One of the most significant breakthroughs in golf club production in recent years has been the use of titanium, notably in drivers. Titanium is stronger and lighter than steel, enabling manufacturers to make ever larger clubheads with ever bigger sweet spots that propel the ball ever farther. Most of the titanium in golf clubs comes from Russia or northern China, and most of the foundries that work with it are in or near Guangzhou.
Only a two-hour drive or 90-minute ferry ride from Hong Kong, Guangzhou is a city of 3.8 million people and about 100 golf manufacturers, if you count the makers of accessories such as bags and shoes. But only seven foundries in the city work with titanium, which requires a significant investment in specialized equipment.
One of these foundries is Maxwin Golf. Its owner, David Chiang, is Taiwanese. He moved to Guangzhou in 1989, becoming the second golf manufacturer in the city. Between 1991 and 1997, he made good money. Since then, business has been spotty. Many deep-pocketed, publicly traded companies from Taiwan have moved to this part of China, and competition has been fierce. Fortunately, Chiang said, he started a karaoke club on the side, where, with 60 girls, profits are more reliable.
Chiang, wearing a counterfeit Versace jacket with Adidas buttons, conducted a tour of his factory for Liou but said the third floor of his plant was, unfortunately, off-limits. Something that no one was allowed to see was going on there. Outside, firecrackers were popping, salutations to the Year of the Ram. Inside, all that could be heard was the rhythmic booming of a machine that stamped sheets of titanium into silvery cutouts that would be used for the faces of drivers.
"Any company that makes things in China will experience theft," Chiang said. "Employees make so little money, they're always going to steal and sell molds on the open market. In Guangzhou alone there are three factories that do nothing but make counterfeits and copies. We have our employees line up after work, and we search them. We have metal detectors at both of our entrances and security cameras at all the work stations. If they're caught stealing, they're fired, and I'll call the police. But it won't ever stop. The copy and counterfeit market is too large."
Callaway was so concerned about security at the Fu Sheng company, its main manufacturer in China, that it sent Herrington there three times in 2002. He offered a bonus equivalent to a year's salary to anyone who turned in a coworker for theft. He also made sure that Callaway clubs were manufactured in their own building, separate from the building that made Nike's clubs. Despite these and other safeguards, wax molds of the newest, hottest clubs still disappear. "We cannot guarantee 100 percent against theft," said Fu Sheng's president, P.Z. Lin.
"That's a joke," says Midi Liu, laughing at the notion of any guarantee. Liu, a Taiwanese, was one of those arrested in Project Teed Off in 1999. After spending four months incarcerated in the U.S., he was deported and now lives in Taipei. Liu still exports Chinese-built clubs and components, but to South Korea. "Sometimes a security guard cooperates [with thieves]," Liu says. "I could get 300 Nike heads this week. I could get Titleist. The Chinese government has said it's cracking down on counterfeiters because of pressure from the U.S. government. But they look with one eye. China just wants to make money"
When Callaway learned that a foundry in Guangzhou, Shunde Jackson Precision Industries Corp., was wrongly representing itself to customers as an authorized Callaway manufacturer, Herring-ton began an investigation. It's a frustrating endeavor. "We're running a big investigation there, and it's pretty unsatisfying," Herrington says. "I can spend $100,000, invest three to six months hiring investigators in China to follow trucks and gather evidence of wrongdoing. We file an affidavit with the Chinese anti-counterfeiting authorities and stage a raid. But the counterfeiters are back in business within a week. The fines and forfeitures are minimal. They're happy to pay the fines as a cost of doing business."
So, for the first time in a decade, there are rumors that some U.S. companies are rethinking their involvement in China. Callaway is believed by some of its competitors to be considering a move back to Mexico, a rumor that Callaway's senior vice president of global press and public relations, Larry Dorman, doesn't dismiss out of hand. "We continue to explore relationships with other vendors, but that decision will be made on the basis of quality and price, not security," he says. "Wherever your vendors are located, there are issues with intellectual-property theft. Proximity does not mean better security."
Others have simply thrown up their hands. "When it finally dawned on me what the culture was over there," says Barney Adams, whose company will continue to make its clubs in China, "I realized we were never going to win this war. Most golf companies are losing their asses right now. One of the fallacies about golf is that we're an industry. We're so busy trying to cut one another's throats, we don't cooperate. Callaway wouldn't dream of working with Taylor-Made. If we pooled our knowledge and resources, we'd have a lot better chance of fighting [counterfeiters]."