Key Tronic Corp. is establishing production capability in China and expanding its involvement with original design and manufacturing projects.
``We've allied ourselves with Chinese manufacturers,'' Jack Oehlke said April 21 by telephone from his Spokane, Wash., headquarters office. Some Key Tronic customers are relocating to China and ``demand their vendor base have worldwide presence.''
Oehlke was interviewed shortly after Key Tronic reported profit and sales of $147,000 and $45.4 million, respectively, for 1998's third quarter, ended March 28. Key Tronic promoted Oehlke to chief executive officer in June and later named him president.
The Chinese partnerships involve plastics and electronics production at sites in Shanghai and Dongguang. One Chinese firm makes its ``own product to our specifications, another is using our tools to make product and the third location uses our tools and specs and we will do the final assembly,'' Oehlke said.
Once the plants are up to speed, Key Tronic plans to export output to the United States, Europe or both. The firm's plan is to leverage production capabilities to build devices that yield profit margins more favorable than those for keyboards, he said.
Intense pricing pressure within the computer industry impacts Key Tronic's large keyboard business. The firm shipped 26 percent more keyboards at 19 percent lower average selling prices in the 1998 quarter, compared to last year's same period.
Key Tronic also continues to fill its Ju rez, Mexico, plant, but does most of its molding in Spokane, Oehlke said.
In fiscal 1997, Hewlett-Packard Co. contributed about 34 percent of Key Tronic's $184.9 million in sales, and new customer Toshiba Corp., 11 percent.
Key Tronic employs about 2,700.