Survivors looking to export markets after the crackdown Mainland gaming machine makers are struggling to survive in a grey area full of risk from uncertainty over government tolerance levels for gambling. Some manufacturers have been forced to abandon the undersupplied domestic market and turn to the highly competitive international market. Karat Technology, a Guangxi-based manufacturer of slot machines and roulette wheels, has not recovered fully from a government crackdown on gaming machines five years ago. The company now ships 70 per cent of its products to overseas markets while still making a small profit domestically, Karat marketing manager Yu Feng says. Founded in 1995, Karat started out with 15 people and net assets of about one million yuan, and benefited from soaring demand by mainland gaming houses that were 'not illegal' at that time. By 2000, the firm had grown into a corporation that employed 500 people and had net assets of 30 million yuan. 'That was our heyday. Clients lined up to order and had to pay cash one week before the delivery,' Mr Yu said. However, the company almost crashed overnight following a government regulation in 2000 that outlawed the manufacture of gaming machines - which paid out gifts, not cash - for domestic use. 'It was a disastrous blow to our industry that killed half of the businesses,' Mr Yu said. He said more than 300 mainland companies were licensed to supply gaming machines before the crackdown. Volatile policies had been the greatest risk factor worrying manufacturers of gaming machines in the country, he said. 'We had a licence that was supposed to be valid for 10 years, but it was revoked abruptly without prior notice,' he said. After losing the licence, Karat applied to go into 'metal processing and electronic components manufacturing'. Karat had no choice but to continue supplying the domestic market while transferring the profits to the international market, said Mr Yu, adding the transition to an export-orientated firm took one year. But being unlicensed for 'gaming machine manufacturing' was still creating problems, he said. For instance, it prevents the company from applying for the United States Gaming Laboratories International certificate, which is required by many large casinos around the world. Mr Yu said his company was internationally competent in software design but lagged in hardware manufacturing, which was especially high-risk. 'It takes only a dozen computers plus a dozen hi-tech brains to do the software, but a mould factory of several hundred square metres would be very hard to conceal,' he said. He said his company's roulette wheels, at US$18,000 each, were only 10 per cent the price of a functionally similar but more attractive model acceptable to US casinos. Despite all the risks, Karat had chosen to stay in the industry, hoping the government would loosen control and the domestic market bounce back. Karat puts a label on all domestically used products declaring 'No Gambling Use'. Mr Yu's rationale attempts to persuade the authorities: 'Gambling is a human behaviour which should not be blamed on the machine. 'Just because someone kills with a knife doesn't mean the knife maker should be arrested. We only make the machines for the fun and entertainment of people.'