Worker teams assemble mass-production prototypes of the Midas Pro2C console at Behringer City in China as part of the pre-production effort leading up to manufacturing the desks there by May. Next, the prototypes will undergo a battery of tests, the results of which will be analyzed at Midas HQ in England. “Made In China.” In the pro audio world, it’s a loaded phrase that means many things to many people. To manufacturers, however, it’s the signifier of the great (some say inevitable) temptation to build products in Asia, where electronic goods can be assembled more cheaply than in Western countries, due to a robust infrastructure and massive workforce available at lower costs than the West.
In recent times, various pro audio companies, such as Mackie, Peavey, AKG and others, have made the leap into manufacturing some of their products in China—and with good reason. As the world’s second-largest economy and its top manufacturing power, China produces more everything than anyone else, having blown past U.S. output in 2010. Today, a full fifth of the world’s manufacturing takes place within China’s borders, and that full-court press of inexpensive productivity has actually helped curb inflation for many of the country’s trading partners.
But with great commerce comes great responsibility. Moving manufacturing to China goes far beyond the simple consideration of maintaining shareholder value. Pro audio is rife with stories of poorly built gear manufactured there, which has led to understandable wariness from end users. At the same time, some argue, with foreign companies taking advantage of lower costs—and wages— in the region, they have a social responsibility to look after their workers’ welfare. These issues and more face any Western company producing goods in China, as the team at Music Group could surely attest.
Music Group recently hit the 10th anniversary of its factory in China, known as Behringer City. To mark the occasion, the German-based company invited Pro Sound News to explore the growing facility in late February and see the state of the company, particularly Midas/Klark Teknik, for itself.
The sizable factory campus in the Guangdong province, with its imposing buildings and countless employees manufacturing familiar gear, is impressive, but the real story isn’t how Behringer—now an arm of its parent company, Music Group—has grown in the last decade, so much as how it has quietly readied itself for the future.
When Music Group purchased the Midas and Klark Teknik brands two years ago, the move caught much of the pro audio industry by surprise, and with good reason. It was an unusual pairing, seeing one of the premiere, high-end pro audio brands come under the auspices of a company primarily known for creating low-cost, high-volume products for the MI and pro audio arenas.
All too aware of industry perceptions, Music Group founder/CEO Uli Behringer addressed them head on, speaking at the factory: “Midas/Klark Teknik has its $300,000 consoles, low volume, low production and for us, we’re the opposite. So when we first met the team, the guy said, ‘Behringer? No way.’ We spent a lot of time actually showcasing our company and explaining what we’re about, and that was an interesting journey, because at the end…the Midas people understood what we’re about and how we could possibly help them. Midas is all about IP, the most brilliant engineers, R&D to the hilt…There was a lot of resistance initially and over time, we grew together and today, I’m very proud to say they consider this a perfect marriage—we value their IP, their R&D efforts, and they help us a lot as Behringer to improve our technology, our processes. In fact, they helped us a lot with the [upcoming Behringer] X32 console. At the same time, we could help them in the processes of manufacturing, we helped them with the buying power, and ultimately, the dream that I had of putting these together really came true.”
Two years later, the first results of that pairing are just coming to fruition, as Midas recently began rolling out its much-anticipated Pro2 console, and will begin mass production of the Pro3 and Pro6 in China by May. While the concept of Midas desks made in China may raise some eyebrows, Behringer explained what that now really means—and how the acquisition of Midas/Klark Teknik forced his company to raise its game. “
I said [to Midas], ‘The products will not be shifted [to China] unless you’re 100 percent happy—what do you need?’ They came up with a laundry list from here to Tokyo—and by the way, there was a little price tag attached, with a small number of $20 million. They wanted to have the most sophisticated SMT (Surface Mount Technology) machines…xray machines, optical inspection machines. Stuff that basically we never thought we would be acquiring.”
Behringer ultimately bought the manufacturing equipment, and touring the factory in February, it was clear the investment had borne fruit in a number of ways. Midas Consoles North Americas’ Jay Easley explained that the company’s new Samsung SMT machines now place 100 million parts per month, running 22 hours every day (with two hours off for maintenance), raising the factory’s first-pass yield to more than 99 percent. The result has been a 100 percent increase in productivity, even as the SMT workforce has been reduced by 90 people.
Jonathan McCune, product manager for live sound at Music Group, added that after the SMT machines place components at up to 12 per second, PCB boards go through optical scanning and 3D scanning for verification, followed by axial insertion so that “larger parts you see on PCB boards can actually be inserted by machine, with no chance to have reversed capacitors or resistors. We put the PCBs through many tests—FCT (functional) testing; listening tests to make sure there’s no noise; and aging tests—and then they go to one of six final assembly lines. This floor employs 800 workers. A quarter of our entire staff works on this floor for final assembly.”
With more than 3,200 employees onsite, the
entrance to Behringer City is well guarded to
ensure everyone at the factory belongs there.With foreign visitors on hand, snapping photographs, the workforce was inevitably focused on getting things done, but the fact that the staff was seen at all spoke volumes about where Music Group stands after a decade of piloting its own ship in China. Coming at a time when highprofile companies like Apple are coming under fire for working conditions at their suppliers’ Chinese factories, Music Group’s openness about its manufacturing facility stood out in sharp relief. Today, over 3,200 people work in Behringer City, 2,000 of them living in onsite dorms, making use of amenities including restaurants and a clinic. “This is a real commitment to the people that build your products,” said Costa Lakoumentas, senior VP of marketing at Music Group. “This is important, and we’re proud of our commitment to people. We’re proud of how we have been accepted in this community.”
That investment has had a direct effect on the bottom line as well. Turnover among factory workers in Guangdong averages around 20 percent annually, according to Lakoumentas; Music Group’s workforce churn last year was 3 percent. “Turnover means instability,” he pointed out. “It means a loss of history, of knowledge. It means constant retraining.”
Keeping that churn low has taken on added importance, it turns out, because the local economy is exploding. The American Chamber of Commerce in Shanghai estimates that labor costs for Guangdong factory workers in rose by 12 percent a year between 2002 to 2009, while The Economist places it at 20 percent yearly over the last four years. This month, investment bank Standard Chartered surveyed more than 200 manufacturers operating in the Pearl River Delta, where Behringer City is located, and discovered wages are already up by 10 percent in 2012 alone. However, perhaps more alarming for factory owners—and their overseas clients— are predictions like one from the EU Chamber of Commerce in China, which expects the cost of manufacturing in China to double or potentially even triple by 2020.
Consequently, the Midas-initiated move towards greater use of automation has helped Music Group stave off some effects of that labor cost increase: “Automation is also a way for us to guard against the uncertainty of the future,” Lakoumentas remarked, allowing the company “to improve quality, to improve our productivity and to ensure that we can continue to deliver that value proposition.”
The productivity is certainly moving forward—in 2011, Behringer City produced nearly 6 million products and has its eye on producing far more this year. Some of that will come from Music Group’s new Eurosound consumer division (not to be confused with its Eurocom installation-centric brand). Headed by Greg Stein, Eurosound made its debut at CES with 50 products—including the much-publicized, gigantic iNuke Boom iPhone speaker dock—all with the intent of gaining a new set of customers to help fuel Music Group’s growth.
At the same time, the factory is gearing up to take on increased Midas console production this spring. The first console to be produced in China was the Midas VeniceF, first introduced in 2010 and initially produced in both the U.K. and China. The resulting Behringer City-produced consoles were deemed more than fit by the Midas team in the U.K., and that paved the way for more ambitious projects— like the Pro2 and Pro2C. Lakoumentas noted, “In December, the first month that we shipped the Pro2, we sold and shipped more Pro2 consoles than all of the digital consoles that Midas had ever shipped in its history before that time.” Midas foresees demand for the Pro2 to only increase, and Behringer’s X32 console— which the company has high expectations for—will also be built inside the factory at a rate of 3,000 mixers a month.
Along with the Midas Pro3 and Pro6 consoles, the Pro2C is also expected to hit mass production in the second half of April. Providing some insight into what that will entail, Ankur Samtaney, analyst for Music Group, led a walk-through of a preproduction line that was conducting safety, heat soak, functionality and burn-in tests on prototypes, with the results and the PCBs themselves to be sent to Midas in the U.K. for further evaluation.
Upgrades and changes are afoot at Behringer City away from the manufacturing floors as well. Music Group is beginning to implement SAP and is gearing up to build another factory 15 minutes away, expected to be 4 million square feet. The move underscores the company’s determination not to use outside manufacturers. “They have no long-term perspective, no long-term view,” said Behringer. “They say, ‘I want to take your money today; you might not come back tomorrow.’ So they maximize the profit on your production loss today. Are they putting in the best switches or the best faders? They don’t really care; they want to maximize the profit today. That’s the problem with third-party manufacturing, and that’s the reason why this factory exists—because we don’t leave it to others. We want to be in charge of our own destiny.”
The result, said Lakoumentas, was that “we’re in China, but this is a German factory. This is a factory that’s run on precision—everything is in its place, everything has a purpose. Have you seen a factory in China that is this organized, this orderly, that has its act together a like this? I guarantee you haven’t, and we take tremendous pride in that.”
So it’s been a tumultuous time since Music Group acquired Midas/ Klark Teknik—a move that caused a domino effect for the budding parent company, spurring a deep investment in automation and further expansion into product lines, new brands and manufacturing facilities. “Now we’re two years later,” said Behringer, “and I’m very proud to say it has been an amazing journey and I’m extremely grateful for the input of the Midas people and our Music Group people. It couldn’t have gone better.”