Competitors or Customers?
By Michael Legault
We've all read the stories. China-based companies are taking our work and our jobs. In many cases this is certainly true. There is no denying, for instance, that most or all of the consumer electronics molding once done in North America has been o...
We’ve all read the stories. China-based companies are taking our work and our jobs. In many cases this is certainly true. There is no denying, for instance, that most or all of the consumer electronics molding once done in North America has been outsourced to Asia-based companies–although a portion has been assumed by Mexico and other countries too. But now, more and more Chinese injection molders are establishing a presence here, eager to form alliances and partnerships with Canadian companies. Is this a ruse; a clever way to lure more business away from our shores? According to two China-based companies exhibiting at the recent Plast-Ex show in Toronto, it is a legitimate business proposition; one they say could benefit both themselves and any Canadian injection molder with the right combination of technical capabilities and long-term strategic business goals.
Huge country, huge opportunities
At a certain level, partnering, forming alliances or inking licensing agreements with a Chinese molder/manufacturer is a no brainer. We are talking about the largest, fastest-growing market in the world. Many Canadian molders have captive lines of products and unique capabilities still not available in China. The key is finding the right partner and getting the right, mutually beneficial arrangement.
Zheijiang Ninghai Dapeng Mold & Plastic Company, located on the east coast of China in the city of Ningbo, is a company consisting of individual firms specializing in injection molding, moldmaking and surface finishing. Its current customer base includes the likes of Panasonic, Toyota and Whirlpool. Chen Jian, one of the company’s directors, said the company has several strategic objectives, one being to supply molds to the North American market. Jian said the company is also looking to team up with smaller Canadian and American injection molders to produce parts in China. According to Jian, the perception that China-based molders have all the advantages is not entirely true.
“We are not as competitive in high-end injection molding as most North American companies,” Jian claimed. “The cost for engineering resins is higher in China, compared to commodity resins, because we have to buy this (resin) from overseas and pay tax and duty.” Chinese companies also have fewer resources available for research and development. He also noted that the Chinese government provides incentives for foreign companies to invest in China.
China-based companies are most competitive in high-volume molding projects using commodity resins, or low-volume work involving engineering resins, as such projects ramp up labor content, an area in which China has a distinct cost advantage, according to Jian.
Currently, 70 to 80% of the company’s molding and moldmaking sales are in the appliance market. The remainder of sales are mostly for automotive applications. Jian said the Chinese economy is undergoing a transition that will accelerate partnerships with foreign firms.
“China’s people are earning more and living better. At first they bought appliances such as vacuum cleaners and washing machines. Now they are starting to buy cars in large numbers.”
Dapeng, the injection molding division, currently has 10 Haitian injection molding machines, the largest being 360 tons. Jian said the company plans to add 16 more machines within the next year; as well build a new facility to house 10 large tonnage machines ranging from 1000 to 4000 tons in clamping force.
“We’re open to any (partnership) initiative in Canada, no matter how small the company,” Jian said.
Jetcrown Industrial Ltd. has two injection molding plants, one in Dongguan, and another in Shekou, both in the southern part of mainland China, close to Hong Kong. The main plant in Dongguan has approximately 400,000 sq. ft. of floor space and employs over 2000 people. Another 350 people work at the smaller plant in Shekou, which has about 100,000 sq. ft. of space. The company has been in business for 17 years and has ISO 9001, ISO 14001 and ISO TS16949 certifications. It pitches itself as a full-service firm with up-to-date capabilities in design, engineering, toolmaking and molding.
“We want to get more contacts with potential customers in North America,” said S.Y. Tang, Jetcrown’s director of marketing. Tang said those customers could be Tier One suppliers or OEMs. Jetcrown would act in the capacity of a custom molder or contract manufacturer for these companies, making parts or finished assemblies at its facilities in China and shipping to other locations in China or to North America.
There is no doubt the company has the capacity to handle large orders. It has 300 injection molding machines, ranging from 40 to 1600 tons in clamping force, between its two plants. The company has 18 co-injection presses for two-color, two-material molding. Other specialties include in-mold decoration, insert molding, high-pressure structural foam molding and gas assist. Jetcrown’s auxiliary operations include pad printing, laser engraving, assembly and painting. On-site engineers can produce 3D solid models using Pro-Engineer, Unigraphics, Catia and AutoCad software. The company also operates a high-capacity moldmaking shop at its Shekou facility. The shop is equipped with a wide array of equipment, including high-speed CNC milling machines, and is capable of producing molds up to 30 tons, or the approximate size of an automotive bumper mold.
In short, Jetcrown is capable of manufacturing to exacting North American and global standards, while capturing all the low-cost advantages for which manufacturers in China are known. Looser labor codes and standards, for instance, allow the company to operate literally around the clock, on a 24/7 basis.
“We can build a complete mold in 10 days,” said Tang, reporting that the company will also supply molds to customers in North America.
Jetcrown’s main North American customers include Inter-tel, a telephone manufacturer, and Emerson, a maker of appliance and energy-saving devices. It also supplies parts to the Japanese business equipment manufacturer, Epson. In order to carry out product manufacturing at a distance for these customers, Jetcrown offers complete project management. Engineering and production staff can communicate in English by e-mail and tele-conference. In the case of a mold build, the company provides customers with a weekly progress report, including digital photos.
“We’ve been doing this for many years and have experience to make it work,” Tang reported. “We’re looking to expand our customer base.”
Canadian molders evaluate options
Traditionally, the expansion of business for China-based molders has come at the expense of North American molders. Certainly that scenario still exists, as many of these companies are seeking to aggressively expand their business with North American OEMs, many of whom are already manufacturing in China. But, as their presence at regional plastics trade shows attests, China-based molders are also seeking to explore business opportunities with suppliers to these OEMs, acting in the capacity of sub-suppliers of parts or molds, on- or off-shore. So far, it appears the reception has been lukewarm.
A number of China-based injection molders and parts suppliers exhibiting at the recent Society of Automotive Engineers (SAE) World Congress said their efforts to enter the North American automotive market have so far not paid dividends.
Quiseng Plastic Chemical Company, a manufacturer of foam insulating mats and rubber parts such as gaskets and o-rings, has been attempting to crack the North American market for several years, without luck.
“We’d like to supply companies with automotive molding,” said Sam Cui, Quiseng account manager. “It’s been very tough so far. We have no customers in the U.S. yet.”
Another company, China Custom Manufacturing, was exhibiting at the SAE for the second year. The company has injection molding machines ranging from 28- to 5,000-tons in clamping force. It offers customers full-service capabilities, including assembly, welding and tooling
design and manufacturing. China Custom Manufacturing, which is part of Pacific Manufacturing Group, operates a sales office in Freemont, CA.
“We want to sell directly to OEMs or Tier Ones,” said a spokeswoman at the company’s booth. “It is very hard to break into this market.”
At the supplier level, business opportunities between China- and Canadian-based molders may take some time to take root and develop. For example, with the exception of the scale of operations, the profile of Horn Plastics Inc. (Whitby, ON) appears remarkably similar to that of Jetcrown. Founded n 1968 as a tool and die shop, Horn expanded into injection molding in 1978. The company recently opened a new 90,000 sq. ft. facility equipped with 42 injection molding presses, mold shop, assembly operations and CAD/CAM design. The company prides itself on being a one-stop contract manufacturer of tight-tolerance parts and assemblies for a diverse base of customers. According to Michael Newman, sales manager, the breakdown of the company’s current business is about one-third automotive, one-third business machine and one-third miscellaneous.
Newman says Horn has been buying molds made in Asia for some time. While the company does not presently have plans to open a plant or partner with another company in China, it is working to finalize a licensing agreement with an Asia-based company that may result in substantial amount of new business. The work, if obtained, will be done at the company’s plant in Whitby.
Jetcrown Industrial Ltd email@example.com
Zhejiang Ninghai Dapeng Mold & Plastic Company firstname.lastname@example.org