Chapter 507 Cooperation with RCA

Chapter 507 Cooperation with RCA

Chapter 507 Cooperation with RCA

"I need to discuss this matter internally." Thomson replied after thinking for a moment;
He didn't believe a word Yang Wendong said about buying the product back for research. How could a place like Hong Kong have the research and development capabilities?
But if a potential powerful partner makes a request, it is not easy to refuse directly. You have to discuss it with others first. Even if they don’t agree, you need to give them face and not refuse immediately. Doing so is not good for him because it may leave a bad impression on the other party.

Yang Wendong said: "Of course, but I hope to get a reply as soon as possible. I also hope to achieve more cooperation with RCA."

"Okay, Mr. Yang, you can stay in New York for a few more days. I will give you a reply as soon as possible." Thomson paused and said, "Speaking of cooperation, Mr. Yang, we at RCA also have a project that we need to discuss with you."

"What project?" Yang Wendong asked curiously.

As Changxing Group has grown to its current size, Yang Wendong has already decided on a strategy to expand beyond Asia. Although he will not set up large factories in Europe and the United States, he will gradually increase his presence in other areas of Europe and the United States: such as venture capital, channel construction, and establishing good relationships with local financial groups.

RCA is indeed a very good partner. It is the largest color TV and radio production group in the United States and the person in charge of one of the three largest television stations in the United States. At the same time, RCA has also made great achievements in many other fields, including technological research and development. It is no coincidence that the liquid crystal chip patent was invented by RCA.

Thomson said, "Mr. Yang should know that the American market has been flooded with cheap and low-quality Japanese televisions over the years, right?"

"Yes." Yang Wendong nodded.

It is true that they are cheap, but it is hard to say that they are of low quality. The production quality of the emerging countries will definitely not be good in the initial stage, but it will gradually improve later. Japan, South Korea and the mainland in the future will all go through such a process.

Japan can be regarded as the first country in East Asia to embrace globalization. In the 50s, its clothing industry caused the collapse of its American counterparts in the market. In the 60s, it switched to home appliances, in the 70s it turned to steel, and after the 80s, it turned to automobiles.

But the US government had no choice but to accept it. Their purpose of promoting globalization was to sell their products all over the world, but they didn't expect that their backyard would be taken away by the Japanese. However, they had no way to object. After all, the United States in this era still had to save face and really wanted to promote globalization.

RCA is clearly a victim of global trade liberalization and is completely unable to defeat Japanese electronics.

Thomson went on to say, "Labor costs in Japan are low, and overtime is crazy. The United States can't compare with this at all. So our group wants to invest in a factory in Asia to produce televisions and then sell them back to the United States."

"I know about this, too. Aren't you planning to invest in Taiwan?" Yang Wendong asked uncertainly, "Or do you want to invest in Hong Kong?"

Originally, in 1969, RCA invested in Taoyuan City, Taiwan, and established the largest color TV production base in Asia. At its peak, it created more than 20 jobs, and % of Taiwan's exports were from RCA;

Yang Wendong knew about this because RCA in the 90s and s insanely injected large amounts of polluted water into the ground, triggering the largest environmental pollution incident in Asian history. The number of local cancer patients increased sharply after the s, but Yang Wendong could not sue because RCA had been acquired by General Electric at that time, and the matter could not be resolved after a lot of wrangling.

Thomson replied: "The investment in Taiwan has basically been decided, so it will not change. However, we have found that Hong Kong already has a relatively complete TV industry chain, so we also want to invest in a factory in Hong Kong and then sell it exclusively within the Commonwealth."

"That's indeed feasible." Yang Wendong nodded: "Then how can we cooperate?"

Although Britain has declined, its former colonial style may be much better than that of other countries, so many countries still belong to the Commonwealth in name. Britain is now also maintaining special cooperation within the Commonwealth, such as low tariffs, similar to the North American Free Trade Area in its previous life, with open markets between each other, and much higher tariffs on other countries.

Therefore, many non-Commonwealth countries have to come to the Commonwealth to set up factories and then enter this market. For example, in the early 60s, the Japanese came to Hong Kong to make radios in order to enter the Commonwealth, but they did not expect to be dragged down by Hong Kong and forced to flee.

Thomson replied: "Let's form a joint venture to build a color TV production line in Hong Kong with an annual capacity of 5 to 10 sets, and then sell them throughout the Commonwealth. If the market demand is high in the future, we can invest more."

"Joint ventures are not a problem." Yang Wendong asked again, "But I also have a TV business. Isn't RCA afraid of competition?"

Thomson smiled and said, "Mr. Yang, please don't mind what I am going to say next. The color TVs produced by your company are of a different level from those produced by RCA. There is no competition between them at all."

"Okay, you are right." Yang Wendong naturally didn't care because what he said was also true.

RCA is the largest television manufacturer in the United States. In terms of technology, it is even stronger than Japan, at least that was the case in the 60s. It’s just that it can’t compete in terms of cost-effectiveness. Just like the smartphones after 2020 in the past, there is excess performance. The same will happen with televisions. Most people just need to have something to watch.

Honor's color TVs were still produced on the production line of the 50s, and they made some 14/17-inch TVs, and they also took the cheap route, which was a big gap from RCA.
However, these Americans may be used to investing in Mexico and always look down on others. They don’t know that once your production line goes there, with the learning ability of Hong Kong, the industrial chain will be successful in a few years. We Chinese can make everything ourselves, except that the brand may not be comparable. Of course, if there are patent restrictions, that’s another matter. Thomson added: “Mr. Yang can also consider it. The investment amount is estimated to be around 1000 million US dollars.”

"Do you want to pay in cash? Or should I invest in manpower, land and infrastructure, and if that's not enough, I can add some more money?" Yang Wendong asked again.

This is indeed a good opportunity to stockpile land. For such a large factory, we can ask the Hong Kong government for a large piece of land.

"Okay, you want Hong Kong people to be responsible for these, and we will be responsible for technology, quality and channels." Thomson smiled and said, "This will be a perfect cooperation."

Yang Wendong nodded and asked, "How do we operate the equity?"

From the perspective of cooperation content and integration of resources of both parties, this cooperation is perfect. Both parties get what they need and invest their own resources. RCA has technology and connections, which is a bit similar to its future investment in Southeast Asia, but in reverse.

Since it is a joint venture factory, there is naturally the issue of shares.

Thomson said: "I own 7% and you own 3%. The management rights belong to us, but you can send financial officers to participate. This is also the right that shareholders should have."

"Okay." Yang Wendong thought about it and did not ask for more shares.

The leading party of this cooperation is indeed RCA. I am just one of its options. What I need is to take advantage of this opportunity of RCA to develop Hong Kong's home appliance industry chain. This will be a good opportunity.

However, the risk is whether these animals will do what they did in Taiwan in the past. We have to keep an eye on them. Or, after we have mastered the industrial chain, we can use competition to destroy the factory. That is also fine.

Normally, I would not do this to my joint venture partner Yang Wendong, but if the people from RCA really had such thoughts or took such actions, I would definitely deal with them.

Thomson smiled and said, "Okay, my team will go to Hong Kong next month. Then, our engineers will discuss these matters in detail."

"No problem, I will be responsible for the reception." Yang Wendong agreed.

After leaving RCA, Yang Wendong asked Lin Youqiang and Wang Zhiqun beside him: "What do you think of this cooperation?"

Wang Zhiqun replied: "I think it's very good. As long as RCA's factory is there, it will definitely cultivate Hong Kong's industrial chain. Now Hong Kong's television industry chain is in our hands. In this way, even if we only have 30% of the shares of the joint venture factory, we can still get almost half of the profits."

This is the benefit of being the first to try something new. In the early days, Honor Electronics was the first to make black-and-white TVs. At that time, Hong Kong had nothing, so it could only purchase expensive imported parts in the early stage. Then it spent several years cultivating the local industrial chain, and even invested a lot of it itself.
Now that they have endured the painful days, they can now receive rewards. Even RCA is willing to invest in Hong Kong because they see a relatively complete TV industry chain here and capital likes to gather there.

Lin Youqi asked, "But RCA will also invest in Taiwan and will probably build an industrial chain in Taiwan. Will it bypass us and buy parts from Taiwan?"

"It's possible. Business itself is competitive. A large company like RCA cannot allow its industry chain to be controlled by others, just like we did in the early years." Yang Wendong said: "Then we can just compete normally. We can even build a factory in Taiwan and make money from the RCA factory in Taiwan."

Wang Zhiqun nodded and said, "Okay, when I return to Hong Kong, I will immediately arrange for people to go to Taiwan to acquire or invest in some factories that can do television industry. In this way, even if RCA develops its own industrial chain, it will still rely on us."

"Well, okay. American companies generally invest and don't participate too much in the industrial chain. They are all popular for light asset investment and use the local industrial chain." Yang Wendong nodded and said, "Hong Kong and Taiwan are their only two choices. It is impossible to buy parts from the United States.

Japan is the only country in Asia that has this kind of industrial strength, and they will have no choice. This will be a good opportunity for us to improve the TV industry chain.”

"This is also the result of our early efforts." Wang Zhiqun said with a smile.

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(End of this chapter)