Becoming an Irreplaceable Global Giant Through OEM, Shanghai’s "Hidden Champion" Officially Announces Hong Kong Listing Plan

In late August, Huaqin Technology, the world's largest smart hardware ODM enterprise, announced plans to issue H-shares and list on the Main Board of the Hong Kong Stock Exchange. This comes less than two years after its debut on the A-share Main Board.

The major moves in the capital market have brought this Shanghai company, which has long been behind the scenes, into the public eye. From starting up in Zhangjiang to now generating over 100 billion RMB annually and pushing over 200 million smart terminal devices into the global market each year, Huaqin Technology has taken 20 years to become a global giant solely through OEM.

Some people question: "It's just OEM work, why is it so impressive?" Others give a completely different evaluation, likening it to the "industrial mother machine" of China's electronic consumer goods. As the global industry upgrades towards precision manufacturing and high-end manufacturing, the stereotype that "OEM = low technology" is gradually being dismantled by companies like Huaqin Technology.

Hardcore Strength in OEM Manufacturing

Recently, Dong Jingjie visited the headquarters of Huaqin Technology. In a prominent spot in the exhibition hall hangs an installation artwork of the Lujiazui skyline, crafted from over 100 different smartphone motherboards pieced together. At the "center stage" are smart phones, tablets, laptops, smart wearables, and AI servers from numerous well-known brands. Here lies the secret to Huaqin Technology’s growth.

The Lujiazui skyline assembled from the motherboards of over 100 different mobile phone models.

For decades, the global electronic information industry has been surging with competition as enterprises from Europe, North America, Japan, South Korea, China, and Taiwan have entered the fray. Amidst this fiercely competitive market, Huaqin Technology has carved out its own niche with its keen market sensitivity.

In its early years, China, as an emerging market, mainly undertook labor-intensive OEM assembly work in the global industrial division of labor, such as mobile phone assembly. This is also known as the OEM manufacturing model, characterized by low technical barriers and thin profit margins. In 2005, addressing the lack of R&D capabilities among mainland manufacturers, Taiwan's MediaTek introduced a solution that could provide manufacturers with most of the core designs for mobile phone development, thereby sweeping the mainland market share.

In the same year, Qiu Wensheng, chairman of Huaqin Technology, and a dozen young people started a business in Shanghai. Most of them had professional design backgrounds, and Qiu Wensheng himself was once employee number 007 at ZTE's mobile phone research institute. They recognized the market opportunity in mobile phone design and had a strong obsession with mastering technology. From the beginning, Huaqin Technology avoided low value-added sectors and focused on the research and design of PCBA motherboards for feature phones.

This model is called IDH, which stands for Independent Design House. Huaqin Technology has achieved rapid development by providing brand manufacturers with R&D design solutions for PCBA motherboards. However, bottlenecks have emerged. On one hand, the technical threshold for IDH in the feature phone sector is low, and the market quickly evolved into hundreds of IDH companies competing fiercely and acquiring customers through low prices. On the other hand, smartphones have begun to replace feature phones. The former have highly integrated chips, resulting in reduced complexity in PCBA motherboard design and decreased demand.

The technical team at Huaqin quickly realized that relying solely on R&D and design would lead to diminishing profit margins. Therefore, the company decisively transformed by extending its involvement in the industry chain to include the newly emerging ODM business. Based on IDH, they added hardware design and mobile phone manufacturing. For mobile phone brand manufacturers, choosing ODM can save more time and costs, allowing them to focus on brand marketing, market promotion, and sales channel development.

Following market changes, Huaqin Technology's ODM business has gradually expanded from smartphones to laptops and tablets, and further extended into AIoT (Artificial Intelligence of Things) and automotive electronics ODM. From a single mobile phone motherboard to a trillion-yuan intelligent platform, more and more people see it as a microcosm of China's electronic information industry transitioning from "manufacturing" to "intelligent manufacturing."

The Huaqin Global R&D Center located in Zhangjiang, Pudong.

Breakthrough through R&D and quality.

As is well known, Taiwanese manufacturers, leveraging their first-mover advantage, rank in the top tier of ODM capabilities in the manufacturing sector and have captured the majority of the global market share.

However, Huaqin Technology also has ways to break through. It currently holds several individual records: it has long remained among the global leaders in smartphone ODM shipments. In the field of notebook computers, Huaqin Technology is the only company from mainland China capable of breaking the monopoly held by its Taiwanese counterparts, ranking third in global shipments. Among the world’s top ten consumer electronics brands, nine are its partners.

Why did it stand out in ODM? The head of the Public Affairs Department at Huaqin Technology mentioned two keywords: research and quality.

Scientific research is not about doing business; it requires settling down, being patient, and truly tests a company's strategic patience. To outsiders, every rapid business adjustment made by Huaqin Technology is actually backed by research plans laid out six to seven years in advance.

"The person in charge said, 'We invest approximately 5 billion RMB annually in research and development.' In the ODM field, Huaqin Technology’s emphasis on scientific research is evident to the naked eye. Not only are the majority of employees technical talents, but research and development centers are also established in several of the country’s most manufacturing-developed and talent-dense cities. By relying on technological innovation to improve product performance, they have formed market competitiveness. Currently, Huaqin Technology holds a total of more than 10,000 intellectual property authorizations, invention patent authorizations, and software copyrights."

In Qiu Wensheng's view, beyond general technology, Huaqin Technology must also master more key technologies. In the past two years, the company has specially established the "X-lab" research department, where "X" represents the unknown. As the name suggests, the team will explore frontier technologies that cannot be quickly commercialized but have long-term value. In particular, key technologies such as acoustics, optics, thermodynamics, and radio frequency, which affect product experience, provide technical reserves for product research and development.

If scientific research is the driving force for forward exploration and breaking boundaries, then quality is the lifeline that safeguards the market. The English abbreviation of HuaQin Technology is the combination of the initials "HQ," which carries a story still circulated in the industry today. In 2006, just one year after the company was established, a foreign client visited. Unfamiliar with Chinese pinyin, he instinctively interpreted it as "High Quality."

This "misunderstanding" arising from cultural differences ironically serves as a clever summary. He Xiangfeng, the director of the ESG Executive Committee at Huqian Technology, stated that from the company's inception, quality has been one of the three major modules personally managed by the founder. Not only do they hold quality meetings without fail every week, but when product quality issues arise, the team also must repeatedly "struggle" until they come up with a solution.

The reputation of "Huaqin quality" has gradually gained recognition in the industry. Even later, when competing for the same product orders with other companies in the market, and quoting slightly higher prices than competitors, customers were still willing to choose Huaqin. This choice has brought tangible benefits to customers: on one hand, the low product return rate helps them build a good reputation in the market; on the other hand, the hidden costs of after-sales repairs are saved, indirectly increasing their profits. As a result, more and more customers have become long-term partners of Huaqin Technology.

At present, many domestic ODM companies are starting to transition into building their own brands. However, Huaqin Technology holds a different perspective. Precisely because it has accumulated solid R&D capabilities over many years, the company prefers to focus on what it does best—specializing in product design and manufacturing. This is also the foundation for establishing trust with clients, positioning itself as “the second R&D center for customers.”

Follow the global layout of the market.

China is a major destination for foreign investment and also a major source of outbound investment. Its outward direct investment flows have ranked among the world's top three for 13 consecutive years. An increasing number of Chinese enterprises are proactively "going global" to explore new markets.

For many Chinese private entrepreneurs, the ultimate goal is to go global and make their products available to consumers worldwide. However, exporting Chinese-made consumer goods is not the same as Chinese companies expanding abroad. Today’s businesses are facing a much more complex international environment.

With the expansion of its business, Huaqin Technology's overseas strategy has evolved from simply following customers to localization. Huaqin Technology has established three major manufacturing bases in Vietnam, Mexico, and India, collaborating with local supply chain resources to promote supply chain localization. "This way, we can quickly deliver and respond in overseas markets, avoid risks from relying on a single market, and optimize global resource allocation," said the head of the securities affairs department at Huaqin Technology.

In the selection of overseas base locations, Huaqin Technology has developed differentiated landing strategies based on the characteristics of different regions. In the Indian market, Chinese companies generally face development challenges. To meet the demand for Chinese brand products in India and comply with local regulatory requirements, Huaqin Technology decided to cooperate with local enterprises to establish a factory. The local enterprises understand the area and have mature construction experience, helping Huaqin Technology quickly open the market. By August 2024, the monthly shipment volume of the Indian manufacturing base has exceeded one million units.

Currently, overseas revenue accounts for 50% of Huaqin Technology's annual revenue. Looking back, Huaqin Technology's journey to becoming a global company is closely tied to Shanghai's role as a global information hub and a front-line platform for connecting with the global market. "Shanghai has a solid talent pool, can leverage the abundant supply chain resources of the Yangtze River Delta, and hosts numerous global enterprises," said the aforementioned representative. Huaqin Technology has already set a clear positioning for Shanghai internally, which is: being in Shanghai means being in sync with the world.