Ties That Bind - Bay Area Council Economic Institute

Investment: Building Global Businesses in a New China
initially distrustful of a Western-educated management team, and fear losing their jobs. Building
trust requires bilingual skills, consultation and cultural sensitivity to make integration work. Zhu,
who grew up on a collective farm during the Cultural Revolution before passing an exam and
going on to college, notes too that highly-trained Chinese engineers, unlike their Western counterparts,
see themselves as blue-collar workers and are uncomfortable with the less structured
workplace familiarity of Silicon Valley.
Cross-Border Synergies
Qualified, bicultural managers—science, engineering and business entrepreneurs, known as “astronauts”
because of time spent in the air, and “sea turtles” in the case of U.S.-educated China
nationals who return home—are in high demand, shuttling between the Bay Area and greater
China to build and run companies. Those companies are in turn being listed and/or rolled up
into larger companies, creating wealth for founders and investors, and jobs on both sides of
the Pacific.
Two examples: Hina Group advised NeoPhotonics, a San Jose optical component maker with
80 employees, in the acquisition of ShenZhen Photon Technology Co., a Chinese maker of laser
diodes for telecommunications equipment with 1,200 employees. The deal combined complementary
technologies, adding value to ShenZhen Photon’s product line while increasing
NeoPhotonics’ revenue stream. It kept NeoPhotonics’ fabrication plant in San Jose open, and
provided ShenZhen Photon with stronger management and a U.S. sales network. In its first year,
the newly-merged NeoPhotonics doubled revenues and added Bay Area sales and production
jobs. In June 2006 it acquired two Bay Area companies, Newark-based LightConnect Inc. and
Optun Inc. of Santa Clara, which strengthen NeoPhotonics’ product line of modules and components
for managing broadband traffic along fiberoptic networks. In conjunction with these
acquisitions, the firm completed a new $50 million equity financing.
Cross-border investment advisors George Sycip and Richard Chong, through their San Francisco-based
partnership Galaxaco China Group LLC, matched MBA Polymers of Richmond
with state-owned Guangzhou Iron and Steel Enterprises (GISE) in a $12 million plastics recycling
joint venture. The plant opened in November 2005 and expects to earn $15 million in
revenues in its first year.
MBA Polymers, launched in Berkeley in 1994, has developed a 30-step process for separating out
the high-end plastic content from appliances, computers, office machines and consumer electronics.
The process is unique in that it can isolate complex polypropylene, high-impact polystyrene
and other compounds in commercial-scale quantities—3 tons per hour at Richmond—for
reuse. The companyhas raised nearly $30 million over the years from angel and venture investors,
the U.S. government and two large customers, GE Plastics and Flextronics International.
MBA Polymers CEO and co-founder Dr. Michael Biddle sees the greatest potential demand
growth for recycled plastics being overseas. China, in particular, is the world’s fastest-growing
market for new and recycled plastics, and imports 50% of the plastics it uses in manufacturing.
Its government is working on environmental laws mandating high-end plastics collection and
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