Workers operate on a production line of Guangzhou Wenzhong Technology Co Ltd, or Custype, a smartphone case maker based in Guangzhou, Guangdong province, in August. [Photo provided to China Daily]
Move improves product yield rates, cuts workloads, streamlines communication for enterprises.
On a narrow one-way street in Chang'an township, an hour's drive from the manufacturing hub of Guangzhou in South China's Guangdong province, a factory of Yihong Precision Technology Co Ltd manufactures an important component for smartphones — a type-C adapter.
The small unit, involving only 45 skilled workers, provides 300,000 type-C adapters on average every day to electronics companies, including big names such as Japan's Sony and Nintendo, as well as Chinese smartphone maker Xiaomi Corp.
Despite a global downturn in consumer electronics over the past year, Yihong Precision saw a 51 percent year-on-year increase in sales in the first half.
This, according to Hua Jiansheng, deputy general manager of Yihong Precision, mainly came about thanks to its push for "digitalization".
"The global electronics consumer market has continued to decline, severely affecting supply chain providers like us. In such a challenging environment, we have to leverage digitalization to solve more problems and liberate employees from complex and lengthy processes as much as possible," Hua told China Daily.
In Chang'an township where Yihong Precision is situated, it is not an exaggeration to say that one can gather all the components needed for a mobile phone just by walking down one street.
Here, over 1,000 electronics manufacturers contribute various upstream and downstream components for global smartphone makers, acting as significant players in the global electronics supply chain.
The small township, covering an area of 81.53 square kilometers and with a permanent population of 800,000, has nurtured seven listed companies, including globally renowned mobile phone manufacturers like Oppo and Vivo.
The global tech industry downturn has deepened amid rising geopolitical tensions, and the smartphone market has been declining for several quarters, posing unprecedented challenges to these Chinese supply chain providers.
Data from the China Academy of Information and Communications Technology showed that over 130 million smartphones were shipped in the domestic market in the first half, a year-on-year decrease of 4.8 percent.
"So, how can a small company like us get a piece of the cake amid increasingly fierce competition?" Hua asked.
A screen shows Yihong Precision's digitalized production process at the company's factory in Dongguan, Guangdong province, in August. [Photo provided to China Daily]
Yihong Precision came to a conclusion recently that controlling production costs and reducing defect rates of products, not increasing manpower, are its top priorities, he said.
It soon leveraged WeCom, the communication platform for enterprises developed by social media platform WeChat, to digitalize its production processes and management support, he said.
Previously, salespeople had to physically carry paper orders and run to various departments for production planning, production schedules and other manufacturing processes for approvals before production could begin.
Now, approvals are done through WeCom, and it only takes a few minutes to complete everything, he said.
Yihong Precision has also developed a new function based on WeCom, where the production supervisor can clearly see the completion rate of each work order with upstream and downstream factories.
"With such a simple move, repetitive paperwork and communication with external factories have been eliminated from the company's wholesale production processes. It has resulted in a significant reduction in workload for employees, which has also allowed them to focus more on production to improve product quality," he said.
The most direct indicator of such a digitalization effort has been that the company has gained a 1 percent improvement in product yield rates, which refer to the proportion of products that meet quality standards and are considered usable or saleable, out of the total number of products manufactured or processed.
"Don't underestimate the 1 percent increase in yield rate. With this 1 percent, we are no longer incurring losses. The gross profit margin of the adapter industry is only around 5 to 10 percent, which leaves little room for profit," Hua explained.
Since early this year, the manufacturing sector of major economies such as Europe and the United States has continued to shrink. In October, China's manufacturing PMI decreased to 49.2 percent, down by 0.9 percentage point year-on-year.
According to a survey by the National Bureau of Statistics, manufacturing enterprises, especially small and medium ones, have faced challenges like insufficient demand and shrinking overseas orders.
Huo Jinjie, president of market research firm International Data Corp China, said in an earlier interview that digital resilience will determine whether or not companies worldwide, including those in China, can respond quickly to business disruptions and restore market confidence amid rising economic uncertainties.
"Digital resilience, which refers to an organization's ability to rapidly adapt to business disruptions by leveraging digital capabilities, will not only enable businesses to restore operations, but also drive them toward more innovations and growth," she said.
The market consultancy predicted earlier that 65 percent of global GDP would be driven by digitalization by 2022 and will drive over $6 trillion of IT spending from 2020 to 2023.
"Currently, many SMEs, especially in the manufacturing sector, are hesitant to drive digitalization due to concerns about high costs," said Lu Qingwei, vice-president of WeCom, adding that it only requires a change in mindset as the costs are not that high.
"The ideal digitalization for companies, especially SMEs, is to offer a canvas and a pen to innovate independently to connect people and data, and become a bridge," Lu said.
A Custype employee makes a phone case at its workshop in Guangzhou in August. [Photo provided to China Daily]
Deng Hong, founder of Guangzhou Wenzhong Technology Co Ltd, or Custype, a smartphone case maker that once held a 70 percent market share in the Amazon 3C electronic accessories category in the overseas market, agreed with Lu's assessment.
Deng began exploring digital management systems in 2018. He visited and extensively studied the digital production lines of several clothing manufacturers, spending more than 2 million yuan ($275,000) to buy automated production equipment.
But soon, the tech veteran realized that the equipment was not suitable for the company's development pace. The machine is lying idle in the factory today.
"It was a waste at that time, like using an anti-aircraft gun to kill mosquitoes," Deng said.
He subsequently built another small proofing factory to make products in small batches. If a product becomes a hit at the seller, he would outsource that to external factories for mass production.
During this process, Deng needed a quick response from various upstream suppliers and downstream factories so that the company could deliver quality products to foreign countries on time. It was then that he started using WeCom, where design, procurement, and suppliers are all able to collaborate on the process.
"Even if an employee of one process leaves, he or she can be immediately replaced by others automatically on WeCom, which is very beneficial for management," he said.
This time, Deng said, the money spent on such a digitalization process was "negligible", as WeCom only charges 300 yuan for the certification of factories with less than 1,000 employees per year.
Zhu Hongren, former chief engineer of the Ministry of Industry and Information Technology and Party secretary of the China Enterprise Confederation, said: "The new generation of information technology has given birth to new formats and models such as digital management, platform-based design, intelligent production and collaboration."
"To seize development opportunities, Chinese companies should fully leverage digitalization to improve industrial and supply chains in the manufacturing sector, so as to create unique and competitive advantages for China in manufacturing in the era of the digital economy," he added.
