China a viable destination for small electronics firms

25 January 2013
By Edward Gent
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ACW International's manufacturing facility in Zhuhai, China

ACW International's manufacturing facility in Zhuhai, China

China is a viable option for small business, says the chairman of an electronics manufacturer putting its facilities up for sale.

ACW International put its manufacturing facility in Zhuhai and its international purchasing operations in Shenzhen and Hong Kong up for sale yesterday, just weeks after most of its UK arm was sold to TT electronics

The firm was established and 1989 and had grown to become one of Britain’s largest independent contract electronics manufacturers, serving commercial, industrial, aerospace, defence and security markets

But it suffered serious losses in 2012 after a significant proportion of its customer base was hit by the economic downturn.

Chairman and founder Chris Woods said: “The down turn was something we could forecast for and we made adjustments and started restructuring to suit. But things just carried on plummeting downward and it just moved to a position where we didn’t have adequate funds to keep us going.”

Despite the fortune of his own company, Mr Woods is keen to champion China as a destination for smaller electronics businesses – though he says it is not a challenge for the faint hearted.

“It’s not an endeavor to be taken on lightly,” he said. “It’s nothing like setting up a business in the UK or US. The bureaucracy you are required to go through is enormous.

“Being a single party state the government is all important in a way you don’t experience anywhere else. It was an education in the way things are done that we had to get approval from 14 different government departments to get a business licence in the first place.”

Mr Woods initially attempted to set up the operations from the UK, but quickly realized he would have to go out to China to get things off the ground.

“Once you are there and you’ve gone through all the hurdles there are a lot of advantages in China,” he said. “The big thing is electronic manufacture. It’s very well supported, like nowhere else I’ve seen. You can go to ‘electronic city’ in Shenzen, where our sourcing company is based, and you could see multistory, big buildings crammed with electronic components.

“Suppliers could just walk in there and get just about everything you could dream of to make any prototype you wanted.”

With low labour costs and a strong work ethic Mr Woods believes even small businesses can flourish in China, though there are pitfalls.

He said: “You do need to make a significant commitment to it, which is what we did rather than entering into a joint venture with a Chinese company. There’s an apt saying, ‘same bed, different dreams’.”

When setting up their businesses in China ACW opted for a Western-managed structure, to ensure they could enforce their own standards of quality and management.

And in a country where corruption and loose attitudes to intellectual property are not uncommon, making a stand can present a challenge when starting out.

“There is probably corruption everywhere but it is pretty endemic in China,” he said. “When you are starting out it definitely does cause problems because you can meet resistance, but you just have to brave it out.”

Cultural and language barriers also present difficulties for new companies, but Mr Woods says the universal language of business overcomes most obstacles.

“I found I got on very well with Chinese people. I felt very comfortable with them and they are good businessmen,” he said.

“The language and the complete lack of transparency for non-Chinese speakers and writers is just unfathomable for most people, that really is difficult. But people in China, although there may be a different slant to it, have the same aspirations and desires as people around the world.”

With ACW’s Chinese operations up for sale Mr Woods is keen to promote the benefits of buying into a company already well-established in China. But for those thinking of going it alone he had three pieces of advice.

He said: “Everything will take longer than you think, and therefore will cost more. You need to be out there and build relationships and see for yourself what is going on. Deal directly.

“And finally, you need enough scale to justify it. People can’t understand why all electronics aren’t made in China because it is cheaper. The reason is you’ve got to justify the cost of setting things up.”

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