Contract Manufacturing of Precision NC And CNC Machining
Precision CNC Machining is actually the strength of the Chinese Industry in terms of being cost competitive. However, where India dominates is in small production runs and protection of intellectual property. There are two potential scenarios where a North American or European company would consider off-shoring to either China or India:
- You are a job shop and need to expand capacity and throughput;
- You are an OEM who needs to manufacture a proprietary product at a low cost.
For a Job Shop:
What the job shops need to protect from is the eventuality that their customer and supplier might establish direct business relationship in order to bypass them and “cut the middleman”. India's judicial system and the overall environment of ethics make it relatively easier to enforce any Non-Disclosure Agreement (NDA) that the Indian supplier would sign.
It is true that India has a very strong culture of corruption. However, this is more prevalent in politics and bureaucracy. Most (but definitely not all) businessmen are ethical. They realize that such ethical behavior is required if they have to gain a foothold and grow as part of the international business community. Besides, being an exporter and being able to visit foreign lands frequently is a sign of great prestige in the society. So the average businessman in India is more willing to honor the NDA signed with the foreign buyer.
By the way, we strongly recommend that the foreign customer retain an Indian lawyer and have the Indian supplier sign an NDA which is enforceable in India. Because the judiciary is State controlled in China, the NDA has no meaning. Besides, the Chinese Government directly or indirectly encourages companies to break such arrangements.
For an OEM (Original Equipment Manufacturer):
If you are an OEM, the most important thing you need to worry about is the protection of intellectual property (IP). China openly encourages its businesses to copy foreign designs and steal technology. India, by law and by social norms strongly discourages such practice. There are always exceptions in both countries. But by and large, your IP is a lot safer in India than in China.
So the OEM needs to weigh the cost of losing the IP against saving a few extra percent on the product cost. If you save 10-20% on product cost by going to China versus India, but if your product is going to be copied within a few months and sold in competition with you, what is going to be your preference?
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