Issue Date: November 19, 2012
At Last, BASF Goes Big On R&D In China
For many years, BASF has run major manufacturing operations in China. The country is central to BASF’s growth strategy, and the firm has invested billions of dollars there. But BASF continued to conduct elsewhere the R&D behind the products it made in China. That changed earlier this month, when the German giant inaugurated a corporate research laboratory in Shanghai.
The opening of the lab illustrates a shift in BASF’s global research strategy. For most of its history, the company concentrated basic R&D work at its headquarters in Ludwigshafen, Germany, while operating numerous technical support centers worldwide. But employees at the Shanghai center will conduct fundamental research in addition to providing technical support for customers in China and the rest of Asia. They will focus on advanced materials used in construction, footwear, personal care, and energy-efficient lighting.
“By 2020, 50% of BASF’s R&D will be conducted outside Europe,” said Andreas Kreimeyer, a board member who oversees BASF’s research organization, at an inauguration event. “Shanghai will work on global topics.” The firm plans to take advantage of the Shanghai center’s location to team up with leading scientists at universities and research institutes throughout Asia.
BASF employs more than 10,000 people in R&D across the globe. The Shanghai center will initially house 220 scientists, and it has room for 450 total. It is located in Pudong’s Waigaoqiao Free Trade Zone, where BASF already operates several specialty chemical plants and where the company recently relocated its headquarters for China and Taiwan. The firm expects to eventually employ 2,500 people at the headquarters, R&D center, and production facilities in Pudong.
After Kreimeyer assumed responsibility for R&D in 2003, he led an effort to reconsider BASF’s commitment to centralizing research in Germany. He and his colleagues concluded that the pros of keeping basic research in Germany did not outweigh the cons. The new strategy has been under way for the past two to three years, he told C&EN in Shanghai.
“Centralization has the big advantage that you have all the company’s top experts in one location,” Kreimeyer said. But BASF seeks to work with the world’s top scientists, and that is more easily achieved through a greater geographic spread, he said. “The argument for decentralization is stronger, but you have to make sure that the required communication and cooperation take place.”
Another advantage of decentralization is likely to be greater creativity. The China R&D center will mostly be staffed by scientists from Asia, which BASF expects will lend a greater diversity of thought to its research activities, noted Martin Brudermüller, the firm’s vice chairman and head of Asian operations.
Moreover, Brudermüller said, the launch of the China R&D center will offer inspiring career paths to scientists who join BASF in Asia. “Young scientists may now join BASF with the aspiration of working seven or eight years in R&D before moving into management or sales.”
The establishment of the R&D center should earn BASF kudos with officials in both Shanghai and the central Chinese government. China’s 12th five-year plan, now under way, calls for the development of more new materials in China, among other initiatives. In Shanghai, companies that set up R&D facilities can benefit from incentives including cheap land, subsidies, and exemption from import tariffs.
The incentives were not a major factor in BASF’s decision to establish the R&D center in Shanghai, said Stefan Dreher, a BASF vice president who managed the set-up of the facility. More important, he said, is that China’s business hub is a natural location for a research center serving Asian customers.
“Asian hair is different. Construction materials are different,” Dreher said. “It’s too slow to ship all the materials and samples to headquarters and expect that they solve all the problems.” Without a major R&D center in Asia, he added, BASF would lag in responding to requests from its customers in Asia.
BASF’s increased focus on Asian R&D is not coming at the expense of Europe. A few days after it celebrated the opening of its Shanghai R&D center, BASF announced it will spend $63 million for a new R&D building in Germany that will house about 200 researchers.
Still, the announcement highlighted the difference in construction costs between China and Europe. For the $70 million it spent in Shanghai, BASF got an R&D center that will accommodate twice as many scientists plus a headquarters building for China and Taiwan.
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