On The Road with Riverwood: Part 5 - On to China
By Ron Keith, CEO, Riverwood Solutions - On tour in Asia
Sep 13, 2012
After a relatively good night's sleep in Hong Kong, I was picked up at the hotel this morning by Howell Wang, the Managing Director of Riverwood Solutions China Ltd. Today we have three factory tours schedule in Huizhou which is approximately 45 km
Northeast of Shenzhen. The factories in this area are ever so slightly insulated from the high turn-over and rapid indirect labor wage inflation that affects the more highly concentrated areas of Shenzhen.
Our first plant tour today was of BYD, the $9B, highly vertically integrated automobile manufacturer that captively produces everything from LED chips and MOSFETS to batteries and touch screens. BYD is one of the better known Chinese brands in the US which is to say that some people have actually heard of them. The company currently has about 180,000 employees in China and over 160,000,000 square feet of facilities on 11 campuses across China. The Huizhou campus that we toured today is part of a campus complex with more than 13M square feet of facilities including extensive dormitories and employee facilities. Huizhou is BYD's 4th largest campuses and is dwarfed by their massive operation in Changsha which has about 42,000,000 square feet under roof.
The EMS operations are but a small part of the activities on this campus which includes high volume production of LED lighting products sold under the BYD brand. Although the company did not disclose any specific numbers, the Riverwood team estimates that the EMS activities represented something just south of $225M in total revenue for BYD, but we are told it is of significant strategic importance to the company. BYD is either one of the last of a dying breed of OEMs that also provide EMS services, or perhaps they are on the front end of a new trend...only time and customers will tell.
The factory tour was largely as expected, with clean, neat, organized, WIP-light operations consistent with what we expect from a professional EMS providers that operates out of anything other than a garage. It was interesting to note that the factory was lit entirely by BYD branded LED lighting that is produced on the same campus. This company prides itself on being extremely vertically integrated and producing their own lighting fixtures is just one small example of that. On our tour we saw a number of automotive, consumer, and computing products being run for various customers in Asia, the US and Europe - including two specific customer that shall remain nameless, but which are notorious for being very demanding of their EMS providers. The BYD EMS factory, perhaps more so than any factory we have been in over the last 10 days, gave us a very specific impression of being a low cost operation, which is how Riverwood views BYD when we are evaluating various supplier options for our OEM clients. Some of the advanced MES functionality and reporting systems that we have seen this week were not as apparent in this facility and far more of the factory's data collection, training records etc. were done manually or posted on paper, relative to the factories we've been in on this visit. The warehousing operations and support staffing areas were a bit old school EMS - which is to say very low on frills and aesthetics and high on functionality, utilization and efficiency. That is not necessarily a bad thing, just a different approach - and BYD has clearly demonstrated that they know how to build products that markets want and produce them at the quality levels and price points that markets embrace.
Our next factory tour, after a delicious and wonderfully hosted meal of boiled tofu, baked sea cucumber (a local delicacy), and steamed broccoli washed down with a thick soy bean juice, was Chinese EMS provider DBG. The company is relatively new, being founded in 1995 as Daya Bay Guanghong Electronics Company Ltd., but generally referred to simply as DBG. As with so many of the factories that Riverwood Solutions deals with in Asia, DBG is a company that would be very difficult for a US or European OEM to find, let alone engage, without some feet on the street in Southern China. Yet this pure play, China only EMS company is one of the 50 largest EMS providers in the world (with 2012 revenues round $300M). DBG would perhaps 45th or 46th in revenue in 2011 according to benchmark industry data compiled and track for more than a decade now by John Tuck at the Manufacturing Market Insider, who I consider one of the most knowledgeable people out there on what's going on in the global EMS world. But as with so many Chinese companies, DBG does not excel at marketing and thus is a virtual unknown in the West, even within highly informed EMS circles.
I had never visited DBG before and knew very little about the company, yet I held some expectations of what we would find during our meetings with management (who hosted the aforementioned lunch) and on our tour of the facility. As with BYD, the tour of DBG revealed an EMS provider that is obviously extremely cost conscious (as one would expect in a global 2% margin industry). This EMS provider is managed from top to bottom to know where every single penny goes. Once again what we saw was a very clean, well-organized factory that was surprisingly light on WIP - and very surprisingly was very light on something else that is quite common in most Chinese factories, namely woman. My colleagues and I both commented to our host that we could not remember seeing an assembly factory in China that had a higher ratio of men to woman - which was reported to be about 55/45 but was clearly 70/30 or perhaps greater. What was not surprising at all however, is that we did not see a single pink smock (pink smocks in most Chinese factories denote people in a quality assurance role) that was male. We did not press the issue and feel that it is not relevant to their manufacturing capability - but it was a stark and noticeable contrast to what we are used to, and to what we saw in the two other factories we visited in Huizhou today.
Contributed by Ron Keith, Riverwood Solutions