China has come a long way in aerospace industry

Today, I want to take a look at just how much China’s aerospace industry have improved in the past 20 years. Back in the early 2000s, China was a large and growing market place for Boeing and Airbus. It seemed like very major political even involving French/Germany or American Head of state would coincide with a major aircraft order. While this way happening, Airbus and Boeing also decided to invest in Chinese supply chain as a way of gaining more orders. Back in 2004, Boeing highlighted $600m in contracts with Chinese suppliers for B787 program.

Boeing Commercial Airplanes Vice President and General Manager, Airplane Production Carolyn Corvi represented Boeing in Beijing to finalize contracts for the 787 composite rudder, the 737 forward entry door and the 737 automatic over-wing exit door with Chengdu Aircraft Industrial (Group) Co. Ltd. (CAC), a China Aviation Industry Corporation I (AVIC I)-affiliated company. Also completed were contracts for the 787 wing-to-body fairing panels between Boeing and Hafei Aviation Industry Co., Ltd. (Hafei), an AVIC II-affiliated company.
Shenyang Aircraft Corporation, an AVIC I-affiliated company, signed memorandum of agreement with Boeing to build the 787 leading edge assembly for the vertical fin. BHA Aero Composite Parts Co. Ltd. signed memorandums of understanding to build the interior panels for the 777 control cabin, as well as the wing-to-body fairing panels and tail cone for the Next-Generation 737. BHA is an equity-share joint venture between Boeing, Hexcel Corp. and AVIC I.

So major AVIC companies like CAC, SAC & Hafei were all winning contracts to build different parts of 737/777/787 aircraft. It made a lot of sense. Boeing brings in Chinese aviation firms to its supply chain and China orders more airliners. However, Airbus made an even larger investment in China. It agreed to build A320 locally in Tianjin. The plant itself was far from state of art due to Airbus wanting to protect its production secrets and China labor being cheap. Airbus also only did final assembly here. However, this was the first time that a large modern airliner was being produced in China. At the time, Xian AC was doing the wingboxes for A320 and a big question was how they can get wingbox equipped on shipped wings to save cost. More importantly was the question of training locals to work on final assembly.

Airbus Tianjin has been strict about who it employs locally, says Charles, adding that "our expectations are very high, so it has been difficult".

He says that only 1% of people who apply to work at the joint venture are successful. Applicants are interviewed and made to do written tests before being sent to assessment centres to carry out practical tests in workshops, he says.

One such test is in a paint workshop test centre, where Airbus has aircraft panels for applicants to paint so their workmanship can be assessed, Charles says, who adds that Chinese workers are sent to Toulouse, France and Hamburg, Germany for one to two years for training.

Just as in auto industry JVs, training local workers in modern aerospace factories was a major gain for China’s aerospace industry. Now that these workers understand the standard expected in modern airliner, they have expertise that can be passed on to rest of the China’s aerospace industry.

To put China aerospace industry capability in 2004-2008 period in perspective, this was the build quality of J-10A back then

There was definitely a lot of laughters online about the huge rivets back then. If you look at the J-10CP photos from past couple of years, it’s pretty easy to see the build quality difference.

In terms of precision manufacturing, CAC clearly got a whole lot better in production quality. As a whole, we can see rest of AVIC companies get better.

2008 was also the launch of the COMAC C919 program as well as the maiden flight of ARJ-21. But back then, China was only able to build the very underwelming MA60 aircraft. 2008 was also the moment Bombardier’s C Series program signed up Shenyang AC as the main supplier for center Fuselage. As many people know, the C Series program had a very troubled beginning due to pressure from Airbus and Boeing. It only took off after Airbus took over the program and renamed it A220. This program is destined for success. However for many years, C Series looked to have been in trouble. From what I heard, SAC was not doing a great in producing center fuselage.

Fast forward to 2020s, it’s amazing how much things have changed. Back in 2021, SAC delivered its 100th mid-fuselage to Airbus. In the same year, Airbus announced that Xian AC is now doing fuselage equipping work for the Chinese A320s. The wing-ribs are also now produced in China as costs in Europe continue to go up and production quality in Chinese supplier continues to also go up.

But it’s the work for A220 that really stands out. Back in 2021, SAC was already responsible for major airframe production of the A220, including forward fuselage, mid-fuselage, rear-fuselage, doors and tail cone. As the most state of art narrowbody airliner in the world, building this much of A220 was quite the feat for SAC. If you look at the A220 supplier list, SAC is prominently listed everywhere in there.

When Macron visited China in April 2023, Airbus announced build a second assembly line in Tianjin as part of its overall strategy to expand A320 production to 75 per month. Airbus expected production to hit 6 per month with first line and then 12 per month once second line is in full production → 144 per year. Last year, Wizzair even received an A321NEO from Tianjin plant. For the near future, Airbus will be producing more A320NEO series aircraft in China than COMAC does with C919. At this point, the narrow body duopoly in China has changed from Airbus and Boeing to Airbus and COMAC.

As Chinese suppliers continue to get better, it also makes more sense for Airbus to use Chinese suppliers in the Tianjin production. Recently, Xian AC just built its third production line for supplying Wingbox to A320. It hit 700th delivery last year and will now be producing 9 per month. I would imagine it will supply more as Airbus Tianjin ramps up production.

By 2014, XAC was already the sole suppliers of wings to Tianjin final assembly line. For something as large as wings, it made a lot of sense to just make it in China. Initially, Xian Aircraft supplied systems for installation in wings built in the UK, progressing to producing certain wing structures. Eventually, Xian began manufacturing entire wing boxes. And for the past 10 years, XAC is actually making the wings. That is moving up the supply chain for XAC. It also produces Wing related parts for C919 project.

The growth of aerospace industry has also fueled growth of domestic supply chain in precision machine tools and material science.

One example is to look at Carbon fiber usage and production.

And another place to look at is look at the 5-axis CNC machine industry

In both cases, you can see the increasing demand from aerospace sector. For Carbon Fiber, 11.4% of domestic demand is now from aerospace sector. For 5-axis CNC machine, Aerospace now looks to have the most demand (even more than the auto industry). Aside from that, the local market has also been taken over by domestic companies likes Beijing Jingdiao Tech and Kede. 5 out of top 6 players are domestic.

The story of Carbon fiber also shows a case of growing sophistication. Last year, SCMP reported that China was to start mass production of T1000 grade Carbon fiber. Although in China itself, this type of development was reported as early as 2018. I guess they may have really started delivering this on large volume. Growth of China’s carbon fiber industry has shown up in other transport sectors where BYD’s YangWang U9 uses it as well as CRRC Sifang’s Cetrovo 1.0 subway car and heavy duty rail. Other uses include space industry, wind industry and satellites. China first surpassed America as the country producing the most carbon fiber in 2021. It has since significantly ramped up carbon capacity even more. 2023 capacity is almost 3 times that of 2020 capacity. China does not play around once it decides to scale something.

Another metal that is increasingly being used in modern airliner is Titanium alloy. We have also seen a huge growth in China’s Titanium mining, sponge and material over the past few years. See below where China’s Titanium sponge production jumped from 70k ton in 2018 to over 200k ton in 2023.

It went from a huge importer of sponge as recently as 2021 to importing almost no sponge by 2023 and far away the largest exporter (with Russia being the largest customer). It had 63% of all of production in 2023.

The story of China gaining market share in these critical high end material and precision manufacturing is everywhere we look at. The more impressive part is just how quickly it has been able to raise production from needing to still import a lot to almost fully meeting its own needs in 2 to 3 years. In many of these cases, China still has to import some titanium alloy or CFRP or industrial robot or CNC machine that it cannot yet mass produce. But as we have seen with their recent progress, that seems like just a matter of time.

The next major hurdles for China’s aerospace industry seems to be getting added as suppliers for avionics, engines, APUs, flight recorders and such. Watching C919 program increase domestic content over the next few years will be an area of immense interest.