China is a global manufacturing power, but the manufacturing industry is still big but not strong.

Data shows that in 2018, the added value of China's manufacturing industry accounted for about 30% of the global manufacturing industry, ranking first in the world. However, the average profit margin of Chinese manufacturers was only 2.59 percent, lower than the average profit level of the top 500 companies at 4.37 percent and even lower than the 6.57 percent of the top 500 companies.

The low profit of manufacturing enterprises not only means that their production is at the middle and low end of the industrial chain, but also increases their vulnerability, making them weaker in resisting risks and more vulnerable to the impact of changes in global economic and trade situation.

How does Chinese manufacturing get out of "libby paper thin"? How do you go from big to strong?

Enhance innovation ability

China's manufacturing industry needs to break out of the "libby paper thin" curve. At both ends of the smile curve, companies rely on technology, patents, brands and services to make high profits, while at the bottom of the smile curve, companies rely on assembly and manufacturing to make small profits.

For a long time, Chinese enterprises have become the world's production and assembly plants with low factor costs and advantages of scale, so as to obtain low profits. In recent years, as production materials and labor costs have risen, manufacturing companies' profits have become thinner, so that some companies have to operate miserably.

How to change this situation?

Liu wenqiang, deputy director of the China academy of electronic and information industry development, said: "to break this situation, China must strengthen the construction of innovative talent, through technological breakthroughs, technological innovation, to promote the manufacturing industry from the low end of the industrial chain to the high end."

In other words, Chinese manufacturing companies have to adjust their position in the smile curve to change their low-margin status.

Many companies have recognized this and are working to change it.

Data shows that in 2019, the total r&d expenditure of China's top 500 manufacturing enterprises reached 711.087 billion yuan (the same below), an increase of 8.63% over the previous year, and the r&d intensity was 2.14%, achieving a "triple increase" in r&d intensity since 2016.

The international experience of Chinese manufacturing enterprises in improving their innovation capacity is worth learning from.

In Germany, the manufacturing lead is not just driven by big companies, but also by millions of small and medium-sized enterprises. Many of these small and medium-sized enterprises are "hidden champions", winning market segments with technological innovation. A previous report from the German savings bank association showed that the average profit margin of its small and medium-sized enterprises was higher than that of large enterprises.

Establish independent brand

Compared with the lack of technological innovation, there is a saying in China that "small profits but large sales".

In a rapidly growing market, enterprises of all kinds, good and bad, participate in the competition. In order to stand firm in the market as soon as possible, they are willing to sacrifice profits to seek economies of scale. In this process, "price war" will be some inefficient enterprises out of the market, become a common sales strategy.

Take the household appliance industry as an example, there are a large number of "white card machines". These white appliances are basically assembled from low-priced, low-quality parts and sold at below-market prices. Even, a few white brand home appliance changes body copy famous brand to sell on the network, disturbed brand home appliance image not only, still leave consumer all sorts of hidden trouble.

To get rid of the price war and establish independent brands is an important link for Chinese manufacturing enterprises to establish themselves in the world.

Yang yuanqing, chairman and CEO of lenovo group, believes that China's manufacturing industry should pay attention to "three changes" from the great strength: first, the manufacturing connotation should be changed from just "dress for others" to the production of their own products with international brand influence; Second, the manufacturing object should be changed from simple following products to products with more innovative connotation. Third, in terms of manufacturing capacity, it is necessary to change from low-end manufacturing characterized by low cost and releasing resource dividends to high-quality manufacturing characterized by efficiency dividends.

According to statistics, the output of more than 200 industrial products in China ranks first in the world. Due to the lack of scientific and technological innovation, insufficient brand building and simple repeated OEM, the profits of many products are generally low.

Take the production of toys and clothing as an example. When the same type of products are produced in China and labeled with foreign brands, the price has increased several times.

To change the dilemma faced by many contract manufacturing enterprises in China, we must strive to build our own brands. From imitation to innovation, from brand to brand, Chinese brands need to achieve continuous leapfrogging.

Standard guidance, quality assurance

To make China's manufacturing industry stronger, we should not only focus on innovation and branding, but also pay attention to product quality and service.

Hu jingyi, director of the Internet of things research center at the China institute of electronic technology standardization, said product quality and service are the life of an enterprise, and only high-quality products can find a way in the market. The quality is determined to a large extent by standards, what kind of standards have what kind of quality, only high standards have high quality.

Bo peng, chief executive officer of lianbao technology, said in an interview: in order to improve the quality of products, lianbao technology has made intelligent transformation of the production line, automated warehouse, automated production line, not only improve the production efficiency but also ensure the quality of production.

Enterprises should check themselves on quality, and the country should also establish more perfect standards on quality.

A few days ago, the country issued a guideline on promoting the quality of manufactured products and services, proposing to enhance the power of quality improvement, including giving full play to the role of standard driving force, strengthening the role of technical support and giving full play to the role of brand promotion.

The guideline also said that a group of standards that coordinate national standards, industry standards and group standards should be set up to lead the improvement of the quality of the industry, push no less than 10 industries or fields to establish a quality grading mechanism, improve the quality traceability mechanism of key products throughout the life cycle, and improve the quality of enterprises and the competitiveness of brands.

While leading by standards and improving quality, manufacturing enterprises should also pay attention to improving service.

Manufacturing is not just about selling physical goods. It is also about the services that come with them. IBM is a typical case, once a pure hardware manufacturer, after development, now IBM has become an integrated IT service provider.

For Chinese manufacturing enterprises, the quality of service should be continuously improved as well as the quality of products. Author/zhang wenxuan, Editor/Huang lijun