With rapid advancements in technology, what challenges and opportunities lie ahead for global semiconductor companies operating in China?
And as China steps up its efforts to boost quality consumption, how are global consumer brands adapting to this shift in demand?
Hello and welcome to ChatLounge.
I'm Xu Yawen.
In this special edition, we speak with two senior executives who are at the forefront of these exciting developments.
We will explore the strategies their companies are adopting in response to China's technological transformation and its quality consumption upgrades.
First we will hear from Marcus Neifel, Senior Vice President of Systems Engineering at Insami, one of the leading US semiconductor companies specializing in intelligent power and sensing technologies.
Marcus shared his insights into why this billion-dollar company is intensifying its focus on China and what it means for the global semiconductor industry.
Marcus, it's a pleasure having you today.
So, to start, could you briefly introduce yourself to us, like your role as the Senior Vice President of Systems Engineering, and how do you see China's semiconductor industry evolve over the years?
Thank you, Yavin.
Personally, let me go back almost 30 years.
I had a chance to do my PhD with power semiconductor, silicon carbide, which are now quite popular for new energy vehicles.
Personally.
Also for me important was as I started collaborating in China and with China in the year 2007.
That was a time as in China combustion engine started growing.
And I was here in a period 2014 to mid of 2018.
That was a time where strategic focal points like electrified connected, automated energy efficient became important in China, for China and rest of the world.
And this is a base for the new energy vehicle.
On.
See me as a company is Semiconductor company, just focusing on power semiconductors, as well as on mixed signal products and intelligent sensing, which are used in the field of new energy vehicles and other industries like energy or also industry.
This year marks OSEMI's 30th anniversary in China.
Over the past three decades, China has become a global powerhouse in semiconductor.
So how have the technical demands of the Chinese market changed over the years, based on your observation?
Onzimi has a long-term commitment in China and to China.
We started more than 30 years ago.
30 years ago exactly, we had a foundation of a plant in Leshan, Sichuan province.
Have been one of the first companies starting with high technology in the west part of China.
Nowadays we have plants and operations beside Leshan in Shenzhen Suzhou, in Beijing, as well as in Shanghai.
And for us, being on-site, the close collaboration with our customers, especially in the time where new energy vehicles have grown, is something where we see that we can combine the strengths we have on the innovation side to co-innovate it.
And this is also part of my role that we are not only a semiconductor company, with components.
My role as a SVP Senior Vice President of Systems Engineering is to ensure that we can understand the needs of the OEM, of the ones who are developing the car, who want to have advanced new energy vehicle, up to flying cars to bring this together, that we can understand, as a semiconductor company from one side, their needs, their requirements.
And, on the other side, with our innovation coming from semiconductors, to bring this together and to co-innovate jointly to have at the end and this is our ambition to make a better product, a better product for our customers, for users, for the society here in China and, for sure, also globally.
Well, you just mentioned about the new energy vehicles.
Here in China.
In recent years.
China is developing heavily on its new energy vehicles, the artificial intelligence and also the green energy, which all rely on the semiconductors.
So could you share some examples of the cooperation between us and me and your collaboration with local companies here in China, some successful examples.
Sure.
Looking back as I was here between 2014, mid of 2018, it was a period of the 13th five-year plan.
That was the hour of the birth of the first new energy vehicle roadmap.
That was where Made in China 2025 was started.
At that time I saw already a strong ecosystem excellence with this deep gradient.
If I look now 10 years back and from 10 years now to the year 2025, and I can see that companies and carmaker like Xiaopeng, like Xiaomi, like NIO, like Geely and others are really the ones who are shaping and leading the technology for new energy vehicle.
And we are working close together with them.
We are their customers, their partners and suppliers.
Look, for example, there was a Shanghai Auto Show.
And there have been many cars have been launched there.
The cars with 800 volt architecture.
Nowadays, most of them, 50% of them are equipped with silicon carbide power devices from Onsemi.
So during those collaborations, were there any maybe challenges emerging, and how did Onsemi tackle those issues?
They are always in technology.
If you go to cutting edge technology, there are moments where you see a project is running in the right direction.
And there are also moments where you have to engage closer, where you have to work together with your customers to solve barriers or to overcome barriers.
Personally, look, I'm now here this year, fifth time in China, always stay for one or for two weeks.
This has to do that I can, in my role, support the teams working close together with our customers, being part of a barrier removal team, creating a common understanding for the projects which we are running right now and, for sure, also to think about the next step for the future.
Being on site, being present, have this close and trusting collaboration is the key for success.
Means innovate together means innovate successfully.
Looking ahead, how do you see China's role like in shaping the global semiconductor industry?
Do you think it will maybe leading the industry or it will, you know, just being the followers?
Yeah first, if I look on other example for battery technology, Long time ago companies who have not known in the world, like CATL or BYD, have started their activities.
They are now world market leaders.
What I recognized as I was on site between 2014 and 18 here in China, stepping deep into the new energy vehicle roadmap.
The first one, there have been quite precise targets for, for example silicon carbide mosfet silicon, igbt technology.
This is something what drives new energy vehicles.
If i look now on the industry landscape, then i can see that new companies are arising here in china.
On the other side, all the established semiconductor companies globally, also here one of them are we in on semi.
What we like is competition, competition in a fair manner, because this is always the one if technology competes for users, at the end, the benefit.
And we are quite successful with our innovations.
If I look on our newest M4 silicon carbide technology, where we combine not only the power semiconductor, we combine it with gate driver, that we can optimize our system will increase again the range of a new energy vehicle.
This is innovation.
It's always, it's a race and it's competition.
And our ambition at Onsemi is make the better product with innovation, and we will do it also in the future.
So competition will kind of facilitate the innovation of the company.
Lastly, for foreign investors who are in China, what's your suggestion to them, like the secret of achieving a successful business in the market.
Here, I am not the one who wants to give others recommendations.
I show on this what Onzimi has done, is doing now and will also do in the future having a commitment bringing innovation to China, China not only at the market.
To leverage the excellence and partnership with our partners and suppliers here in China.
Access to the excellence you can find here in the universities, academia and so on.
Building strong teams in China for China on CME side.
Using them for the Chinese market and for the global market.
On a customer side.
An open and trustful collaboration based on innovation is the glue.
What makes companies successful.
At the end, it must be based on win-win.
What's your future prospect of the Chinese market then?
For new energy vehicles, it's already the leading market in the world.
And it will sustain.
It will continue.
And we will contribute that China market with the new energy vehicle is successful.
And we are also committed to support our Chinese customers being successfully in other countries going to Europe.
Personally, for example, Gesshaven.
Which car do I drive in Europe?
BMW?
No, NIO.
A NIO?
A nice NIO EL7.
Well, thank you so much, Marcus, for your time today.
It's a great pleasure speaking with you.
It's an honor for me and a pleasure to have a conversation with you and being here in Beijing.
That was Marcus Neifel, Senior Vice President of Systems Engineering at UNSAMI.
The Chat Lounge.
The chat lounge unpacks views and opinions on hot issues in a more casual way.
Now to further explore the economic factors driving China's technological landscape.
We're joined by Professor Yan Liang from Willamette University.
She will help us understand the factors shaping China's industrial ecosystem, particularly in sectors like new energy, vehicles and semiconductors.
Professor Liang.
Earlier Marcus Neifel from Insami mentioned that China's remarkable progress in building a strong industrial ecosystem for new energy vehicles over the past decades.
So from an economic perspective, what do you think are the key drivers behind this transformation?
And what advantages does China have in fostering such a collaborative network across semiconductors, batteries and vehicle manufacturing?
Well, I think there are three major reasons.
One I think has to do with really the government policies that really reflect this long term vision and also strategic support for the new energy vehicles.
So this is not just, like the Western narratives, talking about how Chinese government is handing out subsidies.
The matter of the factor is that I think the Chinese government really sees the potential of the NEVs to both help to achieve China's energy independence, help to clean up the environmental pollution, but also to achieve technological leapfrogging.
So the government supports stamps from the upstream to help to secure resources such as critical minerals, but also in terms of very smart industrial policies that introduce, you know, competitions but also provide a lot of RD supports.
And some of the local governments also help to pool together resources like tailings funding and also, you know, the supply chain, as you mentioned, the ecosystem.
Then the downstream, the Chinese government has been building a lot of public infrastructure to facilitate the adoption of EVs.
So for example, China has 4.6 million public charging stations compared to the United States.
And the number ranges between 190 to 540,000 public charging stations.
So all of these are really the support from the government which is, I think, indispensable for the EV systems to thrive.
The second, I think the importance is really the very vast industrial clusters.
This is not only about geographic concentration, which I think is important.
Right.
So you have the Yangtze Delta area, where many of the makers, batteries and semiconductor companies are all together.
So you can source nearly all the components within just hours.
And so that really helped to cut costs and boost speed.
But the clusters also reflect the integration and synergy between different sectors.
So, for example, when you have strong battery technology and capacity that help to fill the EV manufacturing and the automotive driving system also drive the semiconductors sector to scale up and to achieve technological innovations.
So all of this together it helped to build this network.
As you mentioned, that one sector's growth helped to promote the other sectors.
And one sector's growth demand the growth of another sector.
So that is really important for the integration and synergy.
And last but not least, I think China's market is really vast.
So when you have a very large market scale, the consumers are more than willing, more than happy to embrace EVs, then that creates a lot of market potentials for the manufacturers to really engage in investment and mass production.
So I think all of these are really important ingredients for the success of China's NEB sector.
Well Professor, as China continues to make strides in new energy vehicles technology, especially in battery and power semiconductors, what areas of innovation do you see as being critical in the next phase?
And will China focus more on refining existing technologies or will there be breakthroughs in areas like solid state batteries and autonomous driving chips?
Well, absolutely.
I think the Chinese EV sector is very innovative.
It's very dynamic.
We know that the EV market achieves basically a product life development cycle around 18 to 24 months.
So this is incredible when it comes to the improvements of technologies and also designs of these automobiles.
The traditional systems,
Automobile sector usually take four to five years to upgrade, update their products.
Whereas, you know, that time span is much, much shortened in the EV market in China.
So what I'm seeing the focus right now, one has to do with what you mentioned, right?
The hardware part, which is the battery.
So the solid state battery that would help to have longer range to have faster charging.
These are really, I think, the next step, you know, sort of level of technologies for the batteries right.
So the ultra-fast charging, like the BYDs, and also the battery swapping technologies that NIO and Adelton have been focusing on.
So I think that is really on the hardware side to improve the battery technologies.
Then you have the software side, which has to do with the intelligent driving, right?
So such as the ADAS, the Advanced Driver Assistance System system, the AI and smart cockpit, and so on.
So the software side is really trying to bring more intelligence to these cars to allow for more auto driving system.
And beyond that, I think we're also seeing some of the new mobility vehicles are being developed.
The flying taxis, or what we usually call the e-votals, the electronic vertical taking off and landing vehicles.
So that is another kind of a new area for many of these NEV companies to focus on in terms of technological breakthroughs, as well as, I would say robotics, integrations like Xiaopeng's ION to potentially integrate the robots with the automatic ecosystem of driving vehicles.
So all of these, I think, are really promising and also really exciting areas that we are likely to see more new technological breakthroughs.
In my interview with Marcus Naifo from Ansami, he talked about the secrets of your company's operation in China, which includes long-term commitment, local innovation and win-win cooperation.
So do you think it's still a good time for foreign investors to enter the Chinese tech market and considering the growing domestic competition and external uncertainties?
Well, absolutely.
I think there are three really major reasons for why foreign investors should partake in China's fast growing and very dynamic tech markets.
One is that I think there is a rapid growth potential because we know that China is a really large consumer market.
And so there's a lot of industrial and consumer applications for this tech and for new products.
And so the growing market potential is why I think the foreign investors should come to China and you know in China for China to really take advantage of the vast and growing market.
And second reason I think is really, you know, that has to do with portfolio diversification.
You don't want to only invest in one market or only in the Western market.
You need to diversify your investments, so then you'll be able to balance out.
You know the product and market cycles.
And last but not the least, I think there is really the opportunity to join force with Chinese firms to participate in China's very robust innovation and manufacturing ecosystem.
China is now a really innovative hub.
China just made it to the top 10 of the Global Innovation Index.
And this is the first time a middle income country achieves that status.
And according to some of the think tanks, such as the Australia's think tank, China has mastered the leadership in 57 out of 64 critical technologies.
So that just means that companies should come to China to team up and partner with the Chinese firms?
So then they will be able to participate in that innovative ecosystem and to learn from the Chinese technologies and partner with China to develop technologies.
So I think, for all those three different reasons, I think that foreign investors should definitely consider China, especially when China is really now open arm and embrace more foreign competitions and foreign cooperation.
I think this is a win-win opportunities for both China and for foreign investors.
Professor, although the US government has a clear stance on competition with China, particularly in the tech sector, leading US semiconductor companies like Ansami are still choosing to invest in China.
So what's your assessment of their business strategy here?
Yeah, I think that's a great question.
I think Ansami is a salient example that foreign investors wanted to partner with China's companies and also wanted to really participate in the Chinese vast market right.
So as China's AI boom and also many of these new technologies, including green energies, green tech, green products, there is rising demand for semiconductors.
And we know that China's own semiconductor industry is growing very rapidly.
So I think again, for both the market demand, but also for the next generation of innovations, Foreign companies should really work with the Chinese companies.
Now, that said, there are definitely geopolitical risks, such as trade barriers and also export restrictions or investment restrictions from the United States.
But I think it's important for companies to navigate through these kinds of geopolitical risks and really take into account the opportunities the Chinese market offers.
Then Professor, as we witness the rapid rise of Chinese companies like CATL and BYD growing from unknown to industry leaders worldwide.
Do you think this momentum in the tech sector will continue into 2026 and beyond?
And what factors will determine its sustainability?
And what risks, aside from the geopolitical factors you just mentioned, might pose a challenge to this growth?
Yeah, I'm very confident that I think the Chinese tech firms are poised to continue to prevail globally.
There are many reasons.
One is that there is a very large and growing market, and that's not only the domestic market, but the domestic market is the majority, the major market.
So for NEVs, for example, I think this year China's NEV production is probably going to be more than 12 million.
And China has already exported about 2 million in the first 10 months of this year.
So I think you know there is a very large domestic market, but there's also a growing market, especially in the global south.
So I think that strong market demand is going to continue to promote EV production and other tech sectors, right like solar panels, like batteries and humanoid robots.
There's a very large market demand to support the development.
And, as I also mentioned, there is a dominance of the Chinese companies in their supply chain, in the global supply chain.
And they have innovation capabilities and tech advantages that would really allow them to be much more competitive in bringing out new models, new features, at a very high level of cost competitiveness.
And then finally, I think, this global expansion.
You know BYD and others right have built factories elsewhere that really helped them to penetrate into the foreign markets, to really understand the market demand and market pulse in those foreign areas.
And so that would, again, help to propel, right, the growth.
Now, in terms of risks and vulnerabilities, I think, in addition to the geopolitical risks right that means tariffs and other trade barriers is being won.
And second is, I think there certain supply chain vulnerabilities in terms of some of the commodities, like cobalt, like nickel, that China does import.
And so that could create some price volatility.
Should these commodity markets have certain volatility when it comes to the prices?
And the other one, of course, is we're seeing this very intense domestic competition.
And that leads to relatively thin profit margins for many companies.
And so that could create some unsustainable profits for these companies.
But, that said, I think now, with the government's strong anti-evolution campaign, I think we're likely to see domestic companies, tech companies, are trying to more sort of focus on their product improvements, their tech competition, instead of on price competition.
So I think, you know, these are certain risks.
But I also think that the Chinese tech companies, and the governments as well, are aware of some of these risks.
And they're taking measures to safeguard the industries against these external vulnerabilities.
So I'm confident that I think the Chinese tech companies are going to continue to forge ahead.
And, more importantly, I think these technologies are going to be integrated and adopted and really help to boost the traditional industries and really promote total factor productivities in the Chinese economy in the short and long term.
I've been speaking with Professor Yan Liang from Willamette University.
In the second half, my colleague Tu Yun will speak with Willie Tan, CEO of Skechers China, South Korea and Southeast Asia, to find out how the global footwear company is aligning its product marketing and retail strategies to ride the new consumption wave in the country.
Stay with us.
The strong wind was howling and whistling.
He was the first Chinese citizen to graduate from Yale University in the mid-19th century.
I was born on the 17th of November.
She had prominent features.
Three of us were old enough to lend a helping hand.
He navigated between two vastly different cultures and moved further to realize his dream and promote understanding between the people of China and the United States.
Xie Minxin was a native of Hanyang.
I realized no danger.
China is really awakening.
Come and join us in discovering the incredible journey of Yong Wang in his autobiography My Life in China and America.
Check out the audible stories on radio.cgtn.com and all major podcast platforms.
Just search for the podcast Books and Beyond and find My Life in China and America.
Welcome back.
We continue our special edition of Chat Lunch.
Now my colleague Tu Yun speaks with Willie Tan, CEO of Skechers China, South Korea and Southeast Asia.
The company has recently gone private in a deal worth over US9 billion, after being acquired by the New York headquartered investment firm 3G Capital.
It's considered a significant moment for Skechers.
So how will this affect Skechers operations in China?
In fact, I welcome this privatization and it's going to give us more leeway to elevate our business and make us more efficient and effective in years to come.
So I'm looking forward to see a lot of newness into our Skechers family.
Right.
So correct me if I'm wrong.
I understand, Skechers entered the Chinese mainland back in 2007 and now has close to 2500 points of sale across the country.
So what drove the decision to go big on brick and mortar retail instead of sticking to mainly to the digital channel?
In fact, we are in both channels, both digital and the offline, the physical store.
And we started in 2008.
It's already nearly 18 years.
And through that time period, we opened up tier one, tier two.
Then there's more property being built.
So we are part of that.
As the digital start, we are also with the digital sales platforms.
And my philosophy is I adapt where the consumer would like to see us and to buy from us.
So we are also quite big in our digital.
And we invest heavily in our infrastructure to make sure that we are in the game and to deal with our consumer.
So how is the composition?
So like half and half or which part is more?
30-some to 40% on e-commerce.
Right.
And then on the offline, it's about 60% to 65%.
Any plan to increase the digital ones?
We will.
We adapted to change.
So when the consumer would like to see us more into the digital, we'll be there.
Now, especially recently, with all this live stream set up, And so this thing is increasing the digital business because the consumer enjoy that.
So we'll be there.
We will see.
We will react to the market.
But one thing with our offline, we would like to put up a beautiful store.
We would like to expose our product because consumers are touching them.
So those are how we're going to deal with our consumers.
And then, of course, the digital.
We need to invest a lot in our foundation, make sure all our technology, our data are all integrated to all the platforms that we can react to very quickly to the consumer demand.
Right, to keep up with the times.
That's the key, yeah.
So how does operating in China compare with other major consumer markets?
Can lessons from other places like the United States be directly applied here?
Or does China need a totally different playbook?
China is totally different because of our channel setup are totally not identical with, for example, United States or Europe.
In what way?
In the United States, we have a major department store leading the retail.
In China, we are mostly on the mall, on the street.
And so the channels are more different.
And in the West, the businesses are mostly wholesale driven.
And then in China, we are more retail driven.
And then in China, when it comes to digital platform, we have Alibaba, we have JD, we have Douyin, we have BIPcom.
And they develop a different kind of sales channel format.
In the United States, we don't have this.
You know, sometimes in the United States, you just go with Amazon.com or your own brand website.
Oh, TikTok?
TikTok started to be there, but it's operating quite differently.
So in China our digital platforms are very aggressive, very aggressive in getting the consumer to those platforms.
They compete among themselves.
So for us, we also need to develop different kinds of products to deal with different platforms.
So it's a totally different approach.
And then, of course, our technology, its platform technology and the service provider.
And so in our IT department, we need to invest heavily to make sure that our connectivity with all the platform, with all the service provider, with the logistics, it's going to get the product to the consumer in the perfect form.
I understand.
In 2020, Skechers set up an Asia-Pacific product innovation and RD center in Dongguan, the southern province of Guangdong, investing more than 8 million.
It has an imaging studio and live streaming facilities, like you just mentioned, and also expanding logistics operations in eastern Jiangsu province.
So what was the thinking behind those moves?
You know, to be in business in china, we definitely need to have a very strong foundation.
China is the second largest economy in the world, right?
So we cannot underestimate our consumer, and it is not true that we can bring product uh from the west and it's going to work with our chinese consumer, our chinese consumer uh, very demanding, and then we have our own culture, those kind of things.
So, Through that requirement, we decided that we need to put up an innovation center in the southern part of China, because the value chain that require between Tungkun and Fujian province is just only our neighbor.
We can easily get in to get all the product development here in Tungkun.
And then, since we're already over here And then we also need because of the digital requirement, we develop our own studio.
So we need to develop our digital asset.
Every single product has to go through to our studio.
And then we have a group of people there developing all kind of digital asset to deal with our digital market.
And that is on this.
And then at the same time, since we're already over here, we develop our live stream studio.
So because of that, A direct-to-consumer.
And this thing is going to be massive.
It's going to be huge because you are dealing directly with the consumer.
Then we are talking to the consumer and sharing our product DNA.
So these are all investments that we have done.
And because of the scale that we have, we need to have our own logistics.
So we built a huge logistics company. automated advance in Jiangsu, Taichung.
And it's amazing.
It's a massive investment.
We invest over 4 billion RMB.
Right.
So that's about 500.
Nearly 500 million.
Yes.
But this is also because I'm a partner.
Right.
And this is also showing my confidence into our market, into China. being a partner as a Chinese.
So I have an opportunity to know our own country.
Just curious.
I learned that your family was originally from Fujian, but you established this center or this major production line here in Dongguan or Guangdong.
So why not Fujian?
Because in early 20s, We invested a property where our innovation center.
So we have this foundation.
But in Fujian, we place a lot of our orders.
In Xinjiang, in Putian, Fuzhou, we put a lot of our orders into that.
We also have satellite development infrastructure in Fujian.
We just happen to have a ready infrastructure to build what I described.
And then, of course, when it comes again to our logistics, because China is huge, our product SKU are pretty wide.
So we need a very sophisticated data-driven logistics center that we can get our shipment on the digital as fast as we can.
So our infrastructure dealing with digital, are pretty advanced.
And all this infrastructure is not identical what we have in the West.
So that is the difference between how we operate in China.
So in China, we need to be very localized.
Doing business in China, straight from those who have done it.
Then you talked about this localizing R&D.
I bet it's not an easy task.
So what have been the biggest advantages and challenges of localizing RD and content creation and supply chain functions here?
You know, I'm very fortunate on this joint venture that we put up very, very good.
Because my partner, they develop a wide range of footwear product.
Right.
World-class comfort technology and every single product that we have in the shoes are shiny.
And then we meet.
Chinese partners or?
My U.S. partner.
All right.
So they develop a wonderful product.
So now we need to do some adjustment that fit into our consumer, fit into the weather, because we have a very extreme for season.
And the Chinese consumer.
They adjust what they wear based on the weather, which is good for us, because they keep on changing their outfit.
So it's very good.
But of course it's good, but we have got to have a product to be in the store during the weather that was happening.
So I will say that on the product side, the localization is For us.
Some of them is adjustment on what my partner created.
And then, at the same time, we need to put our product to the store at the right time during the weather that we are dealing with.
Any challenges?
A lot of challenges.
You feel it's tough to conquer?
Oh, you know, China is an absolutely quiet, difficult market to understand unless you live in China.
You deal with it.
We're all humans.
What are the differences between you know the needs of people of two different countries, then you know, this summer I traveled to Europe and also went to the United States and then in Asia.
So in couple of weeks I can see the difference on the consumer during summer, how they're European, the way they dress during summer, the way we dress here in China and the way they dress in the United States.
And even the Southeast Asia are totally different the way we dress.
And, of course, it's our culture, our history.
So we are more conservative here. the way we dress as compared in Europe.
Our culture is just different, just within China.
The consumer in Shanghai and the consumer in Chengdu Beijing Quanzhou, Tianjin.
They dress a little differently.
Some of them are a little aggressive, some of them are a little more, But in the past we used to pursue what's popular in Western countries, especially developed countries like the States or Britain or those European countries.
So are these trends changing now?
Or is there any, like you said, Chinese cultural features infused in those trends?
You know, I will say the old days.
It is the Western product has quite a bit of influence to us.
Yes.
And today it has reduced.
We have our own character.
So that is the most challenging is understanding the change on the consumer behavior.
You know, our Chinese consumer used to believe in a lot of Western product.
Yeah.
And today I'll tell you, no, not much.
In other words, they love it, but at the same time, they're also not ashamed to say that I would like to have a local product.
So within Skechers we are I use the word Skechers in China is half Chinese because I'm their partner.
So I adapt to the local consumer, the trend that they like.
We have our character.
We have in China our very strong character.
We used to be a follower.
Now, we are not really a follower.
We have our own thinking.
We have our own life.
We have our own way to dress ourselves.
So that is the most challenging that I'm facing in China, because the consumer also changes very quickly very, very quickly.
That makes a lot of sense to establish an R&D center here in this country.
And are you saying that there will be one day that maybe Chinese fashion will lead the trend?
It is happening.
It is happening.
Look at Pop Mart.
They're all over the world, right?
And then the old days, We thought that only global branding will come to China.
Now we see the China brand heading to the West.
Those are the good side of this, I should say, task or mission.
But given the ongoing US-China trade tensions, are there any new risks associated with expanding your logistics footprint in China?
I will use the word.
The geopolitical situation and slow recovery in real estate has set back to us in China.
But we still have 1.4 billion consumers.
We still have that consumer.
So it's not true that we will be entirely the consumer market will collapse.
It's not true.
Our economy are pretty widespread.
So it is difficult.
It is a CEO strategy.
It's how to deal with the complex, challenging market.
But it is true.
It's difficult because of unpredictable.
But does that mean that there's no way to do the business?
It's all up to how we manage our product, how we communicate with the consumer.
And that's how I look into China.
And for me, I believe that for me it's an opportunity.
Because during the challenging period of time, it's testing how good your strategy will be and how you're going to attack the market.
That's how I read it, yes.
Then would you say, over the past nearly 20 years here in this market, now is the most challenging time for Skechers.
Absolutely.
In what way?
It's uncertainty.
Oh, still uncertainty.
It's still uncertainty.
It's not brought about by this geopolitical tensions.
Yes.
It's just not only us.
It's the globe is also help.
Quite an uncertainty.
So the uncertainty does not only apply to China.
It's applying quite a bit to many nations.
Was there ever a moment, you know, when the company seriously considered moving its production lines completely out of China to avoid potential risks?
No.
Because for us in China, for me, my philosophy is simple.
In China, for China.
The Chat Lounge.
The chat lounge unpacks views and opinions on hot issues in a more casual way.
All right, let's turn to this new consumption wave here in this country which I think might help Skechers lift or improve its performance here, probably to some extent.
China is now focusing heavily on boosting domestic demand.
And how is Skechers aligning its product marketing and retail strategies to ride this new consumption wave then?
For us, we always believe there's an up and down with the consumer and the confidence.
So we are very focused.
We are very focused on our product.
We are very focused to put more technology into our comfort product.
So we have our a good year anti-slip, we have our arch fit, we also have our slip in and that we have a beautiful running shoe.
So what, what we're trying to do?
The first one we're going to be focused into our product, make sure that our products are readily available when there's a new wave or wave that coming in that is going to lift up, lift the consumer confidence.
And then nonstop, we are communicating through our marketing with the consumer as we see that fit.
So we are getting ourselves much closer to the market in a lot of aspects.
So whatever move, we want to make sure that we are ready to communicate.
Somehow we are seeing things that's happened It's giving us a very short period of time to react.
So we also have infrastructure to deal with how the market is reacting.
It seems Skechers has been adapting to the changing situation very, I can say, fluently, right?
And has been moving deeper into lower tier cities across countries.
So what kind of trade-offs maybe come with that strategy?
We just want to extend our footprint to reach out to more consumers.
That's why we're going down to lower tier.
So we are following some of the footsteps of the local brand.
And we're not really penetrating wide yet, which is very good.
That's our open space in the future.
But the footprint, we're just trying to reach out more to 1.4 billion consumers.
And that's why as a CEO of Skechers, I'll say I might be one of the CEOs.
I travel probably nearly 300 cities myself.
And so that I have a chance to see what I'm dealing with.
I just want to let you know that China is just so beautiful.
Those lower tier cities, clean, it's not like it's a backward, it's a very...
I'm becoming more modern.
It's not difficult to reach.
We can either go by high-speed rail.
We can go by car.
The food is wonderful.
People are great.
How can those things turn into purchasing power?
That's why we're opening a store.
We're opening a store.
And then the beauty about China today, everybody got a phone.
Everybody's following us.
So now we're putting a lot of investment in our social media so they can get online.
And then, of course, if we have a physical store, they have a chance to see our product.
They can touch it.
And then it gives us quite a bit of exposure.
So opening up the store in a lower-tier city doesn't mean that we need to have a lot of sales there.
I believe we have some cities that have more sales on e-commerce, on the digital, than the physical.
But the physical, they see, oh, wow, we have the schedules here.
So that When things come in the social media, our product or they'll say oh, let me take a look into that.
So when they get into trying to know us, they will then learn us more.
There's a lot more by product.
When they pass by the store, they might stop by.
They would like to touch our shoes.
They want to try our shoes.
And then that gives us quite a bit of exposure here.
Right.
You said you traveled to 300 cities across the country?
Yes.
According to your observation, what are the main bottlenecks holding back consumer spending in China right now?
And what policy changes do you think could help stimulate consumption further?
You know, I would say that the recovery on real estate is one setback.
That is because of everybody, you know, we Chinese love to own our own house.
So sometimes we thought that we get rich because of the value.
Then then sometimes we forget that oh, our value go down.
So that is, in my opinion, that is one of the the uncertain uh that we have.
But i will believe this is a short term.
This is a short term because we have a great leader in china that they can deal with the complexity.
So for us in business side, we just need to be i look into this thing very positive.
If you not to be positive to deal with china, I will say I think you need to rethink.
But visiting so many cities is just a beautiful country.
And then the consumer setback is very common.
In other words, there's a time your consumer are going up, there's a time you have a setback.
Yes, we might have a little long setback for a while, but I absolutely believe that the Chinese government are doing a lot behind us, thinking a lot that more resources will go in to bring up the consumer confidence.
Because everybody and everybody knows that the consumer confidence will bring a positive GDP.
But if you're asked to come up with some suggestions for the government, what would you say then?
You know, I would say they know what to do.
All right.
They are experts.
I have the confidence.
They have enough think tanks.
We have very talented people on that side of the world.
In other words, they know how to do it.
The government here is very intelligent.
Honestly, they do not need me.
They understand.
They need your advice.
They have.
They already understand.
They really understand.
I absolutely believe.
China today will not build a beautiful Shenzhen, a beautiful Shanghai, because they know.
We are underestimating sometimes their capability.
I have a high confidence about our leader.
So, you know, any advice I give, they know.
That's all I'm going to say.
How might Skechers respond if the market slows, continues, or hits a longer plateau?
We will stay foot.
And then, you know, we have a rolling buy.
So we will reduce our buy rate. we adjust to the market.
And based on what I'm seeing, I don't think we can go worse than what we have, number one.
And that's what I believe.
So the most important is whether our supply chain can react when the market go up.
Otherwise, we can stay put, you know, and wait and see and adjust.
But one thing when we have a beautiful product, your business will continue to climb up a little bit.
You might have best consumer to buy, but you still have consumer buying.
So it's a game of whether the consumer would love to buy from you or not.
For example, I'm seeing a beautiful Hong Kong.
Hong Kong economy has been down.
My business has not slowed down.
So it's really a game of product.
The same thing, I've noticed there's a downtrend in Singapore.
Our business still hang on.
The same thing in Korea.
So it's a game of the product.
I'm a pretty positive.
But of course, that's what I say.
That's what you say.
I agree.
We slow down.
Yes.
Stay put.
Right.
And then let's look how the consumer are reacting.
And then we just need to be ready when we are ready to go.
But some of our beautiful product is also surprising me.
The sales that we are having is a game of prana.
You mentioned your performances in those Southeast Asian markets actually is improving, right?
But on the Chinese mainland, where you have every confidence in the situation, like you said, is not so good or remains flat.
Because it's a big country.
Was it?
It's a very big country.
Is it mainly because of the fierce competition?
Yes, of course.
Absolutely.
Right.
Yes, absolutely.
Absolutely.
We have great product.
Our competitor also have a great product.
Yes.
Right.
Yes.
And how is Skechers going to, you know, win this battle?
Because we're different.
Okay.
They have a running shoes, the way they deal with it.
And I have my own different way of communicating it.
So Skechers, one thing beautiful about Skechers, we are Skechers.
We are not whatever brand, but our Skechers, we have a wide range of product.
We have a product for the entire family, you know.
And then and we sold hundreds of million pairs already
So we have hundreds of million people has test our shoes.
So we've been in business for 18 years.
So, and those consumers love us, those consumers know us, those consumers try our product.
So the most important, we need to maintain and to be better, because they will buy shoes and make sure when they make their move they will think of us often.
That That's why we have the word comfort technology.
So we give you a very comfort shoes.
We attach technology behind the product at a reasonable price that you can afford.
And we hope that kind of strategy is something that we maintain our consumer today and we are building more consumer for the future.
That was Willie Tan, CEO of Skechers China, South Korea and Southeast Asia, speaking with my colleague Tu Yun.
With that, we come to the end of this special edition of Chat Lounge.
Thank you so much for listening.
Have a great weekend.
Ever wondered what's actually going on in Africa through the perspective of an African?
How are things really going between china and africa?
What's the narrative of this relationship?
Well, get a perspective with china africa talk.
Hear from african diplomats entrepreneurs academics, chinese natives and more.
Get on our wavelength every week to find out what's real with china africa talk.
Find us on your favorite podcast.
We'll see you there.
