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V.S. Industry plans to build molding factory in Indonesia

By: Steve Toloken

April 16, 2012

ORLANDO, FLA. (April 16, 2 p.m. ET) — Malaysia’s V.S. Industry Bhd. is building a new injection molding factory in Indonesia to meet increased demand from multinational electronics manufacturers there, as the company says rising costs in China are starting to shift work from that country.

It would be the first injection molding plant in Indonesia for V.S. Industry, which has more than 1,500 injection presses in factories in China, Vietnam and Malaysia. It’s in response to its multinational electronics customers, including Seiko Epson Corp., who want to do more manufacturing in the country, company executives said.

“They have been encouraging us to set up plastic molding in Indonesia to be one-stop,” said Nick Lim, senior manager of marketing for the Senai, Malaysia-based firm, in an interview at NPE2012. V.S. currently has a printed circuit board manufacturing factory in Indonesia.

The new factory, to be located outside Jakarta, is under construction and scheduled to open in mid-2013 with 50 Japanese and Chinese injection molding machines and about 200 employees, he said.

Lim said the new investment is partly related to rising costs in China, as multinationals seek to diversify their manufacturing base away from China. But he said it’s also in response to other molding opportunities in Indonesia’s domestic market.

In China, the company has been downsizing its workforce in recent years as labor costs have been rising at double-digit annual rates.

The company, for example, had 12,000 employees at a massive molding and assembly manufacturing complex in Zhuhai, China, in 2008, but has reduced that to 8,000 employees today, Lim said.

In its most recent annual report, covering its 2011 fiscal year, the publicly listed company said, “The year under review saw the [electronics manufacturing services] sector in China facing tremendous internal and external pressures, arising from higher labor costs and a more competitive landscape as customers began to shift their manufacturing requirements to other low-cost countries in the region.”

V.S. said it is one of the 50 largest electronics contract manufacturing companies in the world.

Lim said the manufacturing cost gap between China and the headquarters plant in Malaysia, where V.S. has 350 injection molding machines, has narrowed dramatically in recent years.

China’s total manufacturing cost used to be 30-40 percent cheaper, but today, the country is only 10 percent cheaper than Malaysia, Lim said.

In Indonesia, Lim said V.S. also anticipates business making plastic components for the American company Itron Inc., which manufactures electric meters there for the Indonesian market.

The company exhibited at NPE2012, held April 1-5 in Orlando.