Story of Successors①: Chongqing Sanxia Cable Decisively Transforms to Meet Market Needs

A worker is busy on the production line of Chongqing Sanxia Cable (Group) Co., Ltd in Jiangjin district, Chongqing. (Photo/Qi Lansen)

Chongqing—In the Chinese mainland, the first generation of entrepreneurs from the country's reform and opening-up era is now facing the challenge of business succession. He Yaowei, who took over his family business less than a decade ago, increased its output value from 600 million yuan ($84.87 million) to 2.6 billion yuan.

"Simply preserving the wealth and business is unsustainable. A passive, 'lie-flat' approach to succession is a dead end. The second generation of entrepreneurs must embrace the same pioneering spirit as the first generation," he emphasized during a recent talk.

Born in 1990, He began assisting his father, He Jincun, with company matters as soon as he entered university in 2008, gradually becoming involved in management to prepare for succession.

In 1993, He Jincun founded Chongqing Sanxia Cable (Group) Co Ltd. Soon after, the real estate market experienced rapid expansion, bringing huge growth to downstream industries like civilian cables and booming production and sales for the company.

However, He Yaowei was the first to propose conditions for taking over during the succession ceremony in 2013.

He believed that the real estate industry could not sustain high growth indefinitely and that the civilian cable market would inevitably shrink. Given the production capacity at the time, the industry was likely to face cutthroat price competition, which could crush many cable companies.

"My condition for taking over was that the company's business must gradually transition to industrial cables," He Yaowei stated.

This wasn't the first time He Yaowei expressed such views, but his assertive stance during the succession ceremony caught He Jincun off guard.

China's real estate sector declined due to the impact of the global financial crisis in 2008. This severely affected the civilian cable industry, which saw a significant backlog of unsold products. This prompted many related companies to start considering transformation.

At that time, China launched a 4 trillion yuan stimulus package, which included accelerating the construction of major infrastructure such as railways, highways, and airports and promoting independent innovation and structural adjustments.

From this period, the father and son began to focus on the "new opportunity" in industrial cables.

Compared to the relatively low barriers of entry in the civilian cable market, industrial cables are much more complex. Their operating conditions often involve high temperatures and humidity, requiring products with better flexibility, oxidation resistance, and corrosion resistance, as well as different insulation materials.

Transitioning to industrial cables means extensively replacing existing production equipment. Even more challenging, the transformation in manufacturing often requires collaboration across the entire industry chain. Convincing upstream suppliers and downstream distributors to transition together is a massive undertaking.

All of this made He Jincun hesitant and indecisive. Not transforming meant waiting for a slow demise, while transitioning could lead to failure. It wasn't until he was "pressured" during the succession ceremony that he made his decision.

Another significant reason that compelled He Jincun to decide was his son's unwillingness to take a passive approach to succession; He Yaowei insisted on forging his own path. This exploration and decisive entrepreneurship spirit reminded He Jincun of his younger self.

He Jincun started his business career at the age of 17, carrying large bags filled with Wenzhou hardware products like screwdrivers and switches as he traveled by train and boat across the country to sell them. In 1988, he founded Chongqing Hengyuan Electric Appliance Co., Ltd., the first company established by a Zhejiang entrepreneur in Chongqing.

After decades of hard work, He Jincun has always believed that Daring to fight is essential for achieving success. Now, in his son, he sees that same valuable spirit. No matter what challenges lie ahead, he believes he should let his son take risks and fight to overcome them.

He Yaowei still has three major challenges to address in transition. The first one was to innovate and develop new products for the market.

In simple terms, producing civilian cables involves taking raw materials like copper and aluminum bars, extruding them into thin wires, and then twisting these wires together, all encased in insulation. However, industrial cables are different; they must undergo tolerance testing in various temperatures and humidity levels and be assessed for tensile strength. Every aspect must be precisely calibrated to allow users with different needs to use them based on specific parameters.

In other words, when making civilian cables, the Chongqing Sanxia Cable R&D team primarily focused on adjusting the production line's mold to create wires of varying thicknesses. When it comes to industrial cables, tolerance testing alone can involve dozens of experiments.

Faced with such a demanding task, the R&D personnel were reluctant. Many even volunteered to apply for transfers to other positions.

"Either adapt to the transition or leave," He Yaowei decisively declared at a staff meeting when he realized he couldn't persuade these individuals. He then instructed the HR department to issue a recruitment notice, offering high salaries to attract talents from across the industry.

As a result, over 30 positions were completely overhauled, leading to the establishment of a research and development team with an average age similar to that of He Yaowei.

He personally oversaw the R&D efforts. After more than eight months, a new fire-resistant cable was successfully developed. The company opened the door to the industrial cable market for the first time in over 20 years of producing civilian cables.

Following this, this young R&D team also launched dozens of types of industrial cables, formulated two national standards, and obtained multiple international and domestic certifications, which prepared the products for mass market entry.

The second challenge was high-standard production. Unlike civilian cables, any quality issues with industrial cables can lead to significant accidents. For cable manufacturers, this could result in immediate elimination from the industry. Therefore, transitioning to industrial cables required a large-scale replacement of existing equipment.

He Yaowei persuaded his father to invest nearly all of their life savings in building new facilities, installing advanced production and testing equipment, and establishing over a hundred new production lines.

He Yaowei said that a fully connected digital workshop utilizing 5G technology improved the product yield rate in the new factory by five percentage points compared to the old factory. Coupled with stricter outgoing inspections, the defect rate was essentially reduced to zero.

The third challenge He Yaowei faced was selling the products. While civilian cables are typically sold through distributors with a straightforward selling approach, industrial cables target large clients who require on-site technical consultation during installation and ongoing service afterward.

To address this, he assembled a professional sales team of over 50 people. Each salesperson needed to have an in-depth understanding of their products and be familiar with how the products would be used in different operating conditions.

The strategy for selling products shifted from the traditional approach of "finding people first, then identifying needs" to the opposite: first, identifying engineering projects, studying their technical requirements for cables, and then proactively reaching out to potential clients with targeted product recommendations. This approach significantly increased the number of deals.

Through the restructuring of the entire production system, Chongqing Sanxia Cable (Group) Co. Ltd gradually opened up the market for its industrial cables. It successfully participated in major projects such as Beijing Daxing International Airport, Wenzhou Urban Railway, Raffles City Chongqing, and Chongqing Rail Transit and exported to over 20 countries and regions.

As the market share expanded, some of Chongqing Sanxia Cable's raw material suppliers also began transitioning to provide industrial cable components. A stable supply chain, built through collaboration between upstream and downstream partners, has started taking shape.

Starting in 2021, the real estate market took a downturn, leading to a significant sales decline for many civilian cable manufacturers. However, after years of capacity adjustments and market expansion, Chongqing Sanxia Cable's sales revenue from industrial cables now accounts for nearly 50 percent of its total revenue. In 2023, the company achieved a total sales revenue of 2.6 billion yuan, realizing a year-on-year growth of 12 percent.

(Wu Gang, a reporter from Chongqing Daily, contributed the Chinese version of this report.)

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