High-Speed Upgrade
Who would have thought a decade ago that cables, wires and a slew of other networking contraptions would today be the rage, with consumers from Beijing to Budapest clamoring for American-made parts?
Tom Chung, for one.
In 1983, when the 42-year-old entrepreneur first got involved with connecting computer systems, e-mail had not yet been introduced and people still relied on floppy disks to exchange computer information.
Now Chung runs one of the area’s fastest-growing networking export companies, Tri-Net Technology, whose sales this year are expected to be $8 million, up from $900,000 five years ago. The Walnut businessman won this year’s Exporter of the Year award from the regional office of the Small Business Administration.
Chung is among hundreds of Taiwanese Americans who have established small to medium-sized computer businesses in the Southland, a trend fueled by the worldwide craze for leading-edge technology. Tri-Net Technology is one of the more modest-sized companies, but its rapid growth offers lessons on how someone with good instincts and a careful business strategy can take advantage of an exploding market.
“When I first got into this industry, people were just starting to talk about networking,” Chung said. “I had a feeling it would be big, so I stayed in it. Sometimes in business, you have to look into the future and follow your feelings.”
This year the global market for networking products is estimated at $14.2 billion, almost $8 billion of which is outside the United States, according to Dell’Oro Group, a Portola Valley, Calif.-based market research firm for networking products.
“The exporting potentials are just phenomenal, because the market is still untapped,” said Dwayne Shirakura, a Dell’Oro Group analyst.
John Armstrong, a networking analyst for San Jose-based research firm Dataquest, said there is strong worldwide demand for networking parts. He said developing countries, such as those in Southeast Asia, are particularly eager for these products because their governments have made it a priority to upgrade the countries’ communications infrastructure.
“The whole industry is growing at a pretty steady rate,” Armstrong said. “And with all the new technologies being introduced, I think that will only support this growth.”
Chung launched his business in 1992, with only two employees and a 2,000-square-foot office in Walnut. Now the company has 30 employees and operates out of a 12,000-square-foot warehouse. Chung hopes to buy a 30,000-square-foot facility as early as next year.
Tri-Net Technology specializes in local-area network products, which link computers, and wide-area network parts, which allow video, fax and telephone capabilities to be integrated onto a single system.
Initially, the company exported its products only to Taiwan and Hong Kong. It now sells more than 5,000 networking products to distributors in 22 countries, including South Korea, China, Singapore, Japan, Greece, Australia, Russia and the United States. Chung sees the rest of Europe as well as South America as his next target.
“My goal is to have distributors in every country of the world,” he said. “Exporting has all kinds of good potential because there’s still not much competition. Most companies are still focusing on the domestic market.”
Tri-Net manufactures cables at its two warehouses in Walnut and Taipei, but its primary business is exporting brand-name products from such American companies as AT&T;, Belden, Lucent Technologies, Cabletron and Cisco through its mail-order catalog. Chung decided to carry top-of-the-line U.S. products because his foreign customers specifically request American networking parts.
“People feel they have to buy from the U.S. because it’s the leader in this type of technology,” Chung said. “But the main reason this market is growing is that people know they need good communication systems to make their countries stronger.”
After immigrating from Taiwan in 1981, Chung attended Valdosta State College in Georgia and received a master’s degree in computer science. When he and his wife moved to Los Angeles, Chung began selling cookies to Chinese grocery stores. He sold televisions and home appliances for a trading company before being hired away by a manufacturing firm to sell telephone jacks in 1983.
With that introduction to the telecommunications industry, he and a business partner in 1987 started a networking company called Unicom in Santa Fe Springs. Unicom carried products similar to those offered by Tri-Net, but Chung decided to set up his own company because Unicom concentrated on the domestic market and he had his sights on overseas clients.
He picked Asia as the starting point because of his own background. His brother, who used to live in Japan and speaks Japanese, came on board as his international sales manager.
“We’re Asian, and we know our culture,” he said. “We know how business is done.”
Chung initially financed Tri-Net Technology with a $100,000 certificate of deposit at a local bank that extended a $95,000 credit line to him. That was adequate for the first few years, but as his business expanded, he needed new sources of funding.
He took advantage of the SBA’s Export Working Capital Program, which helped him secure a $300,000 loan from Far East National Bank in 1995. The following year, the loan amount was increased to $450,000. Having now paid off that loan, Chung is utilizing an $800,000 credit line loan from East West Bank and is considering applying for another type of SBA loan to expand his facility.
“It’s very difficult to stay alive without government assistance,” said David Wang, a senior vice president at Far East National in Los Angeles, who nominated Chung for the SBA award. “Capital access is so important to small exporting businesses. Without capital, they can’t grow and survive.”
Chung believes he has been able to survive because he tapped the right market at the right time, surrounded himself with the right people, selected the right products and utilized the right resources to allow for growth. Another important thing he did was pick the right location.
“Los Angeles has the largest seaport in the country,” he said. “And you can fly to Asia nonstop in 10 to 12 hours. There’s also no interstate freight charges.”
Chung said the time difference between California and Asia also gives his company an advantage over its East Coast competitors because he can contact his business associates in Asia during the workday. The fact that the East Coast is three hours ahead makes that more difficult.
A stumbling point for many exporters is finding honest distributors and maintaining good relationships with them. To accomplish this, Chung used the business services provided by the U.S. Embassy in each country he exports to to gain the credit reports of potential distributors.
He also sought the Commerce Department’s assistance as he expanded into new markets. The agency advertised his products in trade magazines and helped him set up trade shows in various countries.
“Because we’re a small company, we need the government’s help,” Chung said. “It’s so important to get the right assistance.”
To keep up with changing technology, Chung said, he and his team constantly develop and test new markets and products. They also regularly attend trade shows and training seminars to keep up on the latest products.
“Whenever new technology comes up, we pass that information to our distributors, and they’re able to pass it on to their customers,” Chung said.
With technology changing so fast, Chung can’t say for sure where his company is headed. But he knows he has a long history in a niche market and that it’s up to him to take advantage of it.
“We’re working with the world’s leading technology firms, so whatever their direction is, we’ll get firsthand information and be able to share that with our customers,” he said. “We still have a lot of countries to get into, but I believe if we do our marketing the right way, we’ll be able to sell to a worldwide market.”
