Spansion Limited, publicly traded on NASDAQ [SPSN], is the market leader on NOR Flash solutions in the world. Spansion was previously a joint venture of AMD and Fujitsu. It now has approximately 9,500 employees around the globe whose corporate mission is to promote a more mobile, digital, media-rich global society.

P C Loh is vice president of Spansion and managing director of Spansion China. He also oversees three manufacturing plants in Southeast Asia. Loh, a Malaysian Chinese, started his career as an engineer in the semiconductor industry in Singapore more than two decades ago. He was sent to China in 2001 to head Spansion China, which had just been established. After six years, the company employs 1200 people in Suzhou Industrial Park and its production is in full swing. The China operation has won earned high marks from Spansion’s headquarters.

This year, it was named “Best Employer in Asia 2007” in a survey of 750 organizations by Hewitt Associates, a global human resources consulting company. What has Loh’s experience been in managing a company in the fiercely competitive semiconductor industry in China’s fast growing economy? As someone who grew up outside China, what does he think of the China market and what makes him a good business leader? China Knowledge at Wharton talked to P C Loh about these issues in a recent interview. Below is an edited version of the conversation.

China Knowledge at Wharton: Had you been to China before 2001? In what ways do you think China is different from other countries?

Loh: Before I came here in 2001, I had never worked with Chinese people. But it’s a bit strange for me when people say Chinese employees are different. For me, the only difference is that the Chinese are smart, quick to start and eager to learn and improve. This is what I think is the difference. Other differences are due to nationality. Americans, Europeans and Malaysian people are all different.

There is no difference in the people. It’s what the manager sees that is different…. My management concept starts from here. [The employees] are not different; the only difference is that they are good. So it’s important to respect them, cooperate with them and let them understand you. And you should understand them as well. Sure, there will be things they don’t understand. Therefore, it takes time to analyze, communicate and even educate people. That way their potential — including their work capabilities and their contributions to technology — will be gradually realized. You see a good result after some time.

China Knowledge at Wharton: What challenges have you encountered doing business here for years?

Loh: My challenge is that China has been growing too fast. In Suzhou industrial park, there are 2800 enterprises now, most of them [springing up] in the past few years. So there is a huge demand for talent, and since our industry is relatively new in China, there was not [a lot of talent around]. In the beginning of our production, if we hadnt set up our team, there would have been concerns from headquarters as to whether we could produce high technology products and whether there would be quality problems. But we have been training fresh graduates from the university and it took us only two years to resolve that issue. We are now fully recognized by headquarters.


China Knowledge at Wharton: How do you manage your people?


Loh: I never treat them differently [from others]. Again, I dont understand why some expatriate managers like to treat Chinese employees in a different way. Yes, they have their desires and expectations, but employees in America would also have desires and expectations. The employees in other countries will not always be satisfied with the status quo either. They also need to get promoted, receive good compensation, etc. Therefore, I feel its a little bit [strange] when some outsiders [question] the human resource environment in China.


As long as we have set up a corporate culture and a team, and [help] employees understand our mission and orientation in China, the team will be better.


China Knowledge at Wharton: What is the culture of your enterprise?


Loh: It is based on people, and respect for people. What I would like to advocate is, you come to work for the growth of the enterprise; its not only for the salary. But more important is that you are able to be happy with what you are doing. So its [essential] for employees to explore the key components of their work. [We must help them] get recognition and also help them to improve as well as learn things in different departments.


China Knowledge at Wharton: Do you [try to recruit] talent from your competitors?


Loh: We train staff by ourselves. We dont take people from competitors as I dont think its important. First, in todays China where its a more fickle environment, the people in other companies are not necessarily experienced. Second, you have to pay a lot of compensation for this job-hopping. So in most cases, you will feel disappointed. I am more inclined to recruit good students from universities and then spend time to train them.


Even if we recruit staff from outside, they are mostly from different industries. I would like to have their experience in enterprise instead of technology, as our technology is a little bit different than that of other factories. Spansion has already had three factories in Southeast Asia for more than 20 years, so it provides a good learning environment for the China operation.


Some people will exaggerate the challenges and problems of managing a plant in China.


China Knowledge at Wharton: What do you think of China’s young graduates?


Loh: Chinese graduates are very good. They are quick to start and learn things very fast. From operators to engineers, they are all excellent. But they have some problems in management – with regards to some team leaders or department heads. But we have programs to develop them, including a mentoring program where senior managers train young managers. We also have training on different levels to improve the quality of our management. For Chinese employees, technology and operational training are not problems for them. Management is a [little bigger challenge]. These days we are communicating with each other continuously and there is some small improvement.


China Knowledge at Wharton: Do you think a business leader is born or can be trained?


Loh: Definitely [he or she] can be trained. There are no born good leaders. I, too, have taught myself all along the way. My education background is engineering, a discipline of technology that is professional but insensitive to human [issues]. Leaders can be trained, but they must have the desire and spirit to learn.


China Knowledge at Wharton: What is your view on China’s ever rising labor costs from the viewpoint of a global company?


Loh: China is one of our strategic markets, and the sales and marketing group of Spansion has spent a lot of effort here. But it’s not my work. What I can comment on is that in terms of manufacturing, China is not a low-cost place any more. Utilities, including water, electricity and gas, are more expensive than other countries and compensation levels for talented employees have been rising each year. Other benefits have gone up, too. From a long-term standpoint, this is a big problem.


So, for the whole country, our objective should not be to develop in a labor-intensive and low-technology oriented direction, but to explore the strength of the Chinese people, to optimize processes and design and to provide better service. In the long term, especially in places like Shanghai and Suzhou, it’s not suitable for labor-intensive production any more. This is an issue for the whole country, from government to enterprises, to consider.


In the semiconductor industry, we have had factories in other countries in Asia for several decades. We moved to China several years ago because China had advantages in labor costs. So we could move back to other countries anytime. On the other hand, lots of multinationals are producing their goods here mostly for export and then import again. This also justifies why they don’t need to stay in China to manufacture.

Certainly investors could go into western China, but they also have other countries to go to, like Vietnam, Cambodia and even Malaysia and Thailand. China’s utility costs, real estate and inflation index are all higher than those countries’.


If the production costs keep going up, I will see enterprises have more choices in the long run. As a matter of fact, we have seen such things happening now.


China Knowledge at Wharton: The semiconductor industry is fiercely competitive. How does that impact your operation?


Loh: The intense competition has actually made us think more about talent management because you have to retain good people, to optimize production processes and manage your costs. We have been trying hard to control our costs. On the other hand, the quality of our products is very important. But I am proud to say that we have been doing very well controlling our quality.


China Knowledge at Wharton: Who is the biggest competitor of Spansion?


Loh: Flash memory products have two categories. One is NAND; the other is NOR. Spansion is the number one player in NOR products and Intel is our biggest competitor in that category.


China Knowledge at Wharton: What makes one a good business leader?


Loh: I love to read Chinese history books and have read all four classic history novels. You could learn a lot of things from those books. For example, principal number one: Management is based on people. Read The Art of War by Sun Tze. Read The Thirty-Six Strategies [Note: These are both famous ancient Chinese books on military leadership and war strategies]. You could find tons of suggestions, such as “The worst strategy is to conquer the city. The better strategy is to conquer the heart.”


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