Annual sales of Kingfa Sci. & Tec. Co. Ltd, China’s largest modified plastics supplier, have exceeded 1 million tons and RMB 16 billion, an immense achievement in the Chinese plastics industry. It only serves as another starting point – Kingfa has initiated its own 10-year plan – achieving RMB 100 billion of sales by 2025.Stanley Chu, Chairman of Adsale Group, and Yuan Zhimin, Chairman of Kingfa, have exchanged on the development of Kingfa.
Building a strong R&D base
Mr. Chu: Kingfa’s sales have topped RMB 16 billion, far ahead of others in the industry. How did your company achieve this?
Mr. Yuan: It is very difficult to grow in the polymers industry. With roughly 20 years of history, we have surpassed many companies in the world that existed much longer mainly through organic growth.
Our success can be contributed to, first of all, a strong R&D team with more than 900 people building up gradually since the beginning. We never stopped recruiting nor did we lay off our staff even in economic crisis, because we believed R&D and marketing lead the company forward. We currently operate two natiional-level R&D platforms.
Secondly, we identified the right direction, and then do it with focus and devotion.
Thirdly, we always tried to create a win-win scenario with customers, from air freight in the early stages to a nationwide production base layout, and from tailored product for customers to offering one-stop service and complete solutions.
Mr. Chu: Generally speaking, the proportion of a company’s top five customers accounted for 20-30% of its turnover. The percentage is just 7.5% for Kingfa. On the other hand, your suppliers are scattered. How are you able to succeed under these circumstances?
Mr. Yuan: We hope to diversify the risks via this approach. We will not be over-dependent on one customer, which is a reason why we didn’t set up joint ventures. Therefore, we are in a leading position to develop the best customized solutions.
Mr. Chu: What does Kingfa need to overcome in the course of its development?
Mr. Yuan: Actually, Kingfa has encountered a bottleneck situation. Our capacity has stayed at the 1 million tons ceiling for four years. However, in January 2016, sales grew 25% year-on-year.
The development from small to medium is quick usually, but from medium to big, there will always be a chasm to be overcome. Currently Kingfa’s annual sales amounted to US$2-3 billion, a medium-sized enterprise by global nature.
In order to grow, we have spent a lot of energy in developing strategy, structure and organization. For example, developing standardization for the group and implementing informatization and automation.
India as the first step to going global
Mr. Chu: To become the world’s best new materials enterprise is Kingfa’s positioning and vision. However, exports accounted for less than 10% of your turnover. Is this another challenge too?
Mr. Yuan: International staff is still a small proportion in our company. Our strategy is different from others. While many companies target the US or Europe as their first step, we chose India. We believe that going global requires a production base and R&D center abroad.
Why India? First of all, we have the personnel there; secondly, there are local demands. There are also advantages in terms of cost. We used only US$6 million to acquire a locally-listed plastics company, and now its value is approaching US$700 million.
Mr. Chu: Can you discuss the goal of Kingfa for the next decade? How will the company achieve this goal?
Mr. Yuan: China has put forward the Made in China 2025 strategy. Prime Minister Li Keqiang also proposed the slogan of “public entrepreneurship and innovation”.
Under such circumstances, Kingfa aims to achieve RMB 60 billion sales in 2020 and RMB 100 billion by 2025. Our various business segments have started working on it. I believe that we will achieve this goal after 10 years of development.
Mr. Chu: By 2025, what will be the shares of domestic and overseas markets in your RMB 100 billion business?
Mr. Yuan: We expect exports to grow rapidly in our first 10-year plan. It will account for 30% of our business by then. On the domestic side, China is such a big market, the key is to find the right segments.
In addition to our Indian acquisition, we have established a production site in the US that went into operation in February. We also opened an office in Europe this January. Our General Manager there was a former Asia Pacific Head of Lanxess, who knows China very well.
In the future, we will also build up an innovation base known as the “13551 technology platform”. It is going to provide a strong foundation for us to penetrate into new strategic markets and new materials sectors.
What does “13551” mean?
"1": One central R&D Institute.
"3": Three innovation centers - US upstream research center; Europe advanced manufacturing center; China product application center.
"5": Five product testing centers - e.g. Guangzhou home appliances testing center and Shanghai automotive testing center.
"5": Five business incubators - e.g. South China new material development park, bringing in partners to co-develop new material technologies.
"1": One joint education institute-commercial innovation platform.