Made in the USA
Taiwanese Company Takes On American Market
How can a player in Taiwan’s conventional paint industry establish a foot in the U.S. market? Using its unique competitive advantages, Kaohsiung-based Yung Chi Paint and Varnish is taking a three-phase approach of acquisition, expansion and localization.
Taiwanese Company Takes On American MarketBy Brian Chen
From CommonWealth Magazine (vol. 643 )
From colorfully decorated roadside electrical transformers to lines on the roads, metal panels on automobiles and decorative touches on bicycles, paint is one of the most common industrial products in our everyday lives. As a business, it is also the most conventional of conventional industries.
Although you have probably never heard of Yung Chi Paint and Varnish Manufacturing, in Taiwan the company’s flagship Rainbow brand of paint features prominently on baseball stadium billboards as well as in television ads.
After more than 20 years of quiet effort, the company has earned the highest market share in Taiwan among paint manufacturers.
“Seventy percent of the pre-painted steel coil Taiwan exports abroad uses our company’s paint,” boasts Chang De-Ren, company president.
For more than 20 years, Yung Chi Paint and Varnish has made a name for itself in Europe and America supplying big-name steel manufacturers such as Yieh Phui Steel with pre-painted galvanized steel coil under the Rainbow Paint brand.
Now, having established a strong reputation for its paint coatings, Yung Chi is set to market its products directly in the United States.
“In the past, we were surrounded in Taiwan by foreign brands. Now, we’re heading over there to take them on in their market,” asserts H.W. Chen, company general manager.
Yet name recognition alone is not enough to sell products directly in the market of one’s adversary. Rather, the key is being able to rapidly respond to market demands.
As Chang tells us, while the company has historically sold through other Taiwanese steel coil manufacturers, it is now looking to sell directly to U.S.-based steel coil makers. To succeed, service must be prompt, because if they do not receive satisfactory service, they will not hesitate to switch brands.
However, when it began this endeavor four or five years, ago, the company lacked experience in the U.S. market; it was also completely unfamiliar with U.S. tax laws and labor calculations, as well as the difficult task of personnel training. So how did they proceed?
Step 1: Get in the Door
In late 2012, Yung Chi became a major shareholder in Continental Coatings, an international industrial coatings manufacturer based in Fontana, California. Having established a beachhead of manufacturing and sales in the United States, Yung Chi subsequently completed the acquisition of Continental Coatings in 2014.
With the backing of the current plant, facilities, workers, and the management team, Yung Chi provides base paint and dyes from Taiwan, with direct customized mixing in the U.S. to provide coil steel makers nearby in California with coating materials.
At the same time, with the operation of the existing California facility, Yung Chi has become familiar with running a business in the U.S. market.
Step 2: Expanding with Clientele
“We are looking to expand further in the U.S.,” offers H.W. Chen, who notes that the combination of recent years’ experience and the Trump administration’s robust support for U.S.-based manufacturing now poses the perfect opportunity for Yung Chi to expand its U.S. market operations.
Further, building on the momentum of increased investments by several Taiwanese petrochemical companies in Texas and Louisiana, Yung Chi is also set to make inroads into Texas, introducing its fire-retardant, anti-corrosive product line for the petrochemical industry to America.
Since purchasing a vacant plant facility in Texas in mid-2017, Yung Chi has been outfitting it with equipment, and production is expected to commence this July or August.
Step 3: Localized Cooperation
Yung Chi’s ambitions for the U.S. market do not stop there. In addition to steel coil coatings in California and special coatings for petrochemicals in Texas, Yung Chi’s next target is the Great Lakes industrial belt.
Whether via the California or Texas facility, serving Great Lakes region customers requires significant transportation expenditures. The further expansion of Yung Chi’s services into the Great Lakes region can be expected to necessitate the addition of another service base.
“Still, we do not necessarily have to expand our own manufacturing facilities,” says H.W. Chen. Chen notes that Yung Chi can produce certain raw materials and semi-finished goods, and work with U.S.-based coating manufacturers to reduce shipping costs and serve customers close by while expanding market reach.
Therefore, the third phase of Yung Chi’s U.S. investment involves establishing a mixing center in Indiana, working with coating manufacturers nearby to serve customers in the Great Lakes industrial region.
In addition to the three phases of investment, Chang says that Yung Chi’s focus with its U.S. operations on the several production lines where it holds a relative advantage is the key to the company’s ability to survive, if not also continue to expand, in the U.S. market.
For instance, although building material coatings are also one of Yung Chi’s strengths, the company has opted not to introduce this product line to the U.S. for fear of going up against cutthroat competition.
“Going to new markets doesn’t mean just replicating the Taiwan operational model, but taking stock of the company’s relatively unique advantages so that we can survive in this market,” Chen adds.
Yung Chi is making every effort to take advantage of being “made in America.” And the company endeavors to stand firm and keep moving steadily forward into the future.
Translated from the Chinese article by David Toman