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November 30, 2000

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OCTOBER 1, 1999 VOL. 25 NO. 39

B2B: Skyworth's the Limit
The Hong Kong-based TV maker reaches out to the international market through the Internet and cashes in

The fax machine at Hong Kong-based TV manufacturer Skyworth is in danger of going the way of the telex, made obsolete by the well-used scanner sitting nearby. Every day, employees scan in sketches of features for new models and other handwritten information, and send them via the Internet to importers and suppliers around the world, or to engineers at Skyworth's Gongming, China, factory. The recipients then can manipulate the documents on their own computers.

Courier personnel are less likely to be found loitering in the company's reception area these days, too. Customers requesting catalogs, which used to be sent by DHL, are directed instead to the company's website or are e-mailed photos. Huge circuit-board drawings that were once couriered to Gongming are now transferred instantly with the click of a mouse. "Speedpost and DHL used to cost us $10,000 a month, which is very expensive," says vice chairman Henry Lau. "And [the delivery] took two days. During those two days, maybe the engineer is waiting around with nothing to do, so it is a huge waste of money and time."

Skyworth has found the Internet crucial to competing in the brutal game of TV manufacturing. Having doubled in number in the past three years, more than 100 mainland players now battle out fierce price wars and chase ever-changing technology in the name of bigger, cheaper, slimmer, more digitized remote-control bliss.

Ranked No. 4 in sales in China, Skyworth has kept toward the front of the pack by being an early adaptor. The 5,000-employee firm started with e-mail and a listing in 1997 on the Asian Sources' website of companies in the region. Then, six months ago, Skyworth's half-dozen information technology (IT) programmers set about creating the company's own home page. Within three weeks, it was up and running. Lau says communications costs alone have dropped in the past year-and-a-half from $1 million a month to $100,000 - enough of a savings to recoup in 12 months the firm's initial IT investment.

While that story may sound familiar in some circles, Skyworth is actually in an elite minority among Hong Kong businesses. A recent survey by the government's Productivity Council found that less than 35% of local enterprises use the Internet in their daily business. Only 11% have websites. Skyworth, however, uses the web for communication, design, marketing, manufacturing - and it is a major influence on its corporate strategy.

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Besides making and retailing its own brand of televisions in China, the company gets 30% of its revenues from building sets for foreign companies who sell them under their own brands. The only way to reach potential overseas clients used to be through quarterly international trade shows or listings in clunky sourcing directories with limited circulation. But now the Asian Sources' web page and Skyworth's own site bring in 20 or more new business inquiries every day. "I would say the Internet is the first place people look for things," explains Doris Leung, Skyworth's marketing general manager. "So the Internet has helped us a lot to reach some of those customers we didn't know before."

While importers still want to see the real thing before they'll fork out for a whole container load of TV sets, Skyworth is increasingly using Internet video conferences to discuss design aspects with them. With the help of Microsoft's NetMeeting software, managers point a camera at a product and beam live, moving pictures through cyberspace to customers in, say, Germany. "They have a camera on their side too," says Lau, "so we can see their faces and their reactions. This saves us a lot of travel costs."

Customer service - a critical element in keeping competitors at bay - also got a boost from the Internet. Requests or complaints from clients used to take up to half a day to make it from the fax machine to the appropriate person in the sales department. Now messages come directly via e-mail to each representative, so problems can be addressed right away.

Zbynek Haluza of Czech importer Le Cygne Sportif gets frustrated with suppliers who are not online yet. The Internet is particularly important when ordering a product made to his company's specifications. "It's quicker and cheaper than faxes, especially if you want to send a drawing or model. If it's in the computer you can cut and paste the drawing into other documents."

On the mainland, Skyworth is now trying to sell directly to consumers online. So far, it has had little luck. Lau says the company has sold only about 1,000 sets through the Internet (compared to its total China sales of 1.5 million in 1998). But that number could grow as Chinese consumers become better acquainted with computers and e-commerce.

In fact, Skyworth hopes to usher in this new industry with a "set-top box" to be introduced in China in October. Using Microsoft technology licensed under the Seattle company's Venus project, the box essentially turns televisions into computers. The venture is part of Skyworth's bigger plan to diversify to the point that TV sales only make up half of its business five years from now. "Consumer electronics and IT products will be more and more merged in the future," Lau predicts. "PCs are good for the office but they're boring. And consumer electronics are limited to entertainment - you can't get information from them. But information and entertainment combined - that's the trend of the future."

In the present, Skyworth's IT department is charged with securing faster Internet connections for mainland employees who now use telephone modems, and adding new features to the website like a reader counter and a customer discussion page. Just to stay in the game, Skyworth will have to keep constant vigil on the technology it uses in all aspects of operations, from design to marketing to communications. "Digital technology is changing every day," says Lau. "If we sleep three days, we feel we're losing ground."

Pic: Ira Chaplain for Asiaweek

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