By: Steve Toloken
March 6, 2014
HO CHI MINH CITY — South Korean injection machine maker Dongshin Hydraulics Co. Ltd. is seriously considering setting up a manufacturing facility in Vietnam, to cater to Southeast Asia’s growing market, the company’s top executive said in an interview in the country.
While Vietnam’s economy has slowed sharply the last two years, Dongshin sees long-term potential from local growth and the sizable presence of Korean manufacturers in the country, CEO Philip Kim said.
“It’s going to be fully assembled, fully manufactured, in the Haiphong area — that is my target,” he said, in an interview at the Plastics & Rubber Vietnam 2014 show, held March 4-6 in Ho Chi Minh City. “I would like to make the machinery here and targeting to Southeast Asian countries, not for the Western countries.”
He said it was “most likely” that the company would move ahead and build the factory, which he said would be a US$10 million investment with, eventually, capacity to make 1,000 presses a year. A decision is likely this year, he said.
The company currently has facilities at its Busan, South Korea, headquarters, and in Ningbo, China. But Kim said China is becoming a more difficult place to operate.
“In China, there is not much advantage any more, with the labor costs growing,” he said. As well, he said Dongshin has had labor stoppages and difficult situations with Chinese unions in its factory.
Vietnam does not have much domestic equipment manufacturing, but if Dongshin went ahead with the plans, the Korean firm would join China’s Haitian International Holdings Ltd. in manufacturing injection molding machines in Vietnam. Haitian opened its facility, outside Ho Chi Minh City, in 2011.
Any Vietnam plant would initially have to import many of the components because the country does not have a well-developed support infrastructure, but Kim said he hoped to convince some of his suppliers, particularly metal casting firms, to also locate in Vietnam.
“They don’t have much infrastructure yet, but that’s why I am trying to induce other suppliers,” he said. Nonetheless, he said the company is taking a hard look at Vietnam.
“I already ordered to my people to set up the company here first and try to find a location [for the manufacturing plant],” he said. “If you can make it at a reasonable price here in Vietnam, not competing with the Taiwanese or Chinese machines, with the Korean quality with a Vietnamese price, I think I have a chance to sell it here.”
Vietnam’s rapid economic growth slowed dramatically in 2012 and 2013, with 2012 economic growth of 5 percent, its lowest level since 2000. Growth had topped 8 percent a year for the several years prior to 2012.
Most companies at the trade fair said conditions remained difficult in Vietnam but many also said there were anecdotal signs of a turnaround.
Some broader indicators were also pointing in a positive direction: The European Union Chamber of Commerce in Vietnam, for example, said Feb. 25 that its business survey of members operating in the country found a “significantly increased” business confidence in the first quarter of the year.
Kim said he considers the long-term potential of Vietnam and its 100 million residents good, and pointed to the large Vietnam manufacturing operations of Korean conglomerates like LG and Samsung, the world’s largest mobile phone maker.
A January article by the Vietnam Economic News service, for example, said half of the roughly 250 million mobile phones Samsung makes each year are produced in Vietnam.
Samsung by itself accounted for 10 percent of Vietnam’s total exports in 2012, the news service said.
Kim said Dongshin plans to make its smaller hybrid machines in Vietnam, from 80 to 550 tons clamping force. He said the company plans to produce the same version of its machines in Vietnam that it makes in its other factories.
“I’m not going to sell a low-profile [injection press] here and degrade my machine and just adapt to the Vietnamese lower market,” he said. “I don’t want to do that. I want to have the brand name with the quality.”