Earlier this year we reported on Hon Hai's struggle in Shenzhen (Hon Hai Fights in Shenzhen). The basic problem is a main competitor in China, BYD, has been sued by Hon Hai for stealing trade secrets. Delays in legal proceedings in the Chinese court system (which some speculate is aimed at protecting the Chinese company) has resulted in BYD gaining market traction.
BYD has now received a surprising vote of confidence from Warren Buffet who the Taiwan News reports is interested in 10% of BYD shares. According to Taiwan News:
Taiwanese entrepreneur Terry Gou might soon count U.S. investor Warren Buffett among his rivals, if the latter’s investment in a major Chinese company goes ahead, reports said.
Buffett, often mentioned in the past as the world’s wealthiest man behind former Microsoft chairman Bill Gates, is reportedly looking to buy 10 percent of shares in China’s BYD Co., Ltd., a major electronics and auto-parts manufacturer.
The Chinese company is currently involved in a court case pitting it against Foxconn, the brand name of Hon Hai Precision Industries. Foxconn sued BYD in 2006 for violation of trade secrets.
Chairman Terry Gou’s Hon Hai manufactures computers and cell phones for prominent brands such as Apple, Sony, Dell, Nokia and Motorola.
Hong Kong-listed BYD also counts Nokia and Motorola among its customers, and is believed to be those companies’ second biggest supplier behind Foxconn, reports said. The Chinese company is also the world’s second largest producer of rechargeable batteries. Engineer Wang Chuanfu founded BYD in Shenzhen 13 years ago.
Buffett’s reported investment in BYD is seen as a vote of confidence in the Chinese group and in China’s burgeoning technology sector, media reported.
Mr. Buffet is an admirable person. The little I know of him suggests he is a man of integrity and someone who can be admired for the way he conducts business. If he is interested in BYD and will indeed gain a 10% hold in the company, I certainly hope he will be able to have a positive influence on BYD management and urge them to consider fair competitive practices. Chinese tech companies do have a lot of potential but they will only succeed if they can learn to innovate on their own and not by copying.
I personally think Hon Hai has a sufficient competitive advantage to stay ahead of the pack and I do not think BYD will challenge their dominant position for a while yet. That said, BYD should still be willing to develop their own technologies and their own intellectual property and should not steal from others. As for Hon Hai, they must continue to innovate and lead by example. The further ahead they get, the stronger their position will be.
Taiwan News: U.S. W. Buffet and Taiwan Terry Gou likely to turn into rivals in China
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