Making batteries to woofers, GP’s Lo sways to the rhythms of geopolitics and music

[SINGAPORE] If you thought this whole headache of geopolitics roiling business was a recent phenomenon, you need to hear from Victor Lo, the Hong Kong-based business figure, art collector and music buff.

The chairman and chief executive of Hong Kong’s consumer battery giant Gold Peak Technology Group – which also makes the KEF and Celestion audio equipment – and its Singapore-listed subsidiary, GP Industries, has dealt with it almost all of his working life.

Back in September 1982, for instance, when Hong Kong was still a British colony and Lo was a decade into working in the company founded by his father in 1964 as a maker of 9V dry batteries, then British Prime Minister Margaret Thatcher arrived in Beijing for talks with Deng Xiaoping to discuss the territory’s future.

Emerging from the highly contentious negotiations, Thatcher stumbled and fell on the steps of the Great Hall of the People.

A superstitious East Asia took it as a bad omen, and the Hong Kong dollar crashed. Within a week of the visit, the Hang Seng Index had dropped by 25 per cent, and a month later, had slumped by half.

“That weekend, I called all my managers in and said: ‘What do we do?’,” recalls Lo, whose batteries compete with brands such as Duracell and Energiser. “We decided that when the markets open on Monday, we will sell all our US dollar income for the next six months. Our income was (mostly) in US dollars, while our costs were in Hong Kong dollars.”

The following year, the Hong Kong Monetary Authority announced that the local dollar would henceforth be pegged to the US currency at US$1: HK$7.8, where it has stayed since.

Gold Peak’s projections for the year had been for the local currency to average US$1: HK$6. So the peg turned out to be a windfall, when US income was translated into the home currency.

That made for a good story and in 1984, Gold Peak sold shares and listed on the Hong Kong bourse. In 1995, it listed GP Industries in Singapore.

Four decades on, and Lo’s memories of that windfall have been replaced by worry – a sentiment shared by businesses in Asia, generally.

US President Donald Trump’s Liberation Day tariffs announced on Apr 2 have roiled markets, upended sturdy and reliable supply chains, and led corporate leaders into needing to do all sorts of business contortions.

On Nov 13, Gold Peak, which has three factories in Malaysia, two in Vietnam and an audio equipment plant in Thailand supplementing two facilities in the UK, announced a significant shifting of production capacity from China to South-east Asia to navigate US tariffs and rising geopolitical tensions. South-east Asia production is being ramped up to serve the US market, while its China facility will now focus primarily on the European and Asian markets.

Odd as parts of the arrangement may seem – China is much closer to the US – it is aimed at meeting country-of-origin requirements to minimise the US tariff impact, as tariffs on South-east Asian exports are generally lower than those placed on Chinese exports.

But that’s how business is being forced to operate in these Trump days.

“When the two biggest economies put up these huge tariffs on each other, it is almost like saying ‘Let us not trade’,” says the 75-year-old Lo. “Since I entered the business in the ‘70s, I have watched tariffs come down to between 5 per cent and zero in some countries. That gave consumers a lot more buying power.

“Today, the business environment has become so uncertain that companies will hesitate to invest – how do I make a business plan when I do not know what the tariffs will be next year? It all makes for a less efficient manufacturing system and higher costs.”

Companies such as his have no option but to be agile – and frequently take decisions from the gut, he adds. For a whole month after the Apr 2 tariff announcement, Lo says, he held nightly calls with his top managers in Asia and Europe.

One outcome of these discussions was the deeper thrust into South-east Asia, building on plans that were delayed because of the Covid-19 pandemic.

Moving factories around is not as simple as it may sound; GP’s Guangdong operations take in more than 3,000 components, all mostly reliant on a supply chain that was built up over 30 years. Aside from the tariff barriers, there are other issues companies have to tackle, such as restrictions placed by China on critical magnets.

“When I moved that facility to Thailand, I found that 80 per cent of my workers had never built an audio product,” he says. “Every now and then, we run into a fresh problem, like, say, rare earths needed for the magnets in our speakers. Even if you can prove to the Chinese authorities that we need the magnets for non-military use, approvals can take three weeks to arrive.”

The net result, he says, is that where one big factory in China was doing everything, additional factories outside China are now needed – even though the market is not growing enough to warrant a second plant. This means two plants essentially are now serving the same market size, not to mention the additional costs of staffing, shipping and planning.

“We have no choice but to defend our current core businesses. Otherwise, my foundation would be shaky.”

As for Chinese companies, he says, many are reluctant to cut back capacity at home. This leads them to offer extravagant price-cuts for their exports in an attempt to gain or retain market share. When seven in 10 companies do that, the result is that you may have dropped the price but gained little additional business. At the same time, it would have cost China significant goodwill in overseas markets because of its perceived predatory behaviour.

Lo’s solution for GP’s challenges is to somehow expand the market; a bigger thrust into the booming areas of East Asia, and India too, possibly.

Lo, whose profile in Hong Kong is much higher than his corporate role at GP, was chairman of the Hong Kong Polytechnic University between 2004 and 2009. He has also served as a non-official member of the Hong Kong Executive Council and has been involved in promoting the arts.

This last bit about the more refined aspects of living tempts me to dwell a bit on Gold Peak’s audio line.

Although only about a third of the overall business pie, the company’s audio products go into making the Fender guitars, and Celestion speakers, used by music legends such as Eric Clapton and the late Jimi Hendrix.

GP’s mission, Lo says, is to make sophisticated, high-end audio accessible and easy to install for the mass consumer – “amplified and untethered”, as he puts it.

“I equate that to the digital transformation of the camera business. Audio is going through the same transformation with all sorts of new digital and wireless technology coming in. We want to make a very sophisticated music system that is plug-and-play.”

Often, he asks young couples where the husband is a hi-fi enthusiast as to what use they put their elaborate home music systems at times when the husband is away for a period of time. How many wives would even touch the system?

“The wives would rather use the kitchen radio. It is much more user-friendly, and that is the future of audio. We call it Future 5 – we are going to make it five times more friendly.”

Britain, where GP has two factories, has a solid tradition in audio with names such as Garrard once dominating turntables, and Wharfedale in hi-fi speakers. GP’s stable of audio equipment, aside from Celestion, includes KEF, short for Kent Engineering & Foundry, best known for quality speakers and headphones.

Why are the British so good at this?

“I have long dealt with American, Japanese and British music companies,” Lo responds, reflectively. “One year after I acquired KEF and Celestion I noticed that in my UK engineering department at least half the engineers can play an instrument.

“When I go to Japan, they always show me this graph explaining the distortion is measured at 0.0001 and so forth. In Britain, they do it with their ears – British engineers are passionate about their music.”

Amid all the discordant notes that geopolitics rings these days, it is comforting to know that some people in industry still have an ear for the real thing. THE STRAITS TIMES