Many plastics processors are expanding to meet growing demands from the computer, telecommunications and business equipment industries.
If molders are harried, there is a reason: cost pressures.
Dataquest Inc. forecasts for 1997-2002 show a price-ratio erosion for personal computers worldwide.
Based on compounded annual growth rates, shipments of computers will increase 14.4 percent during the five years, but dollar sales will climb only 10.4 percent, according to Joe Grenier, vice president of Dataquest's semiconductor device group. Industry overcapacity and intense competition are among the reasons, according to the San Jose, Calif.-based market research firm.
``The global economic malaise has reduced electronic equipment unit demand and revenue,'' Grenier said. In addition to the pricing pressure, he cited the Asian financial crisis, Japan's recession, the yen depreciation and ``deflection of spending toward the year 2000 problem.''
Demand for digital telephone handsets is a big driver in the world of thin-wall, electronic-shielded molding.
Strategy Analytics Inc. forecasts 1999 shipments of 126.8 million cellular and personal-communication-system telephones, an increase of 17.3 percent in three major world markets.
That contrasts with 1998 shipments of 108.1 million units in the same markets, according to Kelly Quinn, the firm's Boston-based senior industry analyst for North American mobile communications service.
This year, Strategy Analytics expects shipments of 18.7 million digital and 9.9 million analog units in the United States; 53 million units, almost all digital, in Western Europe; and 41.6 million digital and 3.6 million analog units in the Asia-Pacific region.
``From the perspective of the plastics manufacturing world, this is a dynamic and growing market,'' she said.
Cost pressures have impacted venerable printer powerhouse Hewlett-Packard Co. of Palo Alto, Calif., among others.
In January, H-P established a new company and brand name, Apollo, to make and market low-priced products. Apollo starts with 10 employees in San Diego.
Sales of document copying equipment continue to slide as e-mail and area-network communicators use computer printers more and copiers less.
Customer requests for more valued-added service impact molders in various ways.
Mack Molding Co. of Arlington, Vt., projects growth of 20-25 percent in 1999 electronics-related work, according to Jeff Somple, vice president of sales and engineering. The increase comes on the heels of a larger boost in 1998, when ``major jobs kicked in'' after lengthy Mack development programs.
Somple acknowledged the industry's rapid consolidation. In large part, Dell Computer Corp. of Round Rock, Texas, and Compaq Computer Corp. of Houston have driven suppliers to provide joint processing and assembly operations for plastics and metal, he said.
As part of the overall plastics processing consolidation, ``acquirers have taken on a lot of debt,'' Somple noted. ``We'll see in the next year or two'' how the possibly risky new relationships work. ``People made some gambles.''
Original equipment manufacturers are focusing on regional, rather than global, production sites, and plastics processors are following the OEMs, Lelan Jamison said. He is general manager of the injection molding division of Stillwater, Minn.-based UFE Inc.
UFE's injection molding and contract assembly divisions plan during 1999 to establish a high-precision manufacturing facility at a central Mexico site yet to be selected.
``Mexico is competitive and a lot closer than Asia,''Jamison said. Initially, the plant will have about 100,000 square feet and start out with 20-25 machines making telecommunications, office equipment and auto parts.
UFE projects 1999 sales growth of about 5-7 percent in each niche, including electronics, he said. UFE's Singapore operation remains competitive despite the problems in Asia, Jamison said.
Flambeau Corp. of Baraboo, Wis., anticipates 10 percent growth of 1999 electronics and telecommunications sales with business equipment also recording an increase, Bill Flint, president and chief operating officer, said in a statement.
Flint said the Asia situation will not impact Flambeau directly, but he expects that ``those companies that do ship to Asia or have manufacturing there will be more aggressive in trying to grow their domestic business to make up for those lost sales.''
OEMs will continue to apply pressure. ``The selling prices of their products continue to decline so they must make it up,'' Flint said. ``One way is through price concessions from their suppliers.''
Beach Mold & Tool Inc. of New Albany, Ind., anticipates continuing growth during 1999 in its computer and telecommunication niches ``as the customer base expands in the global market,'' David White, vice president of sales and marketing, said.
A willingness to focus on specific customer needs led the privately held custom house into 1998 joint ventures in New Braunfels, Texas, and Tullamore, Ireland.
``We are going to be asked to move here and there,'' he said. ``We will continue to say yes'' if the business is sound, if it serves Beach's OEM customers ``and we can all make a profit,'' he said.
InteSys Technologies Inc. of Gilbert, Ariz., expects a 20 percent increase in its telecommunications business, Greg Layne, president, said. Major telecom customers include Motorola Inc. and Nokia Corp.
``The underlying volume is not necessarily increasing, but the value is increasing'' in the domestic market, Layne said.
InteSys also is exploring ways to mold products closer to customers, possibly through another domestic plant, an acquisition in Europe or a joint venture in China or South America.