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back to index backCHINAtalk February,  2005

Research and development goes global

Development for local production and access to engineers

The globalisation of research and development is one of the emerging trends at tier one suppliers. Part of the reason for the growth, particularly in China, has been for local applications engineering.

Most of the engineering for the current generation of models being introduced in emerging markets has been done in established manufacturing locations, but tier one suppliers are well aware that this may change in future as independent local partners become more important and local plants assume a more significant role within the manufacturing footprint of the OEMs.

And emerging regions have become increasingly attractive as engineering locations for global development due to the efficiencies that they offer in engineering, and the access that they offer to a large pool of engineers.

High quality engineering resources can be in short supply in mature economies such as Germany, United States or Japan - while in emerging markets staff are more readily available at one third to one half of the cost.

Research and development is an unavoidably labour intensive function, so as long as the pool of engineering talent and skills is deep enough, it makes a lot of sense to go where the skills are available, rather than searching for an increase in scarce resources in developed economies.

As Siemens VDO chief executive Wolfgang Dehen said at a recent conference in Frankfurt, China has a pool of tens if not hundreds of thousands of engineering graduates every year.

Delphi has more than a third of engineering in low cost countries
Delphi has been one of the earliest and most extensive users of international low labour cost development capabilities. In Europe the company opened an engineering centre in Krakow in Poland to complement its development centres in Wuppertal and Paris.

Don Runkle, vice-chairman of Enterprise Technologies at Delphi, says that engineering centres in low labour cost countries are an important part of his company's efforts to make the most of the inevitably limited research and development engineering budgets.

"We have an ok amount of research in advanced development, but frankly I would like to figure out how to double the size of it without increasing the overall engineering budget", said Runkle. The use of low cost engineering centres such as Krakow allows Delphi to make more efficient use of its budget, says Runkle.

In addition to Krakow in Poland, Delphi has been developing research and development centres in Mexico and Korea, and plans to make greater use of its new facility in Shanghai.

Delphi already has about 25-30% of its development engineers in low cost centres, says Runkle, and numbers have been growing fast. In the last five years, since Delphi was established as a separate entity, its engineering resources in Asia have grown fourfold, while in Eastern Europe they have grown three times, and in Mexico they have doubled.

Bosch and Denso also expanding internationally
Bosch currently has only 10% of its 21,000 research and development staff in low labour cost countries, compared with two-thirds in Germany. But the numbers are growing.

One of the reasons is the growth of applications development in new markets, say Bosch executives. The other is the growing importance of software in new product development.

India is a major location for Bosch and software development has led the company in the implementation of CMM process standards for code development.

Leading Japanese supplier Denso is also looking to broaden its international R&D footprint. Norio Omori, executive vice-president in charge of research and development for Denso, says that the company's major engineering sites outside Japan, in the United States, Germany and the UK are primarily application engineering sites to support its customers. But Denso has started to develop an international research network to work on more long term developments.

It has been developing engineering capability in low labour cost countries in Vietnam, the Philippines and China to support Denso's central research and development functions. Denso has a facility in Shanghai to develop software for the international business.

The aim is to "have a global research network", says Omori.
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