As we enter the factory, we encounter several dozen women wearing bamboo-leaf field hats and blue work clothes who are preparing shipments. “There are probably about 20,000 square meters here, with four factory buildings,” explains Innopack’s 38-year-old founder Ivan Hsieh, as he points into the distance. “Two of the buildings warehouse our raw materials and semi-finished goods.”
In 2004, when Taiwan’s enthusiasm for investing in mainland China was at its peak, more than 2,000 Taiwanese firms set up operations in mainland China. With everyone “going west,” who back then would have thought to “go south” to an ASEAN nation?
Hsieh was one such nonconformist. Eleven years ago, the Kaohsiung native with a degree in economics from Fujen Catholic University was sent to Vietnam by his employer, a building materials company. Three years later he founded his own company Innopack, which produces honeycomb paper. “Back then all of my friends were going to work in mainland China,” says Hsieh. “No one was going to Vietnam like me. But it has turned out that some of them are now leaving China to come here…”
Today Innopack is the biggest producer of honeycomb paper in Vietnam, supplying 60 percent of the market and earning revenues of NT$300 million. Major American retailers, such as Walmart and the home furnishings chain Ashley, wrap their products with Innopack’s honeycomb paper.
As far as Hsieh is concerned, Vietnam has become a second home. His wife has moved here with him, and they’ve bought a house. His daughters, seven and four, are enrolled at an international school in Ho Chi Minh City.
Back eight years ago, the construction materials firm Hsieh was working for was mostly engaged in the buying and selling of panels and sheets of various materials used in home furnishing products. In the course of making the rounds with clients, he came to learn that a growing number of European and American furniture factories in Vietnam were asking suppliers to reduce weight by substituting wood in back and side panels with paper. What’s more, with the rise of environmental consciousness, several major companies were also looking to replace Styrofoam with other forms of packaging.
Hsieh was 30 back then, and he had been sent to work abroad on a salary of NT$60,000, with food and lodging covered by his employer. He could have continued to live quite comfortably in that position, or he could have waited a few years to build up his résumé before making a jump to doing something else. There was no need to take a big risk. But he sensed a business opportunity, believing that stress-resistant and highly flexible honeycomb paper could easily find new applications in Vietnam’s furniture industry and be used as a packaging material.
And so, rather than holding onto a secure pay check and slowly moving up the corporate ladder, why not grab ahold of a big opportunity dangling right there in front of him and broaden his career horizons? “The truth is I was chasing a dream: I wanted to see if our hunch about honeycomb paper was right, if our firm would be successful here.” He and his wife invested NT$5 million of their savings to found Innopack.
Launching a business in a financial crisis
But the best laid plans of men are subject to heaven’s whims. Right after they launched the business, the international financial crisis hit. Scurrying from client to client day after day, he wasn’t able to acquire a single order over the course of three months. All he could do was gaze anxiously at his empty factory. Then, with great difficulty, he obtained a US$100,000 order. Short of staff, the husband and wife lived at the factory, toiling with the workers from early in the morning to late in the evening, not even getting five hours of sleep each night.
His wife’s health showed some troubling signs. Despite being pregnant, she had insisted on going to the factory every day to check on the order’s progress. She was standing all day, and her doctor warned that if things took a turn for the worse, she might have to have a limb amputated. Hsieh’s mother was flabbergasted: “Is it really necessary to subject yourself to this kind of risk?”
“In those first three years we were looking everywhere to borrow, borrow, borrow,” says Hsieh recalling those difficult early days, a somber note creeping into his voice. “Several times we almost couldn’t make ends meet and nearly had our water and electricity cut.”
He knew all too well that in China alone there were several hundred companies producing honeycomb paper. He may have been the first manufacturer in Vietnam, but making honeycomb paper isn’t particularly hard in itself. If it were just a matter of price, he knew that he wouldn’t be able to beat Chinese or large-scale manufacturers and that sooner or later he would get squeezed out of the market.
Consequently, when Chinese and local Vietnamese manufacturers began to compete for their orders with lower prices, he maintained his sense of urgency, leveraging Taiwan’s long-held reputation for quality and flexibility and developing a capacity for customization so as to move into a higher-priced market segment. “We wanted to take a different path. If you’re making the same packaging that everyone else is, it’s a lot easier to get pushed aside.”
Eyeing bigger opportunities: Vietnam’s entry to the TPP
Starting out by meeting the demands of a picky client turned out to be a key toward gaining a stable foothold.
While competitors were making only standard products, such as paper boxes that would turn limp from a few days of high humidity, Hsieh established a research team that focused on meeting each client’s individual packaging needs. The team’s work started with the formula for the honeycomb paper. They adjusted the glue so it would be better able to stick to different types of paper, and even looked into the size and angles of the honeycomb’s cells.
Other manufacturers can’t make honeycomb paper with a thickness of less than 10 millimeters, whereas Innopack can go as low as 5 mm, allowing clients to use lighter and thinner packaging or to eliminate the need for wooden pallets.
But it’s not easy to convince a potential customer to switch to using honeycomb paper. Hsieh typically has had to visit a client a dozen or more times, demonstrating that he can meet a variety of their needs—for instance achieving a tolerance of as low as 0.1mm in the diameter of the circular openings of packaging, or providing packaging with great enough strength so that even if packages of yarn get banged up during shipping, the yarn itself won’t be mashed. Other firms would conduct a few tests before giving up, whereas Hsieh would stick with a challenge until he had found a solution. Clients, who might not place an order until after two years, were won over by his work ethic. “I just wanted to accept a challenge and see if it could be conquered,” says Hsieh.
He was willing to exert so much effort because he saw that the future would bring bigger business opportunities. Last year, Vietnam formally entered the Trans Pacific Partnership (TPP), meaning that nearly 95% of Vietnamese exports will be able to be imported to the American market without being subject to tariff duties. More and more firms contracting with American brands have recently been moving their operations from mainland China to Vietnam. The demand for product packaging will only grow larger.
And because American brands place high demands on packaging, Hsieh, who has a focus on high quality and is capable of supplying paper packaging that achieves the same results as Styrofoam, has become the best partner for them.
“Some firms think we’re annoying and highly demanding, but he [Hsieh] was willing to work with us no matter what we asked,” says Zhuang Chunquan, owner and CEO of the firm Hoang Du, which mainly does contract work for Japanese brands. “If he said he could do something, he delivered.”
Willing to work tirelessly with clients until finding a solution, he has built up good reputation by word of mouth over the last three years, earning orders from a succession of European and American clients such as Costco and Wal-Mart. Every month, he produces at least 100,000 sheets of honeycomb paper. That’s more than four times what Innopack’s closest Vietnamese competitor makes. Furthermore, the company is turning a profit of 20 percent.
Even if it's the top dog in the market, the company isn’t satisfied.
With a population of nearly 90 million, the Vietnamese market holds a lot of potential, so in recent years Hsieh has begun to think about new applications for honeycomb paper, creating various pieces of furniture with paper and using paper to substitute for wooden panels, display racks and so forth. From the B2B (business-to-business), InnopXK has moved into the B2C (business-to-consumer) market with its own brand of paper furniture: Boardniture.
Creating own products, turning to domestic market
To help with the transition, he has built up a design team. Whenever he runs into a friend who has come from Taiwan, he always asks: “Do you know any talented designers?” He’ll even use Line to interview potential design personnel on his way to work.
The tables and chairs in Hsieh’s office are made out of paper—all the better to demonstrate their quality to visiting clients. Next on the company’s agenda is a plan to sell products on a local Vietnamese Internet sales platform, which would make Innopack the first Taiwanese company in Vietnam to sell paper furniture on such a site.
“He is more far-sighted than many Taiwanese business people, and he’s willing to try things that others wouldn’t dare,” observes an executive at a locally owned Vietnamese paper company.
“We’ve got to move quickly,” Hsieh says. “It’s the only way not to worry about people stealing your ideas.” Many Taiwan firms come to Vietnam only for the cheap labor, but as the country develops, its wages will rise. If you’re constantly chasing the lowest cost, sooner or later you are going to end up repeating the same mistakes that a lot of Taiwanese firms on the mainland made.
A hard lesson he learned the year before last pushed him to move from merely looking for chances to make money to also looking for better ways to manage his money.
Back then, he discovered that their head bookkeeper, a Vietnamese national whom he and his wife had regarded as like a sister, had been abusing their trust and their ignorance of local laws. Over time she had stolen NT$10 million. The Hsiehs were unable to recover the money, losing a lawsuit when they took her to court. “It was really hard for me to swallow. I even had thoughts of getting revenge.…’”
At this point he finally woke up: the company’s internal controls had long been problematic. So he just gritted his teeth and invested in an enterprise resource planning (ERP) system. From the company’s financials to its inventory flows, all are now clear at a glance and easy to manage.
At the end of the year, Hsieh will take over as head of the Council of Taiwanese Chambers of Commerce in Vietnam, Junior Chapter. He is preparing a series of management seminars so as to clear up the confusion of young Taiwanese businessmen in Taiwan who encounter similar problems, helping them to transform and upgrade. Today, more and more Taiwanese under the age of 40 are leaving for Vietnam, either for work or to establish businesses there. Just from January to March of this year, the Junior Chapter’s membership grew by 20 percent. The younger generation of Taiwanese business people are writing stories that are quite different from those of their predecessors.
On the morning of March 20, southeast of Ho Chi Minh City at the seashore travel destination of Vung Tau, more than 100 young Taiwanese business people and managers, dressed up in professional cycling garb, prepared for the start of a long-distance bicycle race. Hsieh was one of the event’s organizers.
“Southeast Asia is on the rise now!” He told us with great conviction. “You won’t have any opportunities staying in Taiwan. Get out and look abroad!”
Eleven years ago, when he first stepped on Vietnamese soil, per capita income in Vietnam was a little over US$600. Today it’s twice that. His own station in life has likewise risen as he has become king of honeycomb paper production in Vietnam and is about to welcome the birth of his third child.
At the age of 30, he responded to his own call. “I did it for a dream. I wanted to know: Are we right about what we are thinking? Can we make a success of ourselves here?” After spending eight years of his youth, he got his answer. (E) [By KangYu-ping / tr. by Jonathan Barnard]