Pierre Chen has built a 'component powerhouse' from the ground up
If you own a smartphone, you are more than likely an indirect customer of YAGEO, a global company based in Taiwan that provides critical components to manufacturers such as Apple and Samsung. Its products are embedded in all manner of devices, from your laptop to your electric car, not to mention satellites and submarines. A wide range of electronic gadgets that are now essential to everyday life rely on YAGEO for their ‘passive components’ – those that are not sources of energy, and more.
The company started nearly 40 years ago, making machine tools in Taipei, Taiwan’s capital city, with turnover of less than USD1 million a year. It was first known for making components with low technology entry barriers, such as resistors. The company started to expand by acquiring companies to fill the gaps in its range so that it could offer customers a complete array of products. Today, it is a global company with annual turnover of around USD4 billion, with 45,000 full-time employees around the world and 49 manufacturing sites spread across 24 countries.
“Taiwan started out as a tech-focused region through the opportunities of the personal-computer era, then laptops and then the smartphone era,” says Pierre Chen, the company’s founder. “But now in 2022, one of the next big tailwinds for the electronic market globally is electric vehicles. Some say that EVs are the next moving personal computers.” The automotive industry now contributes over 20 percent of YAGEO’s total revenue. Factor in other premium channels such as aerospace, medical, industrials and high-end 5G and you have 60 percent of turnover. “This is a testament to how our past M&A strategy has transformed YAGEO into a completely different animal,” says Pierre.
In 1993, the company became the first passive components maker to list on the Taiwan Stock Exchange, when it floated 40 per cent of the shares. Access to the capital markets gave it the firepower to finance acquisitions, and in the following years it bought resistor manufacturers in Singapore and Germany. In 2000, however, it transformed its prospects by paying EUR680 million to acquire the semiconductor and advanced ceramic components subsidiaries of Philips, the Dutch electronics manufacturer. This was the first important step the company took in transforming from a local player into a global component powerhouse.
“We were already quite international but we became a truly international company with this acquisition,” says Pierre Chen. “It allowed us to bring in some very good people, though there were major cultural issues: we all shared the same vision, but we differed over how to improve efficiency and it took around eight years to really merge the two operations. But when the financial crisis broke in 2008, our strong finances helped us survive when others went under.”
In the years since then, YAGEO has continued its strategic M&A activity. In 2019 and 2020, the company went through two further cross-border acquisitions, of Pulse and KEMET, two world-renowned US component companies, both with high brand recognition in the industry and with strong connections to the automotive sector. “For EVs and traditional automakers, reliability is key,” Pierre explains. “It takes years or even decades to build up the quality control systems and the trust with our customers.” Earlier this year, the Taiwanese business also announced another potential transaction, the acquisition of a premium sensor company, Heraeus Nexensos, from the 300-year-old German family technology group Heraeus. With half of sales coming from the automotive sector and half from industrial, this proposed transaction marks the first major step YAGEO has taken towards the premium sensor market.
These acquisitions have all been building up to what Pierre describes as YAGEO’s ‘long-term strategy to transform into a global electronic component powerhouse’. Yet they have also given the group a far more international and therefore diversified manufacturing base, which has allowed the company to approach macro challenges such as Covid and increasing protectionism with flexibility.
As for the next generation, Pierre is optimistic but also very practical. In 2020, his daughter Joy Chen became YAGEO’s Taiwan head of sales after a rotational programme. “I would say it has been and will be a long journey for her in this incubation stage of her involvement with the company,” says Pierre. “Of course I’m happy that she is interested in what we do. However, YAGEO being a public company, we still need to make decisions based on what would maximise the interests of our shareholders and stakeholders.”
He doesn’t doubt his daughter’s ability or her talent based on what she has achieved on her own in the past, but says he would like to see how she responds to a few ‘up and down cycles’ in this dynamic market ‘to prove she could take on even bigger roles within the company’. The state of the market is clearly far from ideal right now, which Pierre sees as ‘an opportunity for Joy to lead her team and shine. I really look forward to what is in store for her.’
In addition to his industrial prowess, Pierre Chen is noted for his activities as an art collector. He started collecting over 30 years ago, focusing on works from the 1990–2005 period where he could find good paintings on the market with a visible price. “One of Francis Bacon’s paintings was auctioned in Europe a few months ago and fetched more than USD142 million. Fifteen years ago, I paid USD3.8 million for a similar work.”
He has been rated among the world’s top 10 collectors by the magazine ARTnews, among the likes of Bernard Arnault of LVMH, Philip Niarchos from the Greek shipping family, and private equity investor Leon Black. His collection of modern and contemporary art includes works by Francis Bacon, Pablo Picasso, Andy Warhol, Mark Rothko, Cy Twombly and Gerhard Richter, as well as contemporary works from China and Japan.
His YAGEO Foundation started as the bridge between Eastern and Western art communities through dialogue, and has evolved to be more active in the mainstream global art community through many collaborations on potential intercontinental exhibitions in the near future. It also promotes and introduces Eastern artists to the Western market. Pierre says there is much more to come from the YAGEO Foundation in the years ahead as well.
When he acquires a new work of art, investment is the last thing on Pierre’s mind. “We do not collect for the sake of collecting,” he says. “I only buy artworks that I love, regardless of their market potential. And I certainly don’t keep them in a storeroom – if art is just an investment, it’s no fun anymore.” For him, art is a part of life and should surround you. “I like to live with paintings in my offices and my homes,” he adds. “High tech can be quite stressful at times, so you need something to balance your life.”