Peter Yip

Back to Contents of Issue: September 2000

by Steve Mollman

Self-deprecating and quick to chuckle, Peter Yip is the kind of guy who can't help looking casual, even when wearing a suit and tie. Yip's voice is a curious blend of Eastern US and Chinese accents, probably a result of his growing up in Hong Kong and attending college in Pennsylvania. After studying computer science and then getting an MBA from Wharton, Yip learned all he could about the US tech scene. Besides founding a network integration and service firm and then selling it to MCI WorldCom in 1987, he worked on VC co-investment projects with the likes of Edelson Technology Partners. In 1990 he returned to Hong Kong, and four years later Xinhua, the official Chinese news agency, approached him about a Net strategy for China. At the time, the Net was barely on the radar screen in the US, much less in China, and Yip's high school pals were busy getting rich off Hong Kong real estate and investment banking. With Yip at the helm, though, Chinadotcom spun off from Xinhua's China Internet and went public on the US Nasdaq in July 1999. The stock's been a wild roller coaster ride ever since, but Yip says his pan-Asian portal operator and Web consultancy is built for the long run. Editor in Chief Steve Mollman shared tea with Yip in the Imperial Hotel in Tokyo.

What are your plans in Japan over the next 12 to 18 months?
Japan is probably the most sophisticated Internet market, particularly in the area of wireless. Our plan is to invest something in the area of $150 million in the next 12 to 18 months. And we'll be taking advantage of what we've done already in the past 12 months. We have a good foundation, with close to a hundred people. I'd like to see us increase the head count and market presence.

Are you doing any work with wireless companies here?
Not yet.

What about in Asia overall?
We have a number of investments. We have some of the strongest expertise in the wireless Internet, starting from working with suppliers and operators such as Nokia, Motorola, and Siemens. We've been advising them with their wireless strategy and also with what kind of content makes sense. Not all content makes sense, because there's not a lot of bandwidth. So we've been working on this for the past three years -- advising companies and customers and developing different prototypes.

Since Japan is the largest online market in Asia -- and No. 2 in the world -- is it a stronger bet for the short term, whereas China, which is less developed, is more of a long-term bet?
We don't see it that way. We see it like this: in order to be successful in Asia, you cannot develop your business model around any one single country. Our strategy has always been pan-Asian. You cannot simply ignore Japan, and you cannot simply ignore China. There's some truth to what you say, with China just beginning to happen and Japan having been around, but we don't look at it short term. We try to build long-term businesses with long-term regional strategies, and we try to have synergy between different countries. You can't have a separate Japan strategy and a separate Chinese strategy.

A lot of our customers are looking for pan-Asian support. They're looking for a company that can understand their long-term needs and help them articulate their e-business strategy -- and be able to support them. GE, for example: we're supporting them in Korea, China, Japan, Singapore, and Thailand. And that's what really differentiates us from all our competitors.

How do you compare to Softbank?
Softbank went to America first, which was the largest market, and started making investments and learning about the Internet. They made some very good investments, including Yahoo, and then brought them into Japan -- Yahoo Japan, eTrade Japan, eLoan Japan, et cetera. So they predominantly focused on Japan, and only recently did they come over to Asia.

We're really an operating company. We build e-businesses, do consulting, and build portals, including our own. We have 1,600 employees, and 95 percent of them are in operations.

You get your hands dirty.
Yeah, we're getting our hands dirty. And we make investments only if they help our operations. Softbank manages many investment funds; we do not. So I think our style is different and our focus is different. Our market at the end of the day is Asia. I see a lot of synergy between us and Softbank.

What are the opportunities for Japanese Net companies in China?
The next couple of years are ones that Japanese Internet companies will never see again. If you miss this opportunity, you miss it forever. They need to be aggressive and understand the market and understand the potential.

The Chinese government recognizes that it's absolutely essential to totally embrace Internet development. The Internet is the only solution for them to streamline many of the state enterprises and really to increase the productivity for the workforce and make them more entrepreneurial and more competitive.

How long is this window going to last?
No more than one year, I think. Of course, there are many companies similar to us that have been looking, waiting for that opportunity. People have been investing in China for 20 years, since it opened up. And not just because of the Internet -- they were investing in relationships, in IT companies, telecom, manufacturing.

What advantages do Japanese Net companies have over US ones in entering China?
Japan is close. It's a two-and-a-half hour flight to Beijing. And Japan is still a part of Asia and still very much an Asian culture. And then there are the character sets, the double-byte technologies -- it's all very similar. America is still 12 hours away, and there are some big differences on the American technology platform because of double-byte.

So there's a big localization advantage for Japan.
Yeah, the localization, the proximity, and particularly in the case of wireless. In China the biggest problem is there's simply not enough critical mass -- not enough PCs, not enough telephone lines. So it's still going to take a very long time to reach the American way of connectivity, which is mostly at home, increasingly with broadband. It will take China at least 10 to 15 years, which gives an opportunity to Japan because of its sophistication in wireless. China has a critical mass now of about 50 million handsets. That's a good number to start with, and it's growing. Japan has big advantages in that.

Which Japanese wireless companies will do well in China?
Certainly smaller companies will be quicker, and in the virgin opportunity of China almost everyone has an equal opportunity, depending on how you position yourself. China is so big. You can start with Shanghai, or some other city, and work your way in.

Is cable TV going to be a big way Chinese people access the Net?
I think there are 400 million television sets in China, versus only about 25 million PCs. That's a natural point of access.

What do you think about Bit Valley in Japan?
IT and Internet companies tend to gather in one area. I think it's a good identity. The idea of sharing is so important. You cannot really replace a discussion like this. You can see people's eyes and feelings. In the end, we're human, and the human touch is very important for ideas. Especially for young people. I'm probably the oldest CEO for any pure Net company in China. All of them are so young! When I talk to them I feel like I'm the father. In some ways it's good because they see me not as a competitor. They say, Peter Yip, go away. You're so old. You're not in our league. You don't think as fast as we do. They're very proud. They're in their 20s and they have so much money. They feel they understand what is coming more than me.


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