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21st Century Business Herald reporter Ni Yuqing reports from Ho Chi Minh

On the banks of the Saigon River, at Landmark Tower 81, Vietnam’s tallest building, a Chinese company is celebrating its 25th anniversary of globalization.

Turning to the other side of the river, a huge electronic screen displays "TCL丨WHERE THE DREAM BEGINS", competing with the nearby "Samsung" advertisement. International, regional and local narratives and competitions are played out here every day.

For TCL, Vietnam is the starting point of its globalization, the "Huangpu Military Academy" for international talents, and the place where dreams begin. 1999 is the origin of everything. That year, TCL acquired Luk Thi Dong Nai Electronics Company in Vietnam and established its first overseas factory based on it.

"We were actually doing quite well in China at that time. In 1999, TCL's TVs ranked first in the domestic market share. Did we dare to fight in Vietnam?" Li Dongsheng, founder and chairman of TCL, recalled in an exclusive interview with a reporter from 21st Century Business Herald on July 30. "I think entrepreneurs must take a long-term view, so we chose Vietnam as a pilot for globalization. That battle was very difficult. We lost a lot of money in the first 18 months. We were so exhausted that we thought about whether to withdraw the money, but we persisted."

After experiencing the initial painful period, TCL now has three manufacturing bases in Vietnam through its two major entities, TCL Industrial and TCL Technology. They are the TV smart manufacturing base (TCL Industrial Smart Terminal Business Group), the smart audio and video terminal product manufacturing base (TCL Industrial's Tongli Technology), and the TV and Monitor complete machine manufacturing base (TCL Technology's Mogia Technology).

Among them, 2019 is the core time point for large-scale expansion. TCL Smart Appliance Vietnam Factory was established in October 2019, and KONE Vietnam Factory was also laid at the same time. At that time, trade frictions were frequent and geopolitical challenges were intensifying.

Vietnam plays an important supporting role in TCL's global industrial chain. Currently, the production capacity of the Vietnamese factory is mainly supplied to the North American market. Li Dongsheng said: "The output of Vietnam's manufacturing base is second only to Mexico, making it the second largest overseas manufacturing base. A few years ago, after the United States unilaterally imposed tariffs on Chinese products, we gradually transferred the production of products exported to the United States to Mexico and Vietnam."

A series of factors, such as unique geographical location, relaxed tariff policy, flexible multilateral relations, and the dividend of young population, are all gathered in Vietnam. Among the ASEAN countries, Vietnam, a medium-sized country, stands out and becomes the first choice for many companies to go overseas. Therefore, Vietnam's GDP in 2023 is only more than 400 billion US dollars, but its import and export volume will reach nearly 700 billion US dollars.

The narrow and long Vietnam is more like an elastic bond, which not only eases some trade frictions, but also becomes an important bridgehead for Chinese companies to go global. Of course, Vietnam itself has weak infrastructure, and its supply chain and automation maturity are relatively low. In recent years, major manufacturers such as Samsung, TCL, and Foxconn have come to Vietnam with their own new supply chain systems.

In Li Dongsheng's view, under the background of anti-globalization, the trade pattern tends to be more regionalized and localized, which has a far-reaching impact on the future development of the global economy. TCL's early global layout was relatively complete, which can reduce the impact. He also introduced that after Vietnam, TCL acquired Thomson Industries of France and Alcatel's mobile phone business in 2004, entered the European and American markets, and then gradually entered the Latin American market, the Middle East and Africa market, and the Asia-Pacific market, forming a global supply chain system.

In the past five years, TCL's overseas revenue has grown from 59 billion yuan to 125.3 billion yuan, with an average annual growth of 17.6%. In 2023, TCL's overseas product revenue will account for nearly half of its total product revenue. "I think globalization will continue to move forward, and the reconstruction of globalization rules and the reconstruction of the global economic structure have become something that must be done," said Li Dongsheng.

Recently, Li Dongsheng has also visited TCL's various industrial bases around the world. In his opinion, "Overseas companies are competing with other countries. I think we are quite good at competing overseas with the skills we have learned from the domestic competition. So we have to compete overseas to get more market share for Chinese companies and Chinese manufacturing."

The following are the main points of the interviews with 21st Century Business Herald and other media:

“You can’t set up a screw-making factory locally.”

Reporter: What role does Vietnam play in TCL's globalization?

Li Dongsheng:TCL has two businesses in Vietnam. One is to supply the Vietnamese and ASEAN markets. Vietnam and other manufacturing bases in the ASEAN region together constitute the support for our supply chain in the Southeast Asian market. For example, TV sets produced in Vietnam can be sold in other ASEAN countries without tariffs. Home appliances produced in Indonesia and Thailand are also free of tariffs when they come to Vietnam. Therefore, the first function of the Vietnam branch is to operate the Vietnamese market, and the second function is to be part of the global supply chain.

We have three manufacturing bases in Vietnam, one in Binh Duong and two in the north. The output of the Vietnam manufacturing base is second only to Mexico, making it the second largest overseas manufacturing base. In addition to the ASEAN market, we also sell to the United States, mainly in the North American market. After the United States unilaterally imposed tariffs on Chinese products a few years ago, we gradually transferred the production of products exported to the United States to Mexico and Vietnam.

Reporter: How do you view the future development trend of the Vietnamese market?

Li Dongsheng:With the rapid economic development in Vietnam in the past few years, market demand is also increasing. This year, TV sales in Vietnam are expected to grow by 8%. During the same period, TV sales in most countries around the world, including China, did not grow or even declined. Therefore, Vietnam is a fast-growing market. In addition, Vietnam is a relatively stable society. After so many years of setting up factories here, there have been basically no incidents that have affected normal operations. Although there are some problems with insufficient infrastructure capacity, I have seen that they are being rapidly strengthened in the past few years.

Vietnam's economy has a very high import-export ratio. Vietnam's GDP last year was more than 400 billion US dollars, but the total import and export volume was nearly 700 billion US dollars. Therefore, its import and export trade is very active. Vietnam's main import and export targets are the United States and the European Union. Next year, the EU-Southeast Asia Free Trade Agreement will take effect. If the product meets the standard of origin, it can also enter the EU tax-free.

Reporter: What experiences can you share in the process of developing the market?

Li Dongsheng:Whether it is Vietnam or other countries, to run the local business well, the business strategy and concept of the enterprise must be rooted in the local area. If we only think about selling products to the local market to make money when we go to a place, it will be difficult to sustain. While developing ourselves, we must contribute to the local social and economic development, so that we can gain local recognition. In addition, the supply chain must be gradually deepened. It is meaningless to build a screw factory in the local area. Therefore, our industrial chain in Vietnam is not only coming here by ourselves, but also many partners in the industrial chain have followed. In addition, in Vietnam, we also cultivate local partners.

"Going overseas"

Reporter: Looking back on TCL's globalization process, what are the important nodes?

Li Dongsheng:There are three important moments. The first is whether we dare to fight in Vietnam. At that time, we were doing well in China. In 1999, TCL TV ranked first in the domestic market share. But I still think that entrepreneurs must look at the long term, so we chose Vietnam as a pilot for our globalization. That battle was very difficult, so we lost a lot of money in the first 18 months. We thought about whether to withdraw the money, but we gritted our teeth and persevered.

The second point in time was the cross-border merger and acquisition in 2004. This was a huge leap, which instantly transformed TCL's business from a Chinese business into a truly global business, extending to economically developed countries such as Europe and the United States. This hurdle was very difficult to overcome.

The third is how to respond when the United States unilaterally increases tariffs on China. My initial judgment was inaccurate, thinking that the problem would be resolved after a period of negotiations. So there was no plan to make major changes in the industrial chain and supply chain, but later we had to adjust the industrial chain for exports to the United States, otherwise we would have to give up this market. Therefore, the adjustment of the industrial chain to the United States brought us great pressure, because the United States is still our largest single country market.

In the process of adjusting the industrial chain, should we defend this market or not? If we defend it, we will have to pay a huge price. These three times were difficult choices for us, and we have survived them all.

Reporter: What new insights do you have from your recent overseas visits?

Li Dongsheng:In the past two months, I have indeed traveled around the world. One reason is that our company has celebrated its 25th anniversary of globalization, and I also want to take a look at our business performance in major global markets. Another reason is that I am under pressure. As a manufacturing company, we need to sell our products, whether they are end products or intermediate products. If the corresponding market growth is slow, we have to look for opportunities in other global markets. Although the global economic growth is not very fast, the market is still growing steadily.

Another important factor is that we have a lot of space and potential in overseas markets, and Chinese companies have great potential overseas. Overseas, I mainly compete with companies from other countries. I think if we can use the skills we have learned in domestic competition to compete overseas, we will be quite good.

This year we have the European Cup and the Olympic Games. This year our color TV sales in Europe have increased by 59%, which is unimaginable in the Chinese market. So we have to go overseas to grab more market share for Chinese companies and Chinese manufacturing.

“Globalization will continue to move forward”

Reporter: In the wave of de-globalization, how do you view the challenges facing globalization and enterprises?

Li Dongsheng:First of all, the trend of globalization has changed a lot in the past few years. The supply chain has become more regionalized and localized, adding more barriers to global trade and investment. The main reason is that many of the US trade protection measures are specific and designated to China, and of course also include a few other countries. When other countries formulate policies, they appear to be the same for all countries. In fact, in terms of policy details, they will formulate some targeted requirements and rules, which have the greatest impact on Chinese companies. Therefore, the global investment and trade pattern has changed, tending to be more regionalized and localized, which has a far-reaching impact on the future development of the global economy.

For TCL, this change has less impact on us because we had a relatively complete global layout in the early years. Its core lies in economic globalization. The original basic logic of economic globalization is to maximize the efficiency of global allocation of production factors. In fact, whether you are in favor of economic globalization or against it, you all admit that economic globalization has brought at least 1% increase in global economic growth every year in the past 20 years. Everyone agrees that efficiency has been improved.

Why did the reverse globalization occur in the past few years and many countries began to change their policies? A very important reason is that under the principle of maximizing resource efficiency allocation, the benefits of global investment and trade liberalization vary greatly among countries due to differences in their own economic competitiveness, economic development level, basic industrial capacity, and infrastructure capacity. Globalization will still move forward, and the reconstruction of the rules of globalization and the reconstruction of the global economic structure have become a must.

In fact, we have already felt this trend several years ago. Economic development must be balanced and cannot be too far apart. We must seek development opportunities between constant balance and imbalance.

Reporter: The global trade situation continues to change. Will TCL adjust its future overseas expansion strategy?

Li Dongsheng:For TCL, the basic strategy of globalization will not change. This is what we have always adhered to, from exporting products to building industrial capabilities with local partners. In the future, the global layout overseas will follow the transformation and upgrading of the industry, increasing the depth and breadth of the overseas industrial layout.

For example, we have signed an investment project agreement in Saudi Arabia in the Middle East to build a 20GW photovoltaic crystal wafer factory in Saudi Arabia. The investment in this project is huge. We will work with local partners, and Saudi Arabia's sovereign fund PIF is the main shareholder. Therefore, with the transformation and upgrading of the industry, we will not only export consumer products and terminal products, but also increase our industrial products and To B products.

We have built a factory for LCD panel modules in India a few years ago, which is also for B-end customers. Of course, our own TV and mobile phone factories in Vietnam will also use our own panels. The transformation and upgrading of the industry will also be realized overseas. In the future, we may continue to deploy related high-tech basic industries and products in major overseas markets.