The Weekly Wire: For Your Situational Awareness 10.4.19
Chinese Shipbuilding Efficiency
Aaron Lin, Senior Market Analyst
The launch of China’s Type 075 landing helicopter deck highlighted the rapid pace at which the Chinese shipbuilding industry has been able to produce warships.
Oft cited figures usually highlight the combined tonnage of naval vessels launched by Chinese shipyards each year as greater than the sum tonnage of all naval vessels launched by several smaller countries. But how has China managed to continually build so many ships per year?
It is easy to point to the huge pool of cheap labor as one of China’s key advantages in shipbuilding. While this is certainly true, and will likely remain so for a considerable time, Chinese labor costs are on the rise. China’s position as one of the three dominant commercial shipbuilders in the world is another factor, as it builds little more than one-third of the global market.
This puts China in prime position to develop and apply industry best practices at scale to naval shipbuilding. The “at scale” caveat is of importance: although the techniques applied in Chinese shipyards are used in other shipyards around the world, the 2008 US Naval War College report notes that efficiency gains are fully often realized only after long-term series production.
Naval shipbuilding often features design classes composed of a small number of ships, making efficiency gains difficult to achieve. Should a shipbuilder also face low commercial orders, processes are likely to be even less efficient on the naval side.
But CSSC and CSIC, China’s leading shipbuilders, have a constant stream of commercial orders that they can use to develop best practices for warship construction, and the PLA Navy itself requires a large fleet that can provide the scale needed to develop production efficiencies.
To be sure, naval shipbuilding has very different requirements than commercial shipbuilding. But CSSC’s and CSIC’s increasing production of highly complex and specialized commercial vessels has given both shipbuilders experience on how to adjust and plan for specific requirements.
Furthermore, the effectiveness of a military system is increasingly dependent on software, which is much easier to transfer from one sector to another than an entire industrial process.
In addition to low labor costs and experience gained in commercial shipbuilding, the Chinese government has invested heavily in developing new shipbuilding infrastructure.
As a point of comparison, Changxing Island near Shanghai is home to over 1,900 acres of shipbuilding facilities, more than triple that of Huntington Ingalls’ shipyard in Pascagoula, Miss.
Having such large facilities doesn’t just mean that one shipyard can produce more ships at a time. It can also greatly shorten the time needed to build a single ship by streamlining production of thousands of components and providing the space needed to integrate large hull blocks rapidly.
Considering the number of people needed to construct large vessels and the consequent labor costs involved, small delays due to inefficient processes or even weather, can rapidly increase costs for the customer.
Thanks to these investments, Chinese shipbuilders can ensure that cost growth can be contained, even as wages in China begin to increase.
Costs are further contained through legal means. Because CSSC and CSIC are state-owned enterprises, the state can impose price controls on naval vessels.
For decades, Chinese law has imposed limits on the profits of defense firms, generally to about five percent of the firm’s costs.
As China’s economy opened, those cost calculations included more caveats, but the Chinese government maintains an interest in controlling the costs. With healthy commercial operations, CSSC and CSIC’s may be able to bear the lower profits from naval shipbuilding.
As the PLA Navy increases its operations around the world and commissions more complex vessels, the next big challenge for China will be maintaining this huge fleet.
Because much of this fleet is still relatively young, the maintenance burden is difficult to determine.
Nevertheless, the facility investments and commercial experience put China in a good position to meet those challenges when they arise.
On October 1, BAE Systems concluded the last delivery of the Eurofighter Typhoon to the British Royal Air Force. The final delivery of the Eurofighter Typhoon comes from a third tranche ordered by the British Royal Air Force in 2009 for 40 fighters worth $4.9 billion.
This was part of a larger 112 fighter acquisition across Germany, Italy, Spain, and the UK. The fighters were assembled at BAE’s Warton facility in Lancashire, UK, which will now begin assembling Qatar’s Eurofighter Typhoons, with the first delivery expected in 2022. Qatar signed an agreement with BAE Systems in 2017 to acquire 24 Eurofighter Typhoons worth $8 billion.
On September 30, Turkish President Tayyip Erdogan announced that Turkey intends to be self-sufficient regarding military production by 2023. In the course of the speech, President Erdogan mentioned tensions in the Eastern Mediterranean and the F-35 issue between Turkey and the United States as accelerating the necessity of this goal.
Turkey has demonstrated the ability to design and build unmanned aerial vehicles, attack helicopters, corvettes, and frigates with an increasing proportion of domestic systems. In his speech, President Erdogan also discussed expanding to include artillery, missiles, torpedoes, fighter aircraft, and other systems.
In addition to providing self-sufficiency for Turkey, this plan would also enable Turkey to start exporting military systems, as evidenced by a 2018 contract for Turkey to provide four corvettes to Pakistan.
However, while Turkey has succeeded in increasing the number of indigenous systems in their military platforms, they are far from being completely self-sufficient, and it remains to be seen if they can achieve that goal in only four years.
Bids for the US Army’s Optionally-Manned Fighting Vehicle were due at the end of September. According to industry sources, at least two bids have been submitted for the program, which develop the replacement for the Bradley Fighting Vehicle.
A joint venture of Raytheon and Rheinmetall, with Textron as a partner, leads the first of these teams. They plan to introduce the Lynx Fighting Vehicle to the US market, producing the vehicle in Slidell, La.
Meanwhile, General Dynamics Land System (GDLS) submitted its own proposal for the competition.
Surprisingly, the GDLS team did not submit a variation of its Griffin III vehicle, which it had frequently used as the centerpiece of its marketing effort, but instead “purpose-built vehicle,” designed for the competition, which according to statements, likely has placed a significant emphasis on reaching the Army’s objective requirement for a 50mm cannon.