Online Extra: Q&A with Legend's Yang Yuanqing

The CEO of China's leading PC maker wants to move into high-end servers and take his brand offshore: We need time to improve the whole image of Chinese brands in the world.

Legend's Yang Yuanqing has been busier than usual over the last few months. The 36-year-old took over as CEO and president of Legend Holdings (LGHLY ), China's most successful computer company, in May. In early June, he spun off Legend's distribution and systems-integration unit, Digital China, raising $48 million on the Hong Kong stock exchange. Then, on June 11, Yang closed a $200 million deal with AOL Time Warner to jointly develop China's Internet market. (see BW Online, 6/18/01, "Legend's Home-Field Advantage")

BusinessWeek Editor-in-Chief Stephen B. Shepard, Asian Regional Editor Mark L. Clifford, and Beijing Bureau Chief Dexter Roberts, recently met with Yang at the company's headquarters in the Shangdi Information Industry Base in northwest Beijing. Taking some time between meetings, the intense Yang discussed Legend's fast-growing business and plans to diversify. Following are edited excerpts from the discussion:

Q: How do you explain Legend's impressive successes to date -- you now hold close to 30% of the market, which is several times the 9% held by your closest rival, IBM. And to what degree has government support contributed to your sales?

A: In the past, the media has attributed our success to government support. In reality, it has to do with our superior management and a better understanding of this market. Actually, the government has never given us preferential policies in terms of tax rates, import tariffs, or purchasing.

In contrast, some local and provincial governments, in order to attract more investment, give foreign companies very preferential tax rates. If you look at Legend's market share, you'll see we're very successful in the consumer market and in selling to small and medium-sized enterprises. In both areas, it's difficult for the government to interfere.

Q: How will you continue to keep your lead domestically?

A: At home, I do believe we still have some advantages in price, in providing localized features, as well as in the services we can offer our customers. Even if computers continue to become more of a commodity, I still believe we'll have our price advantage.

Q: What are Legend's goals over the next few years?

A: For the next one or two years, we'll continue to focus on the domestic market. That's because China's domestic market is still growing very fast. After two to three years, we'll start to increase our efforts to go abroad. Of course, we already are selling abroad. Currently, we already are selling components and motherboards to the U.S. In the future, we'll sell more PCs and more branded products instead of OEMs [contract manufacturing] for foreign companies.

The Chinese brand image is not very good. We need time to improve the whole image of Chinese brands in the world. We hope that Legend can help improve the reputation of Chinese products.

Q: What does the future look like?

A: The development of the Chinese IT industry will be quite similar to the U.S. In the future, the applications-outsourcing business will be very important here. The American market is already mature, China is just at the stage of infancy.

Of course, everyone wants to come into the China market. Oracle is just one example. But the weakness of all companies is in their difficulty localizing [their products and operations] while keeping their costs from being too high.

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