Karin leans into Chinese tech demand to keep 47-year profit run alive

[SINGAPORE] Few companies can boast a flawless track record – but Karin Technology has never booked a loss in its 47-year history, a streak chief executive Michael Ng credits to strict financial controls instilled from day one.

Recalling an incident of over-trading in its early years that could have been “the end of the company” if it had not been resolved, Ng said the company is “very fortunate to have learnt that lesson very early”.

“Since then, we have established internal systems – maintaining financing cash flows, keeping an eye on credit qualities of customers and working closely with banks to ensure that we have enough capital to maintain our businesses,” he told The Business Times over a video call from Hong Kong, where the company is headquartered.

This discipline extends to the company’s accounting practices as well, Ng added, and the company had been engaging a Big Four audit firm for at least 10 years before it went public on the Singapore Exchange.

“When we listed in 2005, people told us that for a company size like ours, they wouldn’t have thought that we’ve engaged a Big Four audit firm,” he said, adding that it shows “commitment” from the mainboard-listed company.

“It gives everyone – not just external shareholders, but also our business partners and our customers – confidence in our company, that we are not some dodgy tech business,” he said.

Appetite for Chinese tech

Karin began in 1977 as a components supplier but has since branched into consumer electronics retail and IT infrastructure.

The company has 14 offices spread across Hong Kong, Macau and China. It no longer has an office in Singapore, which looked after its industrial materials business, after it divested its property at Link@AMK in late 2022.

“The business itself was not growing, and we think the resources were better allocated to growth areas… our growth engine – the IT side,” said Ng, who took over the business from his father Philip Ng in 2021. The elder Ng remains a company adviser.

Describing the growth as “quite massive” within Hong Kong, Macau and the Greater Bay Area, Ng said the management decided to refocus the company’s resources and investments in its IT business, which accounts for about 70 per cent of overall business.

But Singapore and South-east Asia remain on Karin’s radar, he said, for regional expansion in the medium term.

This comes amid growing interest in Chinese technologies over the last few years, even though international tech solutions still account for the bulk of Karin’s IT business. 

“Because of our presence in China, we’re close to those vendors, and in the last decade at least, we’ve introduced a lot of the Chinese vendors into Hong Kong,” he said.

“A lot of them have the ambition to go regional and international with their solutions; and we’ve been working very, very closely with them,” he said.

Asked about the appetite for Chinese tech amid intense US-China rivalry, Ng said its relative affordability is a large draw, although he did not provide a comparison on its cost competitiveness.

Geographical proximity and being in a similar time zone is another factor. Many vendors are based in Shenzhen, which means the turnaround for support is much faster and cheaper compared with working with engineers from half a world away.

Ng said some of his customers are also looking to diversify and seeking solutions that are “not so reliant on traditional core American technologies”.

The spectacular launch of Chinese artificial intelligence (AI) startup Deepseek’s chatbot in January has only further fuelled the optimism, he noted. Businesses are now realising the possibility of deploying AI solutions at a far lower cost.

He likened the excitement over AI to the buzz when the Internet first arrived and businesses were investing heavily to improve their operations.

“A lot of businesses now are refocusing their budgets and spending to ensure they need to look at AI,” he said.

Amid the “thousands and thousands” of up-and-coming Chinese tech companies, Ng said Karin’s mission is clear. “We just need to ensure we help the customers select carefully because there are several things you need to look for.”

Beyond cost, the maturity of the technology and ease of integration are other considerations.

Keeping margins amid falling top line

Yet, despite the strong interest, revenue from the IT segment fell 10.2 per cent to HK$772.6 million (S$132.7 million) for the first half of Karin’s 2025 financial year ended Dec 31, 2024 – just before the arrival of DeepSeek. This was “mainly due to fewer new mega projects secured”, said its interim financial statement.

Ng noted that many of the mega projects secured since the Covid-19 pandemic were multi-year ones initiated by the Hong Kong government as it wanted to digitalise as well as adopt Chinese tech solutions.

These projects have since come to an end and there have been fewer public-sector projects since, he added.

In February, Hong Kong’s Financial Secretary Paul Chan pledged to rein in government spending as the city recorded a third straight year of budget deficit.

Asked if this is likely to affect Karin’s pipeline of projects, Ng said he believes that the government will not deprioritise innovation and digital transformation even amid budget cuts.

Still, he expects the company to shift its reliance from public-sector mega projects to commercial ones, especially as more companies “refocus” on new solutions on the back of a business recovery.

Meanwhile, Karin’s consumer electronics products segment – which accounts for about 10 per cent of overall business – posted a 26.6 per cent fall in revenue to HK$90.9 million in H1.

Ng said this was a result of shifting consumer spending patterns post-Covid, as well as the strong Hong Kong dollar, which is pegged to the US dollar.

A lot of consumers have moved their spending overseas, he said, noting that the low Japanese yen in recent years effectively equates to “a very good discount” on electronic products.

And while Hong Kong used to be a popular shopping spot for Chinese visitors, this changed after the Chinese yuan weakened, making Hong Kong goods a lot more expensive.

“We saw those issues, and we focused on better-margin products and cost-cutting to ensure we can run our businesses more efficiently,” said Ng.

He added that one strategy is to shift some of the company’s staff or operations to its offices in China from Hong Kong, which is more expensive. Currently, about 60 to 70 per cent of its staff are in Hong Kong.

“So if people leave our company, then when we rehire, we look at whether we should hire in Hong Kong or China,” he said.

While revenue in H1 fell 10.6 per cent to HK$1.05 billion, net profit dipped just 0.3 per cent in the same period to HK$10.77 million.

Maintaining the streak

On the outlook amid the rather uncertain business climate, Ng would only say he hopes to continue making a profit and not break the company’s 47-year streak.

He also appeared unfazed by the tariffs imposed by the Trump administration in the US and overall anti-Chinese sentiment.

“A lot of our business revenue comes from Hong Kong and China, and very little is from the US, so in a way, we’re not affected in terms of tariffs,” he said.

The larger question stems from the implications arising from the two increasingly “separate” technological realms that are now being developed by China and the US.

“There are businesses within the two worlds that are continuing to operate. Are we able to have our position in each of those worlds? I think that’s one area that we need to keep an eye on,” he said.

The rapidly changing business environment is the company’s biggest challenge currently, he said.

“We just need to be agile and be alert to the happenings around us,” he said. “In terms of running our businesses, be flexible as well, and in terms of our business decisions, we need to communicate and assess as a team.”