Thursday, February 24, 2011

Technology Transfers

"Beauties are needed with their blue prints". Lockheed, Boeing, Dassault Aviation, European Consortium(BAE, EADS, Alenia Aeronautica), SAAB and Mikoyan-and-Gurevich(MIG) are all lined up in Asia and other parts of the world but now bids must include upgrading the local industry too. These kind of agreements shows that companies are uncertain about their future sales and they want to secure it.
European Consortium gave such proposal to Saudi Arabia when they accepted Eurofighter Typhoon bid of $4.43 billion for 72 beauties. There are many aspects to look why such proposals are emerging now specially if you consider Saudi Arabia which previously has nothing related to hard mechanical engineering labor stuff. The most obvious reason is competition which has become more and more intensive. SAAB which previously bid only for Swedish Air Force tenders is now actively trying to find more potential markets such as Thailand and South Africa for its JAS 39 Gripen and SAAB Erieye. SAAB previous used most of the technology for its aircrafts from the US and therefore has to pay license and other fees thus cost of the product was too high giving them less chance to compete in market. Other factor was that US often created hindrances in the supply of equipments if her own companies are bidding for the same tender or the purchaser has not good relations with them. Now SAAB are trying to develop their systems independently or with the help of Europeans giving them equal footings to compete for international tenders. Swedish companies are facing high labor cost and to act competitively they need to relocate their major workload to importing countries where the environment is stable enough to expand in local industry and even export directly from other countries. India is becoming one of the most suitable market for this sort of transfers due to her labor intensive industry. When it comes to attaching high tech gears to the aircrafts companies recall the structure back to original plant at home and complete the rest of the part.
French companies in order to get big tenders are now locating their labor intensive work to other countries where not only job opportunities are being created for local industry but employees are also OK with the salaries and benefits they are earning. Dassault Aviation asked for $2 billion to upgrade the Mirage 2000s of India because the production plant has stopped for it and only Rafael are being produced now. To lower the cost of upgradation Hindustan Aeronautics will now upgrade 50 examples locally with the help of Dassault Aviation and only 4 to 6 will be upgraded in France. If Dassault Aviation wins the Indian MRCA competiton it has announced to set his assembly plant in India and work with Hindustan Aeronautics Limited(HAL) in technology transfers similar to the commitments made by SAAB and European Consortium. After all the bid is of $10 billion for 126 multirole fighter aircrafts.
But this is not restricted to India, French companies are coming with the same kind of ideas for other emerging markets such Brazil and Russia. French is actively bidding for Brazilian tender for 36 Multi-role fighter planes competing against Boeing F-18 Hornet. France has also recently signed an agreement with Russia to built her two Mistral-class amphibious assault ships and then further two would be built in Russia with technology transfers.
China is also pursuing the same kind of strategy with the developing countries who could not afford highly costly fighters. China has placed condition that it will transfer technology only if the order is in huge numbers. China made an assembly and manufacturing plant for Egyptian Air Force for its K-8 trainers. Egyptian Air Force is currently looking for a batch of JF-17 Thunder along with technology transfers. These fighters will replace F-4 Phantom and F-5 Freedom Fighters.
This strategy is clearly bringing countries together and also paving ways for the companies to have joint ventures in future which will decrease the risk of huge investment and can result in huge profits if it succeeds. For example Spain and Indonesia joint venture for CN-235 which not only met the requirement of local air forces but also widely exported.

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