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| Dim Outlook for Chinese Mould Companies |
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By 2010, China's die and mould market will reach RMB 120 billion (RMB:USD: 7:1). Despite such enormous market potential, Chinese mould companies are still being squeezed by their foreign rivals and affected by their own organisational problems, hence industry investment risks.
Mould making is the foundation of manufacturing industries. From electronics, automobile, electrical machinery, instrument, meters, home appliance to communication equipment, 60-80% of their parts and accessories rely on moulding process.
Foreign companies accelerating their footsteps
Between 2001 and 2005, Chinese mould companies had gained substantial development, with an average growth rate of 20%. Mould sales revenue in China reached RMB 6.1 billion in 2005, and including imported mould products of US$2 billion, the total mould market in China was about RMB 80 billion. Experts estimated that it will reach RMB 120 billion by 2010.
International mould makers have been busy with establishing production lines in China in recent years, for example, German Hella factory in Jilin Province and the Japanese Toyota mould company in Tianjin. And the newly built mould factory in Shenzhen City by Finnish Perlos Corporation is making high-end mould products for telecommunications, healthcare, electronics and automobile industries. |
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The establishment of wholly-owned foreign mould companies in China cannot really improve Chinese companies' mould expertise. Foreign companies have long been leading the market by their advanced technologies and financial strength, and their competitive advantages can only be increased with China's relatively cheap labour and raw materials. This will make the high-end mould market more difficult to access by Chinese mould companies, so in other words, Chinese companies will not have many opportunities to upgrade themselves. The most fearful thing for Chinese mould companies is that before they can gain any significant improvement, their foreign rivals have already captured the lucrative Chinese mould market.
Although China currently has the third-largest mould industry in the world, only behind US and Japan, most of the products are in the low to middle end categories, with low technological contents and value adding components. According to China Die and Mould Industry Association, the most demanded mould products by the domestic manufacturing sectors, such as complex stamping mould, passenger car cover mould, electronic insertion mould, are still reliant on imports. China currently has a mould trading deficit of more than US$1 billion per year.
Problems within Chinese mould companies
According to incomplete statistics, China currently has more than 20,000 mould makers, but half of them are making moulds only to feed their own manufacturing needs. Although in recent years, the mould industry in China has seen some structural reforms, its overall design and production levels are still far behind their counterparts from developed countries.
Weak innovative abilities. The die and mould industry is a technology-intensive and capital-intensive industry, but there is currently a shortage of talents which can master and apply new technologies, as well as shortages of senior mould makers and corporate management talents. On the other hand, due to suboptimal financial performance and lack of attention on R&D activities, many mould companies have not invested enough in product and technology developments. The financing difficulty for private companies in China is also affecting the technological reforms in many mould companies, hence a slow progress.
Low industry efficiency. Although many Chinese mould companies have upgraded their processing facilities, they are still far lagging behind foreign companies in terms of equipment, especially the low percentage of digitised control equipment and CAD/CAM applications. Due to policy and funding deficiency, incompleteness of equipment sets and incompatibility between equipment and parts are quite common among companies, resulting in a chronic problem of low equipment utilisation rate. The low equipment capability has also led to the problem of labour cost blow-out in many companies.
Low specialisation. Low standardisation pf moulds and low applicability of standardised moulds are also affecting mould quality and operating costs. The effect is particularly significant on mould production cycles.
Outdated materials and technologies. Mould quality, lifespan and costs are often affected by their raw materials' performance, quality and varieties. Compared to imported moulding steel, China's own moulding steel materials are still lagging behind. And the unsatisfactory performance of plastics, panel materials and equipment are also affecting the improvement of Chinese moulds.
Foreign company activities
Due to protection of core technologies, most foreign mould companies won't establish joint ventures with local companies. There are two major models for foreign mould companies to enter China. One is entry with related companies (mostly customers) and serving designated customers only, so their mould products typically have a small variety. The other model is independent entry into China and investing in China. This type of foreign companies comes in with the aim of utilising the low cost labour and steel materials in China, so that they can cut cost and increase margins.
It is reported that mould workshops in foreign companies are "classified areas" in China. And their design processes are often handled overseas and communicated with their plants in China via the internet. For foreign mould companies with sufficient capital and proprietary technical expertise, their dominant purpose is to reduce costs, so they don't really need to work with their Chinese counterparts.
Produced by China Business Intelligence: Source: www.cncproduct.com
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