First-Hand Experience with HNTE
For over a century, Schenck has been enhancing manufacturing processes through its now market-leading balancing and diagnosis equipment. Today, the company’s strong China arm, Schenck Shanghai Machinery (SSM), develops and produces solutions for the Chinese and international market, employing over 600 people in China and achieving sales of RMB 600M in 2016.
Peter Legner, CEO and President of SSM, shared with China Focus the company’s first-hand experience with the HNTE program, as well as his take on what China’s innovation push means for multinational high-tech manufacturers.
Tell us about the R&D efforts you are spearheading in China.
We have R&D activities in all business segments: balancing and diagnosis systems, cleaning and filling technology, and testing and assembly products. In China, we focus on developing solutions tailored to the specific market requirements, such as easy-to-handle automation systems and solutions for higher through-put quantities. Our Chinese R&D also jointly works with our headquarters and competence centres in Germany and Denmark to develop “world solutions”: machines and systems built in China and sold to the world.
How complex was the application process to obtain HNTE status?
The biggest challenges are registering six patents in China every three years and proving on paper that the company invests 3% of the annual turnover into R&D activities. Ongoing government supervision to ensure compliance with HNTE criteria has also intensified, but this is not necessarily a setback and will depend on how cooperative local authorities are. For us, this experience has been quite positive so far.
Some foreign SMEs worry about the IP implications of the HNTE program, since it requires certain inventions to be registered locally. What is your opinion on this?
I understand these concerns, as IP is not thoroughly protected by law in China. However, IP protection is improving and with China pursuing its ‘Made-in-China 2025’ program, we certainly can expect the government to focus on this subject.
What would be your advice to other SMEs considering to apply for HNTE status?
It is absolutely crucial to work together with an external consultant who is familiar with the certification requirements and able to guide the applicant through the complex approval process – especially the preparation of all necessary documentation.
Which benefits is “Made in China 2025” likely to generate for innovation-leading foreign enterprises like yours?
In order to achieve its ambitious goals within the set time frame, China will depend on foreign technology and aid for a certain time to come. China’s leap forward in regards to innovation, efficiency, and quality is an opportunity for all foreign companies providing sophisticated technology for plant equipment, software, and system integration. We are technology leaders precisely in equipment and systems designed to enhance efficiency and quality in manufacturing, so we are optimistic about the future.
Will China’s innovation push pose new challenges for foreign technology leading companies?
If China is able to realise its goals, it will have a firm position as a high-tech solutions provider and will become a serious competitor in the world market. “Made-in-China 2025” has the full attention and support of the Chinese government, which is subsidising all promising technology trends in China. This should be a wake-up call for other countries, especially Germany, whose economical backbone lies precisely in the technologies targeted by “Made-in-China 2025”. Even today, one should never underestimate the dynamics of the Chinese market and competition.
At the same time, the requirements of our customers will continue increasing and we will have to adapt accordingly. But I am confident that we will achieve this – we are market and technology leaders worldwide in all our segments, and we have access to the broad and constantly evolving knowledge basis of our headquarters and competence centres.