#2 Chinese Tech Giants : Jia Yueting
You may not have heard of the man named Jia Yueting, but this Chinese entrepreneur has amassed a fortune of over $3.6 billion by competing with Netflix, Apple, and Tesla. The secret of his empire? Always look forward.
Jia Yueting is truly a jack of all trades. His success is thanks to his strategic vision and his appetite for risk. He is the founder of LeEco, one of the most powerful Asian tech groups. At age 44, he was ranked by Forbes as the #37 richest person in China. Despite the turmoil that resulted from his whirlwind of tremendous expansion, Jia Yueting is one of the most stunning success stories in Chinese tech.
This entrepreneur has drawn connections to Steve Jobs. Although Jia Yueting goes as far as modeling his style of dress after the late tycoon, he never misses a chance to critique the Apple empire. Once in 2016, he called Apple outdated, and in 2015, he dared to compare the company to Hitler.
He often boasts about his successful business, Leshi Internet Information and Technology Corp, often known as LeEco. Jia Yueting is the creator of a global ecosystem, revolving around video production. What began as a simple, on-demand video service is now an empire. In addition to an entertainment selection comparable to Netflix, his portfolio includes mobile phones, smart bicycles, and electric cars.
At the wheel of his Jeep, he took on Goliath
No one could have predicted that the son of a middle class family in the rural northern province of Shanxi would be at the forefront of Chinese innovation. Yet, the story of Jia Yueting no longer surprises the Chinese.
Born in 1973, Jia Yueting is the youngest of three siblings. Unlike his older brother and sister, who both graduated from prestigious Chinese universities, Jia Yueting graduated with a degree in finance and auditing from the local university in Shanxi. He spent some of his childhood vacations in a steel factory, and he couldn’t stand bureaucracy or authority. After a short stint doing computer maintenance for a local tax office, Jia Yueting quit his job in order to start his first business.
His first entrepreneurial endeavor was a technical consultancy firm. His work allowed the young man to get a taste of a variety of industries, including coal, construction, real estate, language schools, restaurants, printing, metal, lumber, and more. However, his experiences with telecommunications stuck with him. In 2002, he moved to Taiyuan, the capital of the Shanxi province, where he created Shanxi Xi Bei Er Communications Technology Co. Ltd. This company was focused on IT infrastructure and solutions for telecommunications operators such as China Telecom, the largest operator in the country.
With high barriers to entry in the market, Jia Yueting took a gamble. “At the time, Jia bought a Jeep. He drove from neighborhood to neighborhood in Shanxi for business negotiations,” his friends recalled. After just one year, he had won 50% of the contracts with the local operators.
The success of his business motivated the young entrepreneur to branch out. He launched Xbell Union Communication Technology Co. Ltd. in Beijing in 2003.Two flourishing businesses in two different cities would have been sufficient for some people, but not for Jia Yueting. His move to Beijing allowed him to meet Liu Hong, who would become his most valuable partner. Liu Hong pushed him to think about the potential of 3G, which was not yet offered in China. Together, they created a highly successful business in 2004, known as Leshi Internet Information and Technology Corp., or LeTV.
At the time, LeTV was one of the only companies that offered television shows and movies via a streaming subscription. Unlike his competitors, Jia Yueting insisted on purchasing copyrights. Luckily, his strategy paid off. By 2005, LeTV was one of the first five companies to be officially certified by the government to operate in this sector.
Jack of all trades
LeTV positioned itself as a high-quality film and television series provider. By entering the hardware industry in 2013 with televisions, and then with smartphones in 2015, LeEco Group began to push the limits. This is further evidenced in its massive investment in the startup Faraday Future, which intended on producing electric and autonomous cars to compete with Tesla.
In 2015, the first smartphones were marketed via the company’s dedicated subsidiary. The business strategy differs from that of Apple. Instead of charging high prices for smartphones, LeEco incentivizes their customers to invest in its lucrative entertainment content by offering low-priced devices. By becoming members, users unlock new content, Hollywood blockbusters, or specialty TV series on their LeEco devices.
In order to develop high-quality smart gadgets, Jia Yueting partnered with Terry Guo, CEO of Foxconn — the manufacturer of Apple products. The goal was to create an entire LeEco ecosystem consisting of interconnected hardware and software, including smartphones, smart TVs, smart bikes, and smart homes. Jia Yueting has grand aspirations for his company. As he once said, “We refuse to be mediocre. We will be great, or we will die.” True to his philosophy, Jia has expanded his business at a dizzying speed.
From 2004 to 2016, LeTV grew from a startup that streamed high quality content to a global leader in technology and innovation. Jia Yueting is continuing his acquisitions and partnerships in international territory. For him, “LeEco is not a Chinese company, it is a global enterprise.”
An unstable empire
Poor management, low income, excess expenses, and an overconfidence in demand for its products have brought the company to the brink of failure. The economic model of LeEco suffers from a disparity of profitability in its branches: only the streaming service, LeTV/Le.com, is profitable. To prevent the company from sinking, Jia Yueting had to borrow against his own shares to infuse cash into the subsidiaries. He also lowered his annual salary to 1 RMB ($0.14) in another nod to Steve Jobs, who had once decreased his salary to $1 in an attempt to keep his company afloat. Jia Yueting’s questionable financial management has been criticized by many entrepreneurs.
“We sped ahead without thinking, and our need for cash exploded. We over-extended our limited capital and resources while pursuing our global strategy,” he wrote in a letter to his employees in November 2006. The first delayed payments were made public, and some suppliers began to sue. In April 2017, the planned acquisition of the manufacturer of Vizio TVs fell through due to “regulatory headwinds.” In May 2017, the axe fell: Jia Yueting resigned from his position as CEO of Le.com and was replaced by Liang Jun, a former Lenovo executive. The CFO was also replaced. As a result, job cuts were also announced, notably in the United States, where LeEco had just entered the market.
Despite the setbacks, Jia Yueting is still CEO of LeEco Group. Like Steve Jobs, Jia Yueting has always been able to rise from the ashes. He transformed a small Chinese startup into an international giant valued at several billions of dollars. Today, the future of his business seems to be found on the streets. “We consider the car to be a smartphone on four wheels; it is fundamentally not very different than a laptop or tablet. We hope to surpass Tesla and become the industry leader,” explained Jia Yueting in 2016. Buckle up, Elon Musk.
