Growth pneumatic for German company

A senior worker (left) conducts one-on-one training session for an intern at Festo (China) Ltd's newly upgraded regional service center in Jinan, Shandong province. Provided to China Daily

Boss sees substantial increase in electrical automation technology

In Festo's largest Asian logistics center in Jinan, Shandong province, 30 tons of materials are imported from around the world every week and 15 tons of products are shipped via domestic transport every day.

Considering the figures, it conjures up a busy, perhaps chaotic picture. However, in the upgraded regional service center, with several workers present, the products and wooden boxes were kept in good order on high iron shelves.

The efficient scene may explain the German company's core products: pneumatic and electrical automation technology.

Chen Zhizhong was happy to be one of the first to witness the unveiling of the new center after he was recently designated as the general manager of Festo (China) Ltd.

Transferred from US-based Tyco Flow Control Co, which focuses on heavy machinery, Chen said he is looking forward to some changes based on his past career.

"As a manager, I expected to learn something new from a trendy sector and also the different culture of a European company," said Chen, who had just arrived in Jinan from Shanghai to celebrate Festo's 20th anniversary in the Chinese market since its formal landing in 1993.

Shifting from a public company to an independently family-owned enterprise group, which was established in 1925 with headquarters in Esslingen, Germany, Chen said he feels a closer relationship with peers and a more relaxed working atmosphere.

However, from traditional heavy industry to the emerging automation sector that manufactures intelligent products and smart solutions is also a challenge to 54-year-old Chen.

Chen graduated from Tam Kang University, Taipei, in 1981. He received a master's degree in science from Auburn University, in the US, in 1988.

During his nearly 30-year career, Chen worked at several multinational enterprises as regional sales manager in charge of marketing and sales. He has worked in many markets, including Japan, North Asia, Southeast Asia, as well as the Chinese mainland, Hong Kong, Macao and Taiwan.

"When I came to Festo, I knew nothing about pneumatic and electrical automation, let alone various complex products," he said.

Still, once you pay enough attention to a new field, things just become much easier, Chen added.

Chen's working days at Festo are always long. He is eager to gain more knowledge about each department and employee.

As an indication of his appetite for hard work, our interview started at close to 9 pm. Chen sipped from a cup of coffee after rushing his dinner. The longtime professional manager then had to attend a meeting after the interview.

Of course, after just one year of learning, Chen cannot be described as an expert at Festo. Being a manager, he said he understands that he needs to know more in a wider sense rather than being thoroughly proficient as technicians in specific production chains.

But when it comes to the transition and further path of the company, Chen's logic is just the opposite.

"We are heading toward being a specialist in our focal majors from being an all-round skilled company covering various areas," he said.

Currently, the most important industry segments for Festo China are automotives, tires and rubber, electronics and light assembly as well as the food and beverage industries, which together account for more than half of the company's sales.

Chen said expanding operations in these sectors is one of the key steps.

Despite facing fierce competition from other automation giants in China, such as Rockwell Automation Inc, Siemens AG and ABB Group that already have a place in the market, Chen is intent on Festo catering to what is a volatile business.

Discussing the current situation of the marketplace, Chen said he is very confident.

China's industrial robots market will reach 35,000 units in 2015, accounting for 16.9 percent of the global total, according to the forecast of the International Federation of Robotics, an industry alliance based in Germany.

Over the next two years, revenue in the robotics market may reach 1 trillion yuan ($165 billion) in China, the organization forecast.

Meanwhile, Festo has maintained a double-digit growth rate in China for many years. Festo China has also been Festo's biggest market outside Germany in terms of sales since 2009. Total turnover from China makes up more than 10 percent of the company's total sales.

"China has the world's highest industrial output and the biggest automotive market," said Chen.

The trend among the country's domestic manufacturers is that it is moving from manual labor toward automated production processes. "This offers tremendous growth opportunities, which we are already taking advantage of," said Chen.

"In order to save costs for our customers, we have invested much money in our Jinan factory, which is Festo's biggest factory outside Germany. Meanwhile, we are getting closer to the market by moving the manufacturing base to China," said Chen.

As a supplier, Festo is not only aiming to provide solutions for customers but also help customers reduce costs against a background of rising prices of materials and the cost of labor in China to seize a bigger market share.

Faced with whether the movement of the factory will raise suspicions over the brand's quality in that "Made in Germany" is a selling point for its products, Chen said all producing processes in China are strictly in accordance with German standards.

With the spirit of being "in the region for the region", Chen said Festo has reinforced its foundation for future growth in China.

"Customers can get lower prices and then control their costs. We are working with German experts in China to help the development of the factory," said Chen.

In the training center of the factory, one German technician was tutoring some freshmen, telling them how to operate a sophisticated machine.

For the future, Chen said he expects the sales volume in China to rise by four times by 2020 compared with the current level. "We recruited eight senior managers recently," he added.

Also, when the traditional pneumatic technology market moves into a period of stable growth, Festo will pay more attention to electrical automation and process automation.

Although the electrical automation market makes up less than 10 percent of the company's revenue, it is growing at a pace of 30 to 60 percent year-on-year, while the growth rate for the pneumatic market is 15 to 20 percent.

"We are living in such a fast world. Products are updating day-by-day. The efficiency of electricity is much higher than that of pneumatic technology. We are preparing for the future," said Chen.

Nevertheless, he is enjoying a kind of green life and not over indulging. For example, his iPhone is not the latest version, apparently.

Some of Festo's customers are suppliers of Apple Inc. It is also working with Samsung Electronics Co Ltd and Lenovo Group Ltd.

Still, apart from maintaining the high-end market, the company will also march into the middle-end market to attract more customers and orders.

"As before, sales of our electromagnetic valves are very limited because of their high prices. Today, we are producing them with an automatic system, which has improved productivity. Also, we are expanding into the mass market, such as photocopiers," said Chen.

Not long ago, one customer ordered 5,000 photocopiers. This was the company's biggest order in quantity so far.

Starting from a training program in 1985 when the automation industry was almost non-existent in China, and going through a period when it only had a small logistics center in Shanghai Jinqiao Export Processing Zone, Festo China has started to take root in the marketplace.

It now employs approximately 2,000 staff, has 42 sales centers and more than 13,000 customers in China.

From time to time, he proudly pointed out that Germany is widely regarded as the leader of innovation and rigor, especially in the industrial sector.