German company bucks tech outsource trend | Science| In-depth reporting on science and technology | DW | 16.04.2015
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German company bucks tech outsource trend

Many companies which once produced things in Europe have moved labor-intensive manufacturing to Asia. A Berlin battery maker wants nothing to do with that, thank you.

Berlin-based BAE Batteries GmbH, a battery maker for the tech industry, is a European company that has adapted to remain relevant.

"We decided to only have one plant in Germany," says CEO Jan IJspeert, "and that's why we say that we are one of the few battery manufacturers that can truly say 'quality made in Germany.'"

Nor does the mid-sized source its parts from Asia.

"Not one of the components is from outside the continent," he told DW.

On the factory floor

BAE's decision to produce exclusively in Europe is unusual. Nis Høyrup Christensen, a China expert at the Copenhagen Business School, says EU-based tech companies are migrating east to capitalize on "Asia's cheap labor supply." These companies outsource the production of low-margin, labor-intensive tech goods, ceding those jobs and much of the infrastructure to Asia.

For Christensen, the business model BAE has adopted could help the company survive in the marketplace. Nor does he think the model many other EU-based companies use - that of simply outsourcing all production to China - will work in the long run.

Workers at the Foxconn factory in China

Smartphone supplier Foxconn in China: low costs, lots of criticism of labor practices

"You really can't retain all the design and planning jobs and then outsource all the manufacturing," Christensen said. "The designers and the ones developing the technologies need to be close to the factory floor. There's a lot of innovation going on in the manufacturing process, also."

Finding a niche

At BAE Batteries, the Europe-only strategy seems to be working. IJspeert says the company's business is booming because customers want quality batteries that won’t fail. The company today exports 75 percent of everything it makes to the US, China, Australia and Canada. It's a classic example of a super-specialized, German "Mittelstand" company - privately owned, and with revenues of roughly 50 million euros ($53 million) a year.

BAE has also carved out a niche in developing what he calls "uninterruptible power systems" - and is doing especially well in China, where it sells to that country's cloud computing providers and to the national railroad network.

"If there's a fallout at a data center for several hours, companies can lose millions," IJspeert said. "So this is a market segment where we see that customers are really willing to pay for the quality of our products."

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