May 20, 2005 By Brian Robinson

When Beaverton-based Audio Precision Inc. started up in the 1980s, China was not even on the screen as a market for its audio test and measurement products. It was a communist nation known for cheap and shoddy consumer goods, not as a home for quality technology.

In 2005 things couldn’t be much different. China has become a magnet for consumer electronics and PC makers around the world, attracted by its low costs and increasingly savvy engineers and manufacturers. And it’s a fast-growing market for high-tech items themselves, as a more affluent population starts to demand the material goods many Westerners take for granted.

The country has become a central feature in Audio Precision’s own growth plans. China already generates more than a third of the company’s Asia-Pacific revenue, which grew 50 percent in 2004 and now contributes over half of Audio’s total orders. The company’s total annual revenue is close to $20 million. “And we see china in the future becoming its own technology producer and manufacturer,” said Bruce Hofer, Audio Precision’s chairman and co-founder. “So that makes it imperative we understand what is going on there.”

China: Manufacturing
It’s all a big change from October 1984, when four former Tektronix Inc. engineers and managers decided to try their chances with a business that Tektronix itself felt was too much of a niche area to be worth its trouble. The United States and Europe then provided almost all of Audio Precision’s income, with Asia, mainly Japan, a very small splinter market. At the time much of the company’s market for audio test and measurement instruments, which are used to make sure that electronic systems can actually produce the sounds they are supposed to, consisted of the broadcasting industry.

Everything changed with the expansion of the PC and consumer audio industries in the late 1980s and early 1990s. The emphasis moved away from Europe and then the United States as the manufacture of these digital systems switched to Asian countries such as Japan, Korea and Taiwan. However, Audio Precision didn’t look to China, especially until the dotcom bubble burst and the global high-tech market slammed into recession after 2001. Then Audio needed new markets to replace revenue that had dried up elsewhere. “It was out of that need that we started to get really aggressive with China,” said David Solomon, the company’s vice president of sales and marketing. Fortunately, Audio Precision was already familiar with at least some of what’s needed to sell into China.

Since its business is based on meeting the particular technical needs of customers rather than selling standard boxes to them, the sale depends much more on face-to-face contact with a customer where the company’s executives can more easily convey the technical knowledge that’s needed. That means company officers practically live on the road. They averaged around 100 face-to-face contacts with customers each month in 2004.

That kind of experience fits well with what’s needed in China. “In Europe there’s much more of a separation between the need for business and personal contact,” said Dave Post, director of sales. “But in Asia they have a hard time doing business, particularly with a foreigner, unless they know the person.” That doesn’t mean you can rely just on contact with the Chinese customer, said Hofer. Lots of manufacturing companies in China are owned by the Taiwanese, for example, particularly in the case of PC manufacture. So selling to the Chinese also means making sure you have regular contact with those Taiwanese owners. Plus, the Taiwanese in turn get business from all around the world.

“The decision makers can be anywhere,” said Alan Miksch, Audio Precision’s CEO and president. “Our role is to find those decision makers.” Eventually, as the Chinese turn more to their own high-tech innovations, the research and development decisions that drive much of Audio Precision’s business will be taken by the Chinese manufactures themselves. That’s when executives feel much of the effort the company is now putting into seminars and educational visits for Chinese customers will pay real dividends.

Another avenue Audio Precision is beginning to exploit is the Internet, which Hofer said is “alive and well” in China even though the infrastructure is not as complete as in the United States, Europe or Japan. The company’s Web site includes many technical and product papers that can be downloaded, some of them translated into Chinese. Visitors have to register to be able to get to these resources, which generate leads that are then fed to Audio Precision’s Chinese distributors. That helps to establish a better picture over time of the customers and what their needs are in terms of the expertise the company can offer, said Solomon. “In February alone we had over 500 well-qualified leads,” he said. “The Web is a fantastic avenue for products like ours.”

Portland-based Overland Agency Inc. helped design Audio Precision’s Web strategy. Arve Overland, chief executive and executive creative director, said the Internet is “absolutely the first” channel that companies going into China should consider. It’s about helping to build a knowledge brand, he said. “We see a lot of traffic going through Google and other search engines,” he said. “It’s always about companies they don’t know about, and [the Internet] is one of the most effective ways of reacting to that.”

A part of the Web design also includes an extranet that Audio Precision’s Chinese distributors have some direct control over so they can have the information about leads and potential customers in real time.

Despite all of the travel and Web-based resources, however, some things need to be done the old-fashioned way. Post is moving to Hong Kong for several months with his family to see how feasible it will be to set up a permanent presence there. “There is an advantage of being there in the China time zone that you can’t get by communicating by such things as email,” Post said. “One item took me three months to sort out that way.” If this pilot period works out both for the company and Post’s family, then the arrangement will probably be extended, said Miksch.