CEO Conversations XXXXII: Zhen Ding (4958 TT), Global Leader in the PCB Industry - Insights from Alex Lee, Founder of QIC, and Charles Shen, Chairman of Zhen Ding, Part 1

(Photo: TaiwanPlus)

This episode of CEO Conversations is edited and republished with permission from TaiwanPlus Point.

As an important part of electronic products, the Printed Circuit Board (PCB) is considered to be the “mother of the electronics industry”. This well developed and highly competitive market has around 2,500 PCB players worldwide. What many people may not know is that the largest PCB supply chain is built by Taiwanese entrepreneurs, accounting for more than one-third of the global PCB production value. Subsequently, Taiwan’s role in the global PCB industry is as significant as it is in the semiconductor industry. Today, we have the Chairman of Zhen Ding Technology, Charles Shen, as our guest. Under his leadership, Zhen Ding has held the title of the world’s largest PCB manufacturer for six consecutive years. He has successfully transformed it from an unknown company into a leading global PCB manufacturer. As a world class leader in the PCB industry, Charles Shen has developed a unique management methodology emphasizing long term strategy, partnership with suppliers and sustainability, which differs from traditional Taiwanese tech companies.

In this episode of CEO Conversations, Alex Lee will provide an in-depth interview with Charles Shen to know more about how he led Zhen Ding to become the world’s largest PCB manufacturer and his management philosophy and outlook of the company. The following is our interview content:

Alex:

You are widely known for your experience in finance, and you are one of the few business leaders who have successfully entered the high-tech industry from a finance background. We know that in 2005, you took over the role of Chairman for Zhen Ding's predecessor, Foxconn Advanced Technology Inc. and Advanced Technology Inc. Since then, you have built Zhen Ding to become the global leader in PCBs. I am particularly interested in your career development before Zhen Ding. Could you share a bit about your past and how these experiences helped you succeed in bringing Zhen Ding to global number one?

Charles:

I was born in 1952 into a farming family. Initially, I didn't have the opportunity to attend a secondary school or university. However, it wasn't because I disliked studying; rather, I lacked the time, as I had to return home every day to help with farming. Later, I graduated from Chinese Culture University, which is not considered as a prestigious school, and I did not have a good family background. It was my teacher who encouraged me to take the national exam for higher education, which I passed. This led me to join the Export-Import Bank of ROC, where I discovered that a third of my colleagues had studied abroad or graduated from National Taiwan University (NTU) or National Chengchi University (NCCU). Only five of us were from private universities. Despite this, I progressed rapidly. I was the first among my peers to be promoted and wrote the bank's first accounting guide. Later, when Taiwan's security market opened up, I decided to venture into investment banking, planning numerous corporate IPOs. Both investment banking and corporate banking experiences greatly contributed to my development. I had a strong interest in deeply understanding different industries.

My tenure as a General Manager at Promisedland Resort and Unicap Electronics Industrial provided me with a deep understanding of how a successful company achieves long-term sustainability and establishes its corporate operating principles. In 2005, I had the opportunity to become Chairman of Zhen Ding. I was determined to shape the company according to my vision, so I documented my management philosophy and a manual outlining the methods to achieve it, consisting of 12 principles. They represent the core values of my management approach and the goals I aim to achieve. Each principle can be further expanded into 10-15 specific objectives. I have also shared this framework with the NTU EMBA class. During one session, a student asked me to elaborate on the qualities and attitude required for effective leadership based on my first principle. Subsequently, in June 2020, I conducted another class on leadership, focusing on the necessary attitude for effective leadership.

Alex:

I believe few people in the industry are aware of this secret. Since taking over the role of Chairman in 2006, you have outlined a detailed blueprint to transform Zhen Ding into a global leader in the PCB industry. Additionally, having known you for a long time, I have had the opportunity to see many of your notes. Whenever we've sought your advice in the past, you always seem to have a notebook at hand, able to tell us what you recorded on a specific day, month, or year. Could you please share with us why you choose this traditional approach of maintaining detailed notes and creating a detailed blueprint?

Charles:

It has to do with a habit of mine. As I've just mentioned, I didn't receive a proper education, so whenever I had a chance to learn, I seized it, and I really enjoy taking notes. Someone once said that, after reading an article, you only remember 15% of it. If you read it several more times, it goes up to 30%. However, if you take notes and digest the information, you can retain 50% of it. This percentage grows as you review your notes more frequently. This method helps me build and expand my knowledge base. So, since my university days, I have actually enjoyed taking notes. I haven't stopped doing so to this day. Whenever I come across information that I find helpful, I write it down. My notes contain various topics, ranging from business management, numbers, international finance, to geopolitics. Writing it down and internalizing it allows me to conduct various analyses, and this has been incredibly beneficial for me to make decisions.

After I take notes, I can delve into many analyses. For example, in decision-making processes, biases often come into play. Note-taking helps me to identify and check for biases. That's why I encourage many people to take notes. Particularly for my employees, when they meet a business leader, I tell them that they should use the shortest amount of time, typically 1-2 minutes, to explain what our company is about. With notes, they can precisely summarize the key points. This is what I have always encouraged them to do.

Alex:

I totally agree with this. Whenever we discuss different topics, you can always refer to your notes to review past conversations and discussions. You seem to use a standard notebook. Do you recall how many notebooks you have in total? Do you remember every notebook? Your colleagues also keep track of them?

Charles:

I have 6 cabinets with at least 60 notebooks. They are all numbered. My assistant keeps track of all of them. I provide her with the cabinet and code number, such as numbers 3, 4, and 10. Over the years of taking notes, I categorize the contents into different fields, just like writing a book, where there must be an outline before there can be chapters. This approach was also quite helpful for me back in my early days as a student, especially for exams.

Alex:

I believe this is your way of doing things, and it also reflects your personality. You have your unique way of perceiving things, using your own words to describe what you see and hear. I believe this approach has propelled you towards a successful career. Moving on to my next question, if I recall correctly, you transitioned from finance to the PCB industry in your fifties. Frankly speaking, at the time you decided to join Zhen Ding, it wasn't widely seen as having the most potential, nor was it widely known. How did you lead the company to achieve an annual revenue of over US$5.7 billion?

I have met many companies and business leaders, and besides Morris Chang, who successfully built up TSMC in his fifties, you are the only other business leader that comes to my mind who transitioned later in their career and achieved success without government or other support. How did you make that happen?

Charles:

I believe I was around 48 when I transitioned from finance into the electronics industry. I took on the role of Vice President of Finance at Unicap Electronics Industrial. Starting off from a financial perspective, I quickly realized that their problem wasn't related to finance. I have encountered all sorts of challenges in finance, but what I found most crucial in a company is "leadership" and "management." While Unicap Electronics eventually took a wrong path, during those 4 and a half years in the company, I was promoted from the Vice President of Finance to Executive Vice President, and eventually General Manager of Unicap Electronics. Then, at the age of 53, I joined Zhen Ding. During that period of time, what resonated with me the most was the importance of learning from excellent leaders, while also learning from the not-so-good leaders. My rationale is that if someone makes mistakes, I should not repeat the same mistakes. I learned from positive role models and aimed to steer clear of negative ones. I constantly reminded myself that it would be illogical if my approach did not yield favorable results.

Alex:

Just like myself and many others who have been long-term followers of the PCB industry, we have rarely witnessed this type of consistent revenue growth rate in the overall tech sector. It's incredible that you have been determined from an early stage to become the global leader. Any individual can have this vision, but as you have demonstrated through your notes, you have implemented your vision step-by-step. Therefore, I am eager to gain a deeper understanding of your principles, confidence in leadership, and perspectives. I can envision you being a role model for many business leaders. However, I still want to know more about the source of your confidence, the principles you follow, and how you have been able to execute your plans in order to achieve success.

Charles:

This likely stems from my background. As I mentioned earlier, my careers in corporate banking and investment banking heightened my interest in the industry and strengthened my proficiency in numerical analysis. Over the course of four and a half years at Unicap Electronics, I had to address many operational and leadership issues within this company. Therefore, at the time when I took over the role of Chairman at Zhen Ding, I had been very confident. The PCB industry is essentially at the core of the electronics sector. However, in the past, it was considered a high-pollution, high-energy-consumption industry, which I describe as an industry that's "not loved by parents, not cared for by anyone". Due to this perception, I see it as a perfectly competitive market. In an oligopoly market, there tends to be a significant amount of intervention. While most people believed that the PCB industry lacked attractiveness, they did not realize the potential of this industry, which achieves an average annual growth rate of 3-5%.

In addition, regardless of how products evolve, PCBs have always played an important role. For example, in the early days, traditional cameras required PCBs, and even as digital cameras replaced traditional ones, they still needed PCBs. Even now, as smartphones have surpassed digital cameras, they still require PCBs. This has led me to realize that few industries can be as sustainable as the PCB industry. This industry, with a history spanning over 140 years since its inception in 1880, predates even semiconductors. No other industry has been able to replace it. What about the future? As long as there is continual innovation to keep up with trends, this industry remains irreplaceable. I joined this industry midway, but most of our employees have worked in this industry for their entire careers. There are very few industries that exhibit the same longevity as the PCB industry. Moreover, driven by my passion for analysis, I developed management principles that emphasized the importance of market analysis.

The global PCB industry consists of over 2,500 players. With such a vast market and numerous competitors, running a PCB company requires a thorough understanding of the market, as it is difficult for a single company to cover all kinds of products. After analyzing the market, competitors, and supply chain, I realized the market is large, and there were so many things that I could do. I also observed that most of my competitors were from a technology background, and they tend to run their businesses based on available resources instead of a well-planned business development strategy. Therefore, in 2006, I formulated a set of business rules with the aim of becoming the world's largest PCB manufacturer. At that time, many people actually mocked my ambition, but they didn't realize that I had conducted the comprehensive and thorough analysis regarding the market and competitors.

The attitude and mindset of a leader are the most crucial elements. I firmly believe that with my work attitude and mindset, I see no reason to be inferior to anyone else. It has not been an easy task to become the world's number one, and there was a lot of foundation to be built. In fact, the initial years were quite challenging. When I assumed the role of Chairman, we even had to lease a factory on a 2.75-hectare site. I aimed to become the world’s number one, so I started building our own factories. In addition to factories, we also had to attract the world's top-tier clients. I believed that only by working with such top-notch clients that we would understand where the challenges were and grow our capabilities. Therefore, right from the beginning, all my customers were world-class companies.

In terms of employees, I had to acquire talent to address this large market, and that was why I invested heavily in cultivating talent. Whenever I returned to Taiwan from Mainland China, I dedicated half of my time to talent scouting. Besides seeking talent, I also focused on training entry level employees. Currently, among our 22 factories in Mainland China, 20 factory managers were trained by me between 2005 and 2007. I nurtured them from scratch to become highly skilled individuals. This approach established a strong foundation of the company and ensured the retention of valuable talent.

Furthermore, I also firmly believed that environmental protection was one of the key elements to build up a solid foundation for Zhen Ding. Just as I mentioned earlier, the PCB industry was widely perceived as a high-pollution and high-energy-consumption industry, but we could overcome these challenges. With these continuous efforts, we can finally achieve the goal of becoming the world's number one. It was not accomplished overnight.

Alex:

I remember a few days ago you announced that Zhen Ding would establish its Taiwan headquarters in Qingpu (Taoyuan) and shared some very touching words. If I am not mistaken, you were born in Daxi (Taoyuan), and you returned to your hometown to establish Zhen Ding’s Taiwan headquarters in Taoyuan. Many people might not know that PCB production in Taiwan is clustered in Taoyuan. As Taiwanese PCB companies together hold a prominent global position, it is fair to say that Taoyuan is like the hometown of PCB for the whole world. Could you share with us the motivation behind your decision to return to Taiwan and set up the headquarters in Taoyuan, a place that has traditionally been seen as environmentally polluted?

Charles:

Zhen Ding has its roots in Mainland China, but I, after all, grew up in Taiwan. As I mentioned earlier, Taiwanese PCB companies account for 34% of the global PCB production value, and among them, those headquartered in Taoyuan contribute to 29% of the global total. Unfortunately, due to insufficient infrastructure in Taiwan, many manufacturers have chosen to relocate overseas. Around the year 2000, the PCBs manufactured in Taiwan from Taiwanese companies accounted for about 11% of the global PCB production value, and currently, it is just under 13%, indicating that much of the recent growth has been overseas. However, I always emphasize that the PCB production value from Taiwanese companies with headquarters in Taoyuan is only 29%. If we can transform the PCB industry, it would be beneficial for Taiwan's development. Taiwan's largest industry is semiconductors, followed by the petrochemical industry, and the third-largest is the PCB industry, which is Taoyuan’s largest industry. I am uncertain why the government did not focus on this issue in the past, so I've been consistently discussing this matter with the government. With Taiwan's solid foundation, we should work to promote and further expand the PCB industry.

I thought headquarters represent a company's long-term strategic planning, and I wanted to let the world know that there is a global leading manufacturer headquartered in Taoyuan. Additionally, I wanted to remind the government about the significance of this industry and how it sustains numerous livelihoods. Moreover, environmental protection and pollution control have been challenging in this industry since it is primarily composed of small and medium-sized enterprises, which may not be considered as affluent. Many factories lack proper designs. However, I believe that investments in environmental protection will gradually come into place. Furthermore, in recent years, I have been using a more modern concept to build factories in Mainland China, with each floor covering 10,000 square meters. This allows us to plan for more efficient production. Although factories in Taiwan are generally smaller, I hope to introduce this kind of concept to Taiwan. After all, it is my hometown, and I hope to transform and further develop it.

Alex:

Returning to Zhen Ding, you started with flexible printed circuits (FPC), then entered high-density interconnect (HDI) PCBs, and ultimately ventured into the field of IC substrates. You have formulated the “One ZDT Strategy,” where ZDT is the English abbreviation for Zhen Ding Technology. Currently, Zhen Ding is the only company in the industry that is capable of offering all kinds of PCBs, ranging from FPC, HDI, RPCB to IC substrates. We would like to understand the essence behind “One ZDT.” What is its ultimate goal, underlying spirit, or strategic significance?

Charles:

I initiated the concept of "One ZDT" in 2015. We started with FPC, and I had this vision for a long time: to transform ZDT into a one-stop shop solutions provider for all kinds of PCB products. From FPC to HDI and RPCB, and ultimately our journey towards IC substrate began in 2011, with investments in R&D. By that time, we had already developed the necessary technology. I advocated internally that we should strive to become a one-stop shop solutions provider, providing customers with various types of PCBs. The qualification processes for PCBs are rigorous, but the underlying logic is similar. When a customer approaches us, we can supply any type of PCB they need. Take iPhone as an example, it requires FPC, HDI, mSAP, RPCB, interposers, and IC substrates. The types of PCBs used in a smartphone are diverse. My goal is to offer customers greater convenience and superior customer service by being able to provide all these different PCBs.

Furthermore, the concept of “One ZDT” also aims to push employees to efficiently integrate internal resources. In fact, the manufacturing logic for various types of PCBs is quite similar. If we can efficiently integrate resources, it is similar to open a new branch for a bank – we can quickly establish operations by reallocating 50% of resources from existing branches. As a result, over the years, I have been focused on rapidly integrating internal resources, which has been a key factor in our success. On the supply chain side, I also hope that our suppliers can provide us with a one-stop service. Take the example of the electroplating production line: since various products require electroplating, our supplier could send a team to handle the electroplating for all product lines, thereby increasing production efficiency. The concept of one-stop shopping not only allows our customers to obtain any type of PCB they need, but also offers great assistance to our internal resource integration.

Alex:

When studying the long-term development of the PCB industry over the past years, we found that very few companies have managed to maintain their position at the top for an extended period. Currently, Zhen Ding holds a 7% market share, which is an impressive achievement considering the fragmented nature of the PCB industry. I am aware that your goal is to reach a market share of over 10%. That said, your ambition is not only to become a leader in the PCB industry but also to reach a 10% market share. Where does your confidence stem from? This goal has never been realized in the PCB industry. What insights or strategies do you possess that others may have overlooked?

Charles:

Indeed, no one has achieved this milestone before. Our current market share stands at 7%, and my focus is on developing different product lines. As previously mentioned, PCBs can be divided into four major product categories, namely FPC, RPCB, HDI, and IC substrates. While we have attained a global leading position in FPC, which constitutes approximately 70% to 80% of our revenue, there is still potential for growth in other product lines. In terms of HDI, we have yet to secure a leading position, and in terms of RPCB, our global ranking might be within the range of 20th to 30th. As for IC substrates, we have just begun entering that market.

I have a strategic roadmap that encompasses the applications, customers, and the demand from each of the customers in the global PCB market. This strategic map has been curated by our internal industry analysts under my guidance and it guides my decision-making. Over the years, we have been analyzing this data to support our decisions, and we have been executing on this roadmap step by step. I believe that there are numerous accomplishments that are still within our reach. Given the immense market size, if we can expand and position ourselves according to this strategic roadmap, I perceive achieving a 10% market share as an attainable objective. This industry is capital and talent-intensive, and without sufficient capital and talent, technological development could face challenges. Capital alone is insufficient.

(For more interview content, please refer to the upcoming “CEO Conversations XXXXIII.”)

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

The QIC team consists of experienced finance industry professionals that have worked in major sell-side and buy-side companies. We leverage our industry knowledge and relationships with institutional investors to assist companies and investors to achieve effective two-way communication to enhance shareholder value. QIC also has many years of experience in corporate access services. We plan, schedule and execute tailor-made roadshows and targeted investor events for high-quality corporate clients. QIC does not provide execution services and is thus considered MiFID II-exempt by institutional investors, who welcome QIC’s services and access to senior management of quality companies.

Taiwan Talks interview link: https://youtu.be/mPcpsBoxa3Q