German Innovation Moves East

WSJ writes about why and how Siemens is designing its new cellphone in Beijing rather than Munich:

Siemens’ decision to turn east for engineering know-how represented a big gamble for a company that has relied on the ingenuity of its German engineers for more than 150 years. It also reflected one of Germany’s biggest economic challenges ever: The erosion of its dominance in engineering, long the lifeblood of the world’s third-largest industrialized economy and a source of cultural pride.

For years, Germany, like many other countries, lost manufacturing jobs to China and other low-wage countries in Asia and Eastern Europe. But its engineering sector remained a safe haven, one of the few areas where the country could hold its own globally. Highly paid German engineers proved their worth with a steady stream of innovations, including the world’s fastest train, designed by Siemens and ThyssenKrupp AG.

Now engineering jobs are beginning to move abroad as well. “If the Chinese can produce high tech at low cost, one has to consider where that’s going to lead,” said Siemens Chief Executive Heinrich von Pierer, who in May announced plans to hire 1,000 Chinese engineers this year and invest about $1.23 billion in China. “In Germany, we have to ask ourselves what we have to offer.”

Germany’s predicament shows how the flow of increasingly sophisticated jobs into low-wage markets is reshaping economies around the world. And the biggest winner — China — is not merely taking away existing work from industrialized nations, but is also creating thousands of new jobs.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.