Competition Comes from Below: Part I

Competition Comes from Below: Part I

Chinese manufacturers have mastered the smartphone manufacturing process. Take the case of Shenzhen-based Zowee, which manufactures a variety electronic components including smartphone technology. Zowee like many contract manufacturers won their OEM business given they were a low-cost provider capable of quickly scaling operations to meet demand while adhering to mutually agreed upon quality standards. Over time this contract work builds real domain expertise. Today the best phones from a feature/ functionality/ value standpoint are Chinese brands such as OnePlus and Huawei.

Soon, Zowee will deploy robots capable of building entire smartphones without human intervention. Not only has Zowee mastered the smartphone manufacturing process, it has created new intellectual property (“IP”) around the process. Zowee has the option of keeping this IP in-house or it may choose to commercialize a version of its smartphone-building robots.

This is the outsourcing trade-off – “brain drain”, “IP leakage” – whatever you want to call it. Outsourcing seemingly non-core processes to third party specialists runs the risk of those specialists developing capability in your core competency area. Thus, while you pat yourself on the back for reducing costs, you may have unwittingly given birth to a new competitive class.

Learn about Zowee’s manufacturing process in the below video: