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Chinese TV Maker Sharpens Focus on Europe

From a Factory in Hungary, Hisense Sets Its Sights on Brand Recognition

By Peter S. Goodman
Washington Post Foreign Service
Monday, December 13, 2004; Page A01

SARVAR, Hungary -- Wu Yongliang arrived in April with a suitcase full of instant noodles, a bad case of jet lag and a mind overwhelmed by his mission -- to somehow turn Hisense, a Chinese television-maker still owned by the Communist Party government, into a brand as recognized as Samsung or Sony.

Other than a week-long trip to Korea, he had never been outside China. He spoke no Hungarian and minimal English. He could not pronounce the name of the village where he was to live, its entrance sign looming like a daily taunt -- Ostffyasszonya. The thought of transforming an empty factory into Hisense's first European beachhead filled him with anxiety.

Hisense was among the vendors at Beijing's Appliance World Expo. The firm wants to establish a TV brand for which consumers will pay a premium. (Cui Hao -- Imaginechina/zuma Press)

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"I thought, 'Here, there is nothing. We need everything,' " he said. "There is only darkness, emptiness. We don't know how to do this."

Seven months later, the Hisense line hums with precision. Hungarian laborers in white lab coats insert wiring into flat-panel televisions for sale in France, Britain and Italy at prices as little as half those of established European brands. The new factory now employs 150 and produced its first order in July -- 3,300 televisions for the French retailer Carrefour. Last month, the factory made 20,000. Next year's sales target is 500,000.

China's role as a global manufacturing center is well-established, but the scene here in western Hungary highlights the even grander plans of the country's largest companies. Urged on by China's government and armed with credit from state-owned banks and stock market listings, many are going global in a bid to gain scale, tap new markets and transform themselves into brands that can challenge the world's preeminent logos.

Chinese computer-maker Lenovo's purchase of International Business Machines Corp.'s personal computer business is only the most recent and high-profile example of a strategy being pursued by energy and consumer goods companies, as well as by high-tech firms. The appliance maker Haier has a refrigerator factory in South Carolina and distributes its goods through a deal with Wal-Mart Stores Inc. The telecommunications equipment-maker Huawei operates sales offices worldwide, carving into the margins of Cisco Systems Inc. and Nortel Networks Ltd. Chinese energy companies have bought controlling stakes in oil patches from Indonesia to Sudan; China's largest steel-maker, Baoshan Iron and Steel, has bought into iron ore mines in Brazil to ensure reliable supply, and is part of a consortium seeking control of Canada's largest mining firm, Noranda Inc.

The country is no newcomer to global acquisitions. It has looked outside its borders in the past, particularly for natural resources. But now the focus has broadened in scope and shifted to establishing China's most prominent companies as competitors in their own right, not simply low-cost suppliers to the rest of the world.

Since 2000, acquisitions of foreign assets by mainland China-based companies have climbed from a $344 million to an estimated $4 billion to $5 billion this year, with another $14 billion anticipated next year, said Donald H. Straszheim, president of the Los Angeles-based Straszheim Global Advisors LLC.

"It would take 20 years to make a Chinese company a known brand in America and they don't want to wait, they'd rather buy," said Straszheim.

Analysts question whether China can succeed in its global reach. While Chinese companies excel at tapping the cheap domestic labor to imitate successful goods at low cost, few have contributed much in the way of innovation.

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