Modern vision of an ancient craft

6 Nov, 2012

Jumping on and off a set of small canary-yellow carts – pulled along by an electric buggy – Johnny Fung and I are being driven around his company's sprawling factory complex in southern China. Suddenly the tour, accompanied by energetic commentary from Mr Fung, is interrupted by the sound of children's laughter. We draw up in front of a school for some of the children of the 18,000 people who work on the site.

"These are our little Leo-rians!" booms Mr Fung, the 56-year-old managing director and co-owner of Leo Paper, one of the world's biggest book printers, which specialises in manufacturing illustrated volumes for young readers.

Books manufactured by the company include best-selling titles in the Thomas and Friends series, based on the character of Thomas the Tank Engine created by Wilbert Awdry, and others by the US children's author Theodor Seuss Geisel, better known as Dr Seuss.

Leo Paper's sales last year reached an estimated $500m, with 92 per cent of that coming from outside China. Big publishers including the UK's Templar, Scholastic in the US and France's Hachette are among its main customers.

It has grown strongly in the past 15 or so years as it reaped the rewards of low manufacturing labour costs in the region combined with its own reputation for efficiency and production innovation.

"We've made a huge amount of progress in increasing the efficiency of book production and introducing new ideas – for instance, in new types of pop-up book and ways of folding and colouring paper so we can make a book as interesting and attractive as possible," says Mr Fung, smartly dressed in tan trousers and a matching open-necked sports shirt.

But the business is now at a stage where Mr Fung is adamant that something more is required. "To meet the challenges of the next few years we now need to move in a new way altogether to give ourselves new capabilities in technology. We have to do more to come up with new ideas about merging traditional book printing with new digital technology. It won't be easy and we will zig and zag, but I'm convinced we have huge opportunities."

His vision of how the epochs of both Johannes Gutenberg, inventor of the printing press, and Bill Gates can be integrated starts to take shape as we enter what Mr Fung calls the company's "theme rooms" – a warren-like system of small halls in one of the office buildings on the site.

Here is set out something resembling an Aladdin's cave for the past, present and future of books. Displays show the different technologies used to make books over the centuries, from paper-cutting to hot stamping. There is also space in the cabinets for showing the immense variety of materials – such as feathers, buttons and plastic – that can be added to a page to make the reading experience more interesting for small children.

The last section of the rooms includes high-tech objects such as light sensors, computers and miniature displays that are meant to illustrate new forms of books in which printed pages can be combined with electronics.

One shows how a book for children that is printed on thick card can incorporate a small electronic screen for displaying digital information while the child reads the rest of the text in the conventional fashion.

Drawing on this idea, Leo Paper has launched a concept called FamLoop, in which a child reads from a handheld screen, perhaps also drawing shapes on it using a sensor-activated stencil, while also consulting a "real" physical book. Meanwhile, a parent or friend – possibly thousands of miles away – can join in the activity via a telecoms link.

"We bring designers and book publishers [into the theme rooms] to test our thinking and give them ideas," says Mr Fung. "I think we can achieve a lot by drawing on what we've done with books you can touch and feel and then making a connection with the new era of the iPad and Kindle."

Leo Paper, which is based in Heshan, a three-hour drive from Hong Kong, has been run by Mr Fung since 1993. It was started 11 years earlier by Mr Fung's father – who bowed out early from the business and died in 2010 – and Samuel Leung, who remains the chairman.

Born in Hong Kong, Mr Fung attended high school in New Jersey and then did a degree in operations research at Cornell University. Now a Canadian citizen, before 1993 he had a spell in the information technology industry working for Burroughs, Nortel and Fairchild Semiconductor.

Some sense of why he feels Leo Paper needs to change direction is evident as he makes a tour of one of the several large production plants on the Heshan site.

He is conscious that the competitive advantages China enjoyed for more than a decade can no longer be taken for granted. "Everyone in China is finding costs and wages are going up. Our wage bill has been rising 15-20 per cent a year for some time. We have to move into more value-added processes and step up our efforts to become more innovative."

Inside the plant, workers scurry bet­ween huge printing presses that make about 800m items a year for Leo Paper. About half are books; the rest are a variety of paper-based puzzles, games and activity sets for children.

In another section of the complex, workers are involved in the highly labour-intensive job of making pop-up books – a speciality for the company. Manufacturing such titles requires intricate folding or cutting operations that are virtually impossible to automate.

"There can be dozens of processes to making a book – to do the whole operation as efficiently as possible is equivalent to joining up a lot of dots in the most logical way," Mr Fung says. "We have to produce more with less resources."

Indeed, Leo Paper's workforce of 24,000 – as well as Heshan it runs two other Chinese manufacturing sites – is 3,000 lower than a year ago. The reduction is the result of switching to operations that rely more on technology and less on cheap labour.

If Mr Fung's vision for the next few years comes true, Leo Paper will move further along this road. It will increase its expertise in incorporating electronics into making books, but he says this is likely to come about by forming partnerships with outside groups rather than noticeably increasing the number of IT product specialists working at Leo.

"I don't feel threatened by the new IT technology," says Mr Fung. "But I think we have to react in a positive way so that we can use it to help us to grow."

More News From Financial Times