Wednesday, September 3, 2008

The Pixar of China?

The Telegraph in the UK has just posted a very interesting article about Imagi, the studio responsible for the upcoming Astro Boy CG animated film as well as last year's TMNT. It's an insightful look at what the company is like, and gives a brief history of how it all started.

(SPOILER: It was Christmas Trees.)

It's a pretty cool story about how a company can change so drastically, do some really cool stuff, and serve as an example for other companies in the country. You can read "Astroboy helps Imagi branch out to become China's Pixar" or click the link below to read an archived copy right here on this website.

Astroboy helps Imagi branch out to become China's Pixar

Last Updated: 2:13am BST 02/09/2008

Animation giant once made plastic Christmas trees, writes Malcolm Moore in Hong Kong

Eight Commercial Tower, a dusty, grey building in an old Hong Kong warehouse district, is the headquarters of one of China's most bizarre companies.

In the past decade, Imagi has switched from being the world's largest plastic Christmas tree manufacturer into China's answer to Pixar, the computer-generated animation studio.

In its previous incarnation, named Boto, it shipped more than six million trees a year and was a prime example of the Chinese manufacturing miracle.

Some 10,000 workers laboured at its plant in Shenzhen, turning out 400 different types of trees, including green, gold, frosted with snow, and sparkling with fibre-optic lights. Some had real pine cones while others rotated and counted down to New Year's Eve before launching into Auld Lang Syne.

Now Imagi is a symbol of China's transformation from a low-cost, low-skilled sweatshop into a powerful competitor in high-technology industries. The cost advantages of making toys, cigarette lighters and other knick-knacks can easily be replicated with 3-D movies, it appears.
# China's property white elephant
# Why Shanghai's food rules supreme

Fingerprint readers and facial-recognition scanners guard the doors of the Imagi office. Inside, 450 animators are turning out computer-generated movies in half the time, and for half the cost, of those made by Pixar or Dreamworks.

"We hired lots of our staff from the street. They were taxi drivers and convenience store clerks," said Yan Chen, the lead CG supervisor, who defected back to China after studying in the United States and working for Dreamworks. "We trained them up here. The ones who were talented took 10 days, but others took up to six months," he boasted.

The fledgling company has already scored a hit. Last year's Teenage Mutant Ninja Turtles, made under the aegis of Harvey Weinstein and distributed by Warner Brothers, took $100m (£55.5m) at the box office and cost $35m to make. The average cost of a Pixar movie is $94m and it is $130m for Dreamworks.

Imagi's success has lured talent including Tim Cheung, who made his name on the three Shrek films, as well as Nicholas Cage and Bill Nighy, both of whom are starring in its latest offering, Astroboy.

"We have Asian work values. People actually care about their work and it becomes a part of their life. Western workers go from nine to five.

"But every hour here our staff put in a lot of heart. Animation is a staple diet for Asians. We grow up with them and we are still into them in our thirties," said Mr Chen.

He added that a host of Chinese studios are following in Imagi's footsteps, thanks to government grants in five key "animation" areas on the mainland.

There are rumours that big Hollywood studios are outsourcing their work to the east coast of China. "At the moment they value process over creativity," said Mr Chen, eager to play up Hong Kong's westernised mindset as a competitive advantage.

Across three shaded floors, Imagi's staff are hunched in front of monitors, drawing, colouring and lighting the cast of Astroboy. Their average age is just 24, and many seem far younger. Their desks are crowded with manga models, Batman figures and fluffy toys.

The decision to take the far-fetched leap from manufacturing to digital movie-making was made by Kao Waiho, 31, Imagi's chairman, whose office boasts a Robocop figurine and a cigar humidor inlaid with a skull and crossbones.

His father, Kao Cheungchong, had built the Christmas tree business, but had become anxious that more and more people were switching from fake to real trees. Wal-Mart had cut the prices it was paying.

In 2000, Kao junior was toying with a computer character to market the trees, who he called Dr Festive. It proved a flop. "We did it before most people had broadband, so the website took a long time to load," he said. However, the seed of an idea was planted. "I was searching for a new business, a business that did not depend on how much we could cut our costs but on knowledge.

"There was a moment of clarity when Huawei [the manufacturer of most of the UK's 3G mobile internet dongles] opened a new plant across the way from our factory in Shenzen. It was like Silicon Valley. I knew that the shift up the value chain had started and that our workers would soon want to work for Huawei instead," he said.

After just a couple of years of low-key investment, Kao persuaded his father to sell the manufacturing operation to Carlyle Group for HKD1.1 billion (£80m).

"I persuaded him we could have the same competitive advantage in this. I used examples he could relate to. We can be much more cost-effective. Animators in the US are paid five times as much as they are here."

He also pointed to the ability of an Asian company to buy up popular Japanese animation franchises, whose owners might not always welcome an approach from Hollywood.

Kao is hoping that Astroboy, a manga classic, will boost Imagi into the same league as Pixar. The company's annual report notes that computer-generated movies, between 1997 and 2007, made twice as much as action movies with a similar budget. Investment bank Goldman Sachs, in a research note, noted that while Imagi's share price has fallen steeply on Kao's gamble, the studio is likely to churn out steady profits in the future if it can keep its costs down.

Imagi's remarkable conversion is only one of many on the Chinese mainland. BYD, the world's second-largest battery maker, is now looking at building hybrid cars and has hired a team of Italian designers. Airbus is about to start manufacturing the A320 in Tianjin, Intel is making chips in Dalian, and Chinese companies are leading the way in renewable energy technology, especially photovoltaic panels.

The Communist Party is determined to move industry up the value chain, using a variety of incentives and punishments. China's low-end manufacturers have found their tax rebates withdrawn, and complicated export duties imposed. Their raw material costs have spiralled and they are going out of business in their thousands.

"Move up or move out" said the front page headline of the state-owned China Daily's business section yesterday,

"The process may seem painful," the newspaper intoned, but "it can help the economy achieve a more balanced and therefore more sustainable growth in the long term". At Eight Commercial Tower, the transformation is well under way.