Shanghai — Today Shanghai Kumho-Sunny Plastics Co. Ltd. is well known throughout the industry for their innovative advancements in low-VOC polycarbonate/ABS and ABS compounding and paint-free aesthetic plastic for the car market.
But 15 years ago, Seoul-based Kumho Petrochemical took a risk to enter into a joint venture partnership with Xin MinQi, founder of Shanghai Sunny New Technology Development Co. Ltd. and now general manager and CEO of Kumbo-Sunny.
“Everyone in the industry thought it was a strange partnership, a huge multinational with such a small company,” Xin said. Kumho originally planned to team up with a state-owned enterprise, but after Xin prepared a report on the ABS market for Kumho executives, they changed their mind and decided to partner with him instead.
“The investment was very small. It was an experiment for them,” Xin said, and apparently one that has turned out well so far.
Kumho-Sunny has developed quite a bit from its humble beginnings of generating $1 million in sales the first year, to their current monthly sales of $20 million. In his interview with Plastics News, he looked back and analyzed the company's three stages of development.
The first stage, Xin said, was pure and simple survival.
“After renting the factory and buying the equipment, we pretty much had nothing left. We had to rely on our supplier for support. It was really hard.” Xin remembered that one of the purchasing department employees was put in charge of asking the supplier if they could pay late. Thankfully the supplier believed in the company and saw an opportunity for growth, so was lenient on the pay schedule.
By 2004, Xin said, the company was already ranked No. 3 or 4 in the niche market, in terms of scale. “But of course in terms of our profitability, we weren't doing as well. We used our revenue to pay back our supplier and the bank.”
Soon after, the company entered into their second stage of development. Xin went to CEIBS, a business school in Shanghai ranked No. 1 in Asia, to study for his executive MBA and put his focus on internal management. “That was all about managing the company better, cultivating our employees and taking our company from start-up to small-medium enterprise.”
The global economic crisis was a moment of change for the company. Before 2008, the company's profitability hadn't yet taken off. “After the economic crisis, we were really able to differentiate.”
During that phase, Xin realized that the company's internal management was an important base, but that it shouldn't be his top priority throughout the company's development. That realization brought the company into its third stage of taking market leadership in the PC/ABS & ABS sector. The company's biggest market was and remains the automobile industry, making up 60 percent of their business, followed by home appliances. Their clients are top 10 foreign brands manufactured in China, Xin said.
Xin said that differentiating made its products a must have, not one option among many. That strategy led to a fast rise in profitability.
What Xin meant by differentiation was finding a solution to a problem that no one else had paid much attention to yet.
One problem they focused on was the odor of plastic in car interiors. According to Xin, one-fourth of customer complaints in China about new cars are related to strong car odor.
“Not many other manufacturers have paid attention to this,” he said. “Since I'm closer to the market I recognized this was a need and I can beat others at this.” The product they developed was C-Clear, an interior plastic with less than 60 percent of the volatile organic compounds found in conventional plastics.
One of his biggest challenges has been to get more consumers and manufacturers to recognize the problem that his products provide a solution for, through government channels and public service channels.
“There's no standard yet for VOCs in cars yet, just a recommended level,” Xinsaid. “But if it is really bad, the buyers will definitely refuse it. To protect our customers' health, we must control the amount of offsetting gas odors.” He and his company are working with the government on developing a standard, which could perhaps be published as early as this year. Xin himself believes it will take longer though.
Xin said it could take as long as three to five years for low-VOC plastic for car interiors to become commonplace in China. But it's inevitable, he said. The increasing numbers of car buyers in China will mean an increased attention in car interior odors. “If you're not buying a new car you won't be aware of this problem. But once you buy a car you will think of it.”
Another product that Kumho-Sunny has developed is the Colorful-In line of colored plastics for high-end home appliances. These eliminate the need for spray-painting electronics, a higher cost solution and a source of air pollution.
In creating and promoting these products, Kumho-Sunny had tapped into the greater consumer consciousness of environmental and health concerns. Xin said that the government's recognition of environmental concerns has only been good for business.
And Xin recognizes that what works today might not always work. “Customer needs are changing,” he said. “We must follow the trends and also develop what we can do [that's different]. Every product has its lifespan,” he said, indicating that the environmental focus won't last forever and the company is not only developing products related to that.
The company is now developing an impact resistant material. “It will have the same hardness as other plastics, but upon impact, it becomes soft and pliable like rubber,” he explained.
Kumho-Sunny has three production bases aside from its Shanghai headquarters, with a total production capacity of 270,000 tons and 1,000 workers.
The newest production base opened in 2015 in Shanghai at a production base with a total investment of 320 million yuan ($49 million) and starting production capacity of 100,000 tons. In 2015 the company's annual sales reached 1.5 billion yuan ($231 million).
In 2012, Kumho-Sunny became the market leader in the PC/ABS and ABS plastics compounding sector in China in terms of market share. After that the company moved on to the next stage. “Internal management was taken over by a team and we moved on to developing the brand and differentiating our products and adding value. Our focus had moved to marketing and R&D.”
Xin said he is preparing for the next phase. “We are already No. 1, but I want us to lead by a large margin and then I want us to become the world's No. 1.” He said he thinks that within five years the company can achieve this goal.
“Everyone is used to thinking that the U.S. and Europe do the best in terms of plastics, but now plastics is mostly used for manufacturing in Asia, especially China,” he said. “So a lot of their ABS factories have closed and moved to Asia. Most of the demand for ABS is in Asia.”
Of course the changing economy has had an effect on Kumho-Sunny's business. “We can't be cheaper than everyone else, we won't survive that way. So we can only be different or have some value-add.” And, he added, they aren't only competing with other companies but also with other types of plastics.
Xin said he may consider expanding production to other countries after a few years, “but it won't be because of price,” he said. “It will be because of where the need is.”
“We want to be experts,” he said. “Our category of products is simple — we just do PC/ABS and ABS. But we want to differentiate ourselves and make next-generation products.” Xin said Kumho-Sunny may move into different sectors, but not before becoming experts at the sectors they sell to now. “If I'm not an expert there is no use doing it,” he said.
