The market for knockoff clubs, meanwhile, remains huge and lucrative, and Trophy Sports is a major player in it. Trophy's Integra line offers look-alikes of several major clubs. In February, TaylorMade sent Trophy a cease-and-desist letter alleging design patent infringement, and Trophy agreed to stop importing and selling the Integra Bomber 880 driver, a knockoff of TaylorMade's Burner 420. Jethro Liou says he spends $10,000 a month on lawyers' fees. Lawsuits are just part of the cost of doing business.
Liou also represents a dozen club-makers, importing for a long list of Internet dealers and discount retailers, including Kmart. All told, Liou says, he sells a million golf clubs a year—roughly equivalent to TaylorMade, which sold 89,282 clubs in March. And recently Liou bought a Mexican foundry, Cast Alloys, which he is disassembling and relocating to China.
A graduate of Cal-Berkeley, Liou is fluent in Mandarin—one of the two major dialects in southern China—and Taiwanese. A recent three-day swing with him through the Pearl River Delta provided a rare look inside China's burgeoning golf industry.
Liou Flew into Hong Kong on Feb. 6, during the Chinese New Year celebrations, and from the airport he took a bus to Dongguan, an hour and a half to the north. Dongguan is one of China's industrial meccas, a city of 1.4 million people where private enterprise flourishes. Workers flock there from poor farms in central China, providing cheap labor for manufacturers that have relocated to Dongguan from Hong Kong, Taiwan, Japan and the U.S. The bus passed miles and miles of factories, many operating 24 hours a day to satisfy the appetites of Western consumers.
One of the factories was the Unimold Manufacturing Co., Ltd., which sent a car to meet Liou's bus. Unimold is a tooling factory, the first stop in golf club construction after the club is designed. According to Rob Duncanson, an attorney for several brands, including Titleist, Cobra and TaylorMade, the tooling factory is also where the manufacture of counterfeits begins. "The R&D department of a company in California comes up with a new design for a club and must transfer that proprietary information to the vendor," Duncanson says. "The company doesn't own the vendor. It has a contractual relationship with him. The company says it will pay X dollars to turn this design into a master, from which a tool will be made. The tool is used to mass-produce the clubhead. The problem is, there's no control over the proprietary design when it gets to China. There's a six-to eight-week period during which they develop the master and send samples back and forth for approval, and things can happen."
Unimold, which has been in Dongguan for five years, employs 60 workers. They work 12-hour days, seven days a week, and are paid about $100 a month, plus room and board, according to the manager, Hu Gui Dong. During Liou's 45-minute visit, Unimold's workers were hand-tooling masters for a set of Tommy Armour irons and a Mizuno driver. On an open shelf on the wall were copper molds for some of Unimold's other customers, including Dunlop, Spalding, TaylorMade and Adams. Unimold charges $1,200 for a copper master of a driver. This is the intellectual property of the company that designed the club, but in this tooling factory there are no security guards, no surveillance cameras and no metal detectors to prevent a worker from lifting a copper master. On the street, Liou estimates, a finished copper master of a brand-name club might fetch $10,000—more money than any of these workers could expect to see in a lifetime.
That afternoon Liou made a call on one of his biggest vendors, Unitech Golf Co., Ltd., a casting company on the outskirts of Dongguan. It's a medium-sized operation by China's standards, employing 200 people and cranking out 100,000 to 130,000 clubheads a month for 10 to 20 little-known companies, such as Akia, Echelon, Pax and Velocity. This may be Knockoff Central, but the care that goes into the construction of each clubhead is mind-boggling. There are 200 steps involved between the tooling and the shipping of a head. The wax has to be mixed, injected, cooled and trimmed; the casts have to be scraped, welded and polished; the heads have to be taped, painted, stacked and inspected. Fifty to 60 workers touch every clubhead as it is made—a clubhead that at the end of the day might be sold to Liou for $4 or $5. There are no paid vacations or sick days, no worker's compensation or maternity leave. And if orders fall off, the owner can let a worker go with one day's notice. Modern Communist China, it turns out, is a 19th-century industrial capitalist's dream.
Five years ago, said Jimy Wang, the owner of Unitech, the land around his factory was farmland. This area is called Tangxia, and it is home to 20 factories that make both legitimate and illegal clubs. Since February 2002 the population of Tangxia has doubled, to 400,000. Security measures are much more elaborate at Unitech than they are at the Unimold tooling factory. The front gate is locked and manned by armed guards. There are five security officers among the company's 200 employees, not to mention surveillance cameras overlooking the factory floor. Still, Wang admitted, no security system is foolproof. Wax molds have a way of vanishing out the backdoor. "Every factory experiences theft," he said.
Wang, dressed stylishly in a black designer T-shirt, black pants and a belt with a gold buckle, is relatively new to the golf business. His capital came from his other line of work: a karaoke bar that he owns in Dongguan. Karaoke bars in China, as in the States, have microphones and music, but many of them also provide customers with prostitutes. (Wang insists that his bar does not.)
Another line of capital for some illegal club manufacturers may come from Chinese triads, or crime syndicates, which have long been suspected of using some foundries to launder money from prostitution, drugs and gambling operations. "They are involved, guaranteed," says Fernyhough, the private investigator who spent 14 years working for the Hong Kong police pursuing the Chinese mafia. "Golf clubs are a high-markup item, and anything that has a high margin in it, they will be into."