HN Explorer

Ask HN: Do US companies regret entering China?

46 points by dmfjfj ↗ HN
Some US companies flourish in China (e.g. KFC, Costco) while most end up being defeated by local rivals due to multitude of reasons. For those that entered, has the money and effort been worth it? What ended up costing more of your time than expected?

36 comments

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mscasts
I know of a Swedish company that made a deal with a Chinese company, the Swedish company no longer exist.
anonu
Does correlation imply causation here? What are the details behind this anecdote?
mscasts
I am not really certain about all the details, but it looked like a good deal at first but it turned out that they probably just wanted to copy their stuff.
yitchelle
Did it morph into a Chinese company?
mscasts
No, it got bankrupt. Now I've read that the Chinese company have an almost exact replica of their product.
coldtea
Funny, I know of a Finnish company who placed as its CEO an ex-executive of an American company.

The company then adopted said American company's platform, had consecutive huge losses (for the first time in decades), and was forced to sell several divisions to the same American company...

a012
Nokia, right?
coldtea
I can neither confirm or deny this
BiasRegularizer
Are you referring to SAAB?

If I recall correctly the company was not going to make it during the Great Recession, and no buyers wanted them. So the Chinese bought them but still couldn’t save them from their ultimate fate.

The Chinese owner tried to revive the brand a couple of years ago with an electric vehicle, but I guess that didn’t work out after all.

mscasts
No I am referring to Cybaero.
dis-sys
seriously? a company making drones? I am wondering where dji got all its IPs, must be stealing from their partners on mars.
mscasts
Your condescending tone is not very nice. DJI is great but they make small drones flying on battery, this is a bit different with the missions being completely different.
[dead] Fillsev
Hey,what’s it is?It so bad((
anonu
Abro certainly regretted it: https://www.npr.org/sections/money/2019/03/15/702643451/epis...
Ankhers
But they never actually entered the Chinese market. They just had a counterfeiter that was based in China. And, through the help of Chinese officials, they were actually able to shutdown the counterfeit manufacturer. Tim, the ABRO rep from that podcast, even claims that the Chinese government is doing a great job at protecting foreign IP.
robin_reala
Why US companies specifically?
skrebbel
Some HN'ers forget that not all of HN is from the US. Not too werid given the amount of local SF news on here. OP likely means "non-Chinese" or "Western".
TRossi
It would be nice to show statistics, isolated cases are rarely really interesting to discuss. I've been in China recently and there are plenty of foreign brands, the most successful ones are those who adapt their message, naming, colours, etc.. to the Chinese taste, which of course should be expected.
baybal2
I think GM-SAIC is the biggest example.

China is the one and only country in the world that bought into Buick...

They got a very good perception that they are not in the business of selling cars, but in the business of selling "Americannes." Most Chinese Buick buyers care not of the car falling apart as they drive, as much as it being an American car

delfinom
They design the Buicks in China now and carry it over to the US in a twist of tables.
dmfjfj
KFC famously sold congee on their menu and Costco only sells foreign made goods (ie. made in Canada/USA) in China.
uranusjr
The Costco part is not true. There is definite evidence the recently-opened Costco in Shanghai sells Chinese Moutai (or at least sold at its grand opening, not sure what happens after they got snapped off the shelves). This is not specific to China either; it is common for Costco to sell goods local to its stores, not just made in Canada/USA.
smacktoward
Who ever regretted training their replacement?
scoobyyabbadoo
And why make China come here to steal your IP when you can just ship it to them directly?
Leary
Depends on the business model. Some businesses cannot operate without outsourcing manufacturing to China. China also has more potential for growth than US and Europe combined.
davismwfl
Micron regrets it, essentially having a significant amount of their chip IP stolen by Chinese firms they were involved with one way or another.
dis-sys
Please read more recent news before posting out of date info not useful for anyone. Micron is actively seeking more technical cooperation with Chinese companies completing in the NAND business. Source here [1].

[1] http://www.businesskorea.co.kr/news/articleView.html?idxno=3...

davismwfl
I read the article you linked, and don't see where that is incongruent to what I said.

Micron has stated they regret the situation and how they were forced to do business in China (which many other companies have expressed too, e.g. forced JV's etc). China is a substantial amount of Micron's sales, so they cannot walk away and they have to find a way to mange the situation and still protect the company. They are a business, having regret doesn't mean you take your balls and go home, they need to make money for their shareholders so they will do what is required.

To be clear, the US opened a trade investigation last year into it [1], and China opened it's own anti-trust style investigation as retaliation [2].

[1] https://www.reuters.com/article/us-usa-justice-china-espiona...

[2] https://www.investors.com/news/technology/micron-technology-...

baybal2
This will be a very interesting topic to talk about for me, I beg and hope that it will not be subject to "automatic" deranking.

The topic getting controversial, by far does not indicate it being unworthy of discussion.

dmfjfj
Unfortunately, this submission is already flagged. I am genuinely interested to know. And it wasn’t meant as an anti-China question.
gourou
In "AI Superpowers: China, Silicon Valley, and the New World Order", Kai-Fu Lee (former president of Google China) says many US companies don't give enough resources to their Chinese branch and that's why they fail. The Chinese internet ecosystem being so different than the Western one.

For example, Western users are used to refining their search query and clicking a single link among the results. Whereas Chinese users click most of the links and are used to them opening in different tabs.

However, it took months of convincing to get Google to create a new tab when clicking a link in search results.

https://en.wikipedia.org/wiki/AI_Superpowers

dirtyid
For a holistic overview it's useful to read Chamber of Commerce surveys, there's a recent one by CGCC (China General Chamber of Commerce - US). The basic gist is that growing market and financial motives play biggest role in something like 85% of respondents. Kind of no-shit take away. Don't rely on cherry picked anecdotes of XYZ failed ventures or attributing "regret" because some IP got stolen. There was an interview covering a recent American Chamber of Commerce in Shanghai poll of US data on top priorities for current trade talks and 0.4% of respondents think force tech transfer is an important issue. Which should be obvious since the vast majority of foreign businesses operating in China don't have extremely technical IP that can't be easily replicated, or have very well funded and vocal lobbying groups state side, or is an legitimate intersection of commerce and security with respect to dual use technology, or even that the cost of stolen IP is not factored into these business decisions in the first place. Many US companies are not in China as supply chain operators, they're there to meet demands of Chinese consumers and serve Chinese market to the point where China is a significant share of their revenue. Another example, latest U.S. China Business Council's (USCBC) survey tldr was basically US companies overwhelmingly convinced Chinese companies receive (alledged) unfair state subsidies but they literally don't care because even with the tradewar, 97% of respondents said their China operations were profitable which is UP from 85% in 2015. There's also good podcasts like The Trade Guys (CSIS), Sinica / ChinaEconTalk that covers these topics by actual subject matter experts.

E: I think it's important to highlight that while that data suggests profit seeking US companies overwhelmingly do not regret entering China, that doesn't mean it's beneficial to long term US interests. You have to understand that on paper, China - US trade accounts for a few percentage points of each other's GDP, and indeed both economies are actually not very trade dependent. Many companies and people will still get hurt, the pain will be disproportionately applied, but this tradewar is mostly political theater that both leaders are exploiting since there is no existential risk.

danzig13
Prior to my involvement in my current company, they were discussing setting up production in China. After my involvement in the company, I have no idea how they thought they could pull it off. For whatever reason, they did not do it.

Rumor is a Chinese owned company is already ripping our products off; I can only imagine if we had production occurring there.