DMG Mori, one of the world’s largest manufacturers of advanced machine tools, has begun monitoring the use of its products to ensure they are not being applied to military purposes at a time of rising geopolitical tensions.
Since April, the German-Japanese company has been asking customers around the world to install a remote management system that shuts down equipment if it is removed or decommissioned.
In a letter sent in late March and seen by the Financial Times, DMG extension it said the installation of the system was aimed at preventing its equipment from being “illegally transferred to individuals or countries that could threaten international security”.
The letter added that the company would refuse to reactivate the equipment if its use violated “applicable export rules.” DMG manufactures a machine tool used to make everything from passenger cars to fighter planes.
In response to a question from the FT, DMG said it made the decision to implement the new measures “because of the global political situation – and certainly because of the outbreak of Russian war in Ukraine,” adding it was making sure it didn’t ” the misappropriation of our machines takes place”.
DMG’s move, resulting from the merger of Japanese Mori Seiki and its German rival Gildemeister, comes as tensions rise between the EU and China over the war in Ukraine. China’s foreign minister on Tuesday condemned EU proposals to impose sanctions on Chinese companies for supporting the Russian war machine, promising to strike back “strictly and firmly” to defend its assets.
About a quarter of DMG’s sales are made in Asia. The company does not provide separate figures for its activities in China.
China was Germany’s largest trading partner for the seventh consecutive year in 2022, serving as a vital market for German automakers in particular. But Western concerns about dependence on the US-led Beijing have been exacerbated by the fallout from the Covid-19 pandemic and Russia’s war in Ukraine.
Security concerns have prompted Berlin in recent months to reconsider the use of Huawei equipment in the German telecommunications network and review a decision allow the Chinese shipping company Cosco to buy a stake in a port terminal in Hamburg.
“While the requirement may apply to many countries, it will affect China the most as Chinese civilian-military smelting factories had a history of buying DMG machinery,” said a former DMG China executive. “For years, we pretended not to know where our products were distributed in China.”
Liu Hanyu, an analyst at Daxue Consulting in Shanghai, said other Western machine tool makers would follow in DMG’s footsteps. This, according to a report last month by Guangzhou-based GF Securities, will create “huge risk” for exporters of high-end machine tools in China.
Foreign brands accounted for 60 percent of five-axis machine tool sales in China last year, while DMG captured 17 percent of the market that same year, according to QY Research, a California-based consulting firm. Chinese machine tool users said DMG’s latest mandate could encourage them to increase purchases from local suppliers.
James Wei, an engineer at a Guangdong-based manufacturer who has worked with Western machine tool makers, said at least two local brands could serve as replacements for DMG. “There is an urgency to reduce our dependence on foreign equipment,” Wei said.
However, switching to local brands may come at the expense of quality. “The design of Chinese machines is beautiful and fantastic,” said Raffaello Martini, production director of Ibarmia China, a Spanish machine tool manufacturer. “But you also need to have a strong body to meet the needs of the market.”
This has put Chinese machine tool users in a difficult position. “We have to learn to work with the second best machine tool in the near future,” said an engineer at a Chinese aircraft manufacturer.
Additional reporting by Laura Pitel in Berlin
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