Patrick Plastics’ founder offers insight into Chinese molding market

There’s an old saying that ‘only Nixon can go to China’. And, given their reluctance to explore the possibility of opening manufacturing facilities in Chinese provinces, many North American plastics processors apparently still believe it.

Asked to explain this reluctance, many cite the lack of clear-cut rules and methods for entering the overseas market, as well as concerns about intellectual property (IP) theft.

Patrick Hung, the founder of Patrick Plastics Inc., in Vaughan, Ont., has a unique view this situation.

Hung is a Hong Kong-native who emigrated to Canada in 1976 and promptly started Patrick Plastics, his own injection molding company — he also owns Richmond Hill, Ont.-based moldmaking firm, CTMS — while at the same time keeping his business ties to China.

One year before emigrating, Hung had opened a Hong Kong firm called Season Components Co. Inc., which made battery connectors before branching into injection molding.

Three decades later, Season Components has additional facilities in Dongguan County in China and in Malaysia, and sales offices in the U.S., Ireland, Thailand, Japan and Australia.

It’s safe to say, then, that Hung has as good an understanding of the Chinese and Canadian plastics industries, and what it takes to operate in them, as just about anyone.

One of the best ways for foreign processors setting up in China to gain a foothold is by exploiting deficiencies in Chinese quality control, Hung said.

“In the Western World, if the probability of something impacting quality could happen one time out of a billion then it is considered risky enough to ensure that it doesn’t happen,” Hung said. “In China, however, it’s difficult to convince employees that these highly improbable events are even worth considering.”

As a result, Hung said, North American processors who can come in and offer better standards of quality are at an advantage.

But offsetting this advantage are difficulties in protecting plastics technology in China from IP theft, Hung cautioned.

Hung is no stranger to IP theft himself. Years ago, Hung manufactured Zaks, a series of children’s plastic puzzle pieces, only to find, almost immediately, that an imitation had appeared.

Hung spent two years, and a considerable amount of money, trying to track down the offending party, but the thief always managed to stay one step ahead, always packing up operations and resurfacing elsewhere.

The episode taught Hung that, when conducting business in China, there are two main reasons that IP gets stolen: First, someone believes they can manufacture your product at significantly cheaper cost; second, you’re manufacturing something that’s entirely new, in which case someone will try to duplicate it.

The way around IP theft is to run efficiently, Hung said; if you’re already manufacturing an item as cost-effectively as possible, there’s no value in it for the thieves.

North American processors setting up shop in China should also beware of high employee turnover, Hung said. To mitigate this in his Dongguan facility, he recruits employees from rural areas where unemployment is high, and also offers his workers and their families accommodations, daycare and access to education. As a result, he’s managed to keep turnover low.

Another handicap affecting Chinese firms is getting certification under international standards for automotive parts such as the new TS16949 from the E.U., and this offers another advantage to North American plastics processors already at compliance, Hung suggested.