Asian manufacturers force price erosion

China and Taiwan represent huge opportunities for vendors of OEM machine-vision equipment.

by Andy Wilson
EDITOR
[email protected]

Most salesmen and marketing managers insist that just using price to differentiate your product offering from a competitor's is financially risky. Features, functionality, compatibility, ease of programming, and networking capability, as well as price, must be carefully evaluated before making a purchase decision. In the machine-vision industry, especially, the large number of manufacturers producing image-processing systems, cameras, frame grabbers, software tools, programmable logic controllers, and other peripherals make this evaluation mandatory. In addition, systems integrators must qualify the level of software support, training, and expertise of the involved OEM vendor.

But the marketplace is continually changing sale techniques. Products such as LCD monitors, broadcast-standard CCD cameras, Ethernet networking hubs, routers, and switches have now become plug-and-play commodity items. As a result, a low-cost commodity market has emerged where price has climbed to the top of the list as the differentiating sales factor.

This situation, in turn, has led to low-cost overseas manufacturing plants, with numerous companies competing for the same business. For example, on www.globalsources.com you'll find more than 20 Chinese- and Taiwanese-based manufacturers that offer more than 80 different 17-in. active-matrix TFT LCD color monitors. Because many US and European manufacturing plants have moved to Asia, vision-product vendors are automating their manufacturing lines there to reduce cost, eliminate human error, and increase yield. "As the global manufacturing market focuses on China, many of our current key customers are locating their manufacturing there," says George Ayoub, president of Machine Vision Products (Ann Arbor, MI; www.mvpinc.com), a company that opened a regional headquarters in Shanghai, China, last year.

Robert Shillman, chairman of Cognex Corp.(Natick, MA, USA; www. cognex.com), agrees. Two months ago his company also opened an office in Shanghai. "China is rapidly becoming a leader in manufacturing, and, although labor costs there are still low, the trend is moving quickly to automated manufacturing; as a result, the need for machine vision is increasing at a rapid rate," he says.

Today, China and Taiwan represent huge opportunities for vendors of OEM machine-vision equipment. But in addressing these markets, machine-vision manufacturers should be wary. Already, a number of low-cost machine-vision products are available at commodity prices. And, when Asian manufacturers more fully understand the opportunities that industrial automation systems can bring, it is likely that products being sold by US and European vendors will be copied and duplicated in large quantities.

US companies have sought to protect their efforts with a host of patents designed to stop companies worldwide from copying their ideas and duplicating them at low cost. But, as witnessed in last year's dispute between Cognex and Matrox Imaging (Dorval, QC, Canada; www.matrox.com) over geometric pattern-matching software, this task is easier said than done. After claiming that the Matrox geometric model finder software infringed claims of at least one Cognex patent, Cognex dropped the suit following a review by an independent technical expert.

While successfully defending patented "prior art" may or may not work in Europe and the United States, it will prove more difficult to prosecute manufacturers in

China. Accordingly, even the most sophisticated OEM imaging products will eventually become commodity items driven by price and manufacture in Asia. Therefore, whereas the worldwide industrial-automation market may provide a boon in the short term, the long-term results will focus on low-cost automated manufacturing products designed and built in China and Taiwan for a multitude of high-technology systems, including those for machine vision.