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​When David partners Goliath: Synergies for success

Published on: 28-Jan-2019

Goliaths of the world are increasingly partnering small and medium enterprises (SMEs), and reaping the benefits of such large-small collaborations.

It was not so long ago when factory robots had to be segregated from humans, fenced-up behind “safety cages” painted in highly visible colours and sporting signs that warned workers away. Their sheer bulk and rapid movements posed a significant safety hazard to workers. The 21st century world of collaborative robots, or cobots, on the other hand, could not look more different. Factories of today are increasingly “cage-free”, where sleek cobots sit alongside humans, equipped with systems that ensure safe and intuitive operations. These cobots assist with traditionally manual and repetitive tasks, so that employees are freed up to focus on higher-value work.

According to a report by Grand View Research, a U.S.-based market research firm headquartered in San Francisco, the potential value of the cobot market could grow to S$9.22 billion (US$6.77 billion) within a decade, with an “increasing deployment of cobots in the Asia Pacific region” as manufacturers strive to increase the quality and precision of their processes.

Blending strengths: Hanwha Techwin and PBA Group

Right on the pulse of these developments, South Korea’s Hanwha Techwin announced in February this year that it will be collaborating with Singapore-based PBA Group, putting their combined expertise into establishing a cobot production facility in Singapore. The facility will manufacture the Hanwha Collaborative Robot, said to be an affordable yet high-performance robot that can automate manual work such as picking and placing items, palletising, and screw-driving. 

Current robotic and automation equipment used in Singapore can take as long as three months to manufacture and ship, arriving from places like Europe, Japan and China. The joint venture between Hanwha and PBA Group — the first such collaboration between a Fortune 500 company and a local precision-engineering SME — will reduce delivery times for cobots to as little as four weeks. Maintenance and servicing work can also be done in Singapore.

According to Mr U-Gene Chan, PBA Group’s Business Development Manager, PBA’s intimate knowledge of the South-East Asian market and their strong distribution networks were reasons why they were the choice partner for Hanhwa.

Mr Chan believes that such a collaboration is mutually strengthening. “Hanwha brought the development and research expertise… and PBA developed application technology to fast-track commercialisation of the PBA-Hanwha robot arm”, he said. “The partnership works because both parties could see strong value and a win-win situation.”

The benefits arising from such collaborations are echoed by Dr Shameen Prashantham, Professor of International Business and Strategy at China Europe International Business School (CEIBS), who has studied the partnerships between SMEs and MNCs extensively.

“Small and big firms have complementary capabilities: smaller companies are typically more agile and creative whereas large companies have a stronger resource base and reputation. And each lacks what the other has. So, in theory, [it is] a wonderful combination”, he said.

According to the International Federation of Robotics, Singapore’s “robot density” of 448 robots per 10,000 employees is second only to South Korea in the world, a clear signal of the country’s ambitions in automation adoption. The strategic collaboration between Hanwha and PBA Group will have further positive spillover effects on the economy.

“By providing quick and ready access [to cobots], we can meet the growing demand for robots beyond factories to hotels, restaurants and even the heartlands. The increased adoption of robotics will in turn give rise to a robotics accessories market — this is where local system integrators who specialise in the various industries can move up the value chain to become brand and product owners”, said Mr Chan.

Growing together: Hitachi High-Tech and Cleanlogix

The promising collaboration between Hanwha and PBA Group is just the latest in a string of strategic partnerships between multinationals and SMEs in the country. In 2016, German manufacturing company Infineon partnered Singapore-based HOPE Technik to develop an Automated Guided Vehicle (AGV), a robot that assists with transporting materials and devices across the factory floor. The partnership was recognised as the “Most Technologically Disruptive” at the 2017 Singapore International Chambers of Commerce (SICC) Awards.

In August 2015, Hitachi High-Tech (Singapore), a subsidiary of Japanese tech giant Hitachi Ltd, announced its partnership with Cleanlogix, a Singapore-based SME. Hitachi High-Tech applied Cleanlogix’s proprietary CO2 cleaning technology to the precision cleaning of sensitive technological components. The environmentally-friendly cleaning technology was a perfect fit for Hitachi High-Tech’s needs, as this method used gas in a way akin to a dry-clean, which does not leave any residue or watermarks.

According to Dr Clive Choo, Senior Lecturer at Nanyang Business School who specialises in research on SME strategy, it is reasonable for a multinational to tap on a smaller company’s expertise. “[It] makes a lot of sense for Hitachi [High-Tech] to use Cleanlogix’s existing and proven technology rather than trying to take a huge risk in in-house development”, he said.

For Cleanlogix, Executive Director Mr Patrick Pang cited the access to global customer networks as well as the increased credibility and validation from partnering a large multinational as two advantages of collaboration, making the situation a win-win. His counterpart at Hitachi High-Tech, Mr Christopher Han, General Manager (Electronic Materials and Business Development), affirmed the mutual benefits. 

“I think the partnership is about leveraging on each other’s capabilities and strengths. They [Cleanlogix] have the technology but they may not have the marketing platform, or may not be financially strong enough to deal with the bigger MNCs”, Mr Han said. “We have the worldwide presence.”

The collaboration between the two companies has since grown. In 2017, it was announced that Hitachi High-Tech had taken an equity position in Cleanlogix, further expanding the exclusive and global distributorship of its precision cleaning solutions. This move may allow Hitachi High-Tech to have a greater say in Cleanlogix’s research and innovation strategy, which may help Hitachi [High-Tech] carve out greater “competitive advantages against their competitors”, added Professor Choo.

Singapore means business

SMEs in Singapore continue to make strides in their innovation journeys, positioning themselves as ideal candidates for mutually-strengthening business partnerships. Figures from last year showed that the annual rate of Research and Development (R&D) investments made by SMEs between 2010 and 2015 had more than doubled as compared to the preceding five-year period. More than S$5 billion (US$3.69 billion) was channelled by these smaller companies into research in 2015. Just this year, it was also reported that local precision engineering enterprises spent about S$313 million (US$231 million) on R&D in 2016 — a more than 50 per cent increase from 2015. 

Singapore’s strategic geographical and cultural position between the east and the west also affords plenty of opportunities for fruitful partnerships. China’s Belt and Road initiative (BRI), a vast multitrillion-dollar plan to link Asia and Europe with an infrastructural network, is just one of the many possibilities where local and international firms can partner for success. Singapore is already the top recipient of Chinese outward investments among the 65 BRI countries, accounting for about one-third of all investments since 2015.  

Professor Prashantham of CEIBS sums up the three main advantages Singapore offers to multinationals looking for strategic regional partnerships. “First, there is a lot of interest in innovation among budding entrepreneurs and small-firm CEOs. Second, there is active involvement of the government that makes Singapore an interesting testbed for innovations… [and third,] Singapore has long been seen as a great launching pad for Asia. Solutions from Singapore could, in theory, be scaled in big markets such as China, India or South-East Asia”, he said.

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