Northridge Firm Is Making Itself Heard in China

For more than a decade, Harman Pro Group has been booming the sounds of modern China.

In the face of fierce global competition, the Northridge-based company has carved out a lucrative niche selling professional sound and lighting equipment to government ministries and commercial developers that are investing billions of dollars on trophy buildings to restore the Middle Kingdom’s reputation as a center for art and culture.

Harman products -- which include JBL Pro speakers, Crown amplifiers and Studer audio mixing consoles -- can be found in nearly every prominent place in China, including Tiananmen Square, the Supreme People’s Court, Shanghai Stadium and the Shanghai Oriental Art Theater.

“They revere quality and, particularly in these commercial venues, prestige,” said Mark Terry, president of Harman Pro Group, a division of Harman International Industries Inc. “To the Chinese, what is seen is very important.”

Harman’s domination of the Chinese market can be traced to an energetic Hong Kong musician turned businessman named Bingo Tso, who saw a market for U.S. sound and audio equipment when few foreign companies had that Asian country in their five-year plans. Tso’s firm, Advanced Communication Equipment International Co., distributes Harman products in China.

Tso’s first big break came in 1985, when Communist Party leaders hired his firm to replace the aging speaker system in the Great Hall of the People. This was no simple task. Because foreigners weren’t allowed in the parliament building at that time, Tso’s company had to design a JBL speaker system from drawings and test it in a warehouse in Beijing. In 1989, he handed the pieces over to a Chinese crew for installation in the Great Hall’s 10,000-seat auditorium.

The first time the Chinese government held a parliament meeting after the new speakers were in place, Tso waited anxiously in another part of the city for a verdict. A failure could mean the end of his career -- or worse.

“We could be installing sound systems in jail,” joked Tso, who was in Southern California recently for a Harman Pro Group meeting and trade show.

Luckily for Tso, China’s leaders were heard loud and clear.

China is now the biggest market outside the United States for Harman Pro Group, which does about half its business overseas. Sales in the Asian nation are in the “tens of millions of dollars” and are growing 15% to 20% a year, Terry said. Tso said the firm had 95% of China’s high-end loudspeaker market.

When many of the individual brands were first sold in China, they were independently owned. But they were eventually acquired by the professional arm of Washington-based Harman International.

The parent company, founded by industry pioneer Sidney Harman, also produces electronic goods for consumers and the automotive industry. Harman is married to Rep. Jane Harman (D-Venice).

Although much of China’s population remains impoverished, the country has a fast-growing middle class and a booming tourist trade. Five-star hotels and restaurants are sprouting up across Beijing in advance of the 2008 Summer Olympics, and there are 30 Western-style movie complexes in Shanghai.

Before Tso’s company ventured into China, many of the nation’s top officials had no exposure to world-class sound. Tso and his staff organized roadshows in which they took JBL and Crown employees and equipment to China and offered training seminars during the day and concerts at night. Many of the foreigners were musicians, so they formed WWB, “the world’s worst band,” and played their rock ‘n’ roll to rooms filled with men and women in Mao jackets.

In Shanghai and Beijing, these jam sessions attracted as many as 2,000 people, many of whom had never attended a live music performance, Tso said.

“We did actually create some riots because the audience wanted to push in, jump on the chairs and wave their lighters,” he said. “It was crazy.”

Even if they didn’t know or like the music, the Chinese could hear the difference in the quality of the sounds coming out of the imported loudspeakers. And the U.S. executives were exposed to the challenges of selling expensive audio equipment in a market short on paved roads, telephones and cars.

Tso said the company’s willingness to invest time and money into building a future customer base in China was unusual. But he said the payoff had been huge because many of their earliest contacts had become high-ranking officials in the ministries that oversee the broadcast and entertainment industries.

Landing a prestigious job such as the Great Hall renovation takes years of courting, Tso said. Before winning that contract, JBL and Crown helped arrange for a delegation of Chinese officials to tour the Northridge factory, Dodger Stadium, the John F. Kennedy Center in Washington and several other places outfitted with the brands’ equipment.

China has spared no expense in its quest for global acclaim. Tso’s Advanced Communication Equipment recently won a $20-million contract to provide audio and lighting equipment for the National Grand Theater in Beijing, a giant bubble of titanium and glass surrounded by water that was designed by French architect Paul Andreau. That building, which sits on the edge of Tiananmen Square, contains a 6,000-seat theater and is slated to open this year.

Tso said his company was also bidding on contracts for the 2008 Olympics. But he said he was not hopeful about landing the biggest deals, because those contracts were likely to be tied to high-priced sponsorship deals or to the promotion of domestic industries.

Staying ahead of the Chinese competition is Terry’s chief worry. Toward that end, Harman Pro Group recently unveiled an audio networking system called HiQnet that allows the loudspeakers, amplifiers, lights and other components to easily communicate with one another.

James McGregor, author of “One Billion Customers: Lessons From the Front Lines of Doing Business in China,” said the company’s focus on “continuous innovation” was a smart strategy.

“What China does is they go buy the best and then they figure out how to make it themselves,” McGregor said. “Reverse engineering is an Olympic sport for them.”

Harman Pro Group has suffered some losses to piracy, Terry said, but he added that the company had seen a drop in counterfeiting in recent years. He thinks that it’s because the company’s professional equipment is difficult to copy and the sales volumes are small, making it less profitable for pirates.

Harman Pro Group also takes care to protect its most sensitive technology. The company produces its high-end loudspeakers in Northridge. Although the company imports some of the most labor-intensive parts from China, a few key components are designed and produced in-house. Those include the metal voice coil and titanium diaphragm that vibrate and reproduce the sound.

But Terry said that China’s manufacturers had “upped their game significantly” and that Chinese consumers were becoming more choosy, raising the bar for the foreign brands that have dominated the premier market.

“For many years, it was just the competition of us versus other importers,” he said.

“Now, more and more, it’s us versus the local manufacturers.”