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China bubble or organic growth? Probably both.
hat tip: http://rogerpielkejr.blogspot.com/2011/03/going-up.html
http://www.businessweek.com/magazine...1018613201.htm
hat tip: http://rogerpielkejr.blogspot.com/2011/03/going-up.html
During the opening panel last night Louis Chênevert, CEO of United Technologies, provided another telling anecdote about the massive scale of China's growth. The world elevator market is about 500,000 units per year, of which, 280,000 are installed in China and only 16,000 in the United States (this article has some details).
On the panel, Chênevert, Mark Pinto (of Applied Materials) and Zhenrong Shi (of Suntech Power Holdings) explained and agreed that, in their business areas, companies are relocating to China not because of labor costs, but rather because of scale and subsidies. Given this, my sense is that in may contexts the US cannot and should not try to compete. Think of elevators as a good example.
On the panel, Chênevert, Mark Pinto (of Applied Materials) and Zhenrong Shi (of Suntech Power Holdings) explained and agreed that, in their business areas, companies are relocating to China not because of labor costs, but rather because of scale and subsidies. Given this, my sense is that in may contexts the US cannot and should not try to compete. Think of elevators as a good example.
Frank Lloyd Wright predicted U.S. suburban sprawl when he said the shape of modern cities would be decided by the winner of a race between the car and the elevator. "Anyone who bets on the elevator is crazy," he said.
China may prove him wrong. Some 350 million Chinese—more than today's entire U.S. population—will move to China's cities in the next decade and half, according to McKinsey, and government measures to limit sprawl and protect farmland mean developers have to build up rather than out. McKinsey estimates that as many as 50,000 skyscrapers will be built in China over the next 15 years, the equivalent of 10 Manhattans.
The prospect of that building bonanza has manufacturers racing for a piece of an $11.7 billion annual Chinese elevator market that researcher Freedonia Group predicts will more than double within eight years. While Otis Elevator leads with a 23 percent share, lesser-known elevator makers hope to make names for themselves by breaking speed records or winning trophy contracts in the world's tallest structures.
"If you have more tall buildings, you're going to need more lifts," says Philip Oldfield, a researcher at the Chicago-based Council on Tall Buildings & Urban Habitat. "It's that simple."
Hitachi (HIT) in April finished building a $66 million, 50-story testing tower. The company will use it to develop elevators that can break the speed record, currently held by Toshiba. Two days after the tower opened, Hyundai Elevator vowed to take the title by midyear.
Hitachi and Hyundai are racing to be first with elevators that can climb at an ear-popping 40 mph, roughly the vertical speed of a Boeing (BA) 777. The one-upmanship extends even to the testing towers, where the two are dueling over which has the world's tallest. Hitachi won by tacking on a 33-foot lightning rod.
"It's a very expensive sideshow, but they want to get into the big boys' playground," says James Fortune, a veteran elevator consultant who has advised architects on some of the world's tallest buildings, including the current record holder, Dubai's Burj Khalifa. "You don't hear the big guys bragging about the world's fastest elevators."
The world's biggest elevator maker is Otis, which supplied the 57 lifts for the 128-story Burj Khalifa. Its share of the world market slipped to 20 percent in 2008 from 26 percent four years earlier, according to Freedonia. Otis, a subsidiary of United Technologies (UTX), had sales of $11.7 billion last year, 50 percent more than the elevator sales of its closest rival, Switzerland's Schindler Holding.
To grab share in China, Otis will soon start construction on a fifth Chinese factory. The plant in the inland city of Chongqing is meant to capitalize on a government push to help less-developed areas catch up with coastal cities like Shanghai and Guangzhou. The government's "go-west policy" is one reason about half of the 450,000 elevators installed this year worldwide will go up in Chinese buildings, according to Jeff Pulling, Otis' head of high-rise operations.
Chinese manufacturers are also ramping up. Shenyang Brilliant Elevator, which has become one of the country's biggest domestic lift makers since opening in 2002, will move in July to a 222-acre elevator factory in Shenyang that vice general manager George Tsong says will be the world's largest. The new plant will crank out about 50,000 elevators a year.
Marquee projects make great advertising, says Shinji Sasaki, general manager for overseas marketing at Mitsubishi Electric's elevator unit. Mitsubishi supplied 61 elevators for the Jin Mao Tower, a skyscraper in Shanghai's financial district that was China's tallest building from 1999 until 2008. "We take clients there and have them see for themselves," Sasaki says. "We've landed a lot of sales from that."
That marketing effect is what Toshiba (TOSBF) was looking for when it cut an "irresistible" deal for the owners of the Taipei 101 tower, says C.P. Wang, principal architect of C.Y. Lee & Partners, which designed it. The world's tallest until Burj Khalifa overtook it this year, the Taipei 101 makes use of 50 elevators, including two express lifts that travel at a world-record 38 mph. "They wanted a building that showcased their abilities, so they threw in the marketing costs," says Wang. "They gave the owner a very good price."
China may prove him wrong. Some 350 million Chinese—more than today's entire U.S. population—will move to China's cities in the next decade and half, according to McKinsey, and government measures to limit sprawl and protect farmland mean developers have to build up rather than out. McKinsey estimates that as many as 50,000 skyscrapers will be built in China over the next 15 years, the equivalent of 10 Manhattans.
The prospect of that building bonanza has manufacturers racing for a piece of an $11.7 billion annual Chinese elevator market that researcher Freedonia Group predicts will more than double within eight years. While Otis Elevator leads with a 23 percent share, lesser-known elevator makers hope to make names for themselves by breaking speed records or winning trophy contracts in the world's tallest structures.
"If you have more tall buildings, you're going to need more lifts," says Philip Oldfield, a researcher at the Chicago-based Council on Tall Buildings & Urban Habitat. "It's that simple."
Hitachi (HIT) in April finished building a $66 million, 50-story testing tower. The company will use it to develop elevators that can break the speed record, currently held by Toshiba. Two days after the tower opened, Hyundai Elevator vowed to take the title by midyear.
Hitachi and Hyundai are racing to be first with elevators that can climb at an ear-popping 40 mph, roughly the vertical speed of a Boeing (BA) 777. The one-upmanship extends even to the testing towers, where the two are dueling over which has the world's tallest. Hitachi won by tacking on a 33-foot lightning rod.
"It's a very expensive sideshow, but they want to get into the big boys' playground," says James Fortune, a veteran elevator consultant who has advised architects on some of the world's tallest buildings, including the current record holder, Dubai's Burj Khalifa. "You don't hear the big guys bragging about the world's fastest elevators."
The world's biggest elevator maker is Otis, which supplied the 57 lifts for the 128-story Burj Khalifa. Its share of the world market slipped to 20 percent in 2008 from 26 percent four years earlier, according to Freedonia. Otis, a subsidiary of United Technologies (UTX), had sales of $11.7 billion last year, 50 percent more than the elevator sales of its closest rival, Switzerland's Schindler Holding.
To grab share in China, Otis will soon start construction on a fifth Chinese factory. The plant in the inland city of Chongqing is meant to capitalize on a government push to help less-developed areas catch up with coastal cities like Shanghai and Guangzhou. The government's "go-west policy" is one reason about half of the 450,000 elevators installed this year worldwide will go up in Chinese buildings, according to Jeff Pulling, Otis' head of high-rise operations.
Chinese manufacturers are also ramping up. Shenyang Brilliant Elevator, which has become one of the country's biggest domestic lift makers since opening in 2002, will move in July to a 222-acre elevator factory in Shenyang that vice general manager George Tsong says will be the world's largest. The new plant will crank out about 50,000 elevators a year.
Marquee projects make great advertising, says Shinji Sasaki, general manager for overseas marketing at Mitsubishi Electric's elevator unit. Mitsubishi supplied 61 elevators for the Jin Mao Tower, a skyscraper in Shanghai's financial district that was China's tallest building from 1999 until 2008. "We take clients there and have them see for themselves," Sasaki says. "We've landed a lot of sales from that."
That marketing effect is what Toshiba (TOSBF) was looking for when it cut an "irresistible" deal for the owners of the Taipei 101 tower, says C.P. Wang, principal architect of C.Y. Lee & Partners, which designed it. The world's tallest until Burj Khalifa overtook it this year, the Taipei 101 makes use of 50 elevators, including two express lifts that travel at a world-record 38 mph. "They wanted a building that showcased their abilities, so they threw in the marketing costs," says Wang. "They gave the owner a very good price."
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