No rest for the industrious: Memtech chief won't sit still

Mr Chuang says that although he is old, he cannot slow down. "I need to keep up with what's happening in the industry. I firmly believe that learning is a lifelong endeavour."
Mr Chuang says that although he is old, he cannot slow down. "I need to keep up with what's happening in the industry. I firmly believe that learning is a lifelong endeavour."PHOTO: MEMTECH

Chuang Wen Fu is not a man to sit still - even at 70.

The diminutive executive chairman of Singapore Exchange-listed electronic components maker Memtech International gets a kick out of meeting challenges head on.

"I enjoy solving problems," the Taiwan-born Mr Chuang said in Mandarin. "I'm glad I helped the company adapt to changing trends, and that it's still standing today."

Mr Chuang, who has a diploma in survey engineering from Taiwan's Tamkang University, moved to Singapore in the early 1980s to join San Teh, an SGX-listed keypad components maker.

San Teh, which switched to manufacturing cement in 1996, was forced to sell its keypad business three years later to New York Stock Exchange-listed ITT Corp when cement prices crashed. Mr Chuang was given a three-year contract to help ITT integrate the acquisition and meet specific revenue and profit targets. But Mr Chuang became restless. "I could see big opportunities in the keypad market, particularly for mobile phones, which were starting to take off."

Some former colleagues established a small business - Memtech - to make keypads, and he joined them a year later.

Memtech's revenues grew steadily, driven by demand for keypads from Chinese mobile phone makers. Memtech listed on the SGX mainboard in 2004. At the time, the company derived 80 per cent of its sales from supplying keypads to mobile phone makers like Nokia and Sony Ericsson.

It was smooth sailing, apart from a few hiccups - in 2007, when labour costs in China surged, and again in 2009, when the industry was roiled by the global financial crisis. The latter's impact on the company was relatively mild, since it had sufficient cash reserves.

THE DARKEST HOURS

The real blow fell in 2011, with the dawn of the smartphone revolution, when touchscreens overtook keypads.

Memtech's management team cudgelled their brains to turn the company around - revamping its business model and using existing factory equipment to diversify into new revenue streams.

The company turned first to the banking sector, as automated teller machines and point-of-sales systems required precise input from mechanical keypads, which touchscreens could not provide.

But opportunities in banking were limited, so it switched its attention to the auto industry.

"Touchscreens are used in car entertainment systems, but mechanical keypads are critical in other components, such as safety equipment," Mr Chuang said. "It requires 0.03 second to input data using a mechanical keypad, but for a touchscreen, it takes 0.05 second. So we decided to focus on the auto industry for our future."

Memtech qualified as a supplier of automotive components within two years, quicker than the usual timeframe of three to five years. That decision proved to be a game- changer - its revenues and profits rebounded shortly after, in 2013.

The company has a market capitalisation of about $90 million. Between 2004 and 2015, it averaged annual revenues of US$114.7 million (S$155 million) and gross profits of US$23.6 million. It reported net losses in two of those 12 years.

Memtech derives about 40 per cent of its revenues from automotive, 27 per cent from consumer electronics, 24 per cent from telecommunications, and 8 per cent from industrial and medical. It has manufacturing sites in China - Dongguan, Kunshan and Nantong - totalling nearly 182,000 sq m. It services auto suppliers like Hella, Magna, Lear, Denso and Kostal, as well as car manufacturers such as Ford, Volkswagen and Nissan. It also has long-term relationships with Huawei, Lenovo, Samsung Electronics, Foxconn and Celestica.

Its SGX-listed peers include Venture Corp, Amtek Engineering, Spindex Industries, Hi-P International and Innovalues.

FORGING NEW PATHS

Automotive and consumer electronics will likely underpin Memtech's growth, Mr Chuang said, adding that the potential of China's automotive market cannot be ignored.

New vehicle sales in the country might account for 35 per cent of growth in the global car market between 2011 and 2020, according to data by McKinsey & Company.

Memtech aims to grow revenue contributions from auto to 50 per cent by 2017. Consumer electronics will account for 25 per cent of sales, while industrial and medical, as well as telecommunications, will contribute 15 per cent and 10 per cent, respectively.

A relatively new client is Tesla Motors. Memtech supplies between four and five plastic parts per car - ranging from battery packs and connector holders to electronic control units.

"We had a good start to 2016 when we clinched another big first- tier customer, Faurecia, which is one of the top global suppliers of auto parts. We will make plastic components for its climate control systems," Mr Chuang added.

Memtech hopes to build on existing relationships with Tier 1 auto component suppliers. "We aim to be a strategic partner or core supplier to our customers in this space."

Given its expertise in keypads, Memtech has developed strengths in both plastic and rubber. It works with a mix of materials, for example, integrating silicone rubber and plastic or metal into a single product. "This allows us to shorten our production processes and workflows," he said.

MANAGING RISKS

Rapid shifts in technology pose the biggest threats, Mr Chuang added.

Rising costs are also a challenge. In response to wage increases, Memtech introduced robotic arms to carry out precision picking and placing of hybrid parts in its factories last year. It plans to further automate its production lines.

"Over the last four years, salaries in China have more than doubled, and that has pushed up our operating expenses," he said.

Apart from overheads, Mr Chuang also frets about boosting returns. Memtech announced on March 3 that it would pay annual dividends of at least 30 per cent of its consolidated net profit.

Meanwhile, he is confident that management and staff are equipped to handle any curve balls.

Keeping abreast of industry trends is also at the top of his agenda. "I'm old, but I can't slow down. I need to keep up with what's happening in the industry. I firmly believe that learning is a lifelong endeavour," he said.

Apart from the occasional game of golf, Mr Chuang enjoys collecting Chinese art - in particular, figure paintings - from the Qing dynasty period as well as Shanghai artists. Visiting a gallery is an ideal way to de-stress, he added.

For him, instilling the right values in his children is a priority.

His son, Tze-Mon, 40, is an executive director of Memtech, while his daughter, 38, is a teacher.

The Chinese proverb - (xiu shen ru zhi yu, zhi de sheng yi jin) - is Mr Chuang's touchstone. It states that cultivating moral character is like handling a delicate piece of jade, and developing virtue is better than an inheritance of gold.

"My parents taught me to be a person with good morals, and those values are as precious as jade - a treasure that should be cherished through the generations."

  • This is an edited excerpt from the Singapore Exchange's Kopi-C: The Company Brew column that features C-level executives of firms listed on SGX. A longer version can be found on SGX's My Gateway website: www.sgx.com/mygateway
A version of this article appeared in the print edition of The Straits Times on March 21, 2016, with the headline 'No rest for the industrious: Memtech chief won't sit still'. Print Edition | Subscribe