Evco to build $4 million factory for medical, precision molding

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Steve Toloken Evco President Dale Evans at the company's Shenzhen facility.

SHENZHEN, CHINA — Injection molder Evco Plastics plans to invest at least $4 million in a new facility in China, which the company says will help it better target opportunities for medical and precision part manufacturing and handle the rising costs along with reshoring challenges hitting China’s export sector.

China was the site of Evco’s first non-U.S. factory, but the DeForest, Wis.-based company’s newer operations in Mexico have grown much faster in recent years, President Dale Evans said in a March 18 interview at the company’s Shenzhen facility.

Evco has nine factories and 900 employees in the United States, Mexico and China. Evans, a longtime internationalist in the plastics processing industry, offered insight into how a mid-sized plastic processor is dealing with changing global supply chains.

The company initially built the molding plant in China for the kind of large-part work it does in the United States, like covers for outboard marine motors.

But then some of that manufacturing moved to Mexico, and China shifted focus to mid-volume assembly and smaller parts that can be shipped cost-effectively, he said.

“The business that we’re getting [in China] is the little things, the complex parts, so we need to size the facility and the clean rooms for that type of thing,” Evans said. “I want to build a multi-floor
facility. ... You can have the whole floor be a clean room. You can drop parts through the floor. You can bring resin up.”

The company hopes to have the new facility operating within two years, and plans to keep it near the existing plant, which will shut down.

Evco set up a mold making joint venture in Shenzhen in 1989 with a Chinese defense contractor, and opened its own wholly-owned injection molding facility in Shenzhen in 2004.

But in recent years, Evans said, Mexico has outpaced China. Evco opened its first plant in Monterrey, Mexico, in 2001, and added two more in 2005 and 2007.

Today, its three Mexican plants have 50 injection machines, compared with 16 in China, and more employees. Globally, Evco has more than 140 molding machines.

“Yes, [Mexico] is growing much faster,” he said. “There is reshoring going on. When people talk about reshoring, they talk about North America, not necessarily the U.S.”

But he said the China operation remains competitive. The Shenzhen facility and its 100 employees went eight years without a rejected part, which Evans said was longer than its U.S. operations.

Showing a visitor around the 73,000-square-foot factory, he pointed out a small Class 100,000 clean room. The new installation is a sign of what’s coming for China.

Inside the dust-free environment, two staff in surgical garb used an all-electric press to mold parts for a stent and then machined tiny holes into them for future assembly. It’s Evco’s first clean room in China.

The Shenzhen plant is working toward getting ISO 13485 certification for medical manufacturing — something that Evco’s U.S. operations have.

Shenzhen also recently added its first robot and has another on order, which Evans said reflects the reality of rising factory wages and the need to automate. Worldwide, the company has 104 robots.

“China has a place, our target markets are complex small assemblies,” he said. “If we do that in the U.S., we automate the heck out of it. We have cells that have four robots and a molding machine. Nobody ever touches the product.

“You have to have a certain amount of volume to do that,” he said. “The sweet spot in China is below that volume, where you cannot afford to spend the money on the automation but yet you still need to put the assembly together.”

He said the company will invest at least $4 million in the new building in China, plus additional money for unspecified equipment. It has only two electric molding machines in Shenzhen, out of 16 presses there, but Evans suggested more could be coming as the factory retools.

The company made the wrong decision in Shenzhen opening a plant with high ceilings designed for large part molding, he said, adding with some Midwestern candor: “It’s pretty much because of a mistake I made.”

In the United States, those bigger parts are one of Evco’s major markets. It’s been adding very large presses in recent years, including a 3,500-ton press last year at its factory in Oshkosh, Wis., for parts like vehicle hoods, instrument panels and parts for agricultural equipment.

The Shenzhen factory — which sits in the city’s Longhua neighborhood immediately next to a factory of contract manufacturing giant Foxconn that attracted notoriety for installing suicide nets around its worker dorms — remains overwhelmingly focused on exports.

About half Evco’s Shenzhen products are directly exported, and much of the other half is sent to customers’ factories elsewhere in China where it will ultimately be shipped outside the country, the company said.

Evans was cautious about the potential of China’s domestic market for Evco, in spite of a lot of talk in industry circles about that.

While there’s potential with some of its global medical device customers, he blames what he said is a “selective” enforcement of laws in China that put companies that follow regulations at a “distinct disadvantage” on cost.

Not that the company needs a shot in the arm from China’s domestic market at the moment.

Globally, Evans said the privately owned firm’s sales have grown from about $110 million in 2007 before the Great Recession — when it saw sales drop 40 percent in 2008 and 2009 forcing it to close one factory — to more than $130 million a year now.

Before 2007, he said the company’s sales pretty closely tracked U.S. industrial production. But since then, its growth worldwide has been “significantly above those numbers,” Evans said.

It’s having a record year for mold making, which should indicate good results for its molding and assembly operations in the near future, he said.

“We bet the right horse, with good customers,” Evans said. “We spent a lot of time going after the right customers.  You can do everything right and you have the wrong client, and you’ll fail.”