[MUSIC] To gain a better understanding of the current situation facing foreign invested firms in China. We are visiting two firms, in Guangdong city, in Guangdong province. Located at the heart of the factory of the world. We are particularly interested in the reasons that the firms are located in China and how the companies are innovating to remain competitive. The first company we're visiting is Aztech Communication Device Limited. Part of the Aztech group based in Singapore. The company produces modems, LED lights and other electronics products. We are speaking with Jeremy Moon, a Senior Vice President of the Aztec Group. He told us that their factory in China was established in 2001. They choose Dongguan, because it is close to Hong Kong, a major world port and international hub. They wanted to move to China because of the low wages and China's emergence as a global manufacturing center. But since then, Chinese wages have increased dramatically and are now more than twice as great as wages in Vietnam and other Asian countries. >> Those initial advantages, the environment in China has obviously changed quite a bit. Is it still an attractive place to be manufacturing goods compared to let's say going to countries like Vietnam or places that might have now cheaper labor than China? >> I guess today China especially this part of China has got a total package available. The infrastructure is relatively in place. And the different manufacturers, different parts producers are all located within a short distance from our factory. So, it's really easy for us to move into some logistics. And shipping of parts and products out from this location. >> So there's no plan to move production to any other locations in the future? At least not right now? >> At least not right now. >> So I had another question about the original firm location decision here in Dongguan. Did you consider other places in China that were also near ports like Shenzhen or Shanghai, with the Yangtze River Delta. Was there anything about Dongguan that was different, other than the Hong Kong port? >> Of course, Shenzhen is also another option that we had. I think relatively, in terms of cost and the labor availability, we have selected Dongguan at that point. >> And at that time, did you have connections in Dongguan? Or how did you make connections to the local government? >> It started with a business partner, a friend that has got a factory here. So we started manufacturing inside his factory. And he has got the connections. And from there, that's how we get to know the local government, and started working with them on our own. And the government has been supportive throughout your time here. >> They have been very supportive for our time here. In fact, I think we have quite a number of awards [LAUGH] from the local government, being one of the, well. Encouraged the industries and all that. >> A lot of people have been talking about how difficult the business environment is now in Southern China that many manufacturing firms are struggling a bit. How is the manufacturing plant here doing? >> Say we have been pretty lucky in terms of recruitment of labor. We still manage, we still manage to retain the operators. In terms of business itself we are transforming ourselves a little bit. Recruiting labor has always been a challenged over the last few years. And with the government's support we have converted quite a fair bit of our equipment into automated production lines, that helps to improve our productivity, increase our efficiency and reduce the reliance on manual labor. >> A lot of people talk about innovation these days as really been important for China and firms in China to be able to continue to grow given that costs are going up so high. Can you just talk a little bit about how your company does innovation? >> I mentioned earlier we're based in Singapore. We actually have currently four RND centers. One in Singapore, one in Hong Kong, Shenzen and here is having a factory. So we work very closely with the factory and the R&D team to design products in collaboration with the factory. Make automation easier, improving our products, features. >> If you're hiring lots of Chinese workers and you're doing this innovation from all the various sources and the different R&D centers that you have, does that innovation kind of spread to your competitors in China? Do some workers leave maybe and take that or do other companies copy what you're doing? Does your technology kind of spread to the rest of the sector? >> I think today it's difficult to contain all your technology per say. So we have to move pretty fast and make sure that we bring the product out to the market as quickly as possible before the competition catches up. So with the integration of the R&D as well as our manufacturing facility, we are able to bring products out to the market relatively quickly. >> Well maybe we can talk a little bit about more, about innovation. So what is the innovation work or research work that's occurring here? In the factory, in the China side as opposed to the work that's occurring in the other R&D centers. >> Well, over here, because it's close to the factory itself, so we have got mechanical as well as electronics team here. So what they do is they bring products from other R&D centers and and try to make it fit. We call it new product introduction to the factory or products upgrading. So that we can make use of the automation in the factory. So that's what some of these engineers are doing right now. >> Next, let's visit a company from Taiwan named Symtek Automation China, a manufacturing facility of Symtek Automation Asia or SAA, which is a leading producer of automation machines. We're meeting with Kenny Row, the general manager of the company. The company produces automation equipment for the production of printed circuit boards, which are found in nearly all electronics products. We saw these being made in the Aztec factory, we visited earlier. Symtec automation in China is certified as a high-tech company by the [FOREIGN] government. So Kenny, can you explain a little bit about your major product, this equipment that helps in the production of printed circuit boards. >> Our major product is load and load automation equipment for PCP printed circuit board. Manufacture industry, because the PCB, that the products, it use many kind of the consumer product, right? So, the PCB manufacture, their process is very, very complicated, almost more than 20 stations. So each station they have a major automation equipment. But for us we build the pick and press automation machine for the protection line to replace the labor. So the factory don't need the labor to use, to put the material into the main equipment. Just use our automation machine to pick and press into the proper line. So that is our major product for PCP industry. >> So maybe you can say a few words about your workers. How many workers work in your factory? >> Yeah, we have totally 320 employees in this company. >> Okay. >> Yeah, and our workers all of the, we need the good skills of the engineers and technician to design our machine or produce our machines. >> Yeah, I can see most of the workers are kind of high skill level. So they are typically people who have a college graduates or have a- >> Yeah, yeah most of them is a college grade. >> And is it hard these days to find capable workers in the Chinese level market? >> Yeah in this area actually it's a more difficult to find the good workers. So willing to pay higher salary to hire them. >> Why is this area more difficult to find skilled workers? >> Because more qualified near, they go into the big city like a Shanghai. >> Okay, so location matter. >> Yeah, yeah. >> And so have you thought about moving the production to a bigger city, so it's easier to find these engineers? >> Actually we already have a plan to build another factory nearby the Yang Chang Riverside. >> I see. >> In Kunshan? >> Yeah, yeah. >> Kunshan is located just next to Shanghai. Kenny Row said that the reason they originally located their factory in China is because many of their customers relocated their manufacturing operations from Taiwan to China. >> As you know, the labor cost always are getting up. So many many Taiwanese company move in their factory coming to China. No exception, the PCB manufacturer also come to China to view up their facility, their factory for the service, for the business. So we come into here to build the equipment to support them directly. >> But how are you able to be so competitive? How are you getting all of these companies to buy your machines? >> I just mentioned, because we have the joint venture with Germany company, so we have a Germany technology into our equipment. And also that we build our own up to service team strongly to support our customers that because our customer, they are our customer in Taiwan before, right now they move into China. So they still over there for us. >> But there's now many of your customers are not just Taiwanese friends, though, right? >> Yes. >> Also, there must be other Chinese manufacturers also producing the PCBs. >> First of all, we must keep our original customer and then that we create the local China customer here. Because the more and more China PCB customer, they sell up their facility very, very fast so we can generate our new business from that area. >> How much are actually exporting? >> Okay. >> From firms in other countries? >> Yeah, currently we have 60% business come from the Taiwanese company, about 30% for local channel customers and about 10% is export for Japanese company. >> And so I'm very interested, you were talking about how service is really important. >> Yes. >> Why is service so important? And can't your competitors also provide service in the same way? >> To our after service team take about 25% of total employee. So, because the our agreement deliver to every customer, they, the machine can not have any troubles. So if any troubles they need to call us. We must go into their factories to fix the issues immediately, so can keep the production moving smoothly. Yeah, so the course is very important. >> And who are your competitors now who are trying to sell these types of machines? >> Actually we are the major supplier for such kind of products in even China, Taiwan. But some costs some competitors come from Korea yea. Some from Singapore. >> And what about local? Are there any Chinese firms that are trying to do the same thing? >> I think yes. Local competitor will be a major concern in the near future. They are getting fast, because they have some government support them, and they use many kind of skill to grow their capability to join this market. >> Can you say a few words about your innovation system, how are you creating new innovation to keep ahead of the competition? >> Okay, actually we are certified by China government with a called a High Tech company. >> Right. >> So high tech company need to have some conditions. We need to achieve the conditions. So for example, the engineering accounts, DS and. How many product use the patents and how many products are shared into the market. So many, many kinds of conditions we need to have, to keep the high tech company certification. So we invest many, many technologies for our company. For example, we need to increase our engineering resource more than 30% of total employee. >> 30% of your employees are doing R&D? >> R&D, yes. And, over 4% of total revenue into the idea is spent. And we also sent our R&D people come back to our home company to learn new technology. And they can come back for the new innovations. And also, we cooperate with outside technology company to develop the second generation equipment. And also, we cooperate with local technical college or university have some special projects, get together to develop. And also we create some heckkang for students come to our factory to learning and plastics. So that way can keep our technology updated and have innovation, energy continuously. >> Foreign firms often came to China for low wages and low production costs. And just because wages have risen recently does not mean they are all rushing to leave the country. This is because infrastructure, supplier networks, logistics, and government support are all strong. Also, if customers are located in China, many firms want to be close to them to understand their needs and provide services.
