Tag: C919 jet

OM in the News: The Global Supply Chain for China’s New C919 Jet

More than 1,000 flights took off or landed at Shanghai’s vast airport on May 5, 2017, but one marked the beginning of a new era in the aviation business. After years of delays, the nation’s first modern large jet, the 174 passenger C919, made its maiden flight. The C919 brings its manufacturer, Comac, in head-to-head competition with Boeing’s ubiquitous 737 and Airbus’s A320. China is making its boldest attempt yet to break the stranglehold that these two giants have on the market for big commercial airliners.

“Behind the celebrations of a Made-in-China jet is the reality that Comac was able to build its new plane using a string of Western suppliers,” writes Businessweek (May 8, 2107). At least 15 foreign partners such as GE, Safran, and Honeywell worked on components and systems of the C919. Tapping into the supply chains of Airbus and Boeing allowed Comac to bypass many of the technical challenges of making a modern commercial jet from scratch and built up the company’s expertise for future designs. Companies based outside China supply C919 systems for flight control, power, lighting, cockpit control and much more. The engines and landing gear are also from overseas manufacturers.

China will need over 6,800 aircraft valued at more than $1 trillion through 2035, and 3/4 of them will be single-aisle planes. The country’s largest carrier, China Southern Airlines, had ordered more than $15 billion of new aircraft from Airbus and Boeing since 2015. So the C919 should be a game-changer for China’s aerospace industry.

Classroom discussion questions:

1.What is Boeing doing to respond to the C919 threat?

2.Describe the new jet’s supply chain.

 

OM in the News: GE’s Dangerous Game in China

It was just 2 months ago that our blog  Planes, Trains, and Drones–China’s Reverse Engineering Controversy  pointed out the costs and dangers of  sharing technology and trade secrets with China.  American, European, and Israeli firms have all learned that the short-term profits from chasing the lucrative markets in China have longer-term negative implications when Chinese companies beat them at their own game by making the same products cheaper, if not better. But as one who has served on the board of a publicly- traded (NASDAQ) manufacturer, I am well aware of the quarterly and annual pressures from shareholders who want immediate returns and profits. What US firm takes a 20- or 50-year view of  global strategy?

With the Chinese President touring the US this week, the risk and reward strategy has no better example than GEs decision to share its  airplane electronics and engines with a state-owned Chinese partner, Avic, for the new C919 jetliner. (See Ch.5’s discussion of  joint ventures and alliances).  The New York Times (Jan.18,2011) reports, “As China strives for leadership in the world’s most advanced technologies, it sees commercial jetliners…as a top prize. The Times adds, “GE will be sharing its most sophisticated airplane electronics, including some of the same technology  used in Boeing’s new state-of-the-art 787 Dreamliner”.

Neither Boeing nor Airbus are thrilled to see GE, one of their major suppliers, helping the Chinese so much. But both firms have already opened their own joint plane and parts factories in China. “Boeing has opted to accept the reality of both partnering and competing with China”, says the firm’s CEO.

 The VP of another aviation firm, Rockwell Collins, adds, “his employees often ask whether the company is trading its future for immediate sales in China… It comes down to who can innovate faster”.

Discussion questions:

1.What are the benefits and dangers of joint technology ventures with Chinese firms?

2. Where does China view itself  in 20 years in terms of manufacturing?