CEO Conversations Installment III: Donald Huang, Chairman and President, Global Tek (4566 TT)

Source: Mirror Media

Global Tek’s Unique Business Model And Plans For The Future

Donald Huang has served as Chairman and President since he founded Global Tek (4566 TT) in 2000. Prior to founding Global Tek, he was one of the co-founders of Primax (4915 TT) and Global PMX (4551 TT). Donald holds an EMBA from National Taiwan University. Here he tells QIC about Global Tek’s role as a one-of-a-kind niche machining service provider and the company’s goals for the future.

What steps has Global Tek taken during recent years to ensure its continued success?

It is our mission to provide precision machining expertise and one-stop total value proposition for clients in the automotive, industrial and aviation markets through strong engineering design and manufacturing services. We put immense effort in preparing in advance to seize new business opportunities before they become obvious to our competitors and the overall market. We also have a disciplined program in place to strategically diversify our revenue stream and to optimize our operations. Our geographically diversified production bases and broad product portfolio have allowed us to steadily raise our ROE from 7% in 2014 to 10% in 2019.

We have implemented the following strategies:

• Focus on niche market segments within global industries and work with core customers by providing Value Analysis & Value Engineering services (VA & VE) from the initial product design stage. We have built a mutual-trust and mutual-benefit strategic partnership with leading customers.
• Establish, empower and cultivate our talent pool. We recruit the right people and then train them to serve our core customers with a high level of professionalism.
• We differentiate our services and build our core competitive capabilities through vertical integration and horizontal collaboration, allowing Global Tek to provide customers more, with the benefit to us of reduced capital expenditures – ie. less overall spending. The Global Tek Alliance supports our growth by extending our machining capabilities and capacity beyond that of our own asset base.

At Global Tek, we are constantly working with our many Tier 1 clients to help them improve their products. We have produced customized machining solutions for global players in the bicycle, semiconductor and F&B segments.

What attributes would you say are important in achieving the status and success that Global Tek has earned? Can you briefly talk about your business models?

There are four key factors to our success:

• We have a customer-centric culture. Our first priority is to understand and fulfill our customers’ needs.
• We target Tier 1 clients within specific segments of the automotive, industrial and aviation supply chain, then we build our reputation for high quality, zero rejection rate and specialized manufacturing engineering services one client at a time.
• Our Global Tek Alliance business model leverages the technical skills of our business partners to accelerate our growth, while reducing our financial burden.
• We have empowered team members by cultivating a can-do attitude at all levels of management. A key part of this process is hiring staff whose training and degrees are ‘in excess’ of that required for our industry and organizing them into cross-functional teams. This results in forward-thinking employees that apply creative solutions to everyday manufacturing problems.
  
  

  Global Tek has successfully integrated two business models at its two major production sites. At the Xinwu factory in Taiwan (46% of 2019 sales), we employ the Global Tek Alliance collaboration model with our supply-chain partners. At our Wuxi China factory (45% of 2019 sales), we focus on complex in-house manufacturing processes. Our customers include Tier 1 players in their respective segments, such as Autoliv, BorgWarner, Eaton, Emerson, Fox, Magna and Meggitt.
  

Can you elaborate more on the Global Tek Alliance model? What are the synergies between Global Tek and its supply chain partners?

The Global Tek Alliance business model leverages the strengths of Taiwan’s SME-based precision-machining supply chain cluster. First, Global Tek has invested in its future growth by hiring superior human resources and forming a learning organization -- 41% of our 800+ employees are college graduates, R&D staff are 5% of the total work force and 11% of R&D staff have a Master’s degree or above. These are our most valuable assets and without them we would not be able to employ such a specialized business model. Second, Global Tek conducts R&D projects for high-end machining processes. Once we have standardized the production process and our sales secure large-volume orders, we invite qualified supply chain partners to amplify our on-site production volumes. Third, we use our sales, quality assurance and production management expertise to optimize the performance of our alliance partners, minimizing inventories and enhancing production yields. The result is what we like to call the flywheel effect. Our R&D and sales ‘machinery’ are able to drive revenues well beyond those which we could create on our own.

To maintain our competitive edge and build Industry 4.0 manufacturing capability, we are continually enhancing our internal core manufacturing cells, equipping them with highly efficient and digitized production equipment. We see this as a key to retaining our high-end customers and attracting new ones. These efforts work hand-in-hand with the ongoing expansion of our Global Tek Alliance over the long-term, through which we strive to raise ROE via increasingly efficient capital allocation, a tighter cash conversion cycle and stronger top line growth. As a result, our Alliance partners grow with us; and we experience low rates of turnover amongst our valued Alliance partners.

What are the challenges and opportunities you see for Global Tek in 2020 and beyond?

I view challenging times as a good opportunity to start new businesses and/or add new business lines. First, there is less resource competition. Second, difficult times often result in new customer needs. During the 2008 financial crisis, while most companies faced severe challenges, we took it as an opportunity and invested in our new businesses, including automotive powertrains, aviation and related new equipment.

COVID-19 has caused severe supply chain disruptions, especially in the automotive segment. As a result, we’ve had to work closely with clients to adjust our production schedule. Chinese domestic car shipments rebounded in April and an easing of the lockdown in Europe, Japan and the US has allowed global automakers to resume limited production in May. We expect the second quarter to be the bottom of our 2020 business, with third quarter sales showing improvement versus second quarter, mainly driven by robust demand from our niche segment industrial clients and inventory replenishment demand from automotive clients.

We see many attractive long-term opportunities. First, we are continuously looking at ways to better allocate our manufacturing resources in machining process research and product development for niche applications, such as hybrid, electric and fuel-cell vehicles, medical devices and AI-controlled industrial robotics. We are proactive in our innovation strategies, while at the same time being positively reactive to our customers. We are actively pursuing ways to increase existing client penetration, including sharpening our machining capabilities for the automotive safety, powertrain system, industrial and aviation segments.

We continually search for qualified SME machining suppliers with niche expertise to broaden our manufacturing portfolio and to drive investment returns. Over the next five years, Global Tek will strive to achieve sustained annual sales growth. We are also committed to maintaining a minimum 50% dividend payout ratio.

As a successful serial entrepreneur, what advice would you give to aspiring CEOs in the manufacturing and engineering sector?

During the past five years, Global Tek outgrew local peers in the precision machining sector, with a sales CAGR of 14%. So, I think my first piece of advice would be to figure out how to grow faster than peers and the market, both organically and inorganically. Secondly, be prepared to adapt to changing demand patterns from your customers and their customers, especially in the face of technological change and economic uncertainty. Finally, be open-minded and willing to collaborate with your clients and supply chain partners. Working closely with clients and suppliers will help you to deliver solutions to the market faster than your competitors. It is my wish for every aspiring CEO that they can find a way to utilize their limited resources to achieve a future with unlimited growth potential. That is spirit of the Global Tek Alliance.

If you would like to arrange a meeting with Donald Huang, please contact yvonnehuang@qtumic.com