Western manufacturers seem to be tripping over themselves in their eagerness to sign collaborative agreements with Asian partners as a low-cost route to developing new airliners. Their potential Asian partners seem to be tripping over themselves to sign such agreements, as a low-cost route to acquiring new airliner technology. If they are not careful, the two sides will end up tripping over each other: the one by selling its birthright for a short-term gain, the other by trying to break into a market which isn't big enough to sustain it.
Technology transfer works in a growing market, where the aspirations of the new entrant receiving that technology can be met through expansion. The airliner market is not such a device.
The combined pressures of increasing regulation and customer expectations mean that the entry price into this market is now extremely high. Even the most optimistic projections of airliner sales for the next 20 years show that airliner manufacture can only be profitable if a small number of aircraft builders share the available sales. It follows that if new manufacturers come into the market and take sales, their sales must come from substitution, not expansion.
That does not mean that existing manufacturers have an inalienable right, to continue to dominate the market, nor does it mean that new entrants, should not have access to the market. It does, however, mean that established and aspiring manufacturers alike, need to look closely at what they are trying to do - and why.
Given the complexity of today and tomorrow's airliners, it is unlikely that any new entrant will have both the financial and technical resources to come into the market without the involvement of an established manufacturer. In the short term, such involvement may not be to the exclusive benefit of the new entrant: most of the established manufacturers are searching for ways to reduce costs of manufacture.
In the short term, it can be of benefit to an established Western manufacturer, to have either components or complete airframes made or assembled in lower-wage economies such as China, Taiwan or Korea, while retaining the design, development and marketing of aircraft for itself. It would be a very unwise Western manufacturer which did not heed the fact that these developing economies are acquiring skills (like computing) at least as quickly as they are acquiring skills in metal-bashing.
The danger comes when the new entrant no longer needs the established Western partner because it has acquired the technical and intellectual ability to design and build its own aircraft. Even more crucially, notwithstanding the troubles which have affected economies like Japan's in recent months, the centre of gravity of aircraft financing is moving inexorably eastwards. That means that an Asian partner may well find itself in the happy position of having the low-cost labour base, the high-cost technology base and the vital financial base to build a new airliner.
A Western manufacturer which has exported its technology in order to gain access to labour and finance may find itself in competition with its erstwhile partner, desperately trying to sustain market share and home-based production against a more modern rival, which it has itself at least partially created. True, that manufacturer may have, as its reward for transferring technology, a minority share of a successful programme, but that may not be enough to sustain a business. No matter how clever or innovative a technology is, it becomes debased if its originator is not closely involved in its production.
Therein lies the rub, the manufacturer which exchanges its high technology for a low cost-base, this time around, will not be in a prime position for the development and exploitation of the next generation of high-technology aircraft, because, it may not be generating enough turnover or profits from the current generation. That could mean that it's not only technology that is being transferred, but (by default) an industry itself.
Source: Flight International
