The important thing in any organisation is leadership, not management. A leader must have the decisive courage to be a dictator for the common good.”
So says Taiwanese electronics mogul Terry Gou in ‘Gou’s Quotations’, a ‘little red book’ for his employees.
There must be some sound advice in Gou’s handbook – the Hon Hai Precision Industry boss has built the largest electronics manufacturer in the world.
Where will he lead his company next? Hon Hai is a huge investor in China, and several provinces are now competing to host the next phase of the company’s expansion. Any new investment would bring both prestige and much needed jobs.
The Hon Hai story has mirrored the rise of the Chinese economy. Terry Gou started his company with just $7,500 in 1974. He grasped China’s potential for low cost manufacturing early and set up shop in Shenzhen in 1988.
The company now employs more than 600,000 people worldwide, and has invested more than $4.4 billion in China over the years. It regularly tops the list of foreign exchange earners, exporting $26 billion worth of goods in 2008.
Hon Hai is listed in Taiwan, and has a subsidiary listed in Hong Kong called Foxconn.
The 59 year-old’s company has grown 600% since 2002, making everything from iPhones to Playstations. The company won 15.5% of the electronics manufacturing services market last year, earning $45.6 billion in revenue.
Hence the provincial battle to secure Hon Hai’s business, especially during what has been a very poor year for exports. Provincial officials have a personal interest too – their promotion prospects can be linked to delivering economic growth.
Xiamen, Chengdu and Chongqing led the bid to welcome Gou to their respective cities.
There are accusations of skulduggery too – that Chongqing investigators have been to Xiamen and Chengdu, in an attempt to dig up any information that could give it an edge.
The rivalry goes deep. Coastal towns like Xiamen were the first to bring in foreign investment, and have long looked down on their inland brethren.
But lately, rising labour costs on the coast – and significant tax breaks in the West – have helped cities like Chongqing and Chengdu to catch up.
The two western Chinese cities are less than 270km apart, but competition between them is no less fierce. Chengdu is the capital of Sichuan Province, where Chongqing was once (briefly) China’s capital. It was hived off from Sichuan in 1997 and – as a municipality – gained provincial-level status in its own right.
Neither location is willing to play second fiddle. But Chongqing seemed to have won the early gloating rights, after persuading Hon Hai to manufacture laptop computers in the city. Investment in the plant could eventually reach $1 billion.
But perhaps honours have been shared in the west, as Gou has also announced an LED/LCD plant in Chengdu – another facility that could end up costing $1 billion.
Winning investment from Hon Hai is a major source of pride for local officials and seen as an important vote of confidence.
China can be a difficult place to do business – as discussed in this week’s Talking Point – but Gou’s Hon Hai has enjoyed two decades of success.
Perhaps it’s time the star businessman added to ‘Gou’s Quotations’ a new aphorism about his own decision to make a ‘Journey to the West’ – for profit, of course.
© ChinTell Ltd. All rights reserved.
Exclusively sponsored by HSBC.
The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.