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SCMP Reporter

UNDAUNTED BY the United States Commerce Department's investigation into the mainland's key television  makers for suspected dumping, Skyworth Digital Holdings,  named on the list, has declared its plan to export 300,000 high-end models there this year.

Chairman Stephen Wong Wang-sang believes  US demand for LCD (liquid crystal display) and digital displays is too huge to miss.

This may partly explain why Mr Wong gave up a secure job with a state-owned trading firm to start a private business 15 years ago.

After graduating from South China University of Technology in Guangzhou in 1982, Mr Wong was appointed deputy general manger of the China National Electronics Import and Export Corp.

Lured by the opportunities in the country's emerging private sector, he resigned in 1988 and founded Skyworth Group, which has developed into the mainland's third-largest television  maker.

Although the mainland government has  become more benign towards the private sector, export-oriented firms like Skyworth are struggling with what they see as protectionist measures  as they expand overseas.

The Informer spoke to Mr Wong  to find out how he would cope.

Q: What do you make of the dumping accusations levelled against you?

A: It's groundless. If my firm dumped goods at below cost, how could it have been profitable?

The US anti-dumping investigation was triggered by the explosive growth of Chinese and Malaysian exports to the country last year. However, the US subsidiaries of Japanese brands, which already dominate the US market, did not participate in the American manufacturers' petition even though the Chinese products were substantially cheaper than their's.

We exported only 20,000 TVs to the US last year.

Q: Why  did you export so few to the US if it is such a lucrative market?

A: It's because the gross profit margin of selling low-margin products in the US is even lower than that of selling the same models in South America. There are only several major US buyers doing bulk purchases and so the margin could be squeezed.

High-margin products will allow us more room to manoeuvre, and make  sales in the US still reasonably profitable. That's why we will take an aggressive approach to the US, tapping its huge demand for high-end products such as digital TVs and LCD TVs

Q: How has the  US Commerce Department investigation progressed? What do they want to know?

A: They have sent us a thick pile of questions. We are  preparing documents on our track records, including  selling prices and costs, for their inspection.

A preliminary ruling could be reached late this year.

Q: How will your business plan be affected if the US takes anti-dumping action against Chinese manufacturers?

A: We have been in a partnership with a Mexican manufacturer for five years. We will outsource production to it if the US adopts anti-dumping measures. The Mexican partner has an annual production capacity of 500,000 units and sells mainly at home  and in some other South American countries.

Q: Apart from the anti-dumping actions by developed economies, patent disputes with multinationals are another headache for Chinese manufacturers. Last year, Thomson of Europe  demanded fees for its patented technologies adopted by  mainland manufacturers. How have things gone?  A: There has been no progress. In fact, many of the patent rights (that Thomson claimed) had expired. Some are on integrated circuit chips. But many IC designs also involve  third parties. It's a very complicated issue.

The demand for royalties is not limited to TVs. Last year, my company began paying royalties for DVD  player technology to the leading Japanese and European brands, and so the dispute was settled. The fees amounted to about $60 million ... China's manufacturers are like penniless students being asked to pay heavy living expenses.

Q: Do you think this is unfair?

A: There is a conflict in  world trade development: globalisation should enhance availability of cheaper products, but manufacturers in developing countries have  to pay high fees to multinationals of developed economies for patent rights.

Q: What can the Chinese manufacturers do?

A: They have to make great efforts to become full-fledged. The key factors are to make technological breakthroughs and develop their own brands.

Q: How will your company develop its own brand and technology?

A: For the present, we mainly do  (original equipment manufacturing) for other firms. Exports under our own brand account for only 5  per cent of total export value. We have set the own-brand sales target at 50 per cent of our exports in 10  years. To move closer to the target, we have set up a research and development centre in Shenzhen and hired a Japanese senior executive who worked with Matsushita Group for 33 years. He helps us develop the core optical technology for cathode ray tube TVs.

Q: Does your company aspire to become China's Sony or Matsushita?

A: It has taken Japanese industry giants several decades  to become what they are today. It will be a long, long way to go, but we will have to beat a different path. The world has changed, and is changing more quickly than in the past.



Skyworth seeks the high-end road to success