If WACKER wants to be accepted in a major market as crucial as China, the company really needs to develop its own production capacities. WACKER’s philosophy is that if you want to do business globally, you’ve got to put down roots in local markets. “We work to global environmental protection and occupational health and safety standards, but if we want to satisfy our customers, we have to be unequivocally local in our thinking,” explains WACKER President and CEO Dr. Rudolf Staudigl.
That WACKER has beaten an unorthodox path to this goal is no surprise – it shows the breadth of possibilities offered by globalization. What has already proved a success in the semiconductor field with its Korean partner Samsung in Singapore is here being repeated with American rival Dow Corning. The two companies are jointly constructing an integrated chemical site in the world’s most important growth market for silicones. When the Zhangjiagang plant reaches full capacity in late 2010, it will produce around 210,000 metric tons of siloxanes and pyrogenic silica annually.
There is one sunny day in the fall of 2003 that Dr. Udo Horns remembers very well. He was standing in the midst of overgrown grass and peanut plants, dressed in a white shirt and dark tie, on a huge expanse of waste land in an industrial park in Zhangjiagang, China. A few hundred meters behind him, a dike held back the mighty kilometer-wide Yangtze River. Horns lifted a stick and pointed to the west. In his mind’s eye, the 53-year-old could already see a new industrial facility rising up out of the earth. “We’ll build the pipe bridges here, the warehouse and administrative center over there, the grinding plant and furnaces will go here. I could visualize the plant, like a man building a house, standing on his lot saying, ‘We’ll have the lounge here, we’ll put the kitchen over there,’” recalls Horns, a chemist by training.
Today, Udo Horns’ vision is reality. Horns, who has worked for WACKER for ten years, was responsible for making the joint venture with US company Dow Corning in Zhangjiagang happen. The result: the two companies were able to bring the first phase of the new pyrogenic silica and siloxane plant on line in November 2008. Total investment on the one million square meter site is US$1.2 billion. With this investment, WACKER is showing its commitment to the key Chinese growth market not merely with sales and marketing, but with its own production facilities. In Horns’ opinion, this is money well-invested, “If Chinese society continues to develop as rapidly as it is at present, it’s not hard to imagine the scale of the opportunities China offers for our products.” The rising per capita income in China means that increasing volumes of high-quality goods containing a higher quantity of silicones are being purchased. Horns does a quick back-of-an-envelope calculation; in the US, annual siloxane consumption for cosmetics, care products, auto construction or household goods is two kilograms, in Germany it is 1.2 kilograms – in China it is just ten grams.
Efficient Utilization. Although WACKER and Dow Corning are competitors both in China and elsewhere, they are working together on a unique project to produce raw materials for use in downstream processes within China. When it gets to the point of manufacturing products from these raw materials, the two companies go their separate ways. The primary benefit for WACKER is that the sheer size of the plant reduces production and infrastructure costs. Dow Corning in turn benefits from WACKER’s vast experience with the pyrogenic silica production process. Pyrogenic silica is produced from the waste from siloxane production. This results in a cycle which utilizes 90% of all by-products, which would otherwise require disposal.
Dinner as a Problem-Solving Tool. The entire project has been coordinated by a steering committee and various working groups. The groups, which met up to four times a year, drew up investment budgets and clarified questions relating to taxation and regulations. A particularly important issue in China, says Horns, is that “out here you need to have a special team to maintain contacts with the regulatory authorities and state officials.” Taxes and land prices are negotiable, and customs duties and fire prevention regulations are also much discussed. It is common to get together to discuss such issues over food, which has great cultural significance in China, he explains. “I must have sat talking about the plant with different groups of people at two or three dinners a week.”
Horns is convinced that it is not enough to merely accept the laws and regulations of a country in which you wish to sell your products. Globalization only works where businesses build on the foundations of the culture and traditions of the country in which they are operating.
In Zhangjiagang, this has, he is convinced, been a great success. “We have created the best integrated production system I could possibly imagine,” he says, standing in the middle of the plant, at approximately the spot where, five years earlier, he found himself pointing in the direction of bushes and bare earth. Horns plans to return now and again in a few years time, once production is at full strength. “When you develop something like this, you can’t help but get attached to it; you want to know what happens to it down the line,” he says.