So Cheung Shing, David

Born in 1940, David So completed his secondary education in evening school.  In 1958 he went to Guangzhou to work in a chemicals factory.  A year later he was transferred to Shanghai for learning the knowledge of gas metre.  At that time a gas plant was under construction.  It was planned that after completion of this training he would go back to Guangzhou to work there.  However, construction of the gas plant stopped unexpectedly.  Therefore he was sent to work at a nitrogen fertilizer plant. There, David was responsible for handling the automatic control system.  He had to arrange and install the control panel in order to manipulate the temperature, volume and pressure of ammonium sulfate and nitrogen.  It was during the time he worked there that he had the first contact with the knowledge of electronics.  Moreover, he was taught by the master technicians in the plant and became interested in electronics, especially the binary theory which produced computer memory.  This was later proved to be a good foundation for his career development in Ampex Co. in Hong Kong. 

In 1962 David came to Hong Kong from Guangzhou.  Having planned to work in the electronics field, he became an apprentice in Sunshine Wireless Electrical Appliances Company which sells electrical appliances such as electric cookers, lamps and fans.  David’s work included repairing and installing electrical appliances.  His starting monthly salary was $60, which was increased to $90 three years later before he left the company.  In the early 1960s, transistor radio and electric cooker became popular, and customers had to place orders early.  Products were mainly imported from Japan.  For instance, Shun Hing Electronic Trading Company Limited was an agent for National’s electric cookers.  At that time, the industry for radio assembling had not existed yet.  During his apprenticeship at the electrical appliances company, David was studying English and typing at Eton College in Kowloon City during the day, and he began by learning the alphabets.  Later when he worked in Ampex, he still continued his studies after work.

In 1972, David opened a business with Tsang Ming Pui and Tam Kam Ho – his colleagues in Ampex Co. They set up Elec Computer Component Limited. Tsang had studied in Tong Nam Radio Institute earlier and later became Manager of the Testing Department in Ampex Co.  Being good at personnel management and budgeting, Tsang was promoted to Supervisor of the System Design Department before he left.  Tam came to Hong Kong in 1963. He was David’s colleague at Guangzhou Nitrogen Fertilizer Plant for several years and later entered Ampex Co. to work in the Testing Department through the recommendation of David.  When they started their own business, Tam was in charge of production. 

As David, Tsang and Tam did not have a university degree, their prospect of promotion in either a USA or a British company would be restricted. Therefore they decided to leave Ampex Co. to set up their own business and look for other opportunities in their career. At that time, the three of them saw that there was no production of circuit board in South-East Asia, so they determined to open a factory for the production of double-side plate perforated and printed circuit board for the markets in Hong Kong and South-East Asia.  From 1969 to 1972, they did their own researches by devoting all the time after work in doing experiments until 11 every night. David thought that in the 1970s, production of any electronic parts was good in Hong Kong. 

In the 1960s, Ampex Co. mainly manufactured computer memory. The three of them had only limited knowledge in circuit board. They began with reading books on basic equipment, doing primitive experiments with simple tools such as nail heads, films and Xi Hu brand perforation machines, as well as learning technologies of electroplating and perforation. Only after mastering the key technologies did they set up a factory for production. David considered it important to have a long-term plan for research and development. In doing research and development for new products, they should try their best to surpass the present technologies instead of focusing on customer satisfaction so that they could cater to new technologies in future.

During 1979 to 1980, David was thinking about developing telecommunication products.  Dr Taller (editor’s note: translated version) of The Hong Kong Polytechnic Institute advised David that their company’s technologies should exceed their counterparts by three grades.  At that time, before exporting to USA, Hong Kong telephones should obtain certification by the Federation Communication Commission (FCC) and pass the Electro-Magnetic Interference (EMI) test.  In order to ensure that their products could pass the test without delay, David and his staff conducted vibration tests in an open area in Sha Tau Kok first.  During those days, one could not find any space with more than 700 feet in length in the urban area.  Therefore, David had to do the tests in the open space in the remote region.  Moreover, the facilities for testing in neither The Hong Kong Polytechnic Institute nor The University of Hong Kong were fully developed.  David and his staff had no choice but to risk being questioned by the police for doing the tests in the wilderness.  David was satisfied with the research and development work in the early days and thought that hands-on experience could compensate for his inadequate academic qualification

After their success in researching and developing the circuit boards, David, Tsang and Tam established Elec Computer Component Limited. Talking about their friendship, David sighed and said that it was very deep as they had worked together for many years in Ampex Co. before they set up their company. Therefore, they knew very well each other’s abilities and disposition and could form a solid team in business venture.  This collaborative relationship had lasted more than 30 years.  At the start of the business, the capital for Elec was only $200,000 to $300,000 – the sum of their individual savings and loans from their relatives – without any loans from banks.  During the early years of their business, David was to look after marketing.  When he was in Ampex Co. earlier designing testing device, he met a number of sales representatives of semi-conductor companies, who coordinated with Elec in receiving orders.  In the early 1970s, the circuit boards used by local electronics companies were imported from Japan with prices 20-30% higher than those of Elec products.  Although the quality of the circuit boards made by Elec was not as good as that of Japanese products, Elec’s products could meet the demand by the flourishing local calculator manufacturers.  Therefore the prospect of Elec’s business was good. 

 As Elec’s products had not yet earned credit for their quality, they could only supply to local clients at first.  For instance, they supplied calculator circuit boards to their first two clients: Business Electronics, and Calctronics under Cable & Wireless.  Tsang and Tam were in charge of production in the factory.  At the beginning of their business, there were 40 male and female workers.  The male workers were responsible for electroplation and mechanics, the female workers, quality control.  Requirement in staff’s qualification was not high – only a few studied in technical institutes before, while most of the workers learned the crafts in the factory.  During the early years the machines used in Elec were those assembled by David, Tsang and Tam.  Before they could afford machines imported from foreign countries, all they used were primitive machines such as electroplated tanks.  Since Elec was fast in getting the market share, their development had been smooth since its opening.  There was only one instance where they experienced difficulty – at the end of the first year before Lunar New Year they had to wait till their client, Calctronics had paid before they had enough money to pay their staff’s salary.  Elec soon won the trust from Calctronics, who even made three months’ prepayment in 1973.  The world economic depression in 1974 did not have any adverse effect on Elec.  David said frankly that profit at that time was excellent; even if “of three items produced, one item was wiped out” (editor’s note: i.e. high percentage of defected goods), their business was still profitable.

In 1972, David left Ampex Co. to set up a business with two colleagues.  They established Elec Computer Component Limited (Elec). The three of them had worked together for a long time. Moreover, they had a good understanding of each other and divided their responsibilities according to everyone’s specialization.  Therefore, once started, their business was running smoothly.  In the 1960s, calculators were made with transistors.  In the 1970s, integrated circuit (IC) was commonly used, reducing the size of calculator.  During the early years, local electronics factories were using parts mostly imported from USA and Japan.  An example of them was circuit board for manufacturing calculator.  This provided business opportunities for David and his partners.  At its early stage, the printed circuit boards used by Elec for manufacturing hand-held calculators had to meet the safety standard of the Underwriter Laboratory (UL) of USA before the products could be exported to USA. 

David and his partners then established Eltek Memory Products Limited which manufactured memory for cash register to be exported to Japan.  Later they intended to manufacture electronic products.  In order to avoid conflict of interests with the clients of circuit boards, they switched to communication equipment business.  At the end of the 1970s when the telecommunication market in USA was open, and AT&T could not monopolize the local market, Eltek began to develop household cordless telephone. Their products had obtained certification by the Federation Communications Commission (FCC) for export to USA. In the 1980s, they planned to get Elec and Eltek listed and merged to become Elec & Eltek so as to maintain the approved status of UL and FCC. Finally it was listed in 1984.

In the mid 1970s, Elec Computer Component Limited explored the overseas market.  At that time, the world’s largest circuit board manufacturer, International Business Machine (IBM) set up an International Procurement Office (IPO) in Taiwan, purchasing electronic parts from the Far East region to lower the production cost at the headquarters.  In 1975/76, Elec contacted the IPO of IBM and offered them a few tens of circuit board samples with information on prices and completion dates.  After tentatively approving Elec’s products, the IPO sent their department manager to Hong Kong to check out Elec’s factory in To Kwa Wan.  The manager said to David approvingly, “I couldn’t believe in such kind of building you can build up that kind of quality.”  From then on, IBM had become Elec’s close partner.  Whenever David sold his products to IBM, he could directly ask their budgetary price.  IBM’s offer would far exceed Elec’s production cost, and they never had to bargain. 

Elec was successful in opening the US market, and their clients included HP and Siemens.  Their business in circuit board was not run in OEM mode, which was not suitable for the manufacture of parts and components. Both the product design and the production craft were done by Elec. David stressed that technological development of the circuit board followed that of the semi-conductor. Whenever the electronics companies in USA had developed new products, Elec, which was a supplier of circuit board, had to raise their technological level to keep pace with that in the market. In Elec, there was an engineering department, where David was in charge of tests and experiments, and telecommunication products were developed at the end of the 1970s. 

David was extremely interested in technologies – he would request for visiting his clients’ plants when he discussed business with them in their companies.  For instance, he had seen Lockheed’s infrared-ray tank, which was an eye-opener to him and brought innovative ideas to Elec in their development. David thought that the US companies were open in technology transfers; they welcomed exchanges in technologies with Elec in many areas except secret army technologies or products that were in the process of development.  Later when there was fierce competition in electronic technologies between USA and Japan, Japanese visitors were forbidden to take pictures in the factories so as to prevent the Japanese from stealing technologies. 

David expressed his appreciation in the way the US companies valued honesty and trust and allowed a Chinese to take on the position of General Manager in the Hong Kong branch.  He also strongly agreed with the mode in which US companies run a business.  When Elec was established, they were the first manufacturer of printed circuit board in South East Asia.  Five to six years later, when some staff left the company to start their own business, Elec began to face local competitors.  Since there was rapid development in their early years, Elec became prestigious in just a few years.  Therefore, whenever they negotiated with their clients, Elec had the right to choose in terms of prices and products, without being threatened by other competitors.  Manufacture of circuit board was tailor-made, and the orders of the PCB with lower value were taken by Elec’s competitors.  In the 1970s, Elec’s markets were scattered, with each of USA, Europe and South East Asia comprising one-third of the total in order to keep a balance of risks.

As for US companies, human rights, freedom and innovation are deemed to be most important.  There are fewer demands on the staff; the company cares about the staff’s over-all performance in the production and imposes less restriction on details. David sighed and said that Japanese clients were very picky – they even used magnifying glass to check the products.  From the beginning of their establishment, Elec had been run in the American mode of management so that both the production process and the quality could meet the international standard, including International Process Standard set up by US industries.  They had imposed a series of measures on industrial safety and worker protection.  For example, there was a storage room in the factory for chemicals such as rosin; workers were required to wear protective gears such as eye masks for welding and plating; children workers would not be hired; health-care room and canteen were set up for night-shift workers. 

During their early years, Elec had already established an internal audit system to oversee the company’s finance, personnel and production safety.At the end of the 1970s, Elec’s business was making steady progress.  David and his partners were getting ambitious.  Using large enterprises such as Toyota Motor and IBM as a model, they created their own corporate culture.  He thought that his company should not make the pursuit of profit their only mission, nor should they be managed by only a few entrepreneurs. A large enterprise should adopt a management system and philosophy so as to lessen human errors in operation and increase cohesion among staff. In the 1980s, David invited a consultant company to help them implement the modern philosophy of management adopted by large American and Japanese enterprises. David mentioned about their first and second reforms.

The first reform:
Elec invited consultant company, Alexander Proudfoot to evaluate the details of work process before making suggestions on how to improve efficiency and quality.  Their staff was required to observe the rules.  However, some staff complained that such act was leadership by layman.  Moreover, as that consultant company had a lot of changes in their personnel, the reform ended without a cause. 

The second reform:
In 1986, Elec was hit by a financial crisis. Furthermore, with growth in the company’s scale, David considered it necessary to carry out an internal reform.  Therefore, a US consultant company was invited to implement Toyota’s “Kaizen” model, which focused on establishing team spirit, on the highest level of management first.  David and other directors frankly exchanged their personal ideas such as their feelings towards the staff and the difficulties they encountered in their work.  Such action was similar to the campaign of “Hundred Flowers Campaign” in the mainland, for attaining fairness, openness and justice. The top level of managerial staff acted as a role model to mobilize the staff with their credibility.  About two years later, “Kaizen” was renamed as “Total Quality Management” (TQM) and was gradually implemented one by one in the lower levels.  A workshop was set up in each department, and workers were required to attend a half-hour lesson every day.  In Elec, there were many senior staff and a lot of female staff who had worked there for 20 to 30 years. David thought that comprehensive implementation of quality management could help develop team culture.  However, the result was not notable as people in Hong Kong were not used to openly expressing themselves.

David was born and raised in the mainland.  Many years ago he came to Hong Kong and worked in Ampex, a US company.  There he was promoted from Production Technician to Engineer.  As he was used to the American style of management, he managed Elec Eltek in the same mode, and the issue of conflict in values did not exist. Since David established Elec Eltek, he had had a lot of clients in USA.  Therefore, he often went to California to visit his clients’ factories.  At that time many founders of electronics factories in Hong Kong had previously worked in US companies.  Electronics companies mostly adopted the American style of management and relied on computers more than companies in other fields did.  Two to three years after their establishment, Elec & Eltek had already implemented Management Information System (MIS).  David stressed that if Elec & Eltek wanted to expand in future, they should use computerized management as soon as possible. Two objectives of Total Quality Management (TQM) were Enterprise Resource Planning (ERP) and Just-In-Time (JIT).  The key to putting ERP into practice was using MIS, setting up a central computer to grasp the condition and changes of all the production lines. 

In the 1990s, the branches of Elec & Eltek were all over Guangzhou, Thailand and Nanjing. At that time, a few tens of engineers were employed in the Hong Kong headquarters to handle ERP so that the headquarters could understand the condition of the production lines in all the branches in just half an hour.  As a result, the work process of every product part could be monitored to realize a zero-error JIT.  The key to the success of TQM was openness, justice and fairness – the staff could not hide any information on production. 

Implementation of ERP in the mainland branches had faced a lot of obstacles because the partners from the mainland, for their private interests, covered the negative information such as omitting report on the scrap rate of metal, which indirectly caused damage to Elec & Eltek’s profits.  Therefore, David enforced implementation of ERP, voluntarily revealed to the mainland partners the purchasing prices of raw materials so that there was more transparency on both sides. The concept of ERP was then gradually accepted in the mainland.  TQM helped to decrease the staff’s workload, so their efficiency would not decrease but increase.  David emphasized that what TQM did was to “improve”, not to “reform”, and it was gradually carried out according to the expansion of the company.  The result of TQM in Hong Kong, the mainland and Thailand was good, especially in Hong Kong as the staff there had had many years of experience so they were more ready to adopt TQM.  In 2004, Elec & Eltek as well as all their branches were sold to Kingboard Chemicals Holdings Limited.

In the 1970s, electronic consumer products underwent rapid changes, so David and his friends planned to take part in both the circuit board and consumer product markets.  In order to avoid having conflict in interests with their clients, they decided to take another path which was developing indoor cordless telephone.  Once being launched, their products were successful in the US market.  In 1984, the telephone band (Mega Hertz) in USA was changed, and the old models of telephone could be sold in the market for only three more years. Elec & Eltek was forced by the US importers to lower the product prices and the quantities of their orders. The Board of Directors did not have an accurate assessment of the changes in the market, causing over-inventory and cash-flow problems in 1986. As a result, Hong Kong and Shanghai Banking Corporation (HSBC), which loaned money to Elec & Eltek, imposed credit control on them.

Later the Board of Directors and HSBC mutually agreed that Elec & Eltek would follow a recovering plan monitored by HSBC. Their financial situation would then be assessed weekly.  In order to re-consolidate Elec & Eltek’s finances, the management decided to abolish the department of telephone production and dismiss about 600 to 700 employees.  Moreover, the molds, parts and accessories of the production department were sold to obtain cash.  David considered the Engineering Department for developing cordless telephone the key asset of Elec & Eltek, so he decided to keep it. The staff of the department had a diverse background.  Most of them were in electronic engineering, graduated from tertiary institutions in Hong Kong, Taiwan, Europe and USA. Some had previously worked in American electronics companies such as Ampex, National Semi-Conductor and Texas Instruments. David required the staff to have both academic qualifications and production experiences. The staff of the Engineering Department was originally not happy about the dismissal arrangement.  David allowed them to make their own choice about their future.  After negotiation with the management, the staffs trusted them and were determined to face the difficult situation with the company.  Afterwards they succeeded in developing products such as modem and fax machine.

Some of the staff of the production department left in 1986 to set up their own company making indoor cordless telephones. There was an episode during the period of Elec & Eltek’s recovery. An employee reported to the Independent Commission Against Corruption (ICAC) that a Director of the Board was selling telephone parts at a cheap price for personal gain. The ICAC permitted David to make an internal investigation within two weeks. When the report was done, the ICAC was satisfied and hence the end of the case. At that time there were not any specific guidelines in Elec & Eltek for purchase and resale of raw materials.  After dismissing production staff and selling resources for cash, their finances returned to normal, so HSBC relaxed monitoring on their accounts. The crisis in 1986 was smoothly overcome.  This model of crisis handling was used by HSBC as a reference case.  

In Tsuen Wan, there were two branches. One of them, in Tai Lin Pai Road, manufactured AC adapter and OEM products for supplying to clients such as Wang’s Computer. Another branch was on the 21st floor of an industrial building in which there were also textile factories and machinery factories. On the rooftop of the building, a concrete boom and steel cables were installed for delivering heavy machinery into the building. When foreign clients visited Elec & Eltek’s factory, they were all amazed by that. The factory in San Po Kong was located in Tai Yau Street.  Besides manufacturing multi-layer circuit board, it also manufactured communication equipment such as cordless telephone, fax machine and data device. From 1981 to 1982, the number of workers in Elec & Eltek reached a high of a few thousand.  David had once treated all his workers to a feast at the Vehicular Ferry Pier (Central Pier). Since there were too many workers, this had to be done on two days. During that time, in order to tackle labour shortage, a coach was arranged to pick up female workers in Yuen Long for going to work in San Po Kong. David thought that his experiences in business ventures from the early years were unforgettable.

After the War, USA offered tax reduction to the developing countries through the General System of Preferences (GSP).  If 45 percent of a product’s output value was from the local region, it could be imported into USA on a lower tariff rate.  Hong Kong was one of the beneficiary countries/regions, and so Elec & Eltek’s circuit boards which were exported to USA were eligible for the GSP benefit. In the mid 1980s, Hong Kong was no longer a beneficiary region, so Elec & Eltek set up factories in other beneficiary regions. David had studied the investment environments of countries such as Malaysia, Singapore and the Philippines. After considering elements such as equity system, power of the labour unions as well as work culture, he did not set up any branches there.

Instead, he focused his development in the mainland and Thailand. In 1988, David had successfully bidden a few tens of acres of land in Nantou, Shenzhen for setting up factories. However, the plan was suspended because of the June-Fourth Incident. In 1988, a factory was established in Thailand in collaboration with the Board of Investment (BOI). The chief of the Board came from Chiu Chow – the same hometown as David did, and their negotiation went on smoothly. Half of the resources in Thailand’s factory were put in the production of circuit boards while another half was for Original Equipment Manufacturing (OEM) including word processor for Wang’s Computer and answering machine for AT&T.

In Thailand, Elec & Eltek encountered problems caused by cultural differences.  As the local workers did not want to work overtime, the management had to ask the Thai staff of the personnel department and even the BOI to persuade them.  Another incident was related to the old, outdated rules of the Thai customs. The double-side copper foil that Elec & Eltek exported had once been detained by the customs because there was an embargo on copper during the Korean War. Eventually Elec & Eltek had to ask the leaders of BOI to settle it.

David sighed and said that anyone who invested in a foreign country should integrate himself with the local culture, otherwise he would encounter a lot of obstacles. Thai students who came back to Thailand after studying overseas were employed by Elec & Eltek to fill the posts in management and technology departments. The American electronics factories there also wanted to employ students who came back from overseas, so there were fierce competitions in head hunting. When Elec & Eltek set up a factory in Kaiping, the managers of various departments were lured away by high salaries offered by American factories, causing a serious lack of talents. As an incentive for his staff to stay in the company for a long time, a housing scheme was introduced through which the senior staff was assigned a house.  After five years of employment, the house would become their property.  The staff who had worked there for five years had developed a sense of belonging.  Therefore, the housing scheme was effective in keeping good staff.

After 1993, Elec & Eltek set up factories in the mainland and they had reached a growing stage. It was inevitable for the production lines to shift to the north. In the 1990s, the production lines of Elec & Eltek were concentrated in Kaiping, Guangzhou and Thailand while those in Hong Kong manufactured only one-fifth of the previous yield. However, the Hong Kong factories focused on high value-added multi-layer circuit board and were able to manufacture sixteen-layer circuit board. In 1995, a factory was established in Nanjing with both production and sales for developing the markets in the Yangzi Jiang Delta. Their clients included the mainland enterprises, Japanese enterprises and foreign-funded enterprises in the mainland.  In reminiscence, David sighed about Hong Kong industry’s shift to the north. Since the 1980s, Hong Kong entrepreneurs had been enjoying the benefits of cheap land and labour in the mainland. As for Taiwan and Singapore, they could not shift their industrial production to the mainland because of different national conditions. Later on, with their governments’ encouragement, the entrepreneurs of Taiwan and Singapore were able to improve their industrial technologies to an extent which already exceeded that of Hong Kong.

In the 1990s, the production lines of Elec Eltek were substantially adjusted – some of the old products were shrunk or upgraded while new products were introduced.  The main changes included:

1. In 1993, a spin-off of the circuit board business in Hong Kong was listed in Singapore so that investors could make their choices in investments.  After 1993, Elec Eltek concentrated on developing circuit boards with many layers.  There were at least four layers for the multi-layer circuit boards, and Elec Eltek could manufacture one with a maximum of 16 layers.  David stressed that in order to manufacture circuit boards with appropriate number of layers, it was important not to go for only advanced technology but to consider the efficiency and profit of production first.  According to his analysis, if there were too many layers, production would be limited, and the production lines would face more bottlenecks.  If the number of layers was small, despite that the yield could be increased, so would be the risks.  In order to keep a balance in the risks of the circuit board business, it was required that the amount of orders from every client could not exceed ten percent of the factory’s total yield.

2. In 1993, Elec & Eltek developed electromagnetic industry whose main product was data coupling in two types: linear and digital; the former was used by AC adaptor and the latter was mainly supplied to American electronics companies.  Electromagnet was a key electronic accessory, so there were stringent standards for its quality and safety, and its products were highly profitable.  It was difficult to get into the electromagnetic industry, and American electronics factories had the highest yield. In his early years in Ampex, David had already had an encounter with electromagnet. Elec & Eltek had manufactured transformation system before, which was based on the same principle as electromagnet. Moreover, their factory in Thailand had already manufactured OEM products with internal electromagnetic parts.  Therefore, when Elec & Eltek started a production line of electromagnet in 1993, they had already mastered the technology and accumulated substantial operational experiences. 

3. In the mid 1990s Elec Eltek bought an LCD manufacturer to develop a production line for LCD. The person in charge of that company used to be David’s boss at Ampex.

4. There was not much space in the market for data device

and fax machine, so the production lines for them were shrinking.

David thought that there were two categories in research and development of electronic products. One of them was technological innovation, the other was technological application. To him, the most important criterion for running a factory was efficiency. As the technology of semiconductor dominated the development of circuit boards, Elec & Eltek’s products had to keep pace with market needs by focusing on developing the application level of the technology. In Elec & Eltek, there was an engineering department under which employees were divided into different product teams – cordless telephone, data device and fax machine – each with an officer to determine on the path of development for their products.  The staff of the engineering department was required to communicate with the clients and the marketing department so as to understand the customers’ needs which was useful in developing new products for market share. 

David used Steve Jobs as an example to explain how the thinking of a company’s leader had a decisive influence on launching new products. He pointed out that research and development of innovative technology was not the direction for Hong Kong’s commercial institutions. Research and development of technology had two aspects – engineering and research.  The companies in Hong Kong focused on engineering development whereas only large enterprises such as IBM had the ability and the need for developing new technology, as well as inventing new products, new materials and new machines.  As for Elec & Eltek, its research and development focused on short-term application, not for the future.

When analyzing the reasons for Elec & Eltek’s success, David thought that they could be generalized as “the right time, the right place and the right people”.  “The right time” referred to the early 1970s when electronic calculators were popular in Hong Kong, causing market need for circuit boards.  “The right place” referred to the situation where there was no supply of circuit boards in Hong Kong, and so most of the electronics factories imported circuit boards from Japan; Elec & Eltek grasped the opportunity to monopolize the local market. With “the right people”, it meant close cooperation among the three of them – David and his partners – forming a solid industrial team.

Ever since its establishment, Elec & Eltek had always been growing, so there was no period when they were just maintaining their business in the existing condition without introducing any innovation. David thought that the electronic parts and accessories business was less sensitive to the market, and it was not necessary to follow the trend so closely as the manufacturers of electronic consumer products. It was important for the latter to choose and design products carefully. If a product was unmarketable, the manufacturer would suffer a great loss. However, if there was a fault in production causing the clients to return the goods, the manufacturer could still work overtime to remedy it. 

Using Apple Computer as an example, David pointed out that Nokia and Motorola were no match for the former. Moreover, David used MIT’s medium laboratory as an example to explain the process in which new products, in USA, were launched into the market from tertiary institutions.  Whenever MIT’s laboratory had a plan for new product, people from there would go to China to meet with relevant technology institutes. Once the other side was interested, they could start further development.  If the product was successfully launched in the market, both sides could get their shares of profit proportionally. David thought that tertiary institutions in Hong Kong could follow the example of MIT as a unified policy to launch scientific research products. In so doing, it would not be necessary for enterprises to negotiate with individual professors. Moreover, this would facilitate communication and cooperation between the academic and the industry.

The first stage was learning of skills (before 1972). During the early years David worked in a shop selling wireless electrical appliances and Ampex Co. He kept on learning new technologies, making him the top person in the field and gaining his boss’ recognition. At that time, he had already been thinking a lot about the future trend in electronic products, always asking himself in the middle of the night, “What is tomorrow?”

The second stage was establishing his own business and learning to manage (from 1972 to 1984). When David was an employee, he had already been planning with his colleagues to set up a business. They used a primitive Xi Hu brand perforation device to do experiments; and started their own business when the time was right.  At the early stage of their business, the partners often encountered financial difficulties and were in need of cash.  None of them cared much about their money and their rights, and so they would help each other to overcome the problems. David stressed that in order to set up a business, one should study well to increase the chance of success.

The third stage was formulating a management philosophy after Elec & Eltek was listed (after 1984). David considered the large American electronics enterprises his role models, especially Apple Computer and IBM. Elec & Eltek had manufactured sample goods for Apple before. He thought that Apple’s status was unique in the field, as they often launched the most advanced technology and developed their own software. What made them outstanding was their ability to set the consumer trends and cater to the public taste, and launch a new product when the time was right. The company that David admired most was IBM, Elec Eltek’s client, who never brought down the prices but negotiated with them in a gentleman’s way. David had a close relationship with the top management of IBM, and he had visited IBM’s plant in USA.  David thought that both of them were scientific enterprises with the same philosophies and culture. 

In 1985/86, David poached IBM’s top management staff, inviting four people from there to take up the positions of CEO and VP as he planned to retire and entrust them with running Elec & Eltek. Unfortunately this employment of talents was not effective because of the difference in culture and enterprise experience. For instance, the American CEO and his Hong Kong staff had a meeting which ran overtime. He did not realize the staff’s need for lunch; for himself, a coffee and an apple was enough to fill his stomach, but the staff could only secretly complain. In another case, the American CEO did not realize that Elec & Eltek’s size was a lot smaller than IBM but rashly set an ambitious plan for development. However, Elec & Eltek’s resources were too limited to take the risk, so the big plan could not be implemented. Besides IBM, Elec & Eltek had also poached some experts from other American companies such as Fairchild and Data General, and the result varied according to the adaptability of individuals. David thought that an entrepreneur should have charm to promote the development of the company – but charm was inherent. During the early years of his business, David was mainly handling external matters, so he had experiences in various respects. With this advantage and his ingenuity, he was bound to be a leader.

After 1982, personal computer had become the main electronic consumer product.  Quite a number of companies which manufactured parts had switched to technological products such as hard disk drive.  Hong Kong lacked production of semi-conductor, so the computer industries’ needs could not be met.  Parts such as stock memory had to be imported from places like Taiwan and Korea, where the computer industry was more advanced than that in Hong Kong.  Moreover, in the mid 1980s, the assembly processes of electronic consumer products were shifting to the north, causing further shrinkage of the local market and limiting the development of technology industries such as parts and accessories.  David thought that electronics manufacturers had to take the market into consideration rather than blindly pursuing technology.  During the early years in Tai Po Industrial Estate there had been a few electronics manufacturers for high-technology production.  One of the examples was Hua Ke Electronic which manufactured silicon wafer and therefore, was in need of funds and competent staff.  However, as there was insufficient support from the government, they were not able to keep their factory in the industrial estate but had to gradually switch to consumer production including LCD and electronic watches.

The recent trend in the electronics field is a shift of production to the north.  Hong Kong’s mode of economy has also changed from manufacturing industry to service industry which relies a lot on fields like finance and tourism.  David pointed out that Hong Kong was in a special situation as it was in between the western free economy and China’s planned economy. He thought that nowadays developing an industry in Hong Kong was the same as running a social enterprise, which did not appeal to wealthy businessmen nor large enterprises. He also stressed on the leading role played by the Hong Kong government and advised government officials to implement the modes of economy adapted both by China and the west so as to find a way out for the local electronics industry or even the whole manufacturing industry. The two suggestions he mentioned were:

1. The government should take the lead to encourage small and medium-sized enterprises to develop prototype production, which would then supply to manufacturers in the mainland or overseas for mass production.  Since the orders would be small, the unit cost of the sample would be quite high – five or six times of that in mass production, and should usually be delivered within two weeks. Large enterprises would not be interested in taking orders.  As the prototype production would not be operated in the mode of detailed division of labour, it would be suitable for small and medium-sized enterprises, creating living space for the local electronic enterprises.  Moreover, such business would be profitable.

2. In Europe and USA, there are quite a number of small and medium-sized family factories where there are only 30 to 40 employees.  These enterprises are having difficulties in running their business, and so are already at a sunset stage.  However, despite the loss, they cannot be closed down due to the persistence of their families’ elderly members.  In Hong Kong there are now quite a few unoccupied industrial buildings.  The government can consider bringing those enterprises to Hong Kong; after establishing factories here for manufacturing, they can still keep their marketing, engineering and other departments in their own countries.  Part of the products manufactured here can be delivered back to their countries for sale while part of them can be exported to the mainland.