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Positioning Korean ODM in Chinese market

Posted: 28 Jul 2003 ?? ?Print Version ?Bookmark and Share

Keywords:ceo? interview? management? entrepreneurship? business?

Yang advocates spontaneous participation and sense of ownership.
"A small mobile-phone maker," this is what all the write-ups refer to Korea's Bellwave Co. Ltd. But for its founder Yang Ki-Gon, this "green apple," that have penetrated the Chinese market in such a short time, have ripened sweetly in the mobile phone and telecom component's global scene.

Since its inception in September 1999, Bellwave is now one of the leading companies in the field, aiming at $430 million sales per year. Intuit president and CEO Yang established this R&D-oriented company as he narrates, he was a one-time researcher and kept great interest in it. Yang's first stint as a researcher at the Electronics and Telecommunications Research Institute's mobile communication research department gave him the impression and motivation that he could do better in this field.

Realizing the dream

During his research work on wireless communications technology at ETRI, Yang developed a great interest in the data-oriented technology and businesses. That is when he envisioned of turning it into a global value-chain technology, and that someday he would set up his own company.

But achieving this goal was not that simple. Yang had mixed feelings about quitting his job at ETRI in late 1994, as it was stable and promising. But he also realized that the only way to propagate and utilize his technological expertise was to try different firms before settling down to one. Today, Yang proudly feels that his decision then was right.

After graduating from the Information and Telecommunication Engineering Department of Hankuk Aviation University and working at ETRI, Yang joined Kolon Group's office of planning and coordination to work out technical management support for Shinsegi Telecomm Inc. And for another two and a half years, he worked as head of Pantech's laboratory before finally founding Bellwave.

As CEO, Yang participates actively in design, development, planning of source technologies and quality control activities. But his focus these days has shifted more toward management. He explained, "Management has so many things to consider apart from technological issues. I feel I need to learn more about it."

Winning by preparation

Bellwave pursues not the position of handset makers like Samsung, Nokia or Motorola, but an intermediate position of value chain bridging source technologies and manufacturers. It is not easy for a small firm like Bellwave to enter the cellphone business where behemoths reign. But Yang believed that Bellwave stands a good chance of winning the competition if he pursued a specialized field of the value chain with quick mobility unique to small companies. He also commanded a strategy of making inroads into the Chinese market targeting specialists. His insight into the niche market paid big.

Starting as a subcontractor for GSM phone development with LG Electronics, Bellwave got a series of big deals, including the strategic alliance with Texas Instruments Inc. - which possesses core technology for GSM phones, as well as product development and supply agreements with Chinese companies like Amoisonic, Ningbo Bird and Panda. It was a hard-earned victory, he said. Bellwave's faith-building efforts, technological expertise and extensive preparation, as well as Yang's business skills based on a win-win strategy, all played a great part in the company's success.

Yang also surprised local and Chinese companies by entering into a $70 million supply agreement with Ningbo Bird only after a month's negotiation. He explained that Bellwave's undisputable product quality and the fact that the models will be offered exclusively to Ningbo Bird (whose customer strategy is rather stringent) won them the Chinese company's trust.

This gave Bellwave the major break Yang was waiting for. Statistics after the one-year contract period showed that the single model recorded an impressive sales amounting to approximately $80 million, far exceeding the original target. After that, many big names in China's cellphone industry wanted to have contracts with Bellwave.

Riding this upward wave, the company quickly rose to be the No. 2 exporter among local venture companies in 2002. During this year's Q1, Bellwave accomplished export revenues of around $100 million on the basis of custom clearance and exports of $130 million including royalty revenue, making it officially the No. 1 venture company export-wise. Its sales target for this year is $430 million and as of late April, it has already achieved $178 million.

Management style

"Bellwave's researchers deeply feel that they are the owners of the company," Yang said. "The business pace is fast and the procedures are transparent." Bellwave's virtue is to make its staff move in perfect order in setting up technology development schedules and targets.

Currently, 250 of Bellwave's 330 personnel are research people and he considers them the core competitive power of the company. However, the abundance of researchers bring with it corresponding difficulties. "Researchers' high pride made them dislike 'interference' from others, which is difficult to guide and integrate their various ideas and opinions to certain direction," Yang admitted.

His management style is also based on self-discipline. One example of this is the lack of fixed attendance time. The spontaneous participation and sense of ownership are the reasons why the company grew so fast. But above all, Yang emphasizes that people from the same industry should stick to the basics.

"Glamorous outer looks alone, without product competence and high standard of business quality, will not get you to the pinnacle of success," Yang said. For companies planning to enter China, Yang advises them to do their best, increase their product quality, win trust by keeping promises and always play by the book. He cited that many local small and medium companies are so eager to penetrate the Chinese market that they often do not play the business fairly. Sometimes, they "pirate" customers, offering lower prices than those of competitors that had already made contracts with the company. These companies, he thought, invariably experience failure in the end.

The upcoming crisis

The ultimate objective of Bellwave is to grow into a global company possessing source technologies and to become a world-class specialist of outstanding products. As a precursor to this objective, the company is focusing on becoming an ODM company with the world's highest research productivity. "We are coming close to our target," Yang said.

Although there are still hurdles to overcome, Bellwave has become more famous in China than in Korea. "You need a license to manufacture and sell mobile phones in China. But in just a few years, it will soon turn into a free-competing market, while it continues to accelerate and restructure," Yang hopes. "It is easy to see that China's local companies, with support from foreign companies owning source technologies, show more explosive growth." Companies in the mainland are already showing fast-paced growth with over 50 percent market penetration, and Yang predicts that this trend will continue.

"Chinese companies are superior to Korean firms in terms of production cost, not to mention the power of their distribution channels. Relatively speaking, Korean companies' competitive power will keep diminishing," explained Yang.

As it will not be easy for Korean companies to keep prosperous conditions in the Chinese market after 2004, Yang is looking for different countermeasures including diversification of export markets. He is also considering product differentiation by focusing on software, especially multimedia technology, and local management in China. "From now on, only the company that secures competitiveness in the global market with its own brand can survive." So, he said, we must acquire world-class competitiveness at least in one of the three sectors including development, production and distribution.

Regarding his home country's relationship with China, Yang pointed out that "if we see it simply as a market for selling our products or in terms of competition as we did before, Korean companies' place in China will become ever smaller. Now is the time to change the way we think about it by recognizing China as a mutual complementing partner."

- Joh Yoon-Ju

Electronic Engineering Times - Asia

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