The Asian economic crisis a few years back may have declawed the region’s so-called tiger economies, but now South Korea, Taiwan, Singapore and Hong Kong have regained lost ground and then some for Orange County companies.
Asia’s tigers surmounted the downturn that hit in 1997 and played out in 1998 and now are even bigger markets for local exporters. Based on projections for 2000, the countries took in nearly $3 billion worth of local goods last year, up from $2.8 billion in 1997 and well above 1998’s $2.1 billion.
The turnaround is welcome news for OC companies. Santa Ana-based chip maker Microsemi Corp. gets 20% of sales from the four Asian markets, according to Chief Executive Jim Peterson.
“About $40 million of our total sales typically have gone to those markets within a year,” he said.
A few years ago, Asia’s tigers were seen as fast-growing markets for all types of OC exports. In the wake of the region’s downturn, they have begun developing more of their own unique characteristics, executives say. Singapore is growing as a base for regional headquarters. Hong Kong’s role as a gateway to mainland China has grown. South Korea is big in wireless and high-speed communications. And Taiwan has become even more of a global hotspot for chip and other electronics production.
Linksys Group Inc., an Irvine maker of computer networking products, has its Asian regional headquarters in Singapore and has production in Taiwan.
“The island states are very competitive with each other,” said Iris Lin, director of international business with Linksys. “If they see one island doing something, then they want to do it, too. In general, all of the more developed markets in Asia love staying on top of any major new technology trend.”
South Korea, where Korea Telecom Corp. is pushing high-speed digital subscriber lines, is the biggest market among the tigers for Linksys, Lin said.
“The Korean government believed the country was so badly off after the economic crisis that it made sense to go even further into debt to get every home DSL access,” Lin said. “They now want to see every South Korean child become as tech savvy as a typical American kid.”
Unlike the U.S., cable TV isn’t widely deployed in South Korea or in the other three Asian tiger economies.
“It’s much easier to make existing infrastructure DSL-ready in their world than it would be to install cable,” Lin said. “Based on what we’ve seen, South Korea and its 45 million people,most of those households eventually with DSL,could soon become one the biggest DSL markets in the world.”
Fountain Valley memory products maker Kingston Technology Co. gets chips from Samsung Electronics Co., which is part of one of South Korea’s sprawling conglomerates.
“We have a close relationship with Samsung,” said Wai Szeto, Kingston’s vice president of business development. “We’re one of their top five customers, and we buy a lot semiconductor products from them. South Korea is a very big semiconductor producing country.”
Kingston also does a lot of business with other big South Korean companies such as Hyundai Group and LG Group.
Beckman Coulter Inc., a Fullerton maker of medical diagnostic products, is doing well in South Korea, with some minor hiccups, according to Ed Ehrman, director of worldwide business planning for Beckman.
“In the whole East Asian area, there are always speed bumps,” Ehrman said.
South Korea’s most recent “speed bump” for Beckman took the form of a nationwide doctors’ strike.
“That impacted our business there,” Ehrman said. “Still, South Korea’s a place to be in the long term, and we see big potential in the not-too-distant future in North Korea as well.”
Hong Kong, meanwhile, is showing growth because of its absorption into China,a once worrisome prospect for some companies.
“Hong Kong is acting like an importer for China,” said Lin of Linksys. “A lot of the Hong Kong deals are no longer Hong Kong deals,they’re China deals.”
Many businesspeople remain leery of doing business with China because business standards, laws and other factors still are evolving. The cautious ones prefer starting in Hong Kong, Lin said.
“Hong Kong businesspeople understand business cycles better and they are more aggressive from a business standpoint, compared to their counterparts in China,” she said. “A lot of businesspeople who want to get into China use Hong Kong as a stepping stone.”
This is especially true for middle-tier companies that want fast results and do not have the deep financial pockets of a large corporation, according to Lin.
“We see that larger corporations that aren’t afraid to partner with a big China state firm are more comfortable bypassing Hong Kong and moving directly into China,” she said.
Hong Kong itself, like Singapore, is a relatively small market with only around 7 million people.
“Hong Kong is a limited market for us,” said Ehrman of Beckman, which has a regional office there. “They only have five or six major hospitals.”
Chip maker Microsemi has a production support facility in Hong Kong. But Microsemi’s Peterson said that Hong Kong’s importance as a manufacturing center has diminished.
“Hong Kong is more of trade center now,” he said. “It’s not really that cost-effective anymore from a manufacturing standpoint.”
Singapore, a city-state with roughly 4 million people, also has seen a shift away from manufacturing into services.
Many companies use Singapore as a regional headquarters site, with most manufacturing going to neighboring countries such as Thailand or the Philippines, according to Kingston’s Szeto.
“The Singaporean economy is more focused now on trading and other high-value-added business,” he said.
The Singaporean government bolsters much of the economy through heavy spending,a double-edged sword depending on the economic sector, according to Beckman’s Ehrman.
“When their government wants to spend money, they spend a lot of money,” he said. “When the government wants to tighten its belt, the entire healthcare sector tightens its belt.”
Beckman has a roughly 40% share of medical products sold in Singapore’s two major hospitals, Ehrman said.
Taiwan is a larger market with 22 million people. The country has a large base of semiconductor and computer component makers, producing 70% of all computer motherboards, for instance. Taiwan also is the top producer of notebook computers.
The island’s huge technology sector and decentralized economy helped protect it from the Asian economic crisis, Szeto said. Kingston’s Asia-Pacific regional headquarters is based in Taiwan and supports sales in both Hong Kong and China.
Taiwan boasts a relatively open economy without the government subsidies or conglomerates that dominate other regional markets. But piracy is an issue, according to Lin of Linksys.
“Taiwan is a dog-eat-dog world in terms of hardware competition,” she said. “A lot of things end up getting illegally copied,there is a lot of copyright infringement.”
Linksys contracts with a Taiwanese manufacturer that practices a “closed-door” policy,meaning it pledges to protect trade secrets. And while Linksys produces gear in Taiwan, it doesn’t sell there.
“Selling hardware in Taiwan is risky for the same reasons that selling software in, say, Thailand, is risky,” Lin said. “It doesn’t really make sense for us to sell hardware there.”
Microsemi’s Peterson is cautious about Taiwan, forecasting a slowdown in the island’s economy with a dip in demand for computers and other electronics.
“We’re seeing the same thing as everyone else in Taiwan as far as a slowdown in the PC marketplace,” he said. “Growth there is going to be flat for the entire industry for the next quarter or so.” n
