"A lot of large corporations are expanding overseas these days."
"It's probably because they can make more profit by manufacturing in countries with lower labor costs."
It was Monday morning, time for Chunha Trading's weekly executive meeting.
The attendees were just me, Maru, and Park Jong-bum. With the recent stagnation of our business, our conversations were mostly trivial, but we still held the meetings regularly.
"China is becoming a popular destination. Many small and medium-sized enterprises have already established themselves there, and large corporations are following suit, building factories… It seems China truly is a land of opportunity."
Many Korean companies were expanding into China, attracted by its low labor costs and geographical and cultural proximity to Korea.
Park Jong-bum replied,
"And junkyards are also following suit, hoping to capitalize on the scrap generated by those Korean companies."
"Really? But China has its own junkyards."
"Korean companies tend to trust Koreans more."
China was still under communist rule, with only its economy open to the outside world. In the minds of many Koreans, Chinese people were still associated with the Communist Party.
Due to Korea's anti-communist policies and the existence of North Korea, most Korean companies, despite operating in China for its low labor costs, didn't trust Chinese people.
"That makes sense. Should we expand into China too? It seems like there's no room for further growth in Korea. It's time to look elsewhere."
After the smelter contract expired and the gold extraction method became widely known, the golden age of electronic scrap began.
Many people jumped into the market, but they were no match for Chunha Trading, which had grown in size by monopolizing Korea's electronic scrap for a year.
After countless trial and error, we had a comprehensive understanding of the composition of thousands of different types of electronic scrap, giving us an advantage when submitting quotes to companies.
And our experience of delivering to the smelter hundreds of times prevented us from making costly mistakes.
In the beginning, we bought the scrap at such low prices that even if we made a mistake, the losses were minimal. But now, with the profit margin for electronic scrap fluctuating around 30%, a single mistake could result in a significant loss.
There were many cases where we bought scrap for 5,000 won per kg and only received 3,000 won after delivering it to the smelter. Some cases were so bad that they threatened the survival of electronic scrap junkyards.
In the junkyard world, losses incurred from buying the wrong scrap in the early stages of a business were called "tuition fees." Chunha Trading had paid a very low tuition fee, while the new entrants were paying a hefty price to learn the ropes.
Naturally, electronic scrap junkyards, afraid of losses, became hesitant in their purchases, while Chunha Trading, with its comprehensive knowledge, continued buying aggressively. The gap between us and the competition was widening.
"Are you considering expanding into China?"
Park Jong-bum asked, and I said after a moment of thought,
"I'm just thinking about it. And to be honest, I'm more interested in the US than China."
There weren't many countries that manufactured semiconductors.
The most prominent ones were the US, Japan, and Korea.
Other countries had semiconductor companies, but only those three had globally competitive companies.
We had already dominated the Korean market, Japan was the birthplace of urban mining and had a high barrier to entry due to national sentiment, but the US seemed like a viable option.
Maru nodded.
"That's a good idea. It wouldn't hurt to try, even if we fail."
"Really? You think so too? Then let's do some research. Director Park, please gather information about the US market and semiconductor companies."
After the meeting, I was in the office, reviewing documents, when the phone rang.
"Who is it? Hello."
[Hello, CEO Park. It's Assistant Manager Lee from Joongang Tech.]
Joongang Tech was a relatively large electronics company for a small business in Ansan Industrial Complex.
They manufactured telephones, generating a lot of plastic and circuit board scrap, so we had been doing business with them regularly. But it was rare for them to contact us directly.
"Ah, Assistant Manager Lee, it's been a while. What's up?"
[I'm calling to request a dismantling service.]
I had distributed business cards to companies in Ansan Industrial Complex during our early days, so we occasionally received calls like this.
"I see. I'll tell my employees to take care of it. Are you moving to a bigger location?"
Assistant Manager Lee's voice sounded a bit gloomy.
[It's not that… It's not just about the dismantling. I heard from your employees that you also run a large secondhand goods business. Is that true?]
"Yes, we also handle secondhand goods."
[Then can you come and give us a quote? We need to dispose of our inventory.]
"Inventory? What happened?"
[The bastard CEO ran away. We're trying to sell this stuff and split the money among the employees.]
***
When I arrived at Joongang Tech, the employees' faces were filled with worry, and the entire company seemed lifeless.
"You're here."
Assistant Manager Lee's face looked gaunt.
"Yes, it's been a while. What happened? Suddenly running away?"
Assistant Manager Lee replied weakly,
"What happened? He just ran away. Without paying our salaries."
I was shocked. I had thought Joongang Tech was doing well.
"Wasn't the company doing okay? How did this…"
"Let's talk while we look at the warehouse."
He walked towards the warehouse with slumped shoulders.
"The company's situation worsened due to declining export performance. Our salaries are almost six months overdue."
"Six months?"
Assistant Manager Lee said angrily,
"The CEO kept asking us to be patient, saying the company was struggling, and then he and the director just ran away. Those bastards."
"How did it come to this?"
"I'm just a low-level assistant manager, so I don't know the details, but it seems the US raised interest rates, which reduced the volume of imports. And with the rising exchange rate, the cost of raw materials increased while exports decreased, so the inventory piled up, and they couldn't even pay back their bank loans, so they ran away."
"I see. I'm sorry to hear that."
I realized that the rising exchange rate, which was beneficial for us, was actually a burden for export companies.
It made sense that the cost of imported raw materials would increase with the rising exchange rate, which would increase the manufacturing cost.
As I listened to Assistant Manager Lee's complaints, we arrived at the warehouse. I was stunned when he opened the door.
"There's this much?"
"It's not like it accumulated in just a month or two."
The warehouse was filled with boxes of telephones, ready to be shipped.
"Can you give us a price? We're trying to sell these before the bank seizes them so we can at least get some of our unpaid salaries."
"Let me take a look. Are they all the same model?"
"There are a few different models, but the most common ones are these five. We have about 7,000 units in total."
"Why did you keep manufacturing them until they piled up like this?"
"We had to keep manufacturing because the raw materials we ordered kept arriving by sea. Exports decreased, so the inventory piled up, but the raw materials we had already ordered kept coming in. It was a vicious cycle."
I opened a box, took out a telephone, and examined it.
It was a home telephone, brand new.
Since they mainly exported their products, all the writing on the phone was in English.
'This is good. English fetches a higher price.'
The same secondhand goods would sell for a higher price in China if they had English writing instead of Korean.
"Ah, it's in English. That's a shame. We have to sell these to a third country, but they prefer Korean writing because they like the image of Korean products."
"Really? But it says 'Made in Korea.'"
The situation was unfortunate, but business was business.
It was a trader's duty to negotiate the best possible price.
"I guess Korean writing has a more luxurious image? I don't understand their logic, but that's what they say."
Assistant Manager Lee sighed.
"Sigh, so how much will you pay? These used to sell for 30,000 won each when we exported them to the US."
"You know we can't buy them at that price. The buyers won't buy them if they're that expensive."
"I'm not expecting that much."
I tried to recall today's secondhand goods price list.
'The price for telephones today is 2,000 won each, but that's for used ones. We have to offer more for these brand new units. I wonder how much CEO Wu would pay.'
After a moment of thought, I said,
"5,000 won. I'll give you 5,000 won each."
"5,000 won? You're saying they're only worth 5,000 won each?"
Assistant Manager Lee was surprised, and I pointed at the phone's power plug.
"Assistant Manager Lee, look. This plug is designed for the US market, right?"
"W-well, yes."
"So we can't sell them in the Korean market, and we can't export them to the US because of the declining export performance. That means we have to replace the plugs. Imagine opening each unit and replacing the plugs. It's not just a simple buy-and-sell transaction."
The telephones had to be modified because the electrical standards in China and Korea were different.
But the modification process wasn't expensive.
There were companies in China that specialized in replacing plugs for electronic products, and they charged only 100 won per unit.
"Can't you offer a little more? This is the employees' last resort. My family might starve at this rate."
Assistant Manager Lee pleaded, but I didn't feel sorry for him.
He was the one who had looked down on me for being a junkyard owner when I first visited Joongang Tech and had even made me run errands for cigarettes. I felt a sense of schadenfreude.
"I'm offering you the best possible price."
Assistant Manager Lee's face contorted as he did the calculations.
"35 million won… We have 40 employees, so that's less than 1 million won per person."
I said to the dejected Assistant Manager Lee,
"Alright, I understand your situation. I'll make a special exception and offer you 1,000 won more per unit. That's my final offer. You can try asking other companies if you're not satisfied."
Assistant Manager Lee thought for a moment and said,
"I'll discuss it with the other employees and get back to you."
"Okay, feel free to contact me anytime."
I returned to the company and was working when I received a call from another junkyard in Ansan Industrial Complex.
"Ah, telephones?"
[Yes, I have about 7,000 telephones, brand new. I came across them by chance, and the quality is too good to be sold at regular secondhand prices. Can you adjust the price?]
I chuckled, knowing exactly what was going on.
I had told them to look for other buyers, but Chunha Trading was the only company in Korea that could handle such a large quantity of goods that required processing. I had anticipated this.
"I see. They're in that good condition?"
[They're brand new! I could sell them in my store right now.]
"I see. I haven't seen them myself, but I'll offer you 5,000 won each."
[5,000 won? Alright.]
I knew that the junkyard owner would offer 3,000 or 4,000 won per unit to Joongang Tech, and the disappointed employees would then contact other junkyards.
After receiving calls from three junkyards, Joongang Tech finally called me back.
"Yes, have you made a decision?"
[…Yes, you said 6,000 won earlier, right?]
"About that, I looked into it, and I'm afraid 6,000 won is not possible. The processing cost is higher than I expected. I can offer 5,500 won each."
Assistant Manager Lee protested on the other end of the line.
[You said 6,000 won earlier, why is it suddenly 5,500 won?]
"That was just a rough estimate. I did a more thorough analysis, and I would lose money if I paid you 6,000 won. You should have sold them to me earlier. I'm sorry I can't offer you a better price, but I can't do business at a loss."
Silence followed my words.
He must be discussing it with the other employees.
[Is 6,000 won really not possible?]
"I'm afraid not. You can try other companies if you're not satisfied with the price."
They would eventually come back to me anyway.
"But I can't guarantee that the price will stay at 5,500 won. The market fluctuates a lot."
Assistant Manager Lee groaned and said in a strained voice,
[We'll sell them.]
"Good decision."
I hung up the phone, my lips curling into a smirk.
"You should have been nicer to me before. You reap what you sow, you bastard."