Hsu, Ancle 1961–

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Ancle Hsu
1961–

Vice chairman and chief operating officer, Apex Digital

Nationality: American.

Born: 1961, in Taiwan.

Family: Married (wife's name unknown); children: two.

Career: Apex Digital, 1999–, vice chairman.

Address: 2919 East Philadelphia Street, Ontario, California 91761; www.apexdigitalinc.com.

■ Ancle Hsu cofounded Apex Digital in 1999 and served as its vice chairman. Apex was the largest manufacturer and marketer of DVD home entertainment players in the United States and was a fast-growing supplier of analog and digital television sets. The privately held company expected to exceed $1.5 billion in sales for 2004 and to have sold its products in more than 20,000 retail outlets nationwide. Competitors and analysts described Hsu as a hard-working immigrant who occasionally cut corners in search of a profit.

HUMBLE BEGINNINGS

Born in Taiwan, Hsu immigrated to the United States in the 1980s. He found work in Los Angeles, California, at a business that exported scrap metal to China. While toiling with the scrap metal Hsu struck up a friendship with David Ji, who had come from mainland China. In 1992 the two founded a business, United Delta, which sold scrap metal and other recycled materials to recyclers in China. Hsu's mastery of the Chinese language and understanding of Chinese business culture helped United Delta to prosper. The company branched into stereo speakers for cars, herbal supplements, and disposable rubber gloves. Hsu had a minor misstep when California authorities charged him with a misdemeanor for failing to keep proper payroll records.

RISE OF APEX DIGITAL

By the late 1990s Hsu and Ji had turned to home electronics, relying on a new product—the DVD player—a device with which movies and other materials could be recorded and viewed digitally. Ji and Hsu formed an offshoot company of United Delta and called it Apex Digital. The partners devised a business model in which microchips—the "brain" of a DVD player—were made in California and shipped to China, where the player itself was manufactured inexpensively. Apex accepted slim profit margins and skimped on advertising, preferring to forge ties with major retailers such as Circuit City and Wal-Mart, which would handle marketing, advertising, and sales. The meteoric rise of the company stunned the industry. Apex's focus on low-cost Chinese manufacturing and leading-edge features enabled the company to sell more units of DVD players than any other manufacturer, including the industry giants Sony and Panasonic. As analyst Tom Edwards said, "They came out with the right products at the right time" (Arensman, May 1, 2002).

Apex was early to market other popular features, such as a new Kodak format for showing photographs on a DVD player and a new audio format from Microsoft. A digital camera for playing MP3 files was being planned in 2004. Hsu said that Apex was doing what the established electronic companies had disdained: making new technology affordable to the masses. He argued that the industry giants had lost touch with U.S. consumers. "We don't have the bureaucracy and overhead that Japanese companies have," Hsu explained (Lyons, March 18, 2002).

LEGAL AND QUALITY ISSUES

Hsu's focus on price and features occasionally came at the expense of legal regulations. In 2000 Apex's introduction of its DVD player was marred by a faulty microchip that, to the delight of many consumers, allowed users to copy DVDs to videotape and to override coding that prevented DVDs of films from being viewed in countries where they had not been officially released. Apex replaced the chips after threats of lawsuits from Macrovision Corporation and the Motion Picture Association of America. This DVD player also was the first consumer device that played MP3 files, a format used for downloading music on the Internet. The introduction of MP3 capability had met with controversy because the technology often was used to pirate copyrighted material. Other hardware makers were afraid of legal battles with record companies, but Hsu gambled and won.

A lack of technical support staff and a reliance on outsiders led to problems for Apex. Critics complained that Apex and the Chinese manufacturers on which it relied sometimes failed to pay licensing fees for technologies used in DVD players. Hsu acknowledged this fault and insisted that Apex planned to honor its obligations. Quality control became a pressing issue for the company in 2002 when its high-end DVD player had problems playing discs properly and produced unwanted popping and hissing noises. Apex halted production of the machine and arranged for customers to receive refunds. In 2001 a Chinese exporter sued Apex for payment of an $18 million debt. In 2002 a warehouse company attempted to auction off Apex gear, alleging that the firm was in arrears by $2 million. Hsu argued that partners had wronged Apex and that the problems were related to the small size and rapid growth of the company.