Contents » To score in the NFL, It pays to move 21 r Gap's Athieta iooics a iot like Lululemon 22 * Briefs: CNOOC engineers China's biggest North American buyout 23 (I Edited by James E. Eiiis Companies8(lndustries China Is Really Big. Its Brands, Not So Much • Mainland giants aim to develop products that can thrive in the U.S. and fetch higher prices • "If you just focus on the China brand, people will think it's cheaper and the quality is not very good" It was going to be the start of a Chinese invasion. Haier Group, a company from the northeastern Chinese city of Qingdao and the world's largest maker of air conditioners, refrigerators, and other appliances, opened a factory in Camden, S.C, in 2000. The plant was Haier's first in the U.S. and a big step in its strategy to expand beyond China and challenge Maytag and Whirlpool in American homes. A decade later, Haier is still trying to win over American consumers. It's had some success in niches such as minifridges for hotel rooms and college dorms, but it's yet to make inroads in mainstream products such as full-size refrigerators and washing machines. Haier's U.S. head count tells the story: about 250 workers at the South Caroli- na plant plus 220 working on U.S. sales and marketing. It has 80,000 work- ers worldwide. "We had a few ups and downs," says Shariff Kan, president of Haier America. Companies such as Haier, which had $23.6 billion in sales last year, may be little known in the U.S., but their brands are household names back in China. Some have become global lead- ers, thanks largely to their strong posi- tion in the world's second-largest econ- omy. TCL Multimedia Technology, China's leading maker of televisions, for instance, is now No. 5 globally for LCD TVs. But unless you've shopped online for a low-cost set lately, you've probably missed the brand. Now Haier and other big Chinese brands are trying again to make a splash in the U.S. Haier plans to open an R&D center in the U.S. to focus on larger-size appliances designed with American families in mind. "That will really open the door," Kan says. Haier is following the lead of Huizhou-based TCL, which opened an R&D center in Silicon 0^ Valley last year. The company, ^ ^ July 30-August 5,2012 Bloomberg BusinessWeek Companies&lndustries which started selling TVs in the U.S. under its TCL brand in 2011 (it previous- ly made sets sold under the RCA brand), also has a research lab with the Massa- chusetts Institute of Technology. Chinese phonemakers such as ZTE and Huawei Technologies are making deals with American carriers for their low-cost smartphones, and BYD, a maker of autos and solar panels partly backed by Warren Buffett, set up shop in Los Angeles last year. Even Chinese sporting goods companies Peai< Sport and Li-Ning are intent on establishing an American beachhead. Given the strong home market for made-in-China brands, why bother? One reason: the sheer market size and affluence that makes the U.S. a vora-.

1. Contents » To score in the NFL, It pays to move 21 r Gap's
Athieta iooics a iot like Lululemon 22 * Briefs: CNOOC
engineers China's biggest
North American buyout 23 (I Edited by James E. Eiiis
Companies8(lndustries
China Is Really Big.
Its Brands, Not So Much
• Mainland giants aim to develop products that can thrive in the
U.S. and fetch higher prices
• "If you just focus on the China brand, people will think it's
cheaper and the quality is not very good"
It was going to be the start of a Chinese
invasion. Haier Group, a company
from the northeastern Chinese city of
Qingdao and the world's largest maker
of air conditioners, refrigerators, and
other appliances, opened a factory in
Camden, S.C, in 2000. The plant was
Haier's first in the U.S. and a big step in
its strategy to expand beyond China
and challenge Maytag and Whirlpool
in American homes.
A decade later, Haier is still trying
to win over American consumers. It's
had some success in niches such as
minifridges for hotel rooms and college
dorms, but it's yet to make inroads in

2. mainstream products such as full-size
refrigerators and washing machines.
Haier's U.S. head count tells the story:
about 250 workers at the South Caroli-
na plant plus 220 working on U.S. sales
and marketing. It has 80,000 work-
ers worldwide. "We had a few ups and
downs," says Shariff Kan, president of
Haier America.
Companies such as Haier, which
had $23.6 billion in sales last year, may
be little known in the U.S., but their
brands are household names back in
China. Some have become global lead-
ers, thanks largely to their strong posi-
tion in the world's second-largest econ-
omy. TCL Multimedia Technology,
China's leading maker of televisions,
for instance, is now No. 5 globally for
LCD TVs. But unless you've shopped
online for a low-cost set lately, you've
probably missed the brand.
Now Haier and other big Chinese
brands are trying again to make a splash
in the U.S. Haier plans to open an R&D
center in the U.S. to focus on larger-size
appliances designed with American
families in mind. "That will really open
the door," Kan says. Haier is following
the lead of Huizhou-based TCL, which
opened an R&D center in Silicon 0^
Valley last year. The company, ^ ^

3. July 30-August 5,2012
Bloomberg BusinessWeek
Companies&lndustries
which started selling TVs in the U.S.
under its TCL brand in 2011 (it previous-
ly made sets sold under the RCA brand),
also has a research lab with the Massa-
chusetts Institute of Technology.
Chinese phonemakers such as ZTE
and Huawei Technologies are making
deals with American carriers for their
low-cost smartphones, and BYD, a
maker of autos and solar panels partly
backed by Warren Buffett, set up shop
in Los Angeles last year. Even Chinese
sporting goods companies Peai< Sport
and Li-Ning are intent on establishing
an American beachhead.
Given the strong home market for
made-in-China brands, why bother?
One reason: the sheer market size and
affluence that makes the U.S. a vora-
cious buyer ofthe higher-value goods
Chinese multinationals want to create.
"ZTE wants to be one ofthe top telecom
vendors in the world, [and] we cannot
have a top position without success in
the U.S. market," says Lixin Cheng, chief
executive oflicer of ZTE's U.S. operation.

4. Li-Ning, named for the Olympic gym-
nastics gold medalist, had disappoint-
ing sales when it opened a retail store
on the West Coast, but it's not giving up.
It's shifting its focus to online sales in
the U.S. through Digital Li-Ning, a joint
venture with Chicago-based marketing
firm Aoquity Group. Says Ray Grady,
the venture's general manager: "To be a
global brand, you have to show up and
be relevant in the U.S."
The most successful Chinese com-
pany to do that so far is Lenovo. It's the
world's No. 2 PC vendor, behind only
Hewlett-Packard, albeit largely due to
its strength in China. In 2005, Lenovo
bought IBM's PC business, but by 2009,
its U.S. market had dropped by almost
a third, to 3.4 percent, as it lost busi-
ness to Apple and low-cost Taiwan-
ese rivals such as Acer and Asustek.
To woo U.S. consumers, Lenovo has
begun a makeover. Because of their IBM
heritage, ThinkPads have been popu-
lar among corporate IT managers who
bought the dull-but-reliable laptops in
bulk for employees. The goal now is to
create a cooler, younger image aimed at
consumers so Lenovo can be "a brand
that is desired, not just dictated," says Jeff
Meredith, vice president for marketing.
The campaign was started last year
with print ads and online videos featur-
ing urban hipsters and thrill seekers

5. doing things like booting up a Think-
Pad while skydiving. Lenovo on July 25
unveiled a three-year sponsorship deal
with the National Football League that
"gives us a tremendous new forum to
introduce consumers to our products
and brand," said David Schmoock, pres-
ident of Lenovo North America. The
consumer focus is paying off: Leno-
vo's unit sales in the U.S. grew 6.1 per-
cent in the second quarter compared
with a 10.6 percent decline for the U.S.
PC market, reports market researcher
IDC. That gave Lenovo an 8 percent U.S.
market share, its largest ever.
Huawei has partnered with carriers
iVIetroPCS Communications and Leap
Wireless International to sell cheap
smartphones and is making inroads
with first-tier players such as T-Mobile,
which is working with the Chinese com-
pany on two handsets. ZTE had 4.8 per-
cent market share in the first quarter of
the year, according to CEO Cheng, put-
ting it No. 6 in U.S. handsets. In 2011,
ZTE introduced 11 models for the U.S.;
this year it will launch 18 more.
As recently as 2010, buyers would
have had a hard time knowing ZTE
made their phones since its handsets
carried only its wireless customers'
names. Now, Cheng says 90 percent
of ZTE gear sold in the U.S. has the

6. ZTE name, so American consumers
"can start to learn our brand."
Moving into more fashion-driven in-
dustries could be tougher. Peak Sport,
whose athletic footwear is sold in more
than 6,000 stores in China, this winter
opened a 3,000-square-foot store
in Culver City, Calif., and another in
HoUjrwood showcasing its shoes. They
Rising Profiles Beyond the Mainland
Some of China's largest brands are making
more money abroad than at home
Share of annual revenue
China .Rest of the world
Huawei
($29.4b total)
Lenovo
($29.6b)
Peak Sport
($682m)
are the first steps in a plan to roll out
flagship stores nationwide while also
trying to win shelf space in U.S. chains
such as Foot Locker. In March the Chi-
nese company became a sponsor of
the Drew League, for young basketball
players in Southern California, to raise
its profile.

7. "Consumers want new brands,"
says Sujia, head of Peak's U.S. unit.
"They say everyday it's just Nike and
Adidas. It's boring. Consumers don't
care where you come from." Still, Peak
doesn't draw attention to its Chinese
roots. Says Su: "If you just focus on the
China brand, people will think
it's cheaper and the quality is
not very good."
Having brands mostly at the
low end ofthe market is a long-
term problem for Chinese com-
panies, says Anil Gupta, a professor at
the University of Maryland's Robert H.
Smith School of Business. "Their basis
of comparative advantage is not prod-
uct or service, it's lower price," he says.
"That creates a challenge when trying to
build a brand image that's about more
than low price."
Korean electronics brands such as
Samsung and LG were able to make
that jump, thanks to a multidecade
effort to boost R&D and match what
rivals from Japan could offer. That
could be harder for the Chinese in to-
day's environment. "When the market
isn't growing," says Gupta, "the compe-
tition is going to get more intense."
ZTE's Cheng says his company
will try to overcome any resistance to
made-in-China brands by presenting

8. itself as a partner of trusted U.S. com-
panies. "You cannot just look at ZTE
as a China brand," he says. "The core
technology in our product is from U.S.
companies like Qualcomm, Texas In-
struments, and Google." Besides, says
William Plummer, Huawei's Washing-
ton-based vice president for external
affairs, Americans understand that
many of their favorite brands rely on
Chinese factories run by Foxconn and
other low-cost manufacturers. "Wheth-
er it's an Apple device, a Nokia device,
or a Huawei device," he says, "they're
probably all built by Foxconn."
—Bruce Einhorn
The bottom line China's biggest brands are often
unknowns in the U.S. Many of them are trying to
change that and finding it challenging.
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