Hi Karan,
Would be interested to hear more about the kind of offsets offered to Chinese aviation industry.
What the report made clear was that the Chinese push towards making its more defense conglomerates more competitive, more commercial, and more managerially autonomous both from the PLA and the Ministry and making bidding for weapons contracts more competitive has paid dividends by changing corporate culture.
For whatever reason AVIC and the aviation industry in general seems more insulated from these changes and these pressures. Offsets are a start, but theyre not enough yet thankfully. AVIC itself, especially its core activities doesnt seem to be under pressure to be commercially profitable.
I don't know how much the PLAAF has to do with this - its possible that they're just the bottom of the pile after the 2nd Arty, PLA and PLAN, and so arent able to generate the right pressures on AVIC etc. They just haven't invested in the same way in the full spectrum of air power as they have for example with naval power. I would even say the PLAAF has never recovered since Lin Biao died in 1971 after his attempted coup against Mao.
From Karan M :
Hi Johann,
Many western reports are often a curious combination of patronising claims and outright alarmism. I haven't read the one you cite, but one theme seems common in many of these. When the nation is rising, they ignore it. Or they ignore the trend itself as it is politically inconvenient and rocks the boat. Later, they wake up and suddenly act as if they discovered it. Then they get alarmed.
Anyways, unlike India, which realized the values of offsets rather late in the day, and has had all sorts of self proclaimed experts oppose the concept on 2 grounds (more costs get baked in, and PSUs will take it all etc)..China picked up on it pretty early. They have been asking for 30% of TCV offsets for a while now. Meanwhile, this occurred:
Asia Times Online - News from greater China; Hong Kong and Taiwan
Note the climb has been consistent:
http://seattletimes.nwsource.com/html/b ... ina02.html
Note these are old links but indicate the scale of work done a long time back. Note the willingness to transfer the production of a rudder to China in 2005. The same fellows who belabour HAL for being a PSU and only manufacturing doors etc, don't quite get the fact that a strong state can ensure the right kind of manufacturing comes to the designated firm!
http://pra-blog.blogspot.in/2011/10/reg ... -deal.html
or..
However, it has been sourcing components from more than 35 suppliers in China, including tail sections, vertical fins and horizontal stabilisers, and operates an aircraft conversion joint venture. Mounir expected the number of suppliers to grow.
http://uk.reuters.com/article/2011/09/2 ... LW20110921
Some of these PRC deals have gone through, others haven't, but what has counted is that the PRC Govt has very strongly made the case that if companies wish to survive in China, they have to localize. Its a combination of plain old coercion, backed up by compelling incentives in terms of cost sharing offers, tax breaks, subsidies etc. The end results have been that Boeing, Airbus, Bombardier all have invested heavily in China. The amount of tech., that has flowed into China is staggering.
Now a bit about AVIC - as I recall, it broke up into AVIC1 and AVIC2 and then was reorged into AVIC again, with COMAC hived off to access western technology as Chinas commercial aircraft program was suffering thanks to lack of access to western tech.
Here too, the ARJ-91 and C919 programs have been savvily run. They have a plethora of western suppliers lined up and the PRC Govt has been insisting that for these orders to be placed, localization has to occur, namely either Chinese owned subsidiaries or rather JVs have to supply the systems. In most cases, these so called subsidiaries will be AVIC owned and as the UTC case demonstrates, in the hunt for future business, existing rules may well be given a go-by. GE was also in the news for codeveloping next generation avionics systems along with China.
The point is all these technologies are essentially dual use. The Chinese claim to be targeting Boeing and Airbus commercially, and that may well turn out to be a complete flop, but what is being transferred in terms of quality manufacturing, quality control measures, state of the art equipment and training for labor, will directly translate to the sort of stuff the J-20 needs.
What has basically worked for China is the very GOVT interventionism that this forum decries. Vivek Ahuja, one of our most informed commentators points out the structure of the Chinese aircraft industry mimics the US, well actually the competition between Shenyang and Chengdu is sort of artificial, the sort that currently exists between MiG and Sukhoi in UAC, though MiG is struggling to survive. The point is that the Chinese Govt has poured money in amounts that would stagger the average BRF member into its aerospace industry primes to keep them alive, but even so, they were struggling. What allows Factory 187 part of XIAC (to quote an apocryphal example) survive, is the orders via offsets thanks to China's billion dollar purchase of yet another Boeing tranche.
So this sort of investment has kept their factories upto date.
Now, to develop a J-20, China has to go beyond just decently competitive factories, as you well know. It needs ancillary manufacturers, the kind DRDO has struggled so painfully to develop (and which has been the entire purpose of the LCA). These have been helped by the Chinese commercial industry boom, I'm afraid. For instance, a company that makes networking equipment for Huawei, or some other Chinese firm, can move into adjacent electronics equipment and end up supplying to LETRI or one more of the eponymous acronym firms.
The move to mil standard production has been helped immeasurably, in my opinion, by two players - Israel and Europe. China's current move to AESA, which basically makes them actually a threat to US VLO supremacy, is directly the result of Israel, which basically showed them how to a)make AESA modules b) produce them at quality in numbers and c) test them - this was in an interview at Chinadef,mashup with an interview with the Chinese designers.
Similarly, the use of software packages like CATIA from Dassault bypasses the entire business of purpose designed simulation-design-development-engineering-manufacturing packages that were hitherto the secret sauce for US/Western efforts during the Cold War. The availability of both indigenous foundries also means that the PRC can churn out custom gear at limited volumes.
The other story is that of Russia. Its been my belief based on some digging around, that Russia pretty much kept its MIC running on the back of contracts for Chinese industry. They, in a very mercantile way ensured that as long as the price was right, the Chinese got whatever they wanted. 1 Gen behind whatever USSR had in the labs or was next to ready. The massive rise from where the PRC was in the 1980's to where it rose by ~2000, cannot be explained by own work - the Indian example, and that of many nations shows it takes pretty much 3 decades + to mature own technology. The PRC just skipped a decade on the back of Russian expat labour & ctrl+c and ctrl+v design work.
I wouldnt be in the least surprised if Russian institutes played a huge role in the design of the J-20 as well, handling everything from design contracts for RCS reduction, to supplying materials and subsystems. We know the engines are Russian now.
Now, where they lack is simply the complex interplay of design-materials-experience that is jet engine manufacture. This is something the Russians have resolutely refused to give them.
Here there approach has been twofold - buy whatever is available from the Russians, and spend like there is no tomorrow on local programs, with somewhat lackluster results till date. Mind you, the big difference between India and China is this, the Govt interventionism again, in terms of fiscal support.
People may recall the Kaveri flying on a Gromov Il-76. Well, the Chinese, a few years back, purchased one of these custom made Il-76's. Their huge investment in research and infrastructure facilities dwarfs that of most places worldwide, and eerily mimics the manner in which the Europeans, US, Russians built up during the Cold War.
My point is overall, their approach can be bucketed into four methods:
1. Keep overall control with AVIC etc, the state rules supreme- no matter how inefficient, feed them offset programs and lavish funding to keep the entire apparatus alive. Degree of vertical integration is remarkable. Very inefficient from the ROI point of view but also allows for massive resources on scale, available. Somewhat like the bench system employed by the Indian software industry.
2. Develop local ancillary industries to supply to AVIC et al. Offset programs percolate but so does funding via flagship programs like the J-10. While a state owned firm may make the avionics, modules and harnesses come from private vendors.
3. International cooperation wherever and whenever possible.
Ignore IP, beg borrow and steal - self evident here
Cooperate with Russia, Israel (now stopped by the US which basically built the modern Israeli industry by transferring tech and knowhow from umpteen programs of the 80's and 90's in many cases the losing bids domestically) and Europe. Cases in point, engines from Europe, an entire series of naval systems from France and even the Crotale SAMs reverse engineered later on, the codevelopment of the HQ-9 with Russia..
What they have done with the Su-27 is somewhat similar to our work with Project Devil in the 70's..its a one to one copy outside, but within, all new, domestic systems. Of course, our issue was the SA-2 was already obsolete, in their case, the Flankers basic systems worked well, so I'd wager with Ukrainian assistance, they reverse engineered a lot more and only changed stuff like the mission avionics, FBW etc.
4. Invest, invest, invest.
This is most evident in their remarkable investments in infrastructure. Spread out all over China, often replicated, and wastefully so. The point is very simple, this is a country with megalomaniacal super power ambitions, and since military strength is the currency of power, it is willing to do whatever it takes.
Now the million $ question is, how much of this is actually at first world standards. And by first world standards, lets face it, war is organized brutality, and nothing beats the first world in killing first, oft giving it a humane spin.
Looking at India:
Now India inherited the manpower intensive training process from the British, and over time, owned it and then improved on it/localized it to actually not just train soldiers on its own but have them operate as part of a larger system attuned to local needs. Over the past two decades, despite the bellyaching of this very same group which ignored its own history (i.e. the birth pangs pre-1962 and the hard won success beyond), the Indian MIC has also slowly transitioned into one which can provide reasonably modern systems in most cases. What is now expected is to provide cutting edge systems on par with the best of what international consortiums provide. This is the challenge being faced head on, and which is why a Tejas MK1 is only ordered in 40 units despite being a worthy replacement of the Bison & useful. Compromises will not be made, and hence a Tejas MK2 is required. This is where India differs from say the PLAAF.
In China - the book, "Poorly made in China", shows the rampant quality fade that is the bane of Chinese made goods. The author became so paranoid that by the end of his tenure with a Chinese cosmetics firm, he had stopped using soap and other stuff, in his own life, seeing the stuff the Chinese did to adulterate it.
A recent article in Foreign Policy, mentions the rampant corruption that is there in the Chinese military as well.
Bottomline, I expect that while their stuff will work, they are nowhere near the ability of the west or russians yet, in terms of integrated platforms. The sort that India is buying in the Rafale for instance, and which will become the de facto standard for the AMCA to beat. The kind that India will operate in the FGFA for instance, whose performance will dwarf the Su-35, which aircraft China can still not build on its own.
My take is that for India to compete with China, it has to follow its own path.
1. Reinforce Success - this means to scale up DRDO and the SME approach. What works, works. More investments into AMCA, proper funding on a timely basis to make the Kaveri family become a reality, fund DRDO to get whatever infrastructure it requires for test and for high end items. A foundry for instance, even if process wise it is at current tech., and not next generation. Unfortunately, all this takes vision and commitment at the MOD level and the GOI level. To expect the current UPA Govt. which is amongst the worst administrators to ever run this country, to show this kind of commitment of course is asking for the impossible. But one can hope. DRDO is basically the single tech generator in India and balances out the lack of corporate R&D spend in India. Its capabilities are unique and must be carefully husbanded. Its like a combination of Thales, Safran and MBDA all in one. Which means enormous synergies in terms of weapons development and leveraging common technologies and modules. Which is what allows DRDO to develop a Prithvi, and then a BMD system reconfiguring a Prithvi as a target missile, and then work on radars leveraging work from its BMD program. More SMEs the better. SEZs dedicated to SMEs are also a good idea.
2. Open up manufacturing to private players. Thanks to the TATRA fiasco, this has finally happened. But it must be carefully husbanded. There are reportedly 180 make projects in the pipeline (for make projects, the local company is funded to the tune of 80% of the project by the MOD for prototypes and development, and it has to demonstrate a product which is at least 30% indigenous, presumably by value, the beancounters delight). This is excellent news. India's biggest weakness is its OFB and weakness in basics like quality small arms production, ammunition, artillery etc. Many firms are required.
http://ajaishukla.blogspot.in/2012/06/f ... -ficv.html
http://ajaishukla.blogspot.in/2012/04/p ... ucial.html
3. Safeguard offsets and do not dilute FDI. Both play into the hands of foreign OEMs which want complete ownership of their technology transfer and continue to fob off hand me down tech to India. As the Chinese example shows, a strong spine and consistent national message ensures that the vendor will meet Indian national aspirations. Given India is not a rogue proliferator, and has been overly concerned with protecting IP and not even reverse engineering, this is small fry. A FDI cap of 26-49% is perfectly fine. No nation grew up by outsourcing its weapons development to local subsidiaries of foreign powers, especially if that nation like India is not a member of a bloc like NATO and wishes to remain non aligned. Again, these offsets etc can feed into SMEs. and large players.
4. Start National Groups or Commissions for Aeronautics, Land Systems and others, which ensure user participation and commitment. Both coordination and resource allocation of prime national projects - like the LCA, Arjun etc must rest or be vetted by such groups. Transparency breeds competence, competence breeds confidence, confidence will give results. And neither the user nor manufacturer can leave the designer in the lurch based on own priorities. All will be on same page.
5. International cooperation, wherever possible in a speedy manner. But each must be tied to either stringent offsets or tech transfer or local coproduction, or exports. Tangible benefits. Just reducing Time to market and giving the Indian Armed forces a product on time, budget is not enough. More should be expected.
Finally, from the Armed forces end, we have to speed up procurement procedures as well. Theres little point in deciding on a Rafale and then taking 2 years to sign the contract. Or taking five years to join the FGFA. etc.
Based on 1-5, I think we can outcompete and outfight China.
The Chinese have relied too much on state driven interventionism to sustain massive institutions. Saying they compete is all very well, but at what cost? I'd rather India run a lean machine, which is driven by business and economics.
, regarding Chinese and Indian millitary procument styles on relation to aviation particularly. I therefore can’t resist the urge re-posting some key posts as the following for your entertainment:
