Excerpts

During 2009 there has been a substantial increase in the amount of new contracts for aircraft systems, components and equipment placed with companies based in low-wage economies.

During 2009 an estimated $31,555 million of new business was awarded to the global aviation supply chain (see table two), of which $9,212 million was spent with companies based in low wage economies of the world (see table three). This represents 29.2% of the total market in new systems, components and equipment work, a very steep growth rate over the 6.2% share recorded in 2008 (see table four). Most of this work takes place in the airliner sector, which is responsible for around 73% of the value of the total aviation supply chain.

Was this jump in outsourcing work the result of a statistical quirk or does it signify a more general trend of increased aerospace manufacturing work in low-wage economies? The statistical picture is confusing because of the widely-fluctuating amounts of work being assigned to low wage economy countries (see table three) over the last few years and the fact that one or two major contracts (such as the JSF work assigned to Turkey) can distort the overall picture.

This study, however, suggests there has yet to be a fundamental shift within the market which could spell a substantial change to the entire dynamics of the global aerospace supply chain. There are a number of factors to suggest this.

The value of work won by companies in low-wage economies on European and North American aircraft programmes is worth approximately the same as the work won by Western suppliers on new aircraft programmes pioneered by companies in low-wage economies (China, Brazil, Korea, Turkey inter alia). The value to Western suppliers of work on aircraft originating in low wage economies between 2005 and 2009 was $25,325 million (see table six), whereas suppliers in low-wage economies won $23,564 million of work over the same period from aircraft manufacturers in North America and Europe over the same time(see table five).

But low-wage manufacturing companies are now starting to invest in high-wage areas. For example, at the end of July 2008 Brazil’s Embraer said it would invest EUR148 million in two new plants in Portugal to make wings and tailpieces for export. The two plants will be based in Evora in the south of the country. One, which will cost EUR100 million, will build large metallic parts for aircraft, such as wings, while the other will work with composite materials for tailpieces. The wing production plant should start producing in 2011, and the second plant would become operational in 2012.

It is true that the number of low-wage economy countries now increasing their share of overall global aerospace spend is too many for it to be an isolated or local phenomenon. Countries where the growth trend - in terms of turnover and employment is particulary strong – include:

  • Poland
  • Turkey
  • India
  • Malaysia
  • Pakistan
  • Vietnam
  • Brazil
  • Mexico

This list does not include China, which is growing its aerospace turnover at around 40% a year but restructuring its manufacturing industry to more closely align new production plants with markets. The workforce is currently being reduced from around 400,000 as workers involved in non-core aerospace activities are being reassigned

But there are few signs that low-wage economy companies are starting to move their expertise up the supply chain. Until now the real value in the supply chain has been with systems integrators - such as fuel, pneumatic, electrical and environmental control systems, markets which are still dominated by the US majors Goodrich, General Electric and Parker, inter alia.

As noted in the introduction, Chinese companies registered around $700 million worth of component and structural work on North American and European airliner programmes in 2007. In contrast, Honeywell will earn $23 billion from supplying its HTF7500-E engine to Embraer’s new MSJ and MLJ business aircraft

4.7 Taiwan

The largest aerospace manufacturing concern in the country is Aerospace Industrial Development Corporation (AIDC), which has manufactures the IDF C/D Hsiang Sheng fighter. The company is also involved in a wide range of collaborative civil programmes. These include:

  • The co-development programme of CL-300 business jet empennage with Bombardier Inc.
  • The co-development programme of S-92 helicopter with Sikorsky Aircraft United Technologies Corp.
  • The co-production programme of B-737/747 pressurized door with Boeing Company.
  • The co-production programme of 601K turbojet engine with Allison Company.
  • The co-production programme of ASE120 turbojet engine and AS907 turbofan engine with Honeywell International Inc.
  • The co-development programme of CT7 turboshaft engine with General Electric Company.
  • The co-production programme of Falcon 900/2000 commercial jet's rudder.
  • The co-production programme of Airbus A321/#16A Barrel with Airbus Company.
  • The co-production programme of EC-120 helicopter with Singapore Technologies Aerospace.
  • The co-production programme of C-27J cargo tail with Alenia.

Other significant aerospace manufacturing companies based in Taiwan comprise:

Hiwin Technologies

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