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China Entrepreneur Magazine in-depth coverage: Double-sided Tunghsu


    On the first Monday morning of every month, in a normal office building in Beijing Urban-rural Trade Center, there is a solemn flag-raising ceremony.

    On July 3rd, the flag-raising ceremony was held as scheduled.

    On this day, thousands of people orderly filled up with an indoor ground, a basketball court usually, and all other sports equipment was removed for being a temporary flag-raising space.

    The host dressed up and organized the whole. Employees came in formal dresses and queued up according to different departments. When it was just 8:30 am, the ceremony began and all became silent and serious.

    Two men and one woman dressed military uniforms and carried two flags, and they step into the hall with the goose step. When they were in place, the flag-raising ceremony began and all of the people sang the national anthem. All the procedures were common as we know. But only one thing, one more element right after the 48.5 second, was different. They raised Tunghsu flag and sang the Tunghsu song, and soon the hall was full of singing.

    The man who led the ceremony is Li Zhaoting, Chairman of Tunghsu Group.

    If you have no idea about this company and Li Zhaoting, you may think you were going to a state-owned company’s ceremony. In this pure private company, however, it still adopts the operation mode within the system.

    For the past 20 years, Tunghsu Group has grown from a small private factory to a group company owning 3 listed companies, and more than 100 wholly-owned and controlling companies. Its total asset is more than 130 billion yuan. The business has expanded from single optoelectronic display business to new energy, ecological and environmental protection, new materials, park development, and other fields.  

    Nearly 40 years after the reform and opening-up, entrepreneurs in the Chinese business management field, or experts in the economics field, have been discussing and exploring an operation road which fits into Chinese history and local characteristics.

    This company has caught our attention.

From the system to the system

    Li Zhaoting is the beneficiary of the state-owned company’s system and he never denies this. Early at the age of 30, he became the vice present of a local large state-owned company.

    After the foundation of Tunghsu in 1997, Li Zhaoting did not get away from the system. On the contrary, he even said, “Although Tunghsu is a private company, it is more like a pure state-owned company”.

    This is also applied to the distribution of Tunghsu human resources. Compared with other private companies, Li Zhaoting cherishes talents within the system a lot. Till now, most of the core managers in Tunghsu are from the system.

    From his point of view, “I paid much attention to this point because people from the system have more political sense and are more self-discipline.” That is also the way he is.

    Memories came with smoking. He was in the state-owned company early and he used to go to the office in advance to draw some water, to sweep the floor, and to fetch the newspaper. He thinks this is the devotion spirit owned by people who come from the state-owned companies only. At present, he hopes his employees could do this spontaneously.

    Li Zhaoting, however, is not an ideal interviewee. On one hand, his vocabulary is almost about national emotion, responsibility, gratefulness, and the sense of ethnic mission. In the end, he admitted with a smile that those had penetrated to his bones and they all were the truth.

    Born in a normal worker family in Xinle City, Hebei Province, Li Zhaoting’s parents were employees of a local military industry enterprise. The compound life with the value of seeing the factory as the home influenced him. “The compound was just like a small society and everything could happen”, he said.

    Therefore, till now, Li Zhaoting still holds the special feeling towards the force and the soldier.

    After graduating from the high school, Li Zhaoting was admitted to Hebei Industrial University and majored in engineering. He finished his university in 1985 and went to an old state-owned company, Shijiazhuang Tiantong Diesel Engine Company Limited and became a normal technician.

    At the age of 20, Li Zhaoting’s dream was becoming a technical professional.

    Besides sweeping the floor, drawing the water, and fetching newspapers, he spent most his time on discussing technical difficulties with senior technicians and on researching technology innovation. Years later, Li Zhaoting saw himself as a typical technology idiot.

    At that time, talents like Li Zhaoting who had a high degree and were good at technology, were rare. So that he was easily put into an important position. From the normal technician, to manager of the factory, and to Vice President of the company, he just spent 10 years.

    The 30-years-old Li Zhaoting became the vice president in 1995. Before him, the youngest leader was 50 years old. So his appointment caused a considerable stir and brought him and his family a lot of honor and pride as well.

    During his work experience in Tiantong, Li Zhaoting witnessed the development of this company to be one of the China top 500 large industrial companies and one of the China top 50 machinery industry companies.

    But after being Vice President for 2 years, Li Zhaoting, who was only 32 years old, decided to start his own business unexpectedly.

    Leaders in Tiantong Group tried their best to persuade him to stay there, and his family and friends were also unwilling to let him leave. But he insisted quitting his job and it is this decision contributed to Tunghsu, one of the China top 500 private companies. 

    It was not a proper time for a startup in 1997. This year, the Asian financial crisis impacted the whole South-east Asia and Chinese economy was stricken heavily. The Bidder King Qinchi, Shi Yuzhu’s Giant, the star of healthcare industry Sanzhu Oral Liquid, Guangzhou Apollo, and Zhengzhou Asia that was dominating in the retail industry, were all in trouble.

    Another situation at that time was the reform of state-owned companies. Under the policy of constructing a modern enterprise management system for state-owned companies, lots of state-owned companies laid off workers. The major phenomenon of China economy and Chinese society at that time was reemployment.

    Throughout the reform and opening-up in Chinese private companies’ development history, the reform of state-owned companies 1998 created a group of excellent private entrepreneurs. Different from the 92 Fraction who responded to the national call actively to explore the market bravely, they carried on some psychological burdens more or less. The State Department encouraged merger and reorganization so that getting out of the system means being abandoned to some extent. 

    Within the people who got out of the state-owned companies, there were founders who saw the system management as chains. They left the state-owned company with strong political overtone and intense hierarchy sense, and turned to the modern enterprise management system and the operation demand of the market economy.

    As one of the founders who started their own businesses, Li Zhaoting and his small company provided equipment for CRT glass shell production companies. In the China market at that time, the color television still used CRT monitor and its core part is the picture tube which is crucially composed by glass shell that makes up one fourth of a CRT color television’s cost.

    Li Zhaoting had become a private entrepreneur, while he still chose to adopt the state-owned company’s operation mode. For example, he emphasizes the value and honor of collectivism and requires his employees to devote to the work as a screw and to accept the instruction from Red Culture.

    People around him said, “the smartest point the boss has is that keeping the essence of state-owned companies and abandoning or improving the bad things from them. We get the shortcut in the business execution because we follow national policies tightly and we believe the absolute obedience.” 

    By 2004, Tunghsu had become the largest CRT equipment provider in China and its market share was more than 50%. It had provided Ancai Group, IRICO Group, Baoshi Group, Hunan HEG, Beijing Panasonic, Shanghai Yongxin, Nanjing Huafei, and other large CRT companies with a range of production lines, accessories, and technology services.

The combination of state-owned style and private style

    Among lots of senior managers in Tunghsu Group, Vice President Wang Jianqiang has followed Li Zhaoting for the longest time. 

    Wang Jianqiang still remembers when he came to Tunghsu. He used to work in Shijiazhuang Baoshi Electronics Group  Company Limited (Baoshi Group) and was responsible for sales. At that time, Baoshi Group was one of the most important customers for Tunghsu.

    Baoshi Group is an old Shijiazhuang local state-owned company and its major products are color picture tube glass shell and matching electronic components. Early in 1996, Baoshi Group successfully issued the share of Baoshi A and Baoshi B in Shenzhen Stock Exchange. In 2006, Baoshi A successfully achieved the non-tradable share. 

    As the CRT industry declined, Baoshi Group’s operational situation turned down sharply. Wang Jianqiang could feel the profound changes in the industry as he was a salesperson for a long time. But the state-owned system restricted the transformation of the company.

    Wang Jianqiang said, “I did not think this industry had a promising future. Also, under that system, I could not practice my thoughts.” 

    In the middle of 2007, Wang Jianqiang was introduced to Li Zhaoting by another colleague who had already joined Tunghsu. At that time Tunghsu just moved to Beijing and its production base was still in Hebei Province only. 

    Li Zhaoting called Wang Jianqiang and met him in Shijiazhuang in person. He described the prospect of Tunghsu and introduced the flat-panel display industry.

    It was exactly the transformation period for Tunghsu to turn into flat-panel display business from the CRT business when Wang Jianqiang just came to Tunghsu. Li Zhaoting was keen for talents and his sincerity finally touched Wang Jianqiang.

    From 2003, Tunghsu began to transform from CRT to the flat-panel display. The transformation typically had a comparative significance for a company that imitating state-owned company’s management.

    When Tunghsu was in full flourish in CRT industry, Li Zhaoting sensed the crisis.

    Li Quannian, Executive Vice President of Tunghsu Group, indicated that Chairman has a great vision and is sensitive to the industrial change. And this judgment had gained the common consent, including Wang Jianqiang and many other senior managers.

    In fact, Li Zhaoting had realized the industrial change in 2003 that leading countries in monitor filed like USA, Japan, and Korea were gradually transferring to flat-panel TV research from the CRT color television research. 

    According to Wang Jianqiang, Korean companies at that time had transferred to the flat-panel field while China had no trend. Li Zhaoting began to realize that the age of flat-panel display was really coming.

    After 14 years when Li Zhaoting recalled that transformation, he still felt frightened. “Back to the eve of Tunghsu’s development of glass substrate for TFT-LCD, if we did not have enough insights and follow the industrial traditions, we would face a big challenge of survival.” 

    Then from 2004, Li Zhaoting adjusted the industrial structure and research emphasis, and made the great decision about developing the flat-panel display industry. 

    Like the resignation before, Li Zhaoting’s decision had caused a stir again. Some industrial experts said directly to him that under the situation of technology restrained by foreign companies, it was unbelievable that Tunghsu could research the glass substrate for TFT-LCD independently. 

    It has a high requirement for the size, appearance, and performance of glass substrate for TFT-LCD and zero defect standard is needed. So the pick of raw materials, precision of equipment, fineness of operation, control of technology, and the demand of environment all have strict requirements.

    The cruel reality had proved Li Zhaoting’s judgment. The flat-panel display television replaced the CRT color television in 2006 in the market. The producer of CRT color television was almost in trouble overnight.

    Take Ancai Hi-tech Co., Ltd as an example, it had bought 9 glass shell production lines from Corning Incorporated with huge money. It was dedicated to establish the national aspiration and to create a world class brand.

    At its peak, Ancai Hi-tech’s production capability was up to 56 million glass shells of color television and it was the largest glass shell manufacturer. But with the arrival of liquid crystal age, this company declined soon.

    At that time, the foreign companies had controlled the glass substrate for TFT-LCD field so that they controlled the Chinese color television industry.

    For long, the production of the glass substrate for TFT-LCD was controlled by a few foreign companies. Corning Incorporated took 50% international market share. Asahi Glass, Nippon Electric Glass, and AvanStrate took more than another 40%.

    Li Zhaoting said the biggest difficulty was to break the manufacturing dilemma of the glass substrate for TFT-LCD technology blockade created by foreign companies.

    Wang Jianqiang soon became a valuable assistant for Li Zhaoting in terms of expanding the flat-panel display industry. By the end of 2009, Tunghsu began to build the first 5-generation glass substrate for TFT-LCD production line in Zhengzhou Xufei (a joint venture of Dongxu Investment Group).

    Finally, this production line became the first Chinese glass substrate for TFT-LCD production line, which meant that Tunghsu made the breakthrough of the national glass substrate for TFT-LCD manufacturing and broke foreign companies’ monopoly.

    Statistics showed that the 4-generation and the 5-generation glass substrate for TFT-LCD had gained excessive profits before. However, as the localization of the display materials, which involved Tunghsu’s efforts, the price of Chinese liquid crystal television decreased.

    Li Zhaoting said, “I was happy that due to Tunghsu’s contribution, the Chinese ordinary people could spend 3000 yuan to 4000 yuan on a liquid crystal flat-panel television, instead of 30000 yuan to 40000 yuan before.”

    This was the first significant transformation Tunghsu had made since its foundation, as well as the proudest one for Li Zhaoting. 

    There were also perceptive entrepreneurs in state-owned companies when the market urged the industry to change in the past 10 years. Some of them had the same ability to predict and to act like Li Zhaoting. However, most of their decisions could not be put into the practice as lacking quick reaction.

    “If a company could not be led by the entrepreneur, this company would not have a promising prospect. The biggest problem in state-owned companies is the serious administration of management mechanism. Everything should be reported to managers at every level so that the opportunity was missed. Meanwhile, state-owned companies train talents at all costs so the strict control of compliance, risk, and professional qualification are the obvious advantage in state-owned companies. Tunghsu had employed the two well.” A middle-level manager who cooperates with Tunghsu for long said.

Keep consolidating the industries

    Obviously, Tunghsu has been the No.1 in the optoelectronic display industry. At present, Tunghsu has the 4.5 generation to the 8.5 generation glass substrate for TFT-LCD and more than 20 production lines.

    Li Zhaoting, however, is not satisfied with this.   

    On the one hand, he knew the risk of single industry showed by the fatal dispute with Corning Incorporated years ago. On the other hand, the flat-panel display technology has been developing rapidly and the market is appearing increasingly complicated. 

    So the diversified development had to be considered. Although lots of private companies had adopted an “asset light” strategy, Li Zhaoting decided to consolidate the industries. 

    So Tunghsu keeps focusing on entity industries.

     “These industries are of vital importance to the nation's economy and the people's livelihood. Tunghsu has the gene of Made-in-China and Chairman is not familiar with “asset light” industries. So he would like to choose the entity industries.” Li Quannian introduced the industry layout of Tunghsu.   

    Among multiple industries, graphene industry is in the center of attention with no doubt. As the thinnest, strongest, and with highest electric and heat performance, this new nano material is called “Black Gold”, and is seen as the “King of the New Materials”.

    Scientists even predicted that the graphene would “totally change the 21 century” and would cause a global disruptive new technology industrial revolution.

    From 2006, Tunghsu began to develop graphene battery and formed the industry distribution in 2014. Wang Zhonghui, Vice General Manager of Dongxu Optoelectronic said, during the past 3 years, they had finished the industry distribution in the graphene field and has 7 to 8 entity companies.

    Wang Zhonghui is in charge of the graphene industry in Tunghsu. According to him, the graphene industry distribution was the exploration of optoelectronic display material originally and was born for the optoelectronic display industry.  

    As the graphene industry developed, Li Zhaoting decided to treat it as an independent business and made it a higher degree of corporate strategy instead of depending on other industry.

    Last July, Tunghsu promoted the world’s first graphene-based Li-ion battery product, “Graphene King”. It is believed that this product can be charged to 4800mAh in 15 minutes and can work under -30~80environment with more than 3500 times cycle life.

    Tunghsu has planned to invest 1.65 billion yuan for the graphene-based Li-ion battery project in Taizhou. This project now had completed the land acquisition and was registered. Additionally, Tunghsu had successfully developed the graphene-based LED light, the graphene-based electrothermal membrane, and other graphene-based products. They all had achieved the breakthrough of industrialization in transforming heating from coal to heating from electricity, intelligent cities, power battery, and other fields.

    Besides graphene industry, in 2015, Tunghsu bought Baoan Hongji Real Estate Group and changed its name into Tunghsu Azure (000040.SZ). This became the platform for the new energy industry for Li Zhaoting.

    Last October, Tunghsu Group bought Challenge (002486.SZ) and it is the third listed company of Tunghsu Group. In the future, Challenge will be the platform for the ecological health industry.

    In addition to the two acquisitions, Tunghsu launched the purchase of Shanghai Sunlong Bus. Li Zhaoting hoped to build a closed industrial chain loop from graphene materials, to graphene coating lithium iron phosphate cathode materials, to the graphene-based Li-ion battery, and to new energy cars.

    Li Quannian is responsible for this acquisition. After getting a doctorate degree, he worked in China Asset Management Company, China Spacesat Co., Ltd., and other state-owned companies.

    As before, Li Zhaoting has the preference of employing talents who work in state-owned companies previously. A headhunter found Li Quannian in 2012 but Li Quannian was not interested in Tunghsu at the beginning. Li Zhaoting, however, valued Li Quannian’s working experiences and financial working background.

     “I was touched by the boss’ charm in the end and came here.” After 5 years, Li Quannian still has the vivid memories.

    Baoshi A was renamed Dongxu Optoelectronic in 2013. Li Quannian’s first position in Tunghsu was Chief Financial Officer of a listed company. Soon, he was promoted to Executive Vice President by his professional competence and administrative ability. “Maybe the boss thought I have the financial foundation and I could understand his thoughts, strategies and management methods.”

    In fact, Tunghsu was not intended to go to the new energy car industry. When the company acquired the power battery technology, one of the new energy car core technologies, Tunghsu planned to buy a battery company.

    Li Quannian researched the industry and its top 10 companies. During this process, the new-energy-car idea came out. “There was no suitable battery company for us so we decided to skip it and bought the new energy car business.” Li Quannian said.

    This buyout valued nearly 3 billion yuan, Li Zhaoting fully trusted Li Quannian and his team. After hearing several presentations, Li Zhaoting asked Li Quannian several questions and got the answer, and he decided to conduct this project. “I must make it with my team to prove worthy of Chairman’s trust.” Li Quannian said.

    In the decision and implementation process of this acquisition of Shanghai Sunlong Bus, Tunghsu did it best to combine the essence of state-owned companies with the efficiency of private companies again.

     “We follow the national policies to make the investments. Most of the employees here have the working experience in state-owned companies or governments so that they hold the overall situation consciousness. We focus on the results and appoint people on their merit.” Li Zhaoting said.

Li’s management style

     “Trust the person in position” is the management philosophy of Li Zhaoting. Zhu Shengli, Chairman of Tunghsu Azure, had experienced this deeply and thinks Li Zhaoting’s management is proper.

    “His management is not too much, is not too less either. That is the reason that Tunghsu can develop steadily. Other private companies, however, would have some management vacancies after a certain level’s development.

    Anyone who works with Li Zhaoting could feel the working pressure as he is a typical workaholic, and Zhou Yongjie, who is in charge of the Office of the Chairman, is aware of that a lot.

     “Everything we do will have alternatives,” Zhou Yongjie said. There are lots of elder colleagues in the Office of the Chairman and most of them are male. Because working with Li Zhaoting requires enough energy and strong physical strength.

    In Zhou Yongjie’s eyes, Li Zhaoting seldom has his personal life. His secretaries work in turn and their annual attendances are 360 days, even including the Spring Festival holidays.

    Wang Jianqiang recalled, every time he had a business travel with Li Zhaoting, they would have a meeting at night even they had worked for a whole day.

    For this kind of working intensity, Zhu Shengli, who joined Tunghsu last year, could not handle it easily at the beginning. “Sometimes we should meet four or five customers and the boss is too tired. But he will not stop and keep meeting customers,” Zhu Shengli said.

    Before, Li Quannian had lunch with Li Zhaoting every day. Li Zhaoting usually spent 5 minutes eating the lunch and would hear the reports later right after the lunch.

    Till now, Tunghsu has a regular meeting every Saturday from 9 am to nearly 2 pm, and Li Zhaoting will hear presentations from every department.

    Although working in Tunghsu means undertaking a lot of pressure, but from the top managers to the ordinary employees, they all follow Li Zhaoting soundly. That is the secret of Tunghsu talents management. Li Zhaoting is good at maintaining his employees, and no one is ever expelled by Tunghsu. In Zhou Yongjie’s eyes, Tunghsu has more state-owned-company style than state owned companies.

    The corporate culture of Tunghsu is Hold the Gratefulness and Conduct the Professionalism. Employees who had made an outstanding contribution to Tunghsu got the welfare-oriented allocation of housing. And by the employee stock ownership plan, employees can share the benefits with the company. There used to be a popular article on the Internet called “You cannot say you have better canteen ever than Tunghsu’s” and lots of visitors had witnessed Tunghsu’s business meals with the five-star hotel standard. 

    “We will not give up employees who fall behind the Group’s development. We will put him into a suitable position and this kind of employees takes up 10% of all of the employees,” Zhou Yongjie said.

     Li Zhaoting also has some weak points. In some employees’ eyes, he is always in two minds when making a decision. “Although he has the answer himself, he would still ask for someone else’s opinions and if most of the people disagree, he will reconsider that,” Wang Jianqiang said. 

    Li Quannian said the boss must have some hesitations in front of big projects. “Every great investment valued more than 0.5 billion yuan, he will have long meetings before the decision till the midnight,” Li Quannian said. And this is the proof that Tunghsu is responsible for investors.

     “Lots of companies depends on the standard management and process. But we rely on the Chairman’s intelligence and part of core employees and then we would carry out fine management.” Li Quannian said.

    Working in state-owned companies for long and following Li Zhaoting for long, Wang Jianqiang thinks that Tunghsu’s development relies on Li Zhaoting and his management philosophy of combining the essence of state-owned companies and the advantages of private companies.

     “Before 30 years old, I was in the state-owned company to improve myself. Now I would like to nurture Tunghsu using the essence I absorbed in the state-owned company,” Li Zhaoting commented the first half of his life.