On the radar

China’s emerging role in aircraft manufacturing will address demands at home as well as in the global aviation sector

July 24-30, 2017
By YANG HAN in Hong Kong

When China unveiled a model of its new stealth fighter jet at the Paris Air Show in June, it represented another step forward into the global arena for the country’s fledging aviation manufacturing industry.

It was the first time that the FC-31 jet, developed by State-owned enterprise Aviation Industry Corp of China (AVIC), made an appearance at a Western air show.

From stealth fighters and the world’s largest amphibious aircraft, to passenger jets like the C919 and ARJ21, Chinese plane makers are starting to come onto the world’s radar.

In late April, local media reported that China had successfully tested the AG600 — reputed to be the largest amphibious aircraft, at roughly the size of a Boeing 737 — in the southern city of Zhuhai. The aircraft has received 17 expressions of interest so far, according to Xinhua News Agency.

The importance for China to develop its own aviation manufacturing industry has been prioritized by the central government in the 13th Five-Year Plan (2016-20) and the Made in China 2025 initiative.

“The Made in China 2025 initiative shows that China is trying to switch from low value-added industry to high value-added industry,” said Alexious Lee, head of China industrial research at Hong Kong-based brokerage CLSA.

“As a matter of fact, this kind of strategy has been implemented for decades, from high-speed rail to maritime transportation, and now it’s time for aviation manufacturing.”

Back in the 1970s, China was already looking to enter the global aviation industry, with its first attempt at developing a commercial jet, the Y10. But the project was later canceled.

It was not until 2007 when the State Council approved the large aircraft design plan, with a total investment of 60 billion yuan ($9 billion), that the nation revived its “big plane” ambition.

To fulfill that dream, the State-owned Commercial Aircraft Corporation of China (COMAC) was established in May 2008 to implement large passenger aircraft programs in China, as well as trunk liner and regional jet programs.

Crew members wave after completing the maiden flight of China’s homegrown C919 passenger jet at Pudong International Airport in Shanghai on May 5. Credit: AFP

Since its establishment, COMAC has hit major milestones. Its first regional aircraft, the ARJ21, carried its 10,000th passenger on April 22 this year — less than a year after it started commercial operations.

COMAC’s most recent and most renowned project is the C919, China’s first homegrown large passenger plane. It completed its maiden flight in May and is expected to compete with the updated Airbus 320 and Boeing’s new-generation 737.

Some have argued that because many of the C919’s components are provided by international suppliers, it is just assembled in China rather than manufactured by the country.

However, what really matters in high-end manufacturing is the integration capability. That is according to Huang Xun, associate professor in the department of mechanical and aerospace engineering at Hong Kong University of Science and Technology (HKUST), who was partly involved in the C919 project.

Explaining the case of the aircraft’s engine, Huang pointed out that it uses the advanced LEAP-X (LEAP-1C) engine manufactured by CFM, a joint venture of US giant General Electric and French company Safran, which is the first on a Chinese airplane and will also be used in the Boeing 737 MAX and Airbus A320neo.

On why the overall integration is so crucial, he said: “Take a simple example: The processors on an iPhone are not manufactured by Apple, yet people like using it because it has done a great job in integration that provides smooth user experience.

“Unlike the military sector, the manufacture of commercial airlines is relatively open and there should be joint works. It is an industry of globalization.”

US manufacturing and technology conglomerate Honeywell is one of the major international suppliers for the C919, but its relationship with China’s aviation manufacturing industry goes far beyond that.

“Honeywell has operated in China since 1935, and our aerospace sector has been in China for over 30 years,” said Jeff Rollins, Asia-Pacific vice-president for original equipment manufacturers at Honeywell Aerospace.

“My experience is from MA60 with AVIC, and I was engaged with COMAC at the very beginning of ARJ21,” he said. The MA60, a turboprop-powered commercial aircraft manufactured by AVIC Xi’an Aircraft Industry Co, had its initial flight in 2000.

Currently, the Asia-Pacific headquarters and one technology site of Honeywell are both very close to the COMAC facility in Shanghai.

At the same time, the company has five joint ventures with Chinese companies, such as Hunan Boyun New Materials Co, Harbin Dongan Engine Corp (a subsidiary of AVIC), and AVIC’s Xi’an Flight Automatic Control Research Institute.

“In our relationships, we are doing a lot to develop with COMAC, as well as with our partners within China,” said Rollins. “It’s not just for C919, but we would like to be able to sell that equipment globally to other platforms.”

Foreign investment is not rare in China’s aviation manufacturing. In May, Boeing and COMAC started to build a Boeing 737 completion center in Zhoushan, in East China’s Zhejiang province. And European aircraft manufacturer Airbus Group has set up a new completion and delivery center in North China’s Tianjin, which will deliver its first A330 in September.

According to Boeing, China has a component role in every current Boeing commercial airplane model. More than 9,000 Boeing airplanes fly throughout the world with integrated China-built parts and assemblies.

CLSA’s Lee suggested that China’s aviation manufacturing industry might follow a similar trajectory as the country’s high-speed rail sector, which started by using global resources but has now become China’s business calling card abroad. “From an industry perspective, have it first, then develop it,” he said.

COMAC continues to work on getting airworthiness certificates for the C919 from the European Aviation Safety Agency and the Federal Aviation Administration of the US. On May 31, during a two-day visit to Berlin, Premier Li Keqiang called on Germany to help the C919 get certification from the European Union.

According to the COMAC website, the C919 has already received 600 orders both from domestic and international customers.

“Meeting domestic needs will be the first priority for C919,” said Lee, admitting that it is still too early for China to compete with established giants like Airbus and Boeing.

The International Air Transport Association forecast last year that China will overtake the US as the world’s biggest passenger market by 2024, and in 2035, China will be a market of 1.3 billion passengers.

“This is a very significant market. If you look at the infrastructure development in building airports to serve cities across China with large populations, you need both airport infrastructure and aircraft to serve these needs,” said Honeywell’s Rollins.

In its annual China Current Market Outlook, Boeing projects a demand for 6,810 new aircraft in the next 20 years with a total value of $1.025 trillion. It also predicts that China will need 5,110 new single-aisle airplanes through 2035, accounting for 75 percent of the total new deliveries, compared to 18 percent at present.

While commercial operations for the C919 are still some way off, COMAC is embarking on a wide-body aircraft project, the C929, through China-Russia Commercial Aircraft International Co, its joint venture with Russia’s United Aircraft Corporation.

“It’s very impressive to see how much growth has been made in a relatively short period of time when we compare (COMAC) to their peers,” said Rollins.

Honeywell’s support will continue in the C929 project, and it will also work with Aero Engine Corporation of China on a number of initiatives involving aircraft engines. “COMAC is going to continue to improve their ability to supply China and the world. It’s very exciting to be part of that and see that happen,” Rollins said.

HKUST’s Huang has confidence in the rising status of China’s aviation sector. “Aviation manufacturing is a knowledge-oriented industry and China never lacks talent.

“(We need to think) how to cooperate with foreign companies, how to integrate and build up the global market together. It requires more participants and more effort to make our flights safer and more punctual.”

CLSA’s Lee said: “High-speed rail changed how the world sees China. (To build aircraft) shows that China’s manufacturing can compete with the world.”

Drone makers flying high China’s dominance of UAV sector shows no signs of easing with Shenzhen established as the global hub

July 24-30, 2017
By YANG HAN in Hong Kong

China may be taking baby steps in the manufacture of commercial and military jets but it is leaving its global competitors lagging behind in the drone market. So complete is its dominance, the country’s drone sector is set to remain a leader for years to come.

The military and civilian drone industry may still be in its nascent stage but investment bank Goldman Sachs has estimated the sector will be worth $100 billion by 2020.

China is already the world’s largest exporter of military drones. Xinhua News Agency reported that the Wing-Loong II, made by Aviation Industry Corporation of China, won the biggest ever export order for a Chinese unmanned aircraft system even before its successful maiden flight in late February. The Cai Hong series, manufactured by China Aerospace Science and Technology Corporation, has been sold to more than 10 countries.

But it is in the rapidly expanding civilian and commercial drone sector, which has soared in recent years on the back of falling prices, that Chinese makers are the runaway leaders.

The standout among them is DJI Technology Co, which has developed into the world’s biggest consumer drone manufacturer, accounting for around 70 percent of global market share.

DJI vice-president Xu Huabin said the company was instrumental in developing the commercial drone industry. “Around 2010 and 2011, DJI started to develop multi-rotor drones and downsize it to make it a kind of product that is easy to use and of low cost,” he said.

“In the past, people only knew about drones used in the military field. We can say that DJI created this new industry, changing drones from model aircraft to products that can be commonly used by everyone.”

According to Xu, DJI flying platforms and handheld devices are sold in more than 100 countries and regions around the world, especially in high-end markets like the United States, Europe, Japan and Australia. “Roughly 80 percent of our products are sold abroad.”

DJI may be the market leader but it is not the only major Chinese drone player. In Shenzhen, in South China’s Guangdong province, there are more than 300 drone makers. Often compared to the United States’ Silicon Valley, this city is the world’s hub for civilian unmanned aerial vehicles (UAVs).

Yang Jincai, director of the Shenzhen UAV Industry Association, said in a National Business Daily report last year that 90 percent of the world’s drone products, especially UAVs produced for civilian customers, are made in Shenzhen.

Xu believes that an open platform for innovative ideas and talent, such as in Shenzhen, is a key factor in the strong growth of startup companies like DJI.

Shenzhen ranked second (between Beijing and Shanghai) on a list of China’s most innovative cities, released in February by a research institute under media conglomerate China Business Network.

People visit the headquarters of drone maker DJI Technology Co in Shenzhen, southern China’s Guangdong province, on June 3. DJI is the world’s biggest consumer drone manufacturer. It plays a key role in the commercial drone sector too. Credit: Blanches / ImagineChina

Cities like Shenzhen have even rolled out funding programs specifically for the aviation industry, including drone manufacturing.

“The environment in Shenzhen is beneficial to startups as there are many supportive policies,” Xu said. In the Made in China 2025 initiative, the country’s national strategy focusing on high-tech manufacturing, the development of UAVs is explicitly emphasized.

Xu said that with everyone almost “starting from zero” in UAV manufacturing, no one has an innate advantage. “The one that can find the best talent and the breakthrough (in technology) will have a head start.”

Even so, it would appear difficult for other companies to compete with an industry giant like DJI. According to research firm IDC, in terms of aerial photography drones in China, a total of 129,000 devices were shipped in the first quarter of 2017 — and DJI held a 69.9 percent market share.

Second on the list in that market segment was Beijing-based company Zerotech, with only a 5.6 percent market share despite the success of its pocket selfie drone, Dobby.

Pan Xuefei, a senior market analyst with IDC China, said Dobby’s success was short-lived. In IDC’s report for the third quarter of 2016, Zerotech’s market share had jumped to 26 percent, while DJI fell from 70 percent to 52 percent.

“The report came out when DJI was about to launch its new small drone Mavic, so the whole market was waiting to see how it went. The situation soon recovered after the release,” said Pan.

In third place was French company Parrot with 5.4 percent market share, followed by Chinese companies Yuneec and Walkera with 4.4 percent and 2.3 percent respectively.

Pan pointed out that market demand is increasingly shifting from big drones like DJI’s flagship Phantom series, which targets professional users, to smaller drones.

Small drones, with wingspans of under 250 millimeters, are aimed at the consumer market, so have a much bigger user base, she said.

DJI is active in that space with its new small drone, Spark.

“Image stabilization will be the focus of the future, while manufacturers also need to think about how to advance their technology including human-computer interaction, image transaction and face recognition,” Pan said.

DJI’s Xu sees consumer drones becoming “a daily electronic consumer product” — evolving into smaller, cheaper and more powerful devices for application in a wider range of user scenarios.

Other Chinese manufacturers are exploring the use of drones in the industrial field. Xaircraft specializes in UAV systems for agriculture, while PowerVision focuses on industrial drones.

Even the big Chinese smartphone makes are getting in on the act, with Xiaomi, LeEco and Meitu expressing intentions to enter the market.

During CES Asia 2017, a three-day consumer electronics show held in Shanghai in June, China’s e-commerce giant exhibited a drone delivery system aimed at solving last-mile delivery in rural logistics.

Commercial drone services are a growing industry. Hong Kong-based Dronesurvey Asia specializes in high-quality mapping images and 3D-modeling data for architecture, civil engineering, urban planning, construction and industrial inspection.

The company was established by British-born creative professional and qualified drone pilot Nick Foxall, who has a background in film and video production.

Consultancy PwC, in a study published in 2016, estimated the value of the emerging global market for business services using drones at more than $127 billion.

“I am getting hires especially from construction sites for mapping,” Foxall said, explaining that with certain software, high-resolution and 3D images captured by drones can be used in the construction-monitoring process.

Currently, all of Dronesurvey Asia’s drones are DJI products, and Foxall said he is interested in trying the new Matrice 200 series.

Xu said one of DJI’s biggest advantages is its strength in operation. “It allows us to bring ideas to reality within a short period of time so we can quickly bring out the next generation and keep updating.”

As services develop, he expects the industry to become more integrated, like the automobile sector.

Pan from IDC expects more commercial drone achievements in agriculture, city security and defense, and electricity inspection, with customized solutions for different industries.

Xu said new elements will be added as the industry explores different ways to work with third-party hardware and software developers.

Powerful CH-5 ready for export Potential buyers line up for latest Cai Hong-series drone, believed to be one of the world’s best unmanned military aircraft

July 24-30, 2017
in Chengde, Hebei

China is ready to mass-produce the CH-5 reconnaissance/combat drone, the nation’s latest offering to the international military drone market.

The first mass-production CH-5 made its debut flight, in which it was airborne for more than 20 minutes, at an airport in North China’s Hebei province on July 14.

A mass-produced CH-5 reconnaissance/combat drone takes off for a test flight on July 14 at an airport in North China’s Hebei province. Credit: Wang Jing / China Daily

Ou Zhongming, project manager of the Cai Hong, or Rainbow, series of drones at the China Academy of Aerospace Aerodynamics in Beijing, said after the test that several nations, including current users of other CH models and new clients, are in talks with the academy on procurement of the CH-5, which is believed to be one of the best unmanned military aircraft in the world.

“Today’s flight means the CH-5’s design has been finalized and we are ready to mass-produce it,” he said on July 14, refusing to name potential buyers.

The China Academy of Aerospace Aerodynamics is the country’s largest military drone exporter by number of products sold overseas. Its CH-series drones have been sold to militaries in more than 10 countries, making it the largest drone family that China has exported, according to statistics from the academy.

Shi Wen, chief designer of the CH series, said the CH-5 outperforms all of its Chinese-made counterparts when it comes to operational endurance and payload capacity. The plane is as good as the US-made General Atomics MQ-9 Reaper, a hunter-killer drone often deemed by Western analysts as the best of its kind, he added.

The prototype CH-5 was first flown in August 2015. The drone is made of composite materials and has a wingspan of 21 meters. Twice as big as its predecessors in the CH family, the drone can stay in the air for 60 hours, almost three times as long as other Chinese models. Its maximum operational range is designed at 10,000 kilometers, according to Shi.

The drone’s 1-metric-ton payload capacity enables it to take as many as 24 missiles on a single mission, strong enough to take out a convoy of armored vehicles.

The unmanned aircraft is also able to carry an airborne early warning system to act as a platform for regional surveillance and battlefield command and control. It also can carry electronic warfare instruments to collect electronic intelligence and to jam enemy communications or radar.

Moreover, the CH-5 can detect underwater targets such as submarines when mounted with certain devices, Shi said.

The CH-5 can also use high-resolution cameras, radar and radio transmitters to serve a wide range of civilian and public sectors.

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