Reflection -- The Truth Behind the Seizure of Southern High-Tech

Author: Zhao Qi
Publisher:
Publish Date: 2006-09-01
Features: This is a heavy and thought-provoking textbook that first publicly discloses the landmark journey of China Mobile Communications Development's Southern High-Tech from nothing to something, from brand creation to success, and from peak to collapse. Southern High-Tech, a once-loud domestic mobile phone brand and a state-owned enterprise established with modern systems, rose to become one of the top 50 Chinese electronic information enterprises, the top four domestic mobile phone companies, and a brand value of 3.899 billion yuan within just a few years. The speed was astonishing—how did Southern High-Tech achieve this? However, a domestic mobile phone dominant brand enterprise with annual sales exceeding 4 billion yuan was sealed by the court with just a 20 million yuan acceptance draft. Behind the seizure, the massive debts of Southern High-Tech began to surface. Why did Southern High-Tech fall into this situation? This book is a definitive case study analyzing the survival rules and dilemmas of domestic mobile phone companies under the state-owned enterprise system, as well as an excellent read on corporate management, marketing, R&D, manufacturing, and strategy. It is also a textbook that comprehensively examines the life cycle of a company. It prompts us to re-examine globalization from the perspective of national interests: should there be an alliance between domestic and foreign brands, or should a new mechanism be established for win-win cooperation between local brands and foreign brands? And what exactly have we gained from the strategy of "market exchange for technology"? Can Chinese enterprises unite?
Changsha Intermediate People's Court Anger-Induced Factory Seizure
On the morning of June 23, Southern High-Tech was holding an emergency board meeting in the Guangzhou Economic and Technological Development Zone, urgently discussing the restructuring plan for the company. At this time, Southern High-Tech was like the Balkans before World War I—any minor mistake could trigger an explosion like a powder keg. At this moment, two female judges from the Civil Second Tribunal of Changsha Intermediate People's Court—Zhan Zhiliang, Chen Jia, and clerk Lu Qing—as well as a staff member and lawyer from Changsha Commercial Bank, totaling five people, sealed the warehouse where Southern High-Tech stored finished mobile phones. This sudden seizure occurred because Changsha Commercial Bank's Ruichang Branch had repeatedly failed to collect payments and had applied for a preservation order with the Changsha Intermediate People's Court. According to legal procedures, the court sealed Southern High-Tech's factory, production equipment, and other fixed assets worth 25.5 million yuan, equivalent to the value of the overdue payments.
After affixing the seals to the warehouse, the execution judges from Changsha Intermediate People's Court communicated with the leadership of Southern High-Tech. The court agreed to give Southern High-Tech 24 hours to raise the funds. If they could pay back the 20 million yuan within that time, they would lift the seizure. After the communication was settled, the judges returned to their hotel. At this point, Southern High-Tech fully realized the impact of the seizure on them. Paying back 20 million yuan now was like a fairy tale, because at the Guangzhou Economic and Technological Development Zone Court, there were over a dozen economic lawsuits involving Southern High-Tech that had already been filed, judged, and were awaiting execution. Therefore, to prevent other courts from seizing assets again, the Guangzhou Economic and Technological Development Zone Court had already implemented a protective seizure of Southern High-Tech. That same evening, the court sealed Southern High-Tech's production workshop, equipment, raw material warehouse, and finance room. Meanwhile, some employees from Southern High-Tech's headquarters were transferring part of the company's assets outside. However, during the transfer, around 10:00 PM, the staff member and lawyer from Changsha Commercial Bank who had accompanied the judges from Changsha Intermediate People's Court to execute the seizure arrived at Southern High-Tech and saw the company in the midst of a large asset transfer. They immediately reported back to the judges.
The next morning, when the judges from Changsha Intermediate People's Court arrived again, they found that the production workshop and equipment had been sealed by the Guangzhou Economic and Technological Development Zone Court. Tensions arose at that moment. Although some Southern High-Tech management personnel explained to the execution judges that the involved amount was only around 20 million yuan and that the entire factory worth billions should not be seized, the court execution officers replied, "I don't know how much you're worth!" At that time, the execution judges from Changsha Intermediate People's Court believed that Southern High-Tech was deliberately avoiding them, so in anger, they affixed seals to all areas that the Guangzhou Economic and Technological Development Zone Court had not seized, including the elevator, all offices, and even the finance room and Chen Zhen's office. As a result, no one from Southern High-Tech's headquarters could enter the office building. The entire company, including senior leaders, watched the seals from the Changsha court firmly attached to their office doors, yet they were powerless. This included some places where seals were simultaneously affixed by the Changsha Intermediate People's Court.