CEO Conversations: Charles Shen, Chairman

Charles says, “To me, ZDT is not simply just a profession or a business, but my ambition. I lead this company with my soul.” Charles has set a clear growth plan with the goal of making ZDT become the “TSMC of the PCB industry”.

Zhen Ding (ZDT), the world’s largest Printed Circuit Board (PCB) manufacturer, has recently attracted global investors’ attention since its investor conference in March when the company elaborated its long-term plan in the IC substrate business for the first time publicly. Since then, the company’s FINI holding increased by 4.41 percentage points. Compared to other IC substrate peers which faced net sold by FINIs year-to-date, Zhen Ding’s performance against the trend is particularly eye-catching.

Back in 2006, Charles Shen, who had just taken over the role of Chairman of ZDT the year before, made a bold statement to make ZDT become the world's largest PCB manufacturer. What made the statement particularly audacious was that in that year ZDT had only generated US$439 million revenue and was ranked 26th in the global PCB industry with 0.9% market share. As a result, no one, except for himself, had taken his statement seriously. Fifteen years later, in 2021, ZDT has now been the world's number one PCB manufacturer for five consecutive years, with revenue of $5.5 billion and a market share of 6.8%, a market share that no other company has ever achieved in this highly competitive PCB industry. ZDT’s remarkable operating results were attributable to the joint effort of a management team led by Charles that can “analyze data, outline clear business plans, make quick decisions, and ensure thorough execution on plans.” This demonstrates a high level of execution that no one in the industry can match.

When Charles walked into the meeting room to have an interview with us, he had several dense, neatly handwritten notebooks in hand, and was ready to share with us all the operating data for both ZDT and competitors. He says, “To me, ZDT is not simply just a profession or a business, but my ambition. I lead this company with my soul.” Now ZDT is investing heavily in IC substrates, and Charles has set a clear growth plan for the company, with the goal of making ZDT become the “TSMC of the PCB industry”.

Clear goals and thorough execution

Charles, who comes from a financial background, credits his business philosophy with enabling him to lead ZDT in keeping up with key technologies and successfully turn ZDT into a global PCB leader. He explains, “My role is like that of a band conductor. I must have a deep understanding of music theory, but I don't necessarily have to play the instruments. The key is, in Chinese idioms: 'select and arrange the combatants, and map out a strategy.' I find the right people to execute the right strategy. I also attach great importance to the rules of business, so that employees can clearly know our directions, blueprint and goals. I did have a plan with multiple steps for ZDT to become the world’s largest PCB company and we executed it step by step. Now all my employees trust that I am a man of my words.”

Setting milestones and creating common vision and goals is crucial to ZDT’s success. Charles adds, “In 2014, I set the business plan to reach a revenue scale of NT$155 billion in 2022, and in fact, our 2021 revenue was NT$155 billion, reaching the target one year ahead of schedule. We now have a business plan for ZDT through 2035, and while I cannot disclose the details, we will continue our aggressive growth trajectory. Our business plan is very clear, so my employees do not have to guess what I am thinking, and I have kept the company free of factions and internal rivalries so that the whole company can move forward toward a common goal.”

In addition, Charles spent most of his time being present in ZDT’s manufacturing sites in China and is on the front line of everything. This allows the company to make quicker decisions than peers and capture business opportunities. Charles says, “Business is as fierce as war, and speed is everything in business. Making quick decisions allows us to win. Our decisions are not made randomly but based on a large amount of data and industry analysis. For example, when it comes to purchase equipment, if six of the top ten players adopt a certain equipment, I will use that equipment. This demonstrates how we use data analysis to support our decision making.”

Moreover, when ZDT started to build a new plant in 2006, Charles insisted on investing in environmental protection with the highest standards in the industry. Voices of doubt arose at that time. Charles recalls, “A business leader often struggles with loneliness. At the time when I took over the role of Chairman of ZDT, the company even did not have a manufacturing plant. When planning to build up our first plant, I decided to invest a considerable amount of money in environmental protection. Some people questioned: ‘Charles, you are too wasteful. You should just focus on business operation instead of investing in environmental protection.’ It took a lot of perseverance along the way, and I persevered because my goal was clear. I firmly believed that, to become the world’s number one, I had to build up a solid foundation for ZDT, and environmental protection was one of the key elements. That is why until today, ZDT has continued to lead the industry in environmental protection and has been highly recognized by top-tier global customers. This has become one of our strongest competitive advantages."

Leverage “One ZDT” strategy to widen the market share gap

Charles adds, “Five years ago, I outlined our core strategy of ‘One ZDT’. On top of Flexible Printed Circuit (FPC), in which we have been a dominant player, we would expand our product categories into IC substrate, High Density Interconnect PCB (HDI), Substrate-Like PCB (SLP), and multi-layer Rigid PCB (RPCB), to provide customers one-stop shopping PCB solutions. Over the past two years, we have achieved some initial desired results of this strategy. Our product applications have become more diversified, with revenue contribution from Mobile Communication declining from 71.7% in 2020 to 61.5% in 2021, and our revenue scale continued to grow. I believe that only by realizing ‘One ZDT’ can we widen the market share gap between ZDT and our peers and continue to gain market share.”

Charles explains, “In fact, my idea of ‘One ZDT’ was first inspired by Samsung. Samsung’s former Chairman Kun-hee Lee once said that the reason why Samsung was able to launch new products six months earlier than its competitors was that they held the technology of designing, developing and manufacturing of high-end PCBs. That said, a smartphone requires FPC, RPCB, SLP and IC substrate. If we have each of these product capabilities, we can advise our customers on how to design their products as a whole and provide them with better solutions, so that their new products can have better performance and we can get more orders from them. Meanwhile, under ‘One ZDT’, our different product teams can work together at customers’ product development stage, and once we get the parameters of customers’ products, we can accurately calculate the bill of materials (BOM) and provide a reasonable quote to customers.”

Charles emphasizes, “In the past, no one in the PCB industry could offer such total solutions. Generally, RPCB manufacturers would only provide RPCB, and FPC manufacturers would only offer FPC. They would simply manufacture and deliver the products after receiving customers’ own designs. ZDT is different. Under the One ZDT structure, we integrate our internal teams to provide customers with comprehensive total solutions. We position ourselves as a PCB service provider, instead of a PCB manufacturer. We work with our key customers two years before their launch of a new product, and on average we need to make samples for a product for 25 times before finalizing it. We collaborate with our customers directly, and hence our relationships with them are very close. Not only do we need our customers, but they also need us.”

Charles further adds, “In addition to providing customers with one-stop shopping, the “One ZDT” strategy contains two other aspects. First, our internal resource integration must also reach One ZDT. I have always emphasized the importance of ‘treating suppliers fairly and respectfully’, as we have obtained many resources from our suppliers. Because of this respect and cooperation, ZDT can always get our equipment on time, even though the supply of IC substrate related equipment is tight. Second, One ZDT can help us mitigate the impact from seasonality. In the past, seasonality had great impact on our operations. Through One ZDT, our product applications are more diversified and capacity utilization could be more balanced in each quarter, which improves our operating efficiency. Overall, One ZDT strategy has gradually played out, and I believe we can widen the market share gap between our peers in the future. I have set the goal of reaching 10% global PCB market share by 2030."

IC Substrate: The time is ripe. ZDT will catch up quickly.

Charles says, “IC substrate is the most high-end product in the PCB industry. I have long believed that ZDT was compelled to enter this business, so we began to build up the IC substrate business in 2011. In my opinion, there are three elements for success in IC substrates. The first is talent. In 2011, we encountered a lot of difficulties in talent acquisition because there was no IC substrate talent in China. As a result, it took us a lot of time to accumulate talent and R&D capabilities. Our current General Manager DJ Lee joined ZDT in 2016, and he was the person who has built the most Ajinomoto Build-up Film (ABF) factories in Taiwan. Now we have also built up an IC substrate team of more than 2,000 talents. If we had not started investing in the talent and R&D capabilities of IC substrate in 2011, it would not have been possible to deliver any satisfactory results now.

“Second is capital. I always say that one must have deep pockets to run the IC substrate business because of the capital-intensive nature of this business. During the period of 2011-2020, the cumulative R&D investments in ZDT's IC substrate business reached NT$6 billion, and in the next four years, we plan to spend another NT$60 billion capex for the business. Being the world's No. 1 PCB manufacturer, ZDT is able to support its IC substrate investment with profits earned by other business units.”

“The third is the timing of entering the market. I believe the IC substrate market is large, and it is better for us to pull the trigger when we are completely ready. Since 2019, we have made significant progress in our Bismaleimide Triazine (BT) substrate business, and we have done particularly well in yield rates. As a result, some customers requested us to increase production capacity. Overall, I would say developing the IC substrate business requires ‘right time, right place, and right people’ (天時、地利、人和), and the time is now ripe. We are a company that always pursues operational stability, so I would not dare to make this bold move to invest heavily in IC substrates if talent and capital were not ready. Now we are confident that we have enough talent and R&D capabilities, and the BT business also began bearing fruit last year. I believe this is the perfect timing for us to quickly ramp up this business!”

ZDT's ambition and execution in IC substrate is demonstrated by its rapid speed of plant construction. Charles says, “Speed is crucial. No one in the industry has the same efficiency as us in building new plants. For example, for our second BT fab in Qinghuangdao, it took us only 15 months from land acquisition to mass production in August this year. Similarly, for our first ABF fab in Shenzhen, it is expected to take two years from land acquisition to mass production in the first quarter of 2023.”

Charles says firmly, “ZDT was a little-known company when I assumed the role of Chairman in 2005, but I outlined a detailed business plan to grow this company step by step. I am always dedicated to run this business, and I am fixated on how to further improve our position in the PCB industry. Over the past 10 years, our compound annual growth rate (CAGR) for consolidated revenue reached 13%, which is much higher than the industry average. IC substrate is the second lifeline of ZDT, and I am fully confident that we will grow along with the same curve. We aim to become one of the top 5 IC substrate manufacturers in the world by 2030.”

(To learn more about ZDT’s IC substrate plan, please see the next volume: “CEO Conversations: DJ Lee, General Manager of Zhen Ding Technology Holding Limited”)

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CEO Conversations: Charles Shen, Chairman

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