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Recently, while in Shenzhen, China, I had the chance to catch up with Don Cullen, the global marketing director at MacDermid Electronics Solutions. We sat down to discuss the many changes he’s seen in China since his first visit there nearly 20 years ago, and the country’s future.
As a frequent visitor to China, I have to agree; the country has definitely changed. Today, China is much different than it was 20—or even five—years ago.
Barry Matties: Hi, Don. So, when did you first start visiting China?
Don Cullen: It’s got to be about 20 years ago…I could check my visas. Shenzhen was quite a different place back then. It was at the beginning of the Special Economic Zone, which started, I think, in 1986. By 1990, it was all dirt roads and chickens on the back of bicycles. The circuit board industry at that point was in Kowloon, Hong Kong. Many of our customers were on the Kowloon side, so whenever we came to Asia we'd start off in Hong Kong. Taiwan was developing at the same time as well. These days, we have a substantial business in the Dongguan area and in Jiangsu, just like everyone else. We go where the customers are. We've been expanding a lot currently, and at a higher rate up in Jiangsu and East China.
Matties: There’s definitely a lot of growth in West China. It looks like they have their eye on the Russian market.
Cullen: I've been reading about that. They're really securing their relationship with Russia. I saw in The Economist magazine recently that they're going to build a rail between a Southwest Chinese city, go through Kazakhstan, and through part of Russia, through Belarus, Poland, and then all the way to Germany. That's going to be the alternative to the sea route through Europe and it'll only take 10 days instead of six weeks.
Matties: With plenty of stops to sell product along the way.
Cullen: Right. It's like the old Silk Road—that's what they're calling this.
Matties: Tell me, how long have you been with MacDermid?
Cullen: Twenty-five years.
Matties: In those 25 years, you've seen a lot of changes in the industry, and here in China. What one thing strikes you the most?
Cullen: The China story is the most amazing thing, I think, in any industry. To see the kind of wealth creation that has happened in China…
Matties: Especially in the last five years.
Cullen: Yes! When people ask me, “What do you do?” I say, “I go to Asia. That's what I do!” And to witness this kind of stuff—to see 500 million people move into the middle class—is something else. A lot of people have preconceived notions about China and its government and America and its freedom, but to really see capitalism in action you’ve got to come here. I always tell the story about going to Shenzhen and being on a street corner, getting thirsty, and wishing there was someone around selling bottled water. Three months later, I came back to that same street corner and there's a guy selling water. Because that is the demand and they can meet the demand. They can move capital so quickly.
I first came to China as a researcher doing a lot more time on the fabrication floors, doing a lot of down and dirty stuff, and it was a lot of fun. Then I began to sell more to the OEMs. I remember coming to Shenzhen, into the glass building over here, and working with Intel. I remember it being nicer and it was a much better job. But in 2008 I moved into photovoltaics because we were really getting a lot of traction in that business. So I guess I’m back involved in fabrication, but I have to say the solar cell cleanrooms are much nicer than the board shops.
Matties: That looked like it was going to be a blossoming industry in America, but that quickly shifted to China. Were you surprised at all by that?
Cullen: It did and no, not really surprised. I think it followed the exact same path as circuit boards, but at a quicker rate. At present, I've got more innovative opportunities in the United States for solar. A lot of these new concepts come out of Silicon Valley and they prove it there, so I have projects in California, New York state, and Texas. Two weeks ago, I spent an afternoon watching 40,000 cells being made with my chemistry in Texas.
Matties: Nice. I remember the sharp downturn in America for the PCB market; it was like someone turned off the light switch in America and moved to China overnight.
Cullen: Yes, we did the same kind of thing a lot of companies did: We allocated our resources proportionate with revenue, but that might have been a mistake in the Americas. We underallocated. But you do need a certain critical mass; we’ve brought back resources, and now we're disproportionate with an overabundance of staffing in the Americas to really capture the people doing leading-edge PCB designs. Because that stuff does come back to Asia. I would say we're in a big investment mode right now.
Matties: What do you see happening in America in the next five years?
Cullen: I think more of the same, really. People talk about our residual military electronics business, our medical electronics business, and the fact that PCBs get smaller and smaller as densities get higher and higher. It's not a big business anymore but it's lasted longer than I thought. The transition has been amazing. I toured the old factory we had in Connecticut (it’s now closed): In 1999 they were running three shifts and we had a dozen loading docks full of truck trailers that we would load and ship out around the clock. I was talking to the facility's manager and he said within one month during the dot-com bust it went to nothing; it went to half a skeleton crew.
Matties: Hero to zero, just like that.
Cullen: It was amazing, but MacDermid came over to Asia a long time ago. MacDermid was here 10 to 15 years before I joined the company and they were well established here. It wasn't just China; it was Taiwan, Japan, etc. We really got our claws into the Asian market and we're an Asian company now. The MacDermid Electronics part of our business is essentially an Asian company.
Matties: How would you describe competing in China?
Cullen: I would say that with our traditional competitors there is a certain amount of discipline, price discipline especially, and the technology levels are good. The big competition now is local suppliers; there's a lot of straightforward copying.
Matties: Yes, we’ve been talking about counterfeits here and in the chemical industry.
Cullen: There is, and it’s a concern, but it’s changing for the better. As prosperity brings more people into the middle class in China, the education gets better, the technology is improves, the engineering follows the technology and manufacturing, and eventually the design capability will develop here --it's all connected. That’s when the local chemistry suppliers will be a more important competition. The business is becoming much more complicated and it's better for the consumer. It keeps us driven. With our products it's the same story. We have to innovate to survive and thrive. The products that made us gobs of money on back in the 1980s, we gave up on 10 years later. We made lots of money on products like etchants and cleaning, but times change—even our oxides and oxide alternatives are much more commodities now. We must keep things in the pipeline and develop new products for the future. That's what technology companies do. Look at Intel; it's the same model.
Matties: How do you look at your growth? Do you guys say, “We’re going to accelerate or go buy a certain number or market share?” What’s that like for you?
Cullen: Well, you always get these different targets from management, right? We try to meet the targets. In the past 15 to 20 years, we've had a strong focus and efficiency providing profit dollars and cash flow by investing in the right people, innovation, and technical service. Innovation for MacDermid means the research of new chemical processes. The service is applying that chemistry knowledge to the customer and really making it totally lean and efficient. Our new goals are shifting more towards a focus on revenue growth; it kind of goes in cycles and you tend to see that. We're going to put a lot more emphasis on market share coming into the market and giving comprehensive support to a larger set of customers in the electronics market.
Matties: So, you’ll raise your values substantially in the marketplace to do this?
Cullen: Yes. I wouldn’t be surprised to see MacDermid doubling its revenue by the year 2020.
Matties: What kind of extra support can you bring to the market to make them say, “Ah, that's what we need?”
Cullen: Well, we always allocate resources, innovation, and service according to our business plan. If we say we’re going to allocate to a more aggressive business plan then we invest more. And there are always good investment opportunities.
Matties: I'm just thinking from the customer's point of view: What’s the story you tell them to say, “We’re the right company to choose.”
Cullen: I talk about this with my solar business because they’re not as familiar with our business model. In MacDermid’s business model, we're not selling chemicals. We're selling a solution. We provide what we call “customer-specific applications know-how.” It's like the old story of the plumber who made a house call to fix the furnace, but all he did was turn one screw. The homeowner says, “I just paid you to turn one screw?” And the plumber says, “Yeah, but I knew which screw to turn.”
Matties: That’s the value.
Cullen: That's what we do: We take that engineering demand from our customer and put that burden on ourselves so they can do what they do best, which is build circuit boards. We take care of their chemistry. We have customers where we have guys that go in every morning and give complete comprehensive support to the customer. And that's something I think we can continue to offer with every high technology PCB shop in Asia.
With the solar cell industry, they don’t yet understand this concept. So when I tell them, “You realize we're going to be there, making up your bath, changing your anodes, doing your polarography, etc,” they’re all shocked. But that's what we do and that's the value we provide. It works well for us and we love doing it.
Matties: It seems like the automotive industry is really driving much of the technology in this area right now.
Cullen: We've noticed that. We're spending a lot more time on the metal finishing side of our business, which has always been very involved in the automotive business. Recently they've been bringing our electronics people into the largest automotive conferences. For example, a couple months ago, we did a big conference at Shanghai GM, then a month after that one for Ford. More and more automotive is becoming electronics focused. It’s not just the traditional circuitry, which, of course, is growing at a huge rate, but it's the things like molded interconnect devices. Such devices can turn a fender or functional part that you want into a circuit by doing laser activation of the plastic and plating it up. There are huge opportunities and these guys are going crazy thinking about the possibilities for turning their entire car into a circuit.
Matties: Ten to 20 years from now, we’re not even going to understand a car.
Cullen: Yeah, we won't get it.
Matties: Don, thanks so much for your time.
Cullen: Thank you. It was really nice to see you again, Barry.