Foxconn Moving Direct to Consumer

Sunday, June 29, 2014 6:53
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I remember having conversations years ago about what Foxconn would do going forward, and whether or not they would be happy as the manufacturer to brands.   The WSJ article, Amid Margin Squeeze, Foxconn Designs Its Own Fate, puts this question to rest.

Recently, the $130-billion-a-year in revenue company has ventured into handset accessories under its own brand, and sales and distribution of mobile phones. It also plans to offer telecommunications services in Taiwan.

For me, this has always been a bit of a no brainer.  Foxconn has an amazing amount of talent in the firm that is not just managing the supply chain and assembling gadgets for their customer, but have for years also been bringing designs to the brands that they feel would sell well in the market.

Partner that with every entrepreneurs desire to be seen out front, and it was only a matter of time before Guo “dipped” his toes into creating his own consumer brand.

It is unclear whether Foxconn’s new offerings can grow large enough to significantly affect the company’s bottom line. The company doesn’t break out how much of its business currently consists of assembly work for others.

Some of Foxconn’s latest initiatives, such as making its own mobile accessories under the “Coverbank” name as well as a Bluetooth headset branded “Candyard” are raising eyebrows, with many analysts wondering whether Foxconn will ultimately compete with its clients in smartphones and other gadgets.

Foxconn has said it has no plans to enter the smartphone market with its own set of products.

No plans (yet).

Bites of China. Finally a Show Worth Watching!

Monday, June 9, 2014 8:46
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A couple of weeks back, while riding the G train back from Nanjing, something caught my eye.  An advertisement by CCTV for what I believe could be one of the best produced shows China has put together.  At first, I had no idea what the advertisement for, but what was clear was that it was celebrating the various food flavors of China, and those who are tilling the fields and preparing the dishes.

The show is called Bite of China, and I cannot recommend it enough.

Sure, China is known for its fair share of food failures, including recycled oil, but watching this show has restored a bit of my love for the flavors here.  Flavors that were actually the basis for one of my earliest posts, and have provided a never ending hunt for me and my wife as we look to try new things.

I have attached a small clip that I found on Youku, but for those of you who are interested in watching, the entire series is also on Youtube as well.  Just click here.



What Do China’s Millennials Want ?

Tuesday, February 4, 2014 10:44
Posted in category Invest in China, The Big Picture
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For a number of years, I had it pretty good.  I had a number of teams that were under me, were stable, and were producing.  It was at a time when a lot of questions were being asked about the post 80s generation in China, but for whatever reason I was immune.

But, those days are over, and just yesterday I had another millennial go AWOL on me.  So, it was perhaps interesting timing that CNBC put up the article Millennials may be more like boomers than we realize highlighting how several studies point to a generation that is looking for meaning in their job, in their company, and for balance:

A new study from Deloitte also found differences in workplace attitudes between millennials and older generations, saying that the former “want to work for organizations that foster innovative thinking, develop their skills and make a positive contribution to society.”

With advice to readers being

Employers that think ahead can respond to the group’s priorities, Coleman said. Those embracing digital technologies—both in how work gets done, and in creating and selling products—have a leg up in attracting millennials. Offering leadership opportunities and focusing on culture and values also helps.

Now, I am not sure if this is what the boomers were looking for.  They are in power at the highest levels right now, and while I spend a lot of time speaking with this generation about strategically finding meaning in their company and creating visions filled with meaning, tactically they just aren’t there.

So is this how the two are similar?  That they both “want”, but neither “can’t”?

Early in their careers, what I am seeing is that for the millennials is that they are solely focused on getting good grades at a good school that will lead to a good job.  A “good” job will pay the bills and allow for the purchase of an apartment, which will provide the assets needed to get married and have a kid (or two).  But, this isn’t anything different than other generation is it?

Which leads me to wonder what this generation will really want?

Sure, as an employer, you will need to cover all the bases and keep an eye on salary levels, but is that going to be enough going forward as this group moves up from staff to management to executive levels over the next 20 years?

For me, one of the big questions will be whether or not they will be able to accept challenges, take on risk, and innovate.

What do you think?  Is this group different than the others?

What Would be the Impact if the Chinese Economy Tanked?

Monday, February 3, 2014 10:00
Posted in category Going to Market, The Big Picture
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One of the most interesting conversations I ever had was over drinks with a European central banker looking to learn about the reach of China. His core questions was “If China imploded, what could be the impact…. “, and for a couple of hours we worked through a few industries. How far their supply chains reached into China, regardless of where the products were sold, as well as what level of dependence those same firms/ industries had on China for top line growth.

I’m sure it is a conversation many have had, but for me the big lesson was that few take the time to think about it enough, and regardless of what your feelings are on China’s potential for a “hard landing”, it is something I have always advocated creating scenarios for… because if nothing else, I personally find that I learn more through disaster response planning, and honestly speaking, it is quite easy to have a conversation about the end of the China dream. Always has been, and I have yet to find myself in a room where someone else wasn’t interested in joining.

Anyway, with the talk of a hard landing has begun popping up again, I found the infographic in the CNBC article A hard landing in China: The risks in one graphic interesting as a starter point for those looking to understand the challenges that China is facing and implications should all hell break loose. It has a number of interesting components, the most interesting I pasted above, and I would recommend readers to take the 2 minutes to look through it and consider what the impact would be were China to slow down.

Following that, how could you turn that into an opportunity. Because in reality, while a slowdown would have an impact globally, it could also be an opportunity for many to reinvest in China or buy commodities on the cheap.

Update: The Sydney Morning Herald article China’s banks ‘could trigger global meltdown’ has some sobering data worth reading through.  As I mentioned, I do not believe China will ever lose a bank… it will lose the banking system…

The Year of the Horse is here! Bring on the Fireworks! Bring on the SMOG!

Friday, January 31, 2014 7:26
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LAst night, while enjoying a hot pot with friends and doing my best to ignore the CCTV New Year extravaganza, I was taking screen shots from my CN Air quality app to see if it would be possible to show the impact of fireworks on China’s air quality.

As you can see, over the course of the night things got measurably worse.  Large areas of the country that started off the night in fairly good shape ( less than 100), quickly moved into 100-150 territory, and areas that were already in the orange ended up in purple (325+) and black (500+).  Which for us was striking given the fact that construction sites and factories have been idle for the last 7-10 days, and a large portion of the trucks have been taken off the road

Which left us wondering what the source was.  Sure, fireworks had a role later in the night, but with Shanghai starting off the day at 400, things were already pretty bad.

One theory we thought about, which may (or may not) hold water.

Moving 300 million people from factories and offices in urban environments, where power producers are subject to higher standards and enforcement, to homes in China’s 3rd, 4th, and 5th tier cities, where standards and enforcement are more lax, resulted in higher overall emissions than had they remained in the city.

That, while for as energy intensive as construction sites and factories are, 300 million urbanites in the countryside is actually far worse for the environment.  But that is just a theory….

Fighting China’s Smog Comes With A Price.

Monday, January 27, 2014 2:40
Posted in category Invest in China, The Big Picture
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When the first “Airpocalypse” descended last year, I was asked by a member of the media what could be done to “solve” the crisis. A loaded question no doubt, but in thinking about the fact that China’s economy will double by 2025, and its energy package will need to be 400% of today’s, there was only one real solution to the problem.

They could turn off the economy

Which, as you can see from the 30 day snapshot above is in fact what they are doing on a rolling basis. Telling factories, foundries, construction sites and trucks to shut down or curb activity when emissions surpass 250-300, and then allowing them to resume once the figures get below 50.

It is a tug of war that I personally view as being not only unsustainable, but far more expensive than any model I can think of for finding a real balance.

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When a Want Turns to a Need, Foreign Companies Compete

Tuesday, December 17, 2013 21:20
Posted in category Going to Market
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While grading papers last year, I came across the following quote that a student of mine had mined from an interview that I thought summed up the current situation for a number of industries:

“We’re willing to offer some opportunities to local companies. Why not? They are cheap. But it will only be limited to those uncritical systems. For important systems, definitely MNCs will be still our first choice. I don’t think it is going to change in short term.”

It was from an industry executive being interviewed as part of a market entry strategy for a very large “clean” tech firm, and I thought did a great job of highlighting the fact that there is space for foreign firms to compete in China.  Even under a time where the government if looking to reward domestic innovation.

Building on the quote from my own experience, where I think firms entering China would be best to focus is on areas where there is a KNOWN need.  Where there is a KNOWN problem that can no longer be ignored, or a KNOWN constraint that needs to be overcome.  I stress KNOWN because there are plenty of industries/ areas of China where domestic innovation trumps quality because the problem really isn’t tangible, and the solution really isn’t needed.

But once that issue or constraint is KNOWN, things change.  Particularly at the provincial or national level, where the NEED to solve a problem trumps the local need to drive a firm/ GDP forward.

Then it is a process of identifying the key stakeholders and putting forward a value proposition that provides a way forward for a leader to roll out a solution for a KNOWN problem.

Best case, this happens without much effort.  A knock on the door.  A ring of the phone.  They come to you.

But for others, the path is a little more complex.. the hill a little steeper.  It requires investing into a pilot that is VISIBLE, and spending a bit more time than normal explaining the value proposition to the right people.

Which hopefully will lead to a phone call.  A knock on the door.

Capturing China’s Carbon

Monday, December 2, 2013 4:39
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As the Chinese come to grips with the tangible realities of energy, and its emissions, there are a number of interesting pilots that are going on in China to capture emissions and do something useful with them. And while I am not a huge fan of solutions that do not address the underlying failures, at this point I believe that China will need any and all help it can get as it looks for ways to reduce the various pollutants its economy is kicking off, at the source or further downstream.

With that, I invite you to spend a few minutes and learn about a pilot that is going on in Shanghai. A pilot that is capturing carbon from the energy production process, and creating several products that others can use. As mentioned in the video, the capacity of this technology (to date) is a fraction of a fraction of what would be needed to clean the air.. but, it is a ilot, one of several, and over time one can only hope that the costs and capacity of this technology can be ramped up.