This article presents the difficulties of getting a foreign business to stay in China and use other countries for production. It includes a discussion of Chinese policies, digital sourcing, and why Fictiv stays in China. It is intended as an analysis of the complexities involved with international trade in this sector.
Fictiv is a digital manufacturing company that allows customers to design and buy equipment, such as injection molding, CNC milling, laser cutting, and 3D printing. It was founded in 2013 in San Francisco and has raised $37 million in venture capital investment.
The key people involved with this case study are Zach Kaplan, CEO of Fictiv; Eric Pan, General Manager for China; and Jack Tong the COO who has worked for the Chinese government. We have also drawn from interviews with members of the Senior Leadership Team at Fictiv.
When it was first founded Fictiv opened its doors with only one standard office: in San Francisco, California. As a digital manufacturing platform it has since grown exponentially, with more than 100 employees worldwide. However the company still remains in San Francisco with its headquarters. From an organizational standpoint, two of the biggest decisions that Fictiv has made recently are that it firstly expanded into China and secondly opened an R&D center in Shanghai.
Fictiv’s Chinese office is headquartered in Beijing and Eric Pan is the General Manager for China operations. In 2012, Fictiv identified that there was a need to build a presence in China and Eric Pan was brought on, who had already been working as an enterprise account manager at Alibaba’s Tmall Global. Being an enterprise account manager at one of the leading ecommerce companies, Fictiv believes that Mr. Pan’s background and knowledge will be an asset to the company going forward.
In 2013, Fictiv went international and opened an office in Shenzhen and signed a partnership agreement with Shenzhen Technology, which is a Chinese company based in China that has been involved with electronics manufacturing for over 10 years. Eric Pan says “We partnered with them to build a high-tech manufacturing facility in China.” The purpose of this partnership is to help Fictiv get access to capital and experience in China, as well as provide better lines of communication between Fictiv representatives in the United States and the Chinese production team.
In 2017 Mr. Pan attended the 5th Annual China Entrepreneurial Forum in Beijing and stated that his main goal is to help Fictiv expand into new emerging markets. The company also has a partnership with a Chinese company called Ringo Electronic Precision, which has a high-tech manufacturing facility.
Fictiv’s Chinese production team is mainly located in Shenzhen and the office there is located close to the Guangdong Lingnan University (GLU), where they are currently looking at expanding their presence. At GLU they are working on developing new materials for different applications such as petrochemicals and tissue engineering.
Policies in China make it difficult for small foreign companies like Fictiv to survive. Since China’s market economy is not market driven, there are many policies that must be followed by foreign companies. The biggest problem that Fictiv has faced is staying in the country while other large companies are moving out of China. Due to these policies, small foreign countries are leaving China to go to more developed countries. Another problem that Fictiv was forced to deal with was the Chinese industry being more cost competitive than their American competitors such as 3D Systems and Stratasys.
Eric Pan says “The biggest thing about doing business in China for Fictiv is (China’s) very different political landscape and procedures”. The Chinese government is the first challenge for Fictiv. For example, in order to have a company in China you must have a Chinese business license. In order to get this license you must go through a series of procedures involving the local governments and work with them to get approval.
For example, if you are going to be producing in China and hiring people, then you need approval from the government. This is because they want to make sure that they are not missing out on jobs for their local population and that your company isn’t taking away jobs from people within the country. As part of this process there is also an investigation made by the government which may take up to 45 days or longer. If you cannot go through this process, then your business will not be allowed to operate within the country.
