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Published on: Jul 7, 2022

Joint Venture
Safran Group

As part of our ongoing research into European joint ventures in Europe, Datenna decided to highlight and research remarkable cases. This case considers the joint venture set up by the French Safran Group and the Chinese Shanghai SAIFEI Aviation Ewis Manufacturing Co., Ltd.

Joint Venture Cases

Short read

  • The joint venture Beijing Chiyi Unmanned Digital Perception Technology has been established in 2007 and sees the cooperation between the German Robowatch Robotics Group, North Navigation Control Technology, the main shareholder, and other Chinese investors.
  • The foreign partner is a German company that makes software solutions for service robotics and Development services for robotic vehicles.
  • The Chinese state influence in the joint venture is labeled as high.
  • North Navigation Control Technology Co.,Ltd. is a provider of military scientific research systems and products. Among the main shareholders of this company we can find the China Soldier Investment Management Co., Ltd. which is heavily involved in the country’s military sector

The Joint Venture

Shanghai SAIFEI Aviation Ewis Manufacturing Co., Ltd. is a joint venture established between Shanghai Aircraft Manufacturing Company, Ltd. and the French SAFRAN Group. The joint venture is the main manufacturer of EWIS, Electrical wiring connection system, for Chinese C919 commercial aircrafts. Throughout the joint venture, the two partners cooperate in the supply of EWIS systems which can then be applied to a number of Aircraft sections and processes. The joint venture has been active since 2012, and since then the entity has filed several patents, suggesting flourishing research and development activities. Within the joint venture, the Chinese party holds the majority share (51%), while the foreign partner only holds 49% of the shares.

View the ownership tree here

Shanghai SAIFEI Aviation Ewis Manufacturing

The Chinese party, Shanghai Aircraft Manufacturing Company, Ltd.  was founded in 1950 and was involved in the manufacturing and repairing of more than 3400 aircraft for the People’s Liberation Army Air Force (PLAAF) and the People’s Liberation Army Navy (PLAN) as well as for the Civil Aviation Maintenance Association of China. It is fully owned by COMAC, the Commercial Aircraft Corporation of China, which is an SOE funded by the Aviation Industry Corporation of China and the Shanghai Guosheng (Group) Co., Ltd., which was conceived as the investment channel for the major industrial projects of the Shanghai Municipal Government.

Safran Group

The French party Safran is involved in the defense sector, as the company “offers a wide range of defense systems and equipment, deployed by armies, navies and air forces from around the world to protect nations and populations”. The company is also active into the aerospace field “enabling technologies for rocket propulsion systems and high-performance space optics.” Given the company’s size and footprint within Europe, a partnership with Safran could provide a partner with cutting-edge aerospace technology.

COMAC C919’s project

The joint venture between Safron and COMAC dates to the announcement by COMAC C919’s project in 2012. COMAC C919 project refers to the development of a specific aircraft, namely a 190-seat passenger plane through which the company envisions to conquer the market share of the Boeing 737 and Airbus 320 within China. For the project, special foreign suppliers were appointed through a bidding process. To become a supplier for COMAC, they specified that winning suppliers would set up joint ventures with Chinese companies to assemble the modules for C919 in China. A joint venture agreement was thus mandatory. Taking all foreign suppliers into account, it is estimated that 85% of COMAC’s C919 has been developed thanks to designated foreign suppliers. The joint venture discussed above can be considered a direct result of this agreement, which also led to further cooperation in the field.

Technology Transfer Risks

Foreign suppliers are often eager to join these kinds of projects. COMAC, a Chinese state-owned company, made it clear that their goal is to seize a considerable portion of the commercial aircraft market worldwide. Therefore, foreign partners face challenges in protecting their international property rights and should develop strategies to safeguard their IP and technologies. Even more so when they could potentially contribute to the rise of a relevant competitor in their sector in the near future. That the Chinese government has a clear strategic interest in the aviation sector is visible in the market access for foreign investors. Articles 15 and 16 of the Special Administrative Measures for Market Access of Foreign Investment still provide that Chinese control is required for investments by foreign investors in public air transportation enterprises. The detected military links and the lack of control over the joint venture by the European partner justify concerns over the transfer of relevant technology and IP rights.

EU Arms Embargo on China

Another point of perplexity is represented by the military-related activities conducted by both partners, which could potentially be the ground of application of the joint developed technologies and goods. Concerns are legitimated also by France’s “narrow interpretation” of the “arms embargo” announced in 1989 by the European Union placed to sanction Chinese government suppression of demonstrations in Beijing. By 1989 the list of the items to be included in the embargo wasn’t clear, this gave freedom to single member states to decide how to shape national lists. Therefore, both UK and France decided to only make “lethal items” and “major weapon platforms” fall under the arms embargo. This “narrow definition” excludes a myriad of other goods which have potential application in the military sector. This situation represents a point of concern.  Regulations on export control have prevented most of EU countries from entering the Chinese market but potentially distortive export control practices could lead to the circumvention of such limitations.