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Chinese electronics get foot in US sales door through Toronto

By Fred LanganSpecial to The Christian Science Monitor / October 5, 1988



Toronto

China's electronics industry now owns a piece of a chain of stores to sell its goods in the United States. The deal was done through James Ting, a Canadian businessman who has built his fortune by dealing with China, and controls a company called Semi-Tech Microelectronics Corporation.

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Mr. Ting does business with Stanley Ho, a Macao businessman; the Chinese government, selling goods for a state trading company; Hong Kong suppliers; and Samsung, the giant Korean trading firm. His company, STM, has several joint ventures with Chinese electronics firms.

Born in Shanghai, raised in Hong Kong, Australia, and Canada, Ting describes himself as ``neither here nor there'' - the cultural go-between.

Analysts were shocked last month when a technology company suddenly went into the retail business. STM bought 87 stores in the Northeastern United States from Consumers' Distributing - a Toronto-based catalog chain - for $100 million. Ting's plan is to have an outlet for consumer products made in China.

There's lots to sell. Shenzhen Electronics Group has the full range of electronic gadgets in its catalog, from televisions to microwave ovens.

``We're going into the distribution business to help the Chinese earn foreign exchange, and we'll make money doing it. The Chinese are hungry for Western technology, but they don't have the foreign exchange to buy it,'' says Ting. ``Our connections and outlets will give them the money to buy our technology.''

That's his strategy: Develop technology for the Chinese and sell it in the West to earn foreign exchange - and his fees.

He says his secret to doing business with the Chinese is persistence. ``You have to pick one relationship and work on it. This is difficult for a lot of people.''

Knowing the language helps. He speaks several dialects of Chinese.

His first trip back to China was while working on a doctorate in electrical engineering in 1979. While there, he met Ma Fu-yuan, then a high-ranking official in the Ministry of Electronics. Mr. Ma is now president of Shenzhen Electronics Group in China and on the board of directors of STM Far East Ltd., Ting's Hong Kong subsidiary. Shenzhen owns 10 percent of STM Far East, which is traded on the Hong Kong Stock Exchange, where it is among the top 10 most active stocks.

Founded in 1983, STM is in the list of the 200 largest companies in Canada. It is one of only two Canadian companies with manufacturing facilities in Hong Kong and the only Canadian company listed on the Hong Kong exchange.

Semi-Tech's sales will be 10 times as high over the next year, jumping from $40 million to $400 million, according to Paul Little of the Toronto investment firm of Gornitzki, Thompson & Little. ``The idea is to balance risk in a business where there are so many failures.''

Perhaps the riskiest joint venture STM and China are working on is the erasable CD-ROM, which would allow laser discs to work the same way a floppy disk does now. A compact disc - the same type used for music - holds the equivalent of 1,700 floppy disks. Semi-Tech has built a number of computers that are used in China, mostly IBM clones; it has produced a 3-inch floppy disk drive under a joint agreement with China and a modem with an antenna sticking out the back which sends data over radio lines instead of phone lines, ideal for a country with unreliable phone systems.

When Ting first went to China he noticed that foreign computer companies sold only complete systems to China. He decided to enter into partnerships where he supplied research and manufacturing. This worked on a series of small computers, ending in an IBM AT clone that is used extensively in China. It is assembled in China from parts made in China, Hong Kong, and throughout Asia, from research done in Toronto.

Ting's firm has a backlog in orders of $500 million for a new super micro, a computer he is developing in a joint venture with the Chinese. The super micro will be used mainly in China, and he hopes it will become an export product.

Semi-Tech's large building in Markham, north of Toronto - the richest town in Canada and the home of IBM Canada and dozens of other technology producers - is filled with Chinese nationals learning the computer business or helping to work on new research projects. One example is the 3-inch floppy drive, the same type used in IBM clones. STM had a contract to develop the drive. China sent engineers to Toronto and after two years the product was ready. It is manufactured in Shenzhen Province, just over the border from Hong Kong. China owns the drive for Chinese sales - Semi-Tech gets a royalty - and Ting's firm owns it for the rest of the world.

In South Korea, Semi-Tech-Microelectronics has also cut a deal with Samsung of Korea to sell its laptop computer, which comes in several models, including a fast one with 386 microprocessor. Samsung has the South Korean and US market (with STM taking a royalty on the sale of each computer). STM sells it in Canada, Europe, and Asia.

The laptop, developed in joint research with China, is aimed to compete with similar machines being sold by Toshiba, which may suffer from a trade ban with the US because of submarine propeller secrets sold to the Soviet Union.

``You know the Chinese would love to buy American technology, but in most cases they are not allowed to because of American security restrictions. So they buy from a Canadian company like us instead,'' says Ting.