Wednesday, December 28, 2016

China's Haier Group will manufacture low-end tablets and laptops in Cuba

Chinese companies are the primary vendors of Cuban Internet infrastructure and consumer electronics -- now they are moving into manufacturing.

Haier is in 29 countries
I had never heard of the Haier Group until yesterday, when I read that they would be manufacturing laptops and tablets in Cuba.

A quick Google search revealed my parochial ignorance. It turns out that Haier is one of the world's largest home appliance and consumer electronics companies, selling under its own brand name and producing "white label" products for other companies.

In 1999, when they were making one third of the refrigerators sold in China, they decided to enter the US market. It took them a year to get a meeting with Walmart and this year they finalized a $5.6 billion purchase of General Electric's appliance division.

In speaking of the GE acquisition, Bloomberg reported that Haier "had always fancied themselves the GE of China so now they get the real thing," but another Bloomberg post quotes an analyst as saying that “Haier is not interested in becoming the GE of China; they want to be the Apple of China.”

Since Haier is going to be making laptops and tablets in Cuba, I checked out their current offerings. They are low-end and very cheap -- the opposite of Apple today. For example, their 10-inch Windows 10 tablet with a detachable keyboard sells for $149.99. The reviews are not surprising. It is slow and the build quality poor, but it is fine for running a browser with 6 or 8 tabs open and Office apps -- just don't expect to edit video or run demanding games on the machine.

They say the laptops will be "6th generation," which sounds pretty cool until you see the specs -- Core i3, Celeron and Core i5 CPUs with up to 1 TB of memory. It is clear that this factory will not be churning out the "Apples of China" for some time. (Maybe they started counting Intel generations with the 4004).

They are partnering with GEDEME, a Cuban manufacturer and wholesaler of telecommunication and electronic devices as well as office furniture and radio towers. It sounds like GEDEME is a jack-of-all trades manufacturer and they will assemble the machines using Haier parts, equipment and production processes. The factory capacity is said to be 500 units per day, but only 50,000 units are planned for the first year and initially all units will be for the wholesale market and government offices.

GEDEME factory -- four managers, one worker, no robots -- symbolic if not literal.
The software partner is Cuba's University of Informatics Science, which will be responsible for drivers and customization for the operating system -- presumably Windows 10.

This reminds me of Japanese industry after World War II. They began making low-end products using local labor, but gradually moved up the value chain until they were using foreign labor and producing high-end products. Cuba is the foreign labor in this case -- low-cost and relatively well educated.

However, there has been a major shift in manufacturing technology since "made in Japan" meant low-end products -- assembly work is now heavily automated and will be more so in the future. I wonder how many Cubans will be employed in this factory and what sorts of jobs they will have.

Chinese companies are the primary vendors of Cuban Internet infrastructure and consumer electronics -- now they are moving into manufacturing.
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