Why Additive Manufacturing Will Ruin China
We call this century the Asian Century.
China is on the rise. GDP has ballooned in recent years (despite suspect figures), manufacturing is on the up and we can see Chinese manufacturing displacing Western manufacturing.
Chinese manufacturing really hit it’s stride when Deng Xiaoping, one of the former leaders of the Communist state, embarked on a series of economic reforms to shift the Chinese economy out of stasis. He opened up to Western markets by promoting (some) liberalisation of the regulatory environment.
Today those reforms now bite the West hard. The promise of China has never been in technological innovation, but the efficiency in which it does it. With a fifth of the world’s population working for very little, it’s no wonder they have managed to completely decimate Western manufacturing hubs (turning Western economies into service economies for the most part).
That manufacturing sector has been a massive reason for China’s growth. They’ve done well to cultivate a generation of Chinese entrepreneurs too, allowing a number of technology businesses to start and grow. Despite the walls stopping Facebook from entering the country, social media and other platforms still thrive in their own way.
Now look to another process which has emerged recently: additive manufacturing.
To understand additive manufacturing (also known as 3D printing) you’ve got to first look at the process of subtractive manufacturing (traditional manufacturing).
In subtractive manufacturing you start with a large sheet of metal (as an example). You then cut that metal into pieces, taking away the resources and bits you don’t need, until you’ve got something resembling what you wanted in the first place. Essentially, it relies on taking away from your existing resources.
The result of that process is a lot of wastage. Traditional manufacturing pulls something like 30% of it’s resources in waste, just because it has to go through the subtractive process.
Additive manufacturing approaches the problem from a completely opposite direction. Using precision laser technology, it adds material at the exact point required. The result is a process that enjoys little in the way of wasted material. The process is more efficient and generally cheaper than it’s subtractive counterpart.
We’ve seen the rise of the 3D printer as the first iteration of additive manufacturing. Make no mistake the current generation of technology is a gimmick. There is very little you can do with a Makerbot other than create some basic items (at the moment).
Where it will change quickly is as the technology behind that additive process gets more efficient and more precise. Once we can add metals and other elements, suddenly you’ll be able to 3D print a phone. Or a computer. And all you will need are the resources (as in raw materials) to do that.
Why then does this ruin the Chinese economy?
One of the first things you’ll see when someone can print their own phone is immediacy brought to manufacturing. This is hard to grasp — traditionally we’ve always had to wait for our products. We’ve had to go to a shop, or go online to an e-commerce store. In the future, we’ll just need the relevant design. Everything else can be done by us.
The very human desire for immediacy (how many people pay for priority shopping?) will mean manufacturing starts to become decentralised. People will start to have 3D printers in their homes and directly manufacture the goods they want.
You won’t see that applicable to every single sector of manufacturing. Cars, for example, may be too large for most 3D printers to handle at a given time. There will be elements of large capital goods that will survive this disruption.
The Chinese economy, as a whole, is built off the exports of whitegoods, plastics and a host of other everyday appliances. It’s a fairly logical thing to assume then that as the capability to manufacture these goods shifts from a centralised model (factories) to a decentralised model (3D printers) we’re going to see the Chinese economy take a large hit.
It isn’t just the impact on Chinese exports that additive manufacturing will hurt, though. The demand for raw materials suited to the manufacturing capabilities of 3D printers is going to increase. This is particularly pertinent as the cost of goods are reduced.
Take iPhone cases. To print an iPhone case costs around 40 cents versus the average 10 or more dollars you’ll spend buying from a store. Suddenly the rest of that 10 either goes into consumption (the purchase of raw materials for your printer) or into savings (eventually resulting in more consumption).
For the Chinese economy this could be disastrous (and not just the Chinese economy!). Rising commodity prices may take away from the ability to quickly and efficiently build large scale public infrastructure. As a result, that will place greater pressure on government debt balances.
This next century is no longer going to be the Asian Century. Additive manufacturing will drive power back into the hands of consumers and their ability to purchase at scale.
As a result, we’re not just going to see the Chinese manufacturing sector change. We could see it perish completely.
