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Profitable Partnerships(HKTDC Enterprise, Vol 06,2006)

Chung Mei Industries Ltd

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Chung Mei Industries Ltd is a leading supplier of electrical home appliances, including a wide range of heating products
The ingredients of success can be quite varied, and for one Hong Kong manufacturer it came in the form of switching its assets into new product lines and, more recently, learning how to cooperate with other commercial interests in joint venture agreements.

Chung Mei Industries Ltd was established in 1963. Initially, the firm made torches. "We did quite well throughout the 1960s and 1970s, supplying various lighting products," says CEO Sebastian Man.

"However, in the late 1970s - when Hong Kong lost its competitive advantage in the US market when its Most Favoured Nation status ended - there was a surge in competition. Many firms started looking for more profitable lines, and our decision was to try small, domestic electrical appliances."

As a result of this move, by the late 1980s Chung Mei was firmly entrenched in the domestic electrical appliances sector. Today, the company has three main appliance lines: heating products, kitchen appliances and personal care items.

"Personal care items form only a small part of our business with products such as hair-dryers and crimpers," informs Man. "However, in kitchen appliances we are one of the largest suppliers of electric kettles, for example." He says that from its experience in these lines, Chung Mei has built up a bank of knowledge in "thermodynamic products" that use water and heat technology.

"We are also one of the world's largest manufacturers of ice-cream making machinery, among other products. But, overall, heating products form our main business, and we have one of the largest ranges of heating appliances offered by any Hong Kong or Chinese mainland producer," Man claims.

"Chung Mei started manufacturing fan heaters in the 1980s, moving with the times and changing technology to introduce ceramic heaters, radiant heaters, convectors and baseboard heaters," he adds.

More recently, Chung Mei formed a joint venture company with one of the largest industrial firms in Turkey - a member of the KOC group, a US$20bn entity - to manufacture heating products on the Chinese mainland.

"As a result of that joint venture, we now also produce oil-filled radiators, towel-warmers and a wide range of water-heaters," says Man. "The intention is that the mainland will become the manufacturing platform for our Turkish partners."

He believes that the best strategy for other companies with ambitions on the mainland is to also form strategic alliances with foreign corporations, as Chung Mei did with KOC.

"We used to have a Turkish national heading our marketing team and he knew of the Turkish firm's interest in trying to manufacture oil-filled radiators on the mainland. I happened to know the managing director of the Hong Kong office and so when the opportunity came it was easy to put a deal together. Happily, what was originally intended to be a small trial scheme is now evolving into something of great interest to all involved."

He feels that the traditional ways of approaching business - simple assembly processes - are almost completely outmoded. "Today, you really must add value, and you really must find new modes of operating, particularly if you want to do more business on the mainland," he says.

"Firms seeking partners must have something tangible to bring to the table," he asserts. "In our case, that is in-depth experience of doing business on the Chinese mainland."

Man says it is also important to discuss ways to add value and develop more complex products incorporating advanced technology in an effort to fend off competition.

"Further joint venture opportunities are in the offing for Chung Mei," he says. "One area of opportunity to watch is the intellectual property and licensing segment."

Chung Mei's production facilities are in Dongguan on the mainland, where it employs several thousand workers. "We started out as an OEM manufacturer and then moved into ODM. Today, we have several patents utilising our own technology," he states. "The US is our major market, followed by Europe - particularly the UK - Australia and New Zealand."

Clearly, Chung Mei has a keen eye on cooperation because it adds a successful ingredient to the mix.

WRITTEN BY TONY HENDERSON

Chung Mei Industries Ltd

11/F, Chung Mei Centre,
15B Hing Yip St, Kwun Tong,
Kowloon, Hong Kong
Tel: 852-2389-1318
Fax: 852-2797-8025
Email:
chungmei@chungmei.com