to EA Clause, patent factories shall obtain prior authorization of the patent supplier for out-of-area sales. However,the patent agreement does not stipulate preconditions for EA authorization,with absence of the wording ‘shall obtain consent of patent factories in the area’.” Attending representatives suggested trying to revise EA Clause by adding necessary ancillary conditions and requesting patent suppliers to confirm no occurrence of any foreign enterprise sales bypassing EA Clause.

More Homework to Solve Predicament

Solving the predicament in the ship power industry lies in improving its own capability. Industry sources generally believe we must admit that some domestic enterprises do not have obvious advantages amidst same stage competition with foreign enterprises and they badly need to take a new face in technology and management, parts supply and industrial communication and collaboration.

“Only by attaching importance to talent cultivation, can talents be enabled to become a source power for corporate development; only by strengthening technical innovation, can products be developed to meet the requirements of new rules; only by comprehensively improving digital machine making capacity and using information and Internet technology to improve efficiency,can cycle be shortened and product cost be reduced.” Attending representatives suggested referring to HERCULES initiative launched by Europe aimed at consolidating its marine diesel engine overload position, China should jointly develop similar scientific research project, raise the strength of the whole industry to propel development of Chinese marine diesel engines. Further, aiming at foreign advanced enterprises to improve production models is an essential means to improving management efficiency.

Different from main marine diesel engine manufacturing countries, Chinese producers are scattered and do things in their own ways in parts supply. Backward management model of the supply chain and lack equipment supply resources are common problems of the industry.Therefore, representatives suggested stepping up con-construction and sharing of parts supply capacity, e.g., centralized approval, centralized equipment supply,cultivating good quality suppliers,sharpening competitive edge of the whole industry. Industrial chain cooperation can maintain semifinished crankshaft capacity of marine low-speed engines and retain and improve independent supply capacity of crankshaft.

Attending representatives held establishing a collaboration mechanism to boost mutual supplement of advantages,advocating group heating to reduce unnecessary internal consumption. In order to enhance brand development and dissemination, con-construction and sharing of global service capacity should also take a strong step.★