Finnfund

Savcor Coatings, an expert in coating engineering technology, found it unexpectedly easy to get established in China.

It’s two and a half years since the company from eastern Finland began producing thin film coatings for mobile phones in Guangzhou, South China. Last year it started operations at another plant in Beijing for which Finnfund is providing financing.

“So far any surprises in our experiences of China have been only positive,” says Hannu Savisalo, CEO of the Savcor Group. “Many Finnish companies have had their doubts about investing in China but we have never had any prejudices wherever we’ve been in the world.”

Industrial park offers many advantages

Savcor’s Beijing plant is located in the Xingwang Industrial Park, where Nokia and a number of its suppliers have set up operations. Savisalo points out that Savcor’s decision to set up in the Nokia-led park made perfect sense.

“Today mobile phones are manufactured close to their end-markets. Nokia has invested a lot in China, which is the world’s largest market for mobile phones. At Savcor it’s one of our principles to serve customers right where they are.”

It’s much easier to work together when the main customer is within walking distance, he notes.

“Xingwang offers major benefits to the Nokia cluster. The main one is logistical, and success in logistics is the most important thing in the phone business.”

Another advantage of the park is its special taxation status. A company doesn’t have to pay a single juan of tax on goods that stay within the park.

Production in Beijing has started up well, Savisalo says. Eighty people work in the plant, all Chinese apart from a Finnish manager.

“It wasn’t hard to find skilled and hard-working employees. And it didn’t take long to train people for the work.”

Finnfund operations efficient and flexible

The Beijing plant covers about 8000 square metres and is Savcor Coatings’ largest factory. The company acts as a Nokia partner abroad not only in China but also in Texas, USA and Manaus, Brazil and is just beginning production in Hungary.

Finnfund has financed Savcor’s Beijing plant with an investment loan. Cooperation between the two has been gratifying, Savisalo says.

“We have had experience of dealing with a number of lenders. Business with Finnfund on this project has been efficient, flexible and free of red tape,” he explains.

“The role of a financier like Finnfund is more important in countries where, for example, it is hard to mortgage property. Finnish banks are reluctant to accept other assets as collateral, even if they are in another EU country.”

Chinese buy “Made in China”

Savisalo believes that if a foreign company is really serious about entering the Chinese market of 1.3 billion people, it is almost essential to set up production there.

“The Chinese don’t favour imports. They prefer products made in their own country. This fact was in our minds when we decided to begin production there.”

Stories of the difficulties faced by foreign companies in China are grossly exaggerated, he says. “Local bureaucracy is obvious and predictable. The time it takes is fairly long but it’s always the same.”

The ground rules are clear, he adds. “In an exotic economic system there is always tension about whether profits can be repatriated. At least so far we have had no trouble repatriating profits from China. Even its taxation is business-friendly.

“It’s also simple to export goods to China. Trade with China obviously has some special features but these too are disappearing now that China has joined the World Trade Organization. The country is now in a transitional period, just as Finland was when it joined the European Union.”

Savisalo stresses that a foreign company has to take into account the local habits and special features of corporate culture everywhere in the world.

“Perhaps the difficulties that Finnish companies have encountered in China have been more about the local partner in joint ventures. Savcor’s ownership of its Chinese plants is one hundred percent.”

Small-town company scores big

Savcor produces a coating that shields against the electromagnetic interference and radio frequency radiation that mobile phones give off. The process invented by the company has no direct competition in China or anywhere else in the world, Savisalo explains.

“We have a large market share at present,” he notes, “although competitive processes are being developed all the time.”

Savcor Coatings is part of the Savcor Group, founded in 1981 by the Savisalo family and still owned by it. In addition to mobile phone coating, Savcor produces systems for preventing corrosion in the construction and process sectors, hardware and software for improving efficiency in the forest products sector, and container location systems based on satellite positioning.

Budgeted group turnover for 2003 is about 75 million euros. “We have such narrow niche products and special skills that aiming directly at a global market has been our strategy from the very beginning,” Hannu Savisalo says.