This is Mulfingen, a town of just under 4,000
in southwestern Germany.
My first impression?
The small town doesn't look as if there are any major international
companies operating there.
But the place is known as the Valley of the Fans.
There is just one company: ebm-papst.
"Like many other German medium-sized companies,
ebm-papst is also focused on China.
They need the country both as a production location and as a sales market.
And they are now drawing up plans to reduce the risks of
their China business."
The company has almost 15,000 employees worldwide,
of which around 2,000 are in China.
ebm-papst has been producing there for almost 30 years.
I have an appointment with Thomas Nürnberger, head of Asia.
He has to join a video conference to talk to his colleagues
in Shanghai, however.
So I have time to check out the showroom.
The fans manufactured here are used in many different industries.
Sometimes for cooling large semiconductor factories,
sometimes installed in small heat pumps for the home.
"Welcome to our meeting, good to see you!"
I'm joining the video conference.
The aim is to make China a more self-sufficient location,
since there have always been supply chain disruptions in the past.
Such as during the coronavirus pandemic.
With a new headquarters in Shanghai, operations are to become
more self-sufficient, including the IT infrastructure.
"Actually, the local IT team has already set up our required
equipment for the ONE Shanghai project.
Up to now there is no issue."
This means that the China business is becoming more
independent of the headquarters in Germany.
"Local for local" is the new strategy.
"Yes, we've been doing local for
local for several years now,
and we're also trying to
decouple the supply chains.
And we are also trying to develop and prepare various scenarios
with different plans.
For example, we’re planning to be able to relocate production lines
from China to India within 2-3 months, even if we don’t currently
expect to have to do so.
Basically, we want to manufacture in China for China, and want to
achieve a 95% localization rate there in the next two years."
Even in times of increasing geopolitical tensions,
the goal is for the business stay intact.
Will this strategy work?
We discuss this with company boss Klaus Geißdorfer.
He is currently rethinking the globalization strategy of
the past few decades.
As few components as possible should be sent back and
forth between Europe, Asia-Pacific and America.
Everything should be supplied, produced and sold locally.
I ask him specifically what would happen if war suddenly broke out
between China and Taiwan?
"We have definitely set up
our organization in China in such a
way that we can separate the Chinese company from the rest of
the world at any time within
a very short period of time.
We are preparing for this and we are prepared for it.
I can’t yet say what we will do in a specific case if such
an event occurs."
Is ebm-papst's new strategy an isolated case or a general trend?
I asked economics expert Jürgen Matthes in Cologne.
"We are seeing companies in China actually focusing more and more
strongly on localization.
This means that many companies
seem to be focusing much more on
their own China business.
This is obviously possible and many companies are moving
in this direction."
Back to Mulfingen.
CEO Klaus Geißdorfer is certain that although the new strategy will
cost more money in the short term, it will pay off over the long haul.
For the environment, too, since transporting fewer goods means
saving more CO2 emissions.
"We are increasingly moving away from
how we originally thought about globalization:
like moving production via global networks
to wherever the costs are lowest regardless of where they are
in the world.
Time to say goodbye.
Probably also a farewell to the globalization we thought we knew.
"The major economic blocs
such as China, the EU and the US
are drifting further and further apart.
That’s why companies are
increasingly relying on the new strategy
of having local supply chains.
As long as geopolitical tensions continue to rise, this trend is
likely to continue."
The new regionalization strategy will reduce the risk of
globalized supply chains.
The industrial site in Mulfingen
will also have to focus more on
the European market.