Reuters reports that the European Union has opened two investigations into Chinese cable exporters to assess whether optical fiber cables are being sold in the bloc benefiting from unfair subsidies. The European Union sees China as a systemic rival and has 23 investigations underway into various products exported from the country.
If the investigations follow actions to regulate the shipment from China, it would be beneficial to the fiber optic cable makers in the European Union. Chinese companies are able to offer the lowest price for their fiber optic cables due to the overall low cost of production that includes price competitive raw materials, low cost machinery, and lower manpower cost.
There is a debate over the quality versus the price for the fiber optic cables and components coming out of China. The quality of a product is not directly related to the price, but to ensure the highest quality standards a company needs to spend money on establishing and maintaining standards, its own research and development functions, etc. Suppliers offering low prices for their fiber optic products have always been targets of the “Low Quality Supplier” attack from their competitors.
For example, a fiber optic cable company can easily copy the design of another company by just seeing the datasheets. Optical fiber and other raw materials are easily available and the necessary modifications on the machines can be made with the help of mechanical and electrical engineers. This means months or even years of research and development work done by a company can easily be copied by another company.
Intellectual Property rules are not always effective to stop this copy-paste culture. Most of the companies do not maintain that work culture, ethics, or integrity. The cost incurred for research and development can be neglected when such companies offer their products to the market.
With the decrease in domestic consumption of Optical fibers and cables in China, more and more Chinese companies are looking for opportunities to sell their products outside China. Asian, South American, and African markets are experiencing this overflow of Chinese fiber optic products. When there are multiple Chinese companies competing with each other in a market, the local suppliers become voiceless and vanish out from the competition.
How Chinese Cable Companies Get an Upper hand?
Buyers, by nature, will always look for the lowest possible price. Technical evaluations can be passed by providing samples that meet the specification requirements. If in an open tender, in which suppliers from any country are allowed to participate, without any special conditions, almost all participants can be technically qualified. Then the evaluation criteria for selection becomes “THE PRICE”. Yes, only the Price matters at the end of the day!
How to Overcome?
Buyers should maintain certain standards to evaluate the capabilities and facilities of fiber optic product suppliers. Consistent quality can only be maintained with the presence of research and development in a manufacturing location. Severe auditing conditions shall be established by the buyers to ensure both the quality of the product and supplier.
Countries should give priority to local manufacturers. Governments should regulate the dumping of low quality fiber optic products since the investment in communication networks are national assets.
Import duty from sources of low price products can be increased to protect local manufacturers. Some countries provide subsidies for distributors who get the products from China through duty-free zones. Rules shall be made to stop the misuse of loopholes in the regulations.
The Institute that looks into the case alleges that Chinese exporters have increased shipments, increased market share, and harmed EU producers through their low prices.