From Cork to China, PCH is blazing a trail worldwide
The company founded by Irishman Liam Casey does everything from product development, to packaging and much more besides
Liam Casey: “China is still cheaper and the best place, if you take quality, access to raw materials, a skilled workforce and global logistics.”
When rock’n’roll legend Neil Young wanted to change the way people hear music, he turned to Liam Casey, founder and CEO of the Cork, San Francisco and Shenzhen-based supply chain company PCH, to make his Pono music player.
Earlier this month, the crowdfunding campaign for Young’s Pono Music raised about €4.5 million. Corkman Casey, who visited Young’s ranch during the development process, was not surprised.
“He’s very attentive. He listens,” says Casey, juggling three iPhones during our interview in the southern boomtown of Shenzhen where he has been based since 1996.
PCH does everything from product development, to packaging and much more besides. It develops products for multinationals, including Apple, and operates a number of other programmes such as the hardware start-up accelerator Highway1, which help entrepreneurs bring their inventions to market.
He is probably Ireland’s biggest exporter in China, with 4,000 employees and sales last year were close to $1 billion.
When he arrived in 1996, Shenzhen, a former fishing village singled out by the late Deng Xiaoping as a focal point for reform in China, there were about three million people. Today it’s something like 18 million unofficially.
“In commerce today, geography is history. We’re bringing down the barriers for start-ups, which makes it history. We wrap it around our programme in San Francisco – there are pools of expertise around the world that you may not have access to in your local markets, like venture capital or tech experts, and we make that possible. We have access to the factory network here in China, and that is how we make geography history for those start-ups. They can be from anywhere,” he says.
During the interview we realise it’s been 10 years since we first spoke, and we turn to the theme of changing China.
It’s called hardware because it’s hard, he jokes, but Casey insists the low-cost argument doesn’t really carry water anymore, and he believes that if PCH were looking for lowest cost, they would have gone elsewhere.
PCH’s fulfilment centre is three hours from all of the factories the companies work with in Shenzhen, and is three days from 90 per cent of the consumers on the planet that buy the product.
When talking to customers or potential clients in Silicon Valley, one of the key points is that he can not only manufacture products in China for his start-ups, but also sell the same products in China.
But he feels there is a lack of understanding about how important the Chinese market can be and a sea change in understanding is needed in America.
“It’s got everything to do with distribution, and the contracts that the big box retailers put in front of hardware entrepreneurs in Silicon Valley make it impossible for them to raise money from the venture community. They are so onerous that no investor will invest in a start-up because the risk is too great.
“There is a six-month exposure of inventory, raw material and credit terms, and here in China they don’t have that. Here they don’t have that. They ship direct. The e-commerce market here is so mature, with Taobao and T-Mall [Alibaba sites] and others, they don’t need pipelines of inventory.”
Hardware has become a bit of a dirty word in the tech investment community. Casey is having none of it.
“When I talk to start-ups in Silicon Valley, they want to make app-cessories in the US. The Chinese are very interested in core devices. They want to make phones or tablets. The ambition, the sense of what’s possible, here is so much bigger. When I tell them this in Silicon Valley, the first thing they say is they need to bring manufacturing back to America,” says Casey.
China’s growing prosperity has made manufacturing here a more expensive prospect, and there is a perception that the factories are somehow gone to Cambodia or Vietnam. But the government has been trying to move things up the value chain and that is happening in Shenzhen.
“What you have here now is a really skilled workforce. There is a maturing going on. This is still a very young society and it’s becoming more mainstream. There’s an opportunity for the western world to supply products in here,” says Casey.
“When I hear the big factories are moving out of Shenzhen, and some of them are moving out, it’s great, because the talent wants to stay. The people want to stay, they don’t want to go. They came here to Shenzhen 10 or 15 years ago, they’ve grown up here. To them this is the best place in the world. They don’t want to go to Shanghai, to Guangzhou, to Beijing, they want to stay here. It’s a very different atmosphere, very much a can-do place. Very fast.
“When I speak at Shenzhen University, I ask who’s from Shenzhen as a first question – everyone puts their hand up. Ask them who’s born here – no one puts their hand up. Everybody comes here chasing a dream, unsupervised and alone.
“It takes them about six weeks to understand, I’m here on my own, doesn’t matter where I’m from, I’m going to stay focused and get things done. I’m going to stay out of trouble. There’s no trouble here. It’s a very different feeling to anywhere else.”
There is huge turnover in employees in Shenzhen, especially after Chinese New Year when people often change job for various complicated reasons. However, PCH has seen lower turnover than other firms.
“You’ve always had turnover here in Shenzhen. The efficiencies in the factory have become very good, especially with the products we are doing. People care more about the work, about what they are making. Since we started, we’ve made working practices a priority.”
Casey’s company makes it easier for venture capitalists to get involved in the tech business.
“If I was a venture capitalist and I had the opportunity of investing into something like Instagram or a hardware company, I’d invest in the software company. This is the traditional model.
“Our model makes it easier for them to invest in hardware. It de-risks it for them. We want start-ups putting investment into marketing, branding, product development and building a great team,” he says.
“We are changing the way products are brought to market. We are making it easier for a start-up to fund that working capital. That is our 18 years on the ground here, and understanding how to do that and leverage that, that’s our competitive advantage. It’s also the people we have, the understanding.”
PCH is looking for premium products that can ship directly to a consumer.
“It’s about getting the quality right – I’m very happy to pay a premium to any factory that can make the quality products we want,” he says. “Net-net, China is still cheaper and the best place, if you take quality, access to raw materials, a skilled workforce and global logistics. We can take a product from here and ship it anywhere.”
Casey believes PCH’s platform is similar to Netflix.
“If you want to watch House of Cards when it’s released, you have to sign up to Netflix. I’m saying the same thing. If you want to buy this next device, you can buy it on eBay after someone decides to sell it, but you’ll pay a premium.
“But if you sign up to our Shoplocket community, which focuses on early adapters of technology products, you get early access to these products.”
Casey says how his 10 years in the rag trade informed his business sense.
“You would go to Paris and select fabric and it was amazing, the whole range of colours. You would take it back to Ireland and make a product, a shirt, a suit or a pair of trousers.
“You would select this amazing range of fabrics, anything you’d want. You could buy 60m or 600m. That, in the tech world, that doesn’t exist. You couldn’t go to a fair and buy the raw materials to make what you want.
“But today you can. There is Raspberry Pie and Arduino. You have software solutions that sit on top of those. There is now an eco-system of raw materials to be creative and innovative in technology that you didn’t see before and that’s what making it creative and exciting.”
He thinks that being Irish is like a secret weapon. “Ireland has this uniqueness that we have to protect, this sense of curiosity. We come from an island with a small market place, and if you want to compete globally, you are well prepared. It’s a very competitive landscape.”
Casey urges Irish companies to think globally and to commit to Ireland.
“Any company that thinks global has got to think of a global marketplace. We see a lot of our customers focused on cities. Cities are a big focus. Cities of the world, not of a country. When you build a product, you think about people in cities of the world, not of a country. I think that’s the way we need to think about it.
“PCH is about creation of unique content. It’s about enabling entrepreneurs to bring products to the market. It’s a platform that’s end to end – you go from the idea through to the product, delivery to the consumer, concept to consumer.”
The hardest thing in technology is innovation, he says, and to bring out new products year after year after year.
“Our competitive advantage is that we have access to all these incredible entrepreneurs and technology, who want to bring these products to market.
“We are working with them to do it in the most competitive and efficient way possible – we don’t want inventory sitting in warehouses all over the world.”