Memory Makers : Computers: Fountain Valley-based Kingston Technology’s annual sales exceed $1 billion, but firm still retains small-company culture.
On the day that Kingston Technology Corp. first surpassed $1 billion in annual sales, the computer memory company’s co-founder, David Sun, rewarded employees with generous bonuses and the most elaborately catered lunch many workers had seen.
But there was one thing Sun would not do for his workers, although dozens approached him after loading their plates with Chinese, Thai and Japanese cuisine during the lunch. Despite their pleas, Sun would not make a speech.
“You don’t want to hear from me,” he said. “Just enjoy your lunch.”
A few days later, during an interview, Sun explained why.
“I was once chief engineer at a private company that went public,” he said, referring to his stint at Alpha Micro Systems in Costa Mesa during the early 1980s. The day that company started selling stock, employees drank champagne while the chief executive delivered a speech.
Standing above the crowd, the executive said, “Well, I finally made it.” Other workers applauded, but Sun seethed. “I thought, ‘What about me?’ ” he said.
Sun and John Tu, who co-founded Kingston in 1987 and are still the company’s sole owners, have gone to great lengths to make sure their employees, suppliers and customers never have to ask that question.
Sun spent most of the day last Tuesday--the day Kingston passed the sales milestone--strolling around the company’s Fountain Valley plant, thanking employees one by one. The company also took out full-page newspaper ads that carried the names of all 450 of its workers, and gave employees bonuses ranging from $200 to $1,600.
Those were just extra goodies on top of the ongoing perks enjoyed by Kingston employees, who are paid wages well above industry average and get to split 5% of the company’s profits every quarter. That usually means employees get bonuses of $1,000 or more every three months.
Of course, Sun and Tu haven’t done badly either. Just days before their privately held company hit the billion-dollar mark, the founders were listed for the first time among the Forbes 400, the magazine’s annual list of the nation’s 400 wealthiest people. Their wealth was calculated at about $370 million apiece.
Sun and Tu, who met in Orange County in 1981, seem to complement one another. Tu, 54, born in Shanghai, is soft-spoken, thoughtful and gifted at marketing. Sun, 44, a boisterous and energetic native of Taiwan, handles the engineering.
They founded their first company, also a maker of memory components, in 1983, then sold the venture to AST Research Inc. in 1986 for a reported $6 million. But Tu and Sun lost their small fortunes from that sale in the 1987 stock crash.
They set out to rebuild. With just $4,000 in cash, they launched Kingston as the memory market was ready to explode. Sales soared from $13 million in 1988, their first full year, to $251 million in 1992, earning Kingston the No. 1 position on Inc. magazine’s list of the fastest-growing private companies in America.
Sun says Kingston got there by stressing loyalty and flexibility. The company has never canceled an order for the raw materials it uses to make its memory products, and it routinely pays suppliers ahead of schedule.
Tu and Sun eschew fancy offices or job titles, and they encourage their employees to pitch in wherever they’re needed, whether it’s in sales, manufacturing or shipping. The company has no secretaries, and the two founders sit at desks in the center of the company’s bustling sales floor.
“We can walk up to them any time and get an answer,” said Rosanne Carrillo, a sales manager and one of the first employees hired by the company. “Sometimes there’s a line of six people, but I never have a problem talking to them.”
The founders move their desks around the room every so often to spend time next to different employees.
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In the past, Sun fretted about whether Kingston could continue to treat workers like family as the company mushroomed in size. Employees once knew each other by name, but these days the company is so large that everybody--including Sun and Tu--wears identity badges, partly to make sure memory chip thieves don’t wander in posing as assembly workers.
Sun acknowledges that some things have changed. Employees’ roles are more defined. Still, he says he believes “we can grow to 1,000 employees,” without losing the company’s culture.
And more growth seems inevitable, given the business they’re in.
In recent years, computer software has become increasingly complex, keeping in step with advances in computer hardware technology. Programs have grown not just in terms of the functions they perform, but also in sheer girth. And each new version of PC software requires more memory to make it run.
For instance, Windows 95, the hugely popular operating system by Microsoft, requires eight megabytes of memory to run even moderately well, but many computer owners still have machines with just four megabytes. To run Windows 95, they have to buy a new machine or upgrade their old one with products made by Kingston or other manufacturers. Even the memory built into new machines generally is inadequate, Sun said.
Numerous companies have rushed to fill this gaping demand for memory products, including several Kingston rivals in Orange County. Viking Components in Aliso Viejo expects sales of $350 million this year, up from $193 million last year. And Simple Technology in Santa Ana was No. 13 this year on Inc. magazine’s list of fastest-growing companies over five years. Simple’s sales rocketed from $1.3 million in 1990 to $98.7 million last year.
Executives at these companies say that they have in many ways modeled their operations on their giant Orange County competitor, but that Kingston’s real advantage stems from the fact that it was the first to enter the memory upgrade market.
There is “one single reason” for Kingston’s market lead, said Manoush Moshayedi, chief executive at Simple Technology. “They haven’t done anything special. They just started three years ahead of everybody else.”
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Kingston’s size has been of critical importance in recent years, as the industry has suffered a shortage of memory chips used to make upgrade products. Because Kingston often buys $10 million in chips at a time, it is a favorite customer of suppliers such as Toshiba and Samsung. That means Kingston not only gets all the chips it needs, it gets them for lower prices than its rivals.
The company’s next goal is to make Kingston a widely recognized brand name. Later this month, Kingston plans to place prominent ads in mainstream newspapers and magazines. One ad pictures a muscular man pushing a huge stone up a hill. “Maybe you don’t need more people. Maybe you don’t need more time,” the ad copy reads. “Maybe you just need more memory.”
Kingston is aiming for the success Intel has had making its processors, the electronic brains of computers, the brand of choice. To do so, Kingston will spend $20 million on marketing this year, double what it spent a year ago, said Gary MacDonald, head of marketing.
“As Intel is to processors, Kingston will be to memory,” MacDonald said.
The road ahead for Kingston is not without a few potential bumps. Industry experts say the shortage of memory chips will probably end in a few years, as dozens of new supply plants sprout up in Asia. When that happens, access to supplies won’t matter, and Kingston will have to compete with its hungry rivals on service and price.
Sun and Tu don’t seem daunted. They recently bought two buildings adjacent to their existing headquarters, creating room for the additional 100 employees Kingston plans to hire in the upcoming year. The company is also expanding outside Orange County for the first time, with plans to build a new plant in Ireland.
At a recent luncheon, an employee asked Sun where Kingston will be in five years.
“Let’s put it this way,” Sun responded. “If you always try your best, you shouldn’t worry about Kingston. It’s not Kingston [that matters], it’s you.”
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Kignston Technology Corp
Headquarters: Fountain Valley
Employees: 450
Founded: 1987
Sales (in millions) 1995 (to date): $1,000
Product: Computer memory equipment
Owners / founders:
* John Tu, 54, president
* David Sun, 44, vice president, engineering
Source: Kingston Technology Corp
