Tuesday, May 1, 2001

Legend Has It…

(Syndicated article for the Metro newspaper group).

Legend's spokeswoman Catherine Lee showing one of the company's new computers for children.

Legend is a shining star among China’s young and fast-growing computer companies. It has leapfrogged the competition  both domestic and foreign – and captured 31 percent of the PC market in China, as well as 12 percent of the Asian market (outside Japan.) Last December, it opened a new $200 million PC factory, which can build 2 million desktop computers each year.

The factory is located just east of the Summer Palace, in Zhongguancun, an area that is also known as Beijing’s “Silicon Valley”. This is the Haidian district where many of China’s leading universities and research institutes including Tsinghua University and the Institute for Computing Technology (ICT) are located.

This is where eleven ICT researchers set-up a small consulting shop in 1984, and that shop later became Legend. At that time, Legend was among only a few dozen computer stores and small start-up companies in the district. Today, Zhongguancun is hard to recognize. Last year alone, the zone generated $19 billion in income (up 40 percent from 1999,) and 2,400 new companies were added to the thousands that already existed.

Zhongguancun boasts modern factories, office skyscrapers, new apartment complexes, luxury hotels, restaurants, bars and trendy Internet cafes. Traffic crawls on its noisy streets, while bulldozers flatten the old single-story Chinese houses to make room for things new.

Catherine Lee.

Legend’s spokesperson Catherine Lee tells us about the company’s new Intranet, and its new Enterprise Resource Planning system (ERP, i.e. a computer system that integrates all facets of a business, from sales and marketing to corporate planning and manufacturing.) Her company’s elegant meeting room, laptop, and her snappy PowerPoint presentation may not sound like much, but it does reflect a the new style of doing business in China, where previously a reporter would have to “make due” with a party secretary’s political platitudes, while sitting in a meeting room with spittoons and under-stuffed doily-covered armchairs.

A Legend PC for the modern office worker.

Legend has 12,000 employees and a turnover of $2.3 billion. Sales have increased by 72.4 percent on average for the past three years, and profits have gone up 53 percent. “We sold 1.5 million PCs in 1999 and reached our goal of 2.6 million for 2000,” says Ms. Lee, and adds that Legend has been China’s leading PC manufacturer since 1996.

Access to the factory floor is strictly controlled, and photos are not allowed. Past the production flowchart, racks of ready-mounted PCs, and six assembly lines, lies a colossal room - the likes of which you’d find in an IKEA store. The aisles between the huge metal shelves are barely ten-feet wide however, as they are navigated by computer-controlled robots, and not by humans.

On three of the assembly lines (dubbed “satellite” lines,) one worker puts together one computer at a time – start to finish. Ms. Lee says that the average Chinese consumer is still not ready for custom-made computers, but Legend’s vast network of distributors can place custom orders into the company’s e-commerce network via the Internet. The orders are then sent to the company’s ERP system, and will end up on an assembly worker’s computer screen.

It takes 50 minutes to build a desktop PC at Legend’s new factory, plus an additional 1 hour and 10 minutes to test it. “No other local producer has such an advanced capacity,” writes Richard Lo of the Hong Kong-based financial company Ing-Barings, in a report published in February.

The other three assembly lines are called streamlines where, according to the company, computers can be mounted in as little as 20 seconds.

“We have a factory outside of Shenzhen and we are building a new one in Shanghai…so Legend’s capacity should be 4.5 million next year,” says Ms. Lee.

They will need the increased capacity and new factories to face future competition as China joins the World Trade Organization (WTO.) But Legend shouldn’t fear WTO since they already have access to cheap labor (about 70 cents per hour,) and -- as more electronics manufacturers invest in China -- cheap components as well. This combination is hard to beat, so long as China manages to combine economic reforms with political and social stability.

Gone are the days it seems, where the iron rice bowl was a worker’s only incentive. All employees who have worked at Legend for two years are entitled to buy stock options in the company, which is listed both in Hong Kong and NASDAQ. But in case this is not enough motivation, a red banner facing the assembly lines boldly reads: “If you love your country, you have to love your factory.”

Hans Sandberg

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