Quietly putting itself on the map of appliance production
Champions
Guangdongbased company Hanyu may be an unheard-of brand to outsiders, but it has successfully made itself felt in the household appliance manufacturing industry. Having solid experience and visionary strategies under its belt, Hanyu is going to branch out its business to broader areas. Chai Hua reports in the first of a four-part series on hidden champions.
Chinese companies Haier and Little Swan are well known in part because they make washing machines, one of the most popular household appliances. But the products of another global champion are hidden inside the white appliances.
The company is a Guangdongbased manufacturer named Hanyu, which has about 38 percent of the world’s market in drain pumps that are installed in all washing machines and dishwashers.
Making drain pumps sounds like a nickel-and-dime business, but Hanyu was recognized as part of the first batch of national hightech companies. It owns more than 300 patents, has advanced smart factories, and has reaped an annual profit of hundreds of millions of yuan.
It is only one of many “hidden champions” in various walks of the manufacturing industry in the Pearl River Delta Area, thriving together with some well-known names such as Huawei and Midea.
“Hidden champion” is a term coined by German author Hermann Simon to describe small but highly specialized world-market leaders that are almost unknown to the outside world.
For instance, Shenzhen Unilumin Group Ltd is China’s bellwether of LED display export in 2017, while Comba Telecom Systems Holdings Ltd in Guangzhou ranked among the top base-station antenna suppliers globally, second only to Huawei.
Some champions are hidden more deeply in lesser-known cities in the region. Foshan-based Cheon Western (China) Copper Co Ltd is one of the world’s largest manufacturers of phosphate copper anodes, a material for circuit boards, while Linoya Group in Dongguan leads the nation’s fine electronic lines and the precision data line industry.
Their rise relies on independent technology innovation, high-quality products and intelligent upgrading, debunking the region’s previous reputation as the home of low-quality copycats of original equipment and of cheap labor.
“This group of enterprises can be regarded as a middle category between big corporations and burgeoning startups in China’s economic growth and development,” said Tam Kar-yan, dean of the Business School of the Hong Kong University of Science and Technology.
He sees great potential for them to grow bigger and become more competitive in international markets because “they commit to continuous innovation based on rigorous R&D and best-management practices.”
He said most of the hidden champions are lesser-known to the general public as most of them focus on business-to-business operations, but going forward, they will surely stand the chance to become globally recognized names with their strong commitments to continuous innovation.
The ability to innovate is what Hanyu founder Shi Huashan is most proud of and what he values most. When he established the company in 2002, there were already many international pump-makers with key technology patents in the international market. So he was refused by many clients due to risks of violating intellectual property rights even though he did not secretly copy from others.
He decided to start from scratch and apply for his own patents. By the end of last year, his company had acquired more than 360 patents globally, and another 157 are pending.
He is also well aware that there are some companies in China that do not respect patents, but he is confident that his company’s quality goods can’t be easily copied.
“Once, a client turned to another producer for the same product with a much lower price, but three months later, the client came back to our factory again, saying the other factory’s products were easily broken,” Shi said.
He believes technology innovation props up their high level of quality. His company won the 2016 Excellence in Quality award presented by GE Appliances.
“Only three out of its over 3,000 global suppliers performed the defect rate of zero ppm (parts per million), and we are one of the three,” he said, adding that none of the 2 million pumps his company provided to GE and about 10 millions to Whirlpool Corp last year had defects.
In addition, Shi is committed to long-term innovation so that if his products are copied, he could have already have new products in the pipeline. It also allows him to deal with crises more proactively.
For example, in 2006, the price of copper — the raw material of traditional pumps — suddenly tripled, and he resorted to technology innovation for a solution. The company finally came up with a game-changing solution — replacing copper with aluminum, which decreases the cost and product weight exponentially.
Besides innovation, he is also proud of his own brand. He added he is inclined to staying low-key, or the prevailing saying of “getting rich quietly” in Guangdong province, but he still has a dream to build up his own brand.
He refused OEM (original equipment manufacturers) all the way, even though it could have brought in profits more quickly.
“Though the general consumers don’t know us well, we are actually kind of famous in the industry. Many manufacturers would like to have our brand imprinted on their products,” Shi said.
But he admitted the potential of the traditional home appliance market is limited, so finding new development momentum is a must. After thorough research and consideration, he decided to enter into an emerging industry — the newenergy vehicle (NEV) market.
The spirit of hidden champions continues as he believes professionalization is a must for success in every industry. This time, he is going directly to the most core components of the NEV value chain — motors, driving systems and electric-vehicle chargers.
Besides innovation, Hanyu is also going through a transformation with intelligent manufacturing. MeiCloud, an industrial cloud solution provider under China’s leading home appliance maker Midea, which is also one of its clients, has been assisting it with the transformation for two years.
“Many component providers like us thrive together with China’s household appliance industry, and the latter’s prosperity also depends on the growth of core accessories manufacturing behind them,” Shi said.
Now it has almost no inventory and its production efficiency has increased by 15 percent, as the factory has completed 80 percent of its goal of digitization.
“In the early stage of the transform, large enterprise invested heavily in intelligent equipment, but gradually more and more small and middle-sized manufacturers show more urgent needs,” said Zhang Peng, general manager of key account business division at Guangdong Topstar Technology Co Ltd, a provider of industrial robots and intelligent equipment.