For anyone who hasn’t heard of AAC Technologies or its founder Pan Zhengmin, a handy way to find out what the company does is to grab a smartphone and listen. AAC is the key supplier of mini speakers to many of world’s most popular handsets.
Pan graduated from a teacher training college in Jiangsu in 1987, working briefly as a maths teacher. His wife was a nurse and his father ran a small business that manufactured speakers for electronic devices including alarm clocks.
Now 44, Pan founded AAC with his wife in 1993, making basic miniature acoustic products. The tiny Shenzhen-based startup got its first big opportunity in 1998 by securing a Motorola contract and AAC would then focus on the mobile phone industry for the next five years, growing its customer base quickly.
By 2005, its client list had expanded to the likes of Sony-Ericsson, UTStarcom and Kyocera. Senior management claimed that for every 10 mobile phones sold, 4 had AAC’s speakers. But despite its market-leading position, AAC suffered as another faceless supplier to the global electronic giants. It was worth HK$3 billion ($386 million) when it went public in Hong Kong in August 2005.
In one of his rare media interviews, Pan told Global Entrepreneur that his formula for success is “not to stare at your clients but at your own technologies”.
Pan’s key decision was to move away from the mentality of a component supplier to focus more on providing technology solutions.
AAC now holds more than 200 patents, the largest number among any maker of miniature acoustic parts. That’s partly a result of investing in its own research and development, but also because of the company’s partnership with venture capital firms, which have helped it to identify smaller startups with new technologies.
The strategy has helped AAC to continue to secure higher-value contracts from all of the leading smartphone makers, including Apple.
And Pan’s fortunes and AAC’s worth has soared alongside surging consumer demand for smartphones. AAC’s market value now stands at HK$46 billion, a 15-time spike from its IPO.
Pan’s 40% stake is now worth around HK$18 billion ($2.31 billion) – with Forbes last year ranking him 35th in its China Rich List.
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