Stock Code: 601869.SH / 06869.HK

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Boosting ‘Going Global’ – YOFC’s Exploration of the Southeast Asia Market

  • 2017-12-16
  • 3914

On December 20th, 2014, 10 days after YOFC's listing in Hong Kong, President Zhuang Dan disclosed the Company's strategic planning for the first time: the first is to extend the upstream and downstream industrial chain to build a whole industrial chain in the fibre industry; and the second is to ‘build the ship and go out’. What kind of considerations were made for YOFC to select the Southeast Asia market as the first stop forgoing out and taking the lead in Indonesia and Myanmar? What work has YOFC done to expand the Southeast Asia market? What does it mean for the local people? With these questions, reporters from PPTN and CNII explored and found the truth by following the footprints of YOFC in Southeast Asia.

Compete Benefits of the ‘Belt and Road’

Taking the lead in the Southeast Asia market

The history of human development is a history of collaboration, accompanied by the extension of borders and the connection of collaboration. As the earliest and most important channel for the exchange of East-West civilizations, the Silk Road Economic Belt has vast territories and abundant resources, and has been regarded as ‘the longest and most promising economic corridor in the world.’ For thousands of years, people of all countries have jointly written a friendly chapter in the story of this ancient Silk Road.

When history opened a new chapter and human civilization entered the post-industrial society stage, in the face of complicated and profound changes in the global economy, China took the lead in proposing the major initiative of the ‘Belt and Road’, which has become a common consensus jointly built by China and other countries; in turn, it has made great contributions to promoting the world's economic development.

Economic and trade cooperation between China and Southeast Asian countries is particularly cordial and natural. China has a history of collective development experience with Southeast Asian countries with similar cultures and strong cooperation bases. Under the guidance of the ‘Belt and Road Initiative’, the cooperation between China and Southeast Asian countries has been obviously promoted. Every year, the capital demand for infrastructure construction in the Asia-Pacific region is about USD 700 billion, of which more than half comes from Southeast Asia. Meanwhile, the international assistance of financial institutions such as the Asian Development Bank and World Bank in the Asia-Pacific region is also focused on Southeast Asian countries.

This huge investment in infrastructure and the gradual boosting of regional economies has made people full of expectations for the market of Southeast Asia. In particular, a new round of technological revolution and industrial transformation is about to be launched, and the rapid development of such new cutting-edge information technologies as the mobile Internet, Internet of Things and artificial intelligence is now becoming one of the key factors for reshaping the international competition pattern. As an emerging market, Southeast Asia has more than 500 million people and its market value is also on the rise. It is with these factors in mind that YOFC has taken the first step towards ‘going out’ in Southeast Asia on a steady and solid basis.

Localized Marketing

Overseas development has achieved remarkable results

There are two conditions for domestic optical communication companies in general to ‘go out’: one is to focus on overseas trade, that is, to sell products in overseas markets and participate in the construction of local communication infrastructure; the other is to establish production bases by self-building or acquisition, especially in countries and regions along the ‘Belt and Road’ route, to produce fibre products nearby and radiate through the local and surrounding markets. The overseas expansion of YOFC is a combination of both conditions and a two-pronged approach which has proven positive and fruitful in these two aspects.

YOFC's ‘Quality Long March Campaign’ Research Group Visits YOFC International (Thailand) Co., Ltd.

After nearly 30 years of development, the fibre products of YOFC have been exported to more than 60 countries and regions, and 26 overseas offices have been set up. The first stop of our trip, YOFC International (Thailand) Co., Ltd. is the first wholly-owned subsidiary established by YOFC in the overseas market and also a typical representative of YOFC’s overseas sales teams. Since its registration on October 26th, 2016, the Company has become the bridgehead for YOFC to open up the market of Southeast Asia in the short span of about half a year, and has made remarkable achievements. When we met YOFC International (Thailand) Co., Ltd., General Manager Yan Xiaozhi, he had just signed a USD 50 million contract in the Philippines and returned to Bangkok after a long journey. “This order is of great significance,” he told us.“It's the first time we haven’t used agent companies for such a big contract. To this end, our sales team has made numerous efforts. It was worth it because this is a breakthrough which lays a solid foundation for the future expansion of the market.”He was excited and confident as he introduced this project to us.

YOFC has made the difficult decision to encourage the enthusiasm of overseas agents, give full play to their advantages, overcome the environment, language, climate, lifestyle and other difficulties, and set up its own sales team. As YOFC International (Thailand) Co., Ltd. Permanent Chief Sales Representative Li Can said, "The localization of the sales platform is the most direct way to seize opportunities amid fierce competition. Only by setting up a local company can we obtain first-hand information and provide better services to our customers, and this has reduced the cost of intermediate links. At the same time, the flexible use of local policies has created the maximum profits for the Company. YOFC International (Thailand) Co., Ltd., Sales Manager Liu Dan added, "There was a barrier between us and our customers created by the use of agents. We must face customers directly and get along with them so as to know what they really want and be able to keep pace with the market." This ‘old salesman’ with many years of overseas work experience has been able to communicate professionally and thoroughly with customers in Thai, becoming a veritable ‘old Thailand hand’.

It is by constantly strengthening its overseas marketing capabilities that YOFC's exports in recent years have always maintained growth on a double-digit basis, of which Southeast Asia accounts for nearly 40%. According to the plan, in the next three to five years, the overseas sales revenue will account for 20% - 25% of YOFC’ stotal.

Localized Production

Acting according to the circumstances to achieve win-win results

In YOFC's view, enterprises that are ‘going out’ need to ‘teach others how to fish’ accordingly in addition to the output of products, and to use the output of technology to boost the development of local manufacturing industries, consolidate resources and achieve win-win ‘localization’. This is also a good interpretation of the profound words that YOFC President Zhuang Dan once put forward: to “provide technologies in exchange for markets.”

Local staff work busily at the YOFC Indonesia Fibre Manufacturing Company

The sixth day of the Lunar Year 2015 is the date that YOFC Indonesia Fibre Manufacturing Company (hereinafter referred to as ‘YOFI’) General Manager Chen Huixiong went to Indonesia to open up the market after receiving the factory construction notice, which was just over a month from the date when YOFC and Indonesia PT Monas Permata Persada Co., Ltd. (hereinafter referred to as ‘PT Monas’) signed a cooperation agreement in Wuhan to establish a joint venture fibre manufacturing company.

Four executives from China signed a production objective ‘military order’, went into operation and came to a completely strange environment as a self-made entrepreneur starting a new undertaking. Due to the remote location of the factory, they could only work and live in temporary containers in the beginning. At the same time, the external environment of Indonesia was so harsh that there were always local bullies that deliberately embarrassed them. Aside from the challenges of the external environment, the local food and transportation conditions, as well as the language barrier, were the difficulties confronted by Chen Huixiong and his colleagues.

"Finally, we still built YOFI. It's the first fibre factory in Indonesia and Southeast Asia. The foundation laying ceremony was held on June 15th, 2015, and the construction of the factory was commenced on August 26th, 2016. On the National Day of Indonesia, August 17th, 2016, we pulled out the first fibre, which was very memorable.” Chen Huixiong is very familiar with every detail of YOFI.

The situations and environments of overseas markets are much more complicated and diversified, and the situation in each country is different. Therefore, in the layout of its production bases, YOFC always adheres to the principle of ‘adaptation to local conditions’ and plans to establish a complete industrial chain. YOFC decided to develop the cable and fibre business based on local shortages. YOFC planned to expand the ‘tower foot’ of cable and fibre in overseas markets to finally ensure the sales of the ‘tower spire’ of upstream preform, thereby extending the industrial chain and achieving sales across the whole industrial chain.

Almost immediately after the establishment of YOFI, YOFC cooperated with Yadanar Cable Co., Ltd. in Myanmar in March 2015 on setting up a new joint venture in Mandalay to invest in the construction of an optical cable project with an annual capacity of 1 million km. Unlike the Indonesia fibre factory, Mandalay has had optical cable factories as early as 2010, and the joint venture established by YOFC in 2015 further expanded its production capacity.

Recalling his original construction experience, YOFC Yadanar Cable Co., Ltd. General Manager Wang Rui was also full of emotion: "It was really difficult compared to domestic construction. There was a big gap in the requirements for the production environment, technical equipment, staff quality and management level." To this end, YOFC put considerable energy into the introduction of the standards, standardized management and training of employees, finally making the product quality match that of YOFC. Now, as the only fibre factory in Myanmar, the YOFC Burma Company is playing an increasingly important role in the construction of information and communication infrastructure, and its costs have already been recovered after operating for just one year.

As YOFC Executive Director and President Zhuang Danonce said, "It is also a trial to set up factories overseas. If you don't try, you’ll never know how to operate." With more than 20 years’ experience in joint ventures, the management team of YOFC has the advantage of superior coordination management in different cultures and has formed a standardized management system. The facts also have proven this point. The capable management team dispatched by YOFC has not only overcome numerous difficulties and accomplished tasks ahead of schedule, but also quickly absorbed local human resources, expanded the team to over 100 people, output the management system and technology based on local conditions, and achieved localized production.

YOFC Optical Communication Company General Manager Xu Dingfang (first on the right) is interviewed about YOFC's ‘Quality Long March Campaign’ Research Group at the construction site

Just over the wall from YOFI lies the YOFC Optical Communication Company, the second joint venture established by YOFC in Indonesia. The construction of its optical cable project started in June this year and it is scheduled to start operation in February 2018. YOFC Optical Communication Company General Manager Xu Dingfang told reporters that with the successful experience of the fibre plant, he believes that the fourth overseas deployment of YOFC will go more robustly.

‘Going Global’ for Southeast Asia

Changes brought by ‘going out’

‘Going out’ is an important part of ‘Belt and Road’ construction and also its strategic basis. The ‘Belt and Road Initiative’ proposed by China follows the principle of the ‘three commonalities’ of co-building, co-consultation and co-sharing, resolving the three core issues of ‘how to build?’, ‘who will build?’ and ‘build for whom?’ The word ‘common’ firmly ties China with the interests of countries and regions along the ‘Belt and Road’ route.

As for the Southeast Asia market, which is the first stop in ‘going global’, Zhuang Dan said that the primary element considered by YOFC is the present communication development level and population of the country:“For example, the fibre factory in Indonesia. Indonesia has the fourth largest population in the world with 260 million people, and Myanmar has more than 50 million people. These are very important factors to be considered by YOFC in leading Asia and Africa on the road to internationalization.”

The facts have proven that ‘going out’ has brought real changes for both YOFC and the Southeast Asia market.

YOFC's Management Improvement & Project Management Department Chief Engineer of Project Management Li Yongjian has already been to Indonesia 12 times since his first survey and study visit to Indonesia in December 2014. He told us, "YOFI should be the first true overseas plant and also an enormous challenge for YOFC." Li Yongjian believes that the project in Indonesia have trained a group of technicians with overseas experiences and rapidly improved the development capability of overseas markets: "It would have taken two years to build this project if we had proceeded according to the local schedule of Indonesia, but we completed it in less than a year."

At the same time, Li Yongjian said that the quality project of YOFI, the control of cleanliness, was the most successful and most satisfactory for the project team, and also brought qualitative improvement to the project management capability of YOFC: "The preliminary design of the whole project focused on the construction period and project quality, and the fibre workshop is the only fibre drawing plant with all-steel structure. In quality control, the factor with the highest influence on fibre drawing quality is the control over cleanliness. The cleanliness of factories in Indonesia is well controlled, and this has led to the expected results being exceeded."The reporters also felt this during their visit to the factory; there was no obvious trace of dust on the soles of their shoes after wiping them with their hands.

The Myanmar cable factory has undergone tremendous changes after the YOFC's taking over and participation. From a lack of standards and chaotic management, YOFC has established a formal and sound standard system for the sources of raw materials, which then then passed ISO9001 certification. This series of fundamental changes ultimately reflected the substantial increase in production efficiency and product quality. "Customers and partners appraised it as ‘so fast, so good’", Wang Rui told reporters proudly. It is particularly important that the production workers in the cable factory are hired locally from Myanmar, which not only provides employment opportunities but also helps Myanmar to introduce and learn the advanced international standardized production management system to some extent. In the meantime, by taking advantage of cable manufacturing, the YOFC Myanmar Company has also participated in the construction of local network projects, put its successful experience and solutions gained from the construction of the All-optical Network of China in recent years into practice, and upgraded its information network construction and planning in Myanmar.

For the Southeast Asia market, the most intuitive change is the improvement of convenience for the local fixed network and mobile communications, as well as employment opportunities for local people. In Thailand, information has accessed the lives and work of all people; mobile terminals are widely available for ‘smartphone addicts’ in streets and subways; and many places in Myanmar have WiFi, and the streets are full of stores selling mobile phones. However, before 2014, a person with a cell phone SIM card in Myanmar absolutely had a ‘cellular phone’; the quality and effect of calls depended on the weather; and normal calls were often interrupted in severe thunderstorms. In Indonesia, Ivan, a local employee who joined the factory uponits establishment, shared his feelings with the reporters: “Chinese companies came here and brought us a lot of job opportunities. YOFC also gave our local staff the chance to go to the headquarters for training and technical exchange. I’ve also learned a lot from the team that I work with. This is very interesting.”

Coexistence of Challenges and Opportunities

Broad prospects and a hopeful future

Zhuang Dan said that the core roadmap of YOFC's overseas strategy is to create a fibre and cable strategy across the three continents of Europe, Asia and Africa via the Silk Road Economic Belt, and form a closed-loop optical telecommunication industry both at sea and on land. YOFC chose to take the road of ‘encircling the countryside from rural areas’ to lay a solid foundation for Southeast Asian countries with large populations, highly concentrated fibre and cable, and long-term sustainable development prospects.

As an emerging industrialized country with one of the emerging market economies in the world, Thailand enjoys a high level of economy and informationization, and is closely related to Southeast Asian countries, which gives it certain demonstration significance. The YOFC Thailand Sales Company has established a good partnership with True, one of the leading mobile operators in Thailand. When discussing the reason behind selecting YOFC's products, True Purchasing Manager ThongChaigave a brief and clear answer without any hesitation: “Quality”. ThongChai explained that in the face of the explosive growth of information and communication demands in the Internet era, and increasingly fierce market competition, a reliable high-quality network is the foundation for the operation and development of operators. With its high-quality products and excellent service, YOFC has become their first choice. In the future, True will focus on the research and deployment of such emerging strategic information technologies as the Internet of Things, cloud computing and big data, and will conduct closer and deeper cooperation with YOFC accompanied by more network construction.

Myanmar, on the other hand, represents an agriculture-based country with a relatively weak information infrastructure. At present, there are only about 36,000 km of cable lines in the country. This also means that the demand and space for network infrastructure in the future is still very large. Although the YOFC Myanmar Company is the only cable manufacturer in the country, its production capacity is still relatively small when compared to its design capacity. Optimistic about the future of the factory,Wang Rui told us, "With global industrial development and transformation, as well as the deep integration of information and communication networks, the demand for cable in Myanmar will be stimulated, sothe market potential is still huge. If representative information applications are widely accepted and rapidly popularized, this process will be accelerated."

In his interview, YOFI Permanent Sales Director Kong Wentao also confirmed this with data: "With 260 million people in Indonesia and the fourth largest population in the world, 50% of the people are aged under 30, so the country is very young, which gives it very good demographic dividends in the future. At present, its communication market is extremely under developed compared with that of China, and it also lags far behind among the 10 ASEAN countries. Its population is 1/5 that of China but its demand for cable is only about 5 million core kilometers a year, which is only 1/50 of that of China. As such, there is huge space for development in the future."

With this strong market potential, YOFC also faces fierce competition. YOFC's Strategic CenterStrategy and Marketing Department Manager Zhou Qinmin said that all major competitors in the industry have basically set up branches or factories in Southeast Asia, or even entered the market much earlier. However, with the support of the YOFC Headquarters for the expansion of the international team, good local cooperation partners and brand advantages, YOFC has occupied the mainstream of the market.

Looking into the future, the development direction of the whole industry chain extended by YOFC is becoming much clearer. Zhou Qinmin told reporters that the whole industry chain advantages are obvious in that it will not only reduce costs but also ensure that all goods are delivered smoothly to the maximum extent. In addition, YOFC is also striving to explore new overseas businesses, and diversified development has become its next target.

In the overseas drawing workshop of YOFC, you can see preform shining under the high temperature. The hair-like fibre slides out lightly through the drawing tower. The numerous benefits brought by the construction of ‘Belt and Road’ communication facilities has attracted manufacturers in the industry and opened a promising new market. This is not only a new opportunity for YOFC but also the beginning of a new round of undertaking.

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