Before the JR Simplot Co. could produce french fries for McDonald's in China, it had to develop an entire potato industry there.
Idaho's Jacklin Seed spent more than a decade funding a turf-seed lab, training students and promoting demand for lawns before its China market took off in the 1990s. Today, Jacklin grass covers Tiananmen Square and the site of the 2008 Summer Olympics.
Micron Technology has invested more than $500 million in a new memory chip manufacturing plant in Xi'an. It has become one of the major investors in the high-tech and industrial zone aimed at feeding the nation's extraordinary economic growth.
Each of these Idaho-China successes was built on strong relationships, long-term thinking and the promotion of better businesses, services and products than Chinese customers could get anywhere else, experts say.
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China is on pace to surpass Japan this year as the largest economy in the world after the United States - and great opportunity abounds in China for both large and small Idaho businesses, said Roger Lee, the chief operating officer of a Chinese semiconductor company, who commutes between China and his home in Eagle.
"Whatever products and services the Chinese want, the quantities will be big and therefore the price will be good," Lee said. "Thus, it is critical to understand what China needs and what Chinese like to buy."
China already has become Idaho's third-largest export destination (after Canada and Taiwan) and a critical market for many of the state's farmers and manufacturers. That's why Gov. Butch Otter is leading a trade mission this week to Shanghai, Guangzhou and Beijing.
Companies seeking to sell wood products, hardware, dairy, wheat, potatoes and personal items are with Otter, who has been to China several times - first as an executive with Simplot and later as lieutenant governor.
This time, Otter also is seeking to attract new investment to Idaho from China's growing upper class and industries seeking to build plants here - a return investment that has already started.
A Chinese investor helped start Hoku Scientific, a Honolulu company that just began polysilicon manufacturing for solar panels in Pocatello. When money was tight, Tianwei New Energy Holdings, a Chinese company, bought it.
"The Chinese are looking for a beachhead in the United States," said Idaho Commerce Secretary Don Dietrich.
Idaho is ready to give them one.
The economic cooperation between the two vastly different worlds is critical to Otter's Project 60 program aimed at increasing the state's GDP from $52 billion to $60 billion before he leaves office.
GENERATIONS OF GIVE AND TAKE
Idaho's ties to China go back long before statehood. Chinese worked the mines in places like Idaho City as far back as the 1860s.
Nearly all of them came from the city of Taishan in the Guangdong province south of Guangzhou.
Many families kept the connection for generations - like Kim and Mei Fong, who were born in China and married in Taishan but spent most of their adult lives running the Forbidden Palace Restaurant and the House of Fong in the '50s and '60s.
Larry Louie, who owns the Golden Star on Orchard, one of the oldest Chinese restaurants in Boise, has family ties that reach into the early 1900s.
Otter will be the first Idaho governor to visit Guangzhou, though John Evans became the first governor to visit China on a trade mission in 1981. Gov. Dirk Kempthorne led a trade mission to China in 2007 that included then-Lt. Gov. Otter.
Today, the interchange is measured in dollars - but precise numbers are hard to find because of the way the federal government keeps track of Idaho's exports, said Damien Bard, the Idaho Department of Commerce's international business administrator.
Idaho reported $572 million in trade with China in 2009, of which more than $400 million came from semiconductors and other electrical machinery.
The state doesn't track that down to any single customer, but officials assume much of that comes from Micron, which now depends on Virginia and Utah for most of its domestic production. And state statistics show no wheat exported to China from Idaho because Idaho's shipments are aggregated with wheat from around the Pacific Northwest.
But the state is seeking to sell a wider variety of goods and services. Idaho exported $25 million in wood products, mostly paper and pulp. It sold another $21 million in dairy products to China along with nearly $4 million in vegetables (mostly frozen french fries) and more than $3 million in seeds.
WHEN THE DOOR OPENED, IDAHO WALKED IN
China was closed to U.S. trade for much of the Cold War. Only after Deng Xiaoping gained power in 1978 and opened China to foreign investment and limited private competition did Idahoans begin seeking trade.
Jacklin Seed of Post Falls, now a part of Simplot, was among the first to go.
The company sent executives to China in the late 1970s to explore the market in turf grass, said Chris Claypool, general manager. Jacklin began establishing relationships with government bureaus and universities, sharing seeds and training students about turf grass.
"We donated equipment so they could set up their own seed lab," Claypool said.
The major hurdle was creating demand for green space. The breakthrough came when they donated 500 pounds of grass to plant outside the U.S. Embassy in Beijing. That led to other embassies planting grass.
The city of Dalian then began a major greening program, Claypool said. "It took 10 years until the first container was shipped," he said.
Now Dalian is a model for other cities in China, which have embarked on major efforts to repair the landscape with turf grass. Add the growing demand for athletic fields and golf courses, and Jacklin believes it has developed a stable market into the future.
STARTING FROM SCRATCH
Simplot first went to China in the 1980s as a part of a collaborative effort with McDonald's. McDonald's needed a local supply chain to supplement frozen fries from Idaho and the rest of the Northwest, said Dan Cushing, Simplot's China manager.
But it wasn't easy. China potato varieties did not meet minimum standards for McDonald's fries. There weren't any potato growers.
Simplot brought over potato varieties that were suited to northern China's soils and climate.
"It was trial and error," Cushing said.
At the time, China allowed foreign companies to do business only as a joint venture with a Chinese company. Simplot and its partner, the San Yunan Agricultural Group, developed the farming as they built the first french fry factory in 1993.
When the factory opened, Simplot had 5,000 farmers growing potatoes across northern China.
"The reason we had thousands of growers is each had only one or two acres," Cushing said.
Simplot and San Yunan have since expanded the plant and vertically integrated its operations much like the company did in Idaho. That meant developing storage capacity, consolidating the farms, building roads and bringing in irrigation and harvesting equipment.
Today, their farms are sophisticated enough to grow the russet Burbank potato, which is not easily cultivated commercially, Cushing said.
The Chinese government is stepping up its own efforts to research potato farming and train potato growers, but Simplot officials say the technical challenges they faced setting up the spud processing industry are why they feel comfortable that they'll have a role in the country for a long time. It's too complicated to be replicated by the government.
Plus, Cushing said, Simplot's partnerships in China have helped Idaho farmers sell potatoes throughout the East.
The doors stay open to Simplot imports because of the company's commitment.
"If Simplot didn't have this factory here, North American potato growers would have lost market here to competitors," Cushing said.
WHAT WORKS FOR SEED AND SPUDS ALSO WORKS FOR CHIPS
Micron Technology also came to China to serve its customers, not simply to seek lower-cost labor.
Most computers, cell phones and other electronic equipment are made in China today, and it made sense to manufacture memory chips nearby, said Mike Howard, a senior analyst with iSuppli and a former Micron employee.
(Micron officials would not talk to the Statesman for this story.)
Micron first went to China in 2001 with a service office in Xiamen. It followed with sales and marketing offices in Beijing and Shenzhen in 2004.
It also set up an integrated circuit design center in Shanghai and formed a group to support Asia-based manufacturers of mobile phones and consumer electronic devices.
In 2007, Micron opened a new manufacturing facility in Xi'an to assemble and test operations for memory chips and image sensors. It initially invested $250 million and this year expanded operations with another $300 million.
Chinese officials expect the plant to eventually produce 3,000 jobs in the Xi'an High Tech zone, which has 860 foreign-invested companies.
Companies like Micron have to weigh the benefits of manufacturing products close to their markets against the positive aspects of having fabrication facilities near the research and development center, Howard said.
But by producing some chips in China, Micron sees the access advantage that Simplot does: the Chinese markets remain more accessible.
And like processed potatoes and specialized turf grass, Micron's memory manufacturing technology is not easy to replicate.
"It's not something that China is going to be able to readily copy," Howard said.
CHINA TRADE TAKES PATIENCE
Lee, the COO of Founder Microelectronics International Corp., a semiconductor foundry service company in Shenzhen, worked for Micron for 15 years and was one of the key pioneers of Micron's flash memory program before taking an expatriate position in China in 2001. The most important things for Idahoans to know, he said, are that China's economic growth will continue and that Idaho needs to get involved.
It will take an understanding of the differences in culture, history, government and patience, he said.
Echoing both Jacklin's Claypool and Simplot's Cushing, Lee said understanding the importance of personal relationships is critical.
He tells the story of a company that hired a "China expert" to handle delicate consultations.
"It turned out that this China expert's only real experience with China was that he adopted a Chinese baby and made one successful trip bringing the baby back to the U.S.," Lee said.
"How to overcome the differences and get things done efficiently and effectively while meeting all clearly defined and less clearly defined regulations will require the investment of time and effort," Lee said.
Rocky Barker: 377-6484