You are reading the older HTML site

Positive Feedback ISSUE 7
june/july 2003

Auroville 17
by Srajan Ebaen

In a recent on-line news post, Stereophile announced that China had finally surpassed Japan, Korea and Mexico to become the largest maker nation of consumer electronics in the world. A long time ago—and with its own retailers who ran afoul of casual QC procedures—NAD's acronym of New Acoustic Dimensions enjoyed the less celestial insider translation of Nearly Always Defective. This was due to Malaysian factory foremen who were unfamiliar with Western standards, letting things slip they shouldn't have.

Unfortunately for our own domestic audio cottage industry, this learning curve has long since leveled out. Its latest target? To break into the inner sanctum of bona fide HiEnd products. We can no longer exclusively refer to high-volume MidFi or transitional product in the Adcom, Cambridge, Rotel and Wharefdale veins that had been partially or wholly farmed out for eons. Years ago, marquees like Antique Sound Lab, Consonance, Dared, Jolida, and Opera had begun to quietly invade our shores under their own flags and as Chinese products, with value-priced offerings that homegrown products simply couldn't match.

However, with the recent arrival of MingDa, Shanling, and Sophia Electric on our shores (visit http://www.bertrandaudio.com for even more imports—reviews coming soon, Dave Clark)  we're seeing product that's no longer content with being judged on the mere basis of its origin. Fit'n'finish and industrial design compete head-on with established Western expectations for UltraFi. This takes the discussion beyond cheap labor rates into the lofty realms of high-level engineering expertise and top-notch production methods—which doesn't even begin to include those US or Euro brands that acquire partial or complete Chinese turn-key solutions to remain competitive and/or create unusually deep margins that allow outright purchase of market share, on the rebate and per-unit profit sheet rather than in the sound room with sheer performance.

Industry veteran Walter Liederman of Underwood HiFi knows this game better than most, having been a partner and corporate buyer for 10-store audio chain HiFi Buys that eventually sold to Tweeter Etc in the Georgia market. Now in business for himself, Liederman's developed a brilliant interim concept to ride this present Chinese wave before it crashes. He recognizes that our American advantage is shrinking by the minute. As crumbling last-bastion advantage, it currently merely enjoys the 40+ years worth of High-End experience. And unlike the results of it, experience itself can't be outright copied. It must be earned. Even if accomplished in truly accelerated fashion—hopefully and if you're a patriot—it still should take a few more years. Hence Underwood Hifi selects product like Shanling (already perfect in the looks/build/pricing equation) and works out modification packages in collaboration with Chris Johnson of the Parts ConneXion, former president of Sonic Frontiers.

The rationale behind this recipe is simple but effective. While the going is good, let's improve upon these components in the only area where the Chinese are still playing ketchup: Tweaked-to-death performance that competes directly with the best of the best. It's something you can only know if you've been exposed to it, lived it, can identify the current SOTA standards blindfolded and also understand what's involved, exactly, to fulfill them.

Having reviewed some Underwood-modified Chinese gear, I'm here to confirm a sad story. There's no way that US-made product can compete. If this trend continues and our Asian friends complete their crash-course immersion in American and European HighEnd audio, our own guys will get slaughtered wholesale. Period, no question mark in sight.

To stay in the running, those firms that don't already procure most their parts from Asian vendors are forced to make the switch as we speak. Others are developing their own offshore factories or contracting complete brands through established Chinese factories in the time-honored fashion of "Designed here, built there—and don't ask where".

Naturally, all this has been going on for a long time. The new wrinkle? US supremacy on the top floor of the HiEnd Inc tower has presently come under attack. Our present occupation of said floor still enjoys the protection of perception. After all, it wasn't until rather recently that the equation of "made in China = cheap and shoddy" got overturned. Savvy importer/distributors like Roy Hall and Tash Goka had slowly but steadily undermined such audio racism. They were willing to hold the initial bag with their own service departments and warranty coverage if and when problems arose as they do regardless of who builds the goods.

Due to their excellent support, growing word-of-mouth on their brands, positive mainstream reviews and responsive vendors, Chinese-built product no longer had to apologize for being made where it was. It could finally be judged solely on the merit of its performance for the dollar. The saga's next chapter? Western designers traveled to Mainland China in search for existing and attractive product platforms. They'd implement performance and minor aesthetic/feature modifications on site, the need to specify the whole enchilada a thing of the dim past. By now, Chinese vendors already had all the necessary basic building blocks in place. You simply shopped their menu, picked what appealed, discarded what didn't, settled on the minimum order of 40-foot containers and you were in business.

The fact that many US and European firms already enjoyed long-term alliances made identification of the good guys a simple matter of professional references. By virtue not of any personal cleverness but simply work-related exposure, I became hip to the extent that Chinese manufacture had penetrated our little HiEnd circuit when Phil Jones of Platinum Audio relocated to China to develop his present AAD factory. Phil personally introduced me to Soliloquy's then-president Bernie Byers and recommended I be hired. The rest is history.

Years ago already, Phil had predicted what Stereophile just confirmed. Over various dinners, he'd rattle off name brands of designer parts—capacitors, coils, resistors—recognizable to any dyed-in-the-wool audiophile. Without exception, Chinese vendors he did business with, or who were located right down the street, manufactured them. By virtue of his immigrant status, Phil managed to unfurl the domestic scene's map from the inside out. He knew where to get Sonus Faber Amati cabinets made, knew whom of the big-name US and European firms built where, and began competing for OEM contracts himself.

His feelings, not based on sophisticated macro economic equations but purely on impressions garnered from living on site—observing explosive growth and skyrocketing manufacturing sophistication—were simple. If China could remain politically stable, it'd become the dominant economic world power in the next 10 years. That was four years ago.

Many up-and-coming makers of US-made specialty audio product, faced with this reality in 2003, opt for going factory-direct to somehow turn the tables on the opposing pricing advantage they'd otherwise never stand a chance against. Experienced distributors are scouring former Eastern block nations for legitimate high-performance product that, due to previous communist market conditions, can undergo the requisite import and dealer margins and still compete directly—and "unfairly"—against homegrown product. Should such distributors follow the scheme of Artistic Audio, the US importer for the Swiss Ensemble brand who sells direct without dealers, the potential hurt Russian or Polish or Ukrainian brands could put on American firm shouldn't be underestimated.

The only challenge that faces such upstarts? The quality of service and reputation thereof, which their US representatives must successfully implement. Add the fact that unknown brands don't initially enjoy good resale values. They make poor investments until they've put in the necessary time to turn desirable household names. But as ASL and Music Hall have proven in the middle level, time can overcome such handicaps in a few years.

All in all, a grim picture for domestic makers who, like European history routinely overrun by Vikings, Visigoths and Mongols, currently face a similar invasion. And this doesn't account for the inexplicable delay our colleagues in Japan—with the exception of Accuphase, Airtight, and now Esoteric again—have insisted on, to bring into the US their own no-holds-barred efforts. Now that Sony has announced limited availability of its own crème-de-la-crème offerings (which one day could include what I'm told is the world's most advanced electrostatic speaker), should we expect parallel product initiatives by some of Sony's domestic competitors, say Matsushita and Denon?

After all, if the Chinese can overcome the curse of being regarded as fit only for crass mass-market commercialism, how much easier should the Japanese play this game who have enjoyed a far more openly established long-term presence and penetration in our market place?

No matter how you slice this fruitcake, scary times for US makers indeed.

Visit Srajan at his site www.6moons.com