Tapping retailing channels, Chinese professionals and the protection of intellectual property rights will help secure competitiveness as the days of lower Chinese labor costs could soon be over, participants at an investment forum in Taipei last week were told.
“If you gain access to sales channels, that means you are in control of the market,” Cybermart (賽博數碼廣場) CEO Scott Chu (朱家義), said, which is why Hon Hai Group (鴻海集團) set up its own IT retailer in China in 1999.
Despite being the world’s No. 1 electronics parts maker, Hon Hai is banking on Cybermart to consolidate its dominance — from being a supplier of upstream electronic components to a frontline seller that keeps abreast of consumers’ changing demands.
There are 34 Cybermart outlets in major Chinese cities, bringing together about 6,000 dealers to sell digital products that range from computers and handsets to TVs. These stores attract about 200,000 consumers a day, Chu told the forum on Tuesday.
“CMMSS” is Hon Hai’s operational motto, Chu said, explaining that the company not only makes “Components” and “Modules,” but quickly “Moves” the products to the client. Offering quality “Service” to clientele such as Apple Inc, Dell Inc or Hewlett-Packard Co isn’t enough, because Hon Hai believes in having its own “Sales” channels, he said.
“We have been keeping a low profile over the past few years and we made a ‘bang’ in the market this year by landing a Taipei City Government project,” he said, referring to the Taipei International IT Fashion Center (台北資訊園區).
In April, Cybermart beat several competitors, such as Clevo Business Group (藍天企業集團), which owns Buynow (百腦匯) computer and electronics chain stores across the Taiwan Strait, to run the NT$3.9 billion (US$121 million) build-operate-transfer project.
The 15-story center will be located next to Guanghua Digital Plaza (光華數位新天地) on Bade Road. It is part of the city government’s plan to build an area to rival Tokyo’s famed Akibahara electronics district.
“The IT Fashion Center isn’t only a tech-gadget sales place. We won the tender because we have a greater vision for the center — it is a retail space that incubates creativity,” Chu told the Taipei Times on the sidelines of the forum.
The incubation of innovative ideas is an integral part of the center, because Cybermart will offer entrepreneur wannabes a space to go “wild” and come up with ideas for new tech products. It will also assist them with whipping the ideas into shape, and if the ideas prove feasible, even help produce the items, Chu said.
Facing intensified global competition, Taiwanese firms have been seeking ways to boost competitiveness. Hon Hai in particular has come under pressure over the recent spate of suicides at its Foxconn (富士康) plants in China and the substantial wage hikes for its Chinese workers that followed.
Citing a Barbie doll as an example, Chu said the contract makers only earn US$0.33 per doll although Barbie’s retail for about US$20. Most of the money goes to the brand companies and their retail partners, which is why Hon Hai wants to have its own sales channel, he said.
More wage hikes in China are inevitable, said Harry Yu (余宏揚), chairman of e-business solution provider Ares International Corp (資通電腦), adding that salaries are expected to increase by 15 percent a year fot the next five years.
Ares has increased the wages of its Chinese workers by 20 percent following a labor strike at its Suzhou facilities in January.
“The labor strike will have a domino effect across the mainland this year,” Yu said.
Given rising labor costs, he said it is important to tap top Chinese brains to boost competitiveness, because technical know-how will help companies earn more.
“Why not bring very talented Chinese professionals to Taiwan and let them work with local brains to devise top-class solutions for Taiwanese firms?” Yu said at Tuesday’s forum.
This could help make Taipei a top-class tech city, full of world-class professionals just like Singapore, he said.
Singapore’s population has risen from 3.9 million to 5 million over the past six years, he said. The people who made this increase possible included foreign professionals working in Singapore and foreign students.
Singaporean leaders have drawn up plans to boost its population to 6.5 million by attracting more foreign professionals, he said.
Intellectual property rights is another issue for Taiwanese businesses in China.
“Even if you are a manufacturer, patent applications are pivotal to protect your own rights,” Yang Ming-dao (楊明道), a lawyer with Fei Han Foreign Legal Affairs Law Firm (飛翰外國法事務律師事務所), told the forum.
Hon Hai, for example, filed the highest number of patents among all publicly listed firms last year in Taiwan, with more than 2,200 such applications to defend its own IPR, Yang said.
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