Plastics processors in Shenzhen, on China's southeast coast, currently run about 100,000 injection presses, and make 20 percent of the injection molded products exported by the entire country.
Shenzhen, China's first special economic zone, now houses about 5,000 plastics and rubber companies and consumes more than 6 billion tons of raw materials annually. Yet, the region's largest plastics industry group said much needs to be done for local companies to stay competitive, domestically and internationally.
Sun Liqing, general adviser of the Shenzhen Plastics & Rubber Association, offered his views in a Nov. 12 interview with Plastics News at the Shenzhen group's headquarters. Sun said the small-scale and singular business models of local processors are keeping them from upgrading equipment, innovating technically and succeeding globally.
In the region, the largest category of plastics companies have received investments from Hong Kong, the neighboring city that is just a 30-minute express train ride away.
In fact, the former president of the Hong Kong Plastic Bags Manufacturers' Association, Lau Shiuyin, is now chairman of the Shenzhen Plastics & Rubber Association. Lau launched a factory in Shenzhen in 1986.
``Most Hong Kong companies are family businesses,'' Sun said, ``not so many big ones.''
Locally owned private enterprises mushroomed in the past two decades, but most of them have remained small.
``They can do well in business, but they don't really think of taking [the business] to the next level,'' Sun said.
Two-thirds of Shenzhen's plastics products are made by custom processors for original equipment manufacturer customers. Major export destinations are Hong Kong, Taiwan, Japan and Southeast Asia.
``Local companies live on contracts without self-owned intellectual rights,'' Sun said. ``And they are so focused on getting and completing contracts that they don't see the needs of product innovation or automation or any changes.''
He said that less than 5 percent of Shenzhen's blow molding machines are automated, and ``the figure for injection machines is less than 10 percent.''
``Some [companies] don't have the budget for robots and others still believe in cheap labor.''
But already the region is witnessing labor shortages.
``Small companies don't have training,'' Sun said, noting that workers ``learn from practicing.''
``You can imagine how unlikely they are to improve efficiency or to adapt advanced techniques,'' he added.
Also, ``local processors are vulnerable to resin price hikes,'' he said. And recycled resin is in short supply, which makes the problem worse. Compound that with power shortages and rising rates.
``Electric presses are not considered a viable solution, because small and medium-sized companies simply cannot afford them,'' he said.
Instead, the Shenzhen plastics association is promoting the use of variable-frequency drives, to make machines more energy efficient. Sun said companies are able to cut their energy use by about 30 percent, and currently about 30 companies have participated in the option.
``The investment is affordable and [savings] can be returned soon on electric power bills,'' he said.
Sun sees Shenzhen's fiercest competition coming from another China hotspot, the Yangtze River delta, which consists of Shanghai, Jiangsu and Zhejiang. The Pearl River delta - which is basically Guangdong province - and the Yangtze River delta are the two largest plastics manufacturing bases, collectively accounting for 60 percent of the plastics processed in China. But Sun said that many foreign investors are expanding or even transferring the emphasis from South China to the east. And the differences between the two regions explain the trend: The Yangtze River delta outshines the Pearl River delta with larger companies and more direct exports, he said.
``When manufacturers in Guangdong are led by the nose by OEMs,'' Sun said, ``companies in the Yangtze River delta are at the front exploring the global market.''