Asian tigers keep on growing

Aided by UK Trade & Investment (UKTI), many British exporters are winning orders in Asia. John Helm talks to Delcam's marketing manager, Peter Dickin to discover how the company has made inroads into this fertile market.
Economic growth rates in Asia show no signs of abatement. China is currently growing at around 10% a year and has been for roughly the last three decades and India lags not far behind. Asia-Pacific is also leading the growth in aviation orders, and between 2010 and 2030 is expected to account for over 11,000 of all new aircraft deliveries – over a third of global output.

Specialist Birmingham-based software supplier, Delcam was founded in 1977 and has won six Queen's Awards for Enterprise. It was recently ranked the world's leading CAM software specialist supplier for the 12th consecutive year by US market analysts CIMdata.

“Our CADCAM solutions have a wide range of applications,” Dickin begins. “They can be found in aerospace, automotive, healthcare, orthotics, and in many other fields. On the aircraft side, Delcam systems have been used in just about every major programme in recent years, covering engines, airframe components and interiors.

“Globally, automotive is our largest sector. Aerospace accounts for around 15% of sales, though obviously this proportion varies according to country.”

According to Dickin, exports represent more than 85% of Delcam's turnover: “Last year Asia accounted for around a quarter (23%) of total sales. We have wholly-owned subsidiaries in Japan, China, India, Thailand, Malaysia, Indonesia, Singapore and Vietnam. In Korea, Taiwan and Hong Kong, we use joint venture companies, and resellers in the Philippines. China is our biggest export market for new software sales in Asia. We recently signed up our 2,000th customer in the country, and in India we celebrated the tenth anniversary of our subsidiary company.

“Prospects in all the Asian countries are good: sales have recovered following the 2009 economic downturn. Not being in the Eurozone during that period helped since depreciation of Sterling compensated to a great degree for the global fall in CAM software sales. That gave us a competitive advantage since we suffered only a 3% decline in sales value as against an industry average of 15%.

“The Japanese market is second only to China for potential growth as it recovers from last year's natural disasters. We command a high market share in Korea, thanks to a very strong joint venture. Vietnam is coming on quickly, albeit growing from a small base. There is much potential in Singapore, especially on the aviation side since opening the Seletar Aerospace Park a few years ago. We're also seeing significant growth in Turkey as well, although our management structure places this in Europe, not Asia.”

Dickin stresses that trading with Asian countries is very different than with other parts of the world.
“Cultural factors are very important,” he explains. “Throughout Asia much greater emphasis is placed on personal relationships than in either Europe or North America. In the West there is greater focus on technical issues - how things work, for example – rather than on relationships. However, the Asian approach can be quite beneficial to a business like ours where support and back-up services are essential to ensure that the user gets the maximum benefit from the software.

“Also, there is a much greater level of government involvement at all levels in Asia, especially in China. Generally, the state is held in higher regard, so British exporters working with government agencies like UKTI probably gain more credibility than elsewhere.”

As to the future, “Asian industrialisation is likely to result in greater self-sufficiency to reduce imports from the West,” notes Dickin. “Nowadays, many contracts contain ‘offset' clauses requiring some assembly or production to be transferred to the host nation. For example, Airbus is assembling A320s at Tianjin in China, and Rolls-Royce will assemble engines for the Boeing 787 and Airbus A350 in Singapore. Increasing production for the home market should also reduce export dependency which is vulnerable to fluctuations in world trade - something Asian governments have no control over.”

Backing British business

The UKTI plays a key role in facilitating overseas trade deals, employing 2,400 staff and operating in 96 countries. The organisation participates in selected trade fairs, outward missions and provides specialised market intelligence to exporters. Always keen to encourage new participants and especially SMEs, UKTI's West Midlands regional director, Doug Mahoney says businesses that do export see a 34% increase in productivity in their first year of exporting are 11% more likely to survive and benefit from operating in a more competitive environment; attracting and providing more opportunities for higher skilled workers. UKTI also works closely with UK Export Finance - the successor body to the Export Credit Guarantees Department – in providing financial assistance; that came to £2.32 billion in 2011-2.

Bilateral trade with China – now the world's second largest economy – has increased nearly fivefold since 2001. China is also Britain's largest Asian trading partner. However, the trade in goods is one way - last year's deficit was £22 billion - though this was partially offset by the small £2bn surplus on services, which includes IT and software sales. There is evidence that UK is rebalancing its trade with China – from importing five times as much as it exported in 2007, this ratio has reduced year-on-year, to just under three and a half times in 2011. Exports of goods to China have also risen by 19% for the first six months of the year, whereas imports of goods from China have only risen by 5%, so the trade deficit is definitely improving.

The visit to China in November 2010 by Prime Minister David Cameron and other high profile Cabinet members may go some way towards closing this gap. As the largest ever visit there by UK Ministers, it resulted in trade deals worth billions of pounds. For example, in the aerospace sector, Rolls-Royce signed a £750 million agreement to supply Trent 700 engines for 16 Airbus A330s, and Group Rhodes of Wakefield won a £1.85 million machinery contract with Xinhang Aeronautical.

Dickin meanwhile, praises the role of UKTI: “We have been working with them for years and we know the range and quality of support they provide. UKTI networking helped us with a deal we struck with Harbin in 2010 to supply three CAD programmes for aircraft component manufacture, and the Prime Minister's visit gave impetus to the 10-year software upgrades and maintenance agreement we negotiated with First Automobile Works (FAW) in 2011. That was our biggest maintenance contract in the world.”

“Asian governments are so much more involved in all aspects of business that having UKTI's support makes a real difference,” Dickin concludes. “I would highly recommend its services to any company doing business there.”

www.delcam.co.uk