South Korea's injection press industry is making significant investments in mainland China, as it tries to get a foothold in that market and find a way to lower its costs to compete with its neighbor's developing industry.
Jinhwa Glotech Co. Ltd., for example, is spending $10 million to triple the size of its facility in Ningbo, China, this year and give it capacity to make 500 injection molding presses a year.
Other large competitors have made similar moves: LS Cable Ltd. opened an injection press plant in Wuxi, China, in November, and Woojin Selex Co. Ltd. finished ramping up its own Ningbo plant in the second half of last year, putting it on pace to make 800 machines a year there.
The industry's profits are under pressure from lower-cost machines made in China, increases in oil and steel prices, and a South Korean won that has risen against the U.S. dollar, said Young Soo Han, chairman of the Korea Plastics Processing Machine Industry Cooperative in Seoul. He is also president of controller manufacturer HanYoung Nux Co. Ltd. in Incheon, South Korea.
Chinese machines are rapidly catching up, and Korean firms need to focus on improving their own technology, said Won Jun You, KPPMIC executive director. You also agreed that China is putting cost pressure on South Korea, but he said some growth is expected as Korea's information technology industry looks to have a good year.
Korean firms are major global IT exporters - the country is home to two of the world's three largest TV makers, two of the top five mobile phone makers and two of the largest memory chip producers - and government officials are predicting double-digit growth in IT exports this year.
The Korean industry produces about 10,000 injection presses a year, You said.
Industry executives said Chinese production can cut costs. Labor and other savings in China can reduce manufacturing costs 30 percent compared with Korea, said Jason You, regional manager for LS' injection molding overseas marketing team in Wanju-Gun.
Woojin, in a filing with the South Korea Stock Exchange Kosdaq said it expected its Chinese facility to boost profits, and said it expected growth in the mobile phone and home appliance markets.
Most of the Korean companies said they are investing in China to produce simpler machines, mainly for that market. The executives were interviewed at the KoPlas 2006 International Plastics and Rubber show, held March 29-April 2 in Seoul.
Jinhwa, for example, is keeping its research and development center in Korea.
Its Korean operations, which make 900-1,000 presses a year, focus on higher technology, like all electric presses, faster cycle times and silicone molding, said Jung-Min Park, general manager for Jinhwa's overseas sales department. Jinhwa is based in Cheonan, South Korea.
The company opened its 26,200-square-foot plant in Ningbo in 2003 and plans to triple its size this year, to more than 85,300 square feet, and go from 100 employees to 500, he said.
While most of the machines made there are for the domestic Chinese market, the company exported last year from Ningbo to Vietnam, Indonesia and Russia, he said. This year, it plans to export machines to Italy, he said. The company supplies machines to Italian press maker Sandretto Industrie SPA, Park said.
LS Cable, which is part of an industrial conglomerate that makes tractors, air-conditioning equipment and military products, can make up to 600 machines a year at its Wuxi plant, ranging from 80-350 tons clamping force, LS' You said.
The company sources critical components like platens from Korea but finds that Chinese labor costs are just 15-20 percent of employee costs in Korea, he said.
``We cut down our labor costs even more than we thought,'' he said.
The company put several senior engineers in Wuxi to improve Chinese quality, he said. In Korea, the firm is strong in the large press market, with tonnages from 850-2,500, he said. The company makes about 1,500 machines a year in Korea.
Woojin completed its ramp up in Ningbo last year, after spending about 18 months getting the staff properly trained to produce good machines, said Heung Woo Lee, deputy general manager of Woojin's overseas business headquarters in Incheon.
Competitors who are just now opening facilities will face the same delays in training staff, he said.
Another competitor, Dongshin Hydraulics Co. Ltd. in Busan, South Korea, also opened its own facility two years ago in Ningbo, a coastal city that is home to Chinese press giant Haitian and is a center for the Chinese injection press industry. The company makes at least 180 machines a year there, said Dongshin executive Philip Kim.
The Korean industry's other major machinery sector, extrusion, faces a tougher future because of strong Chinese competition in multilayer film equipment, particularly in the agricultural film sector, according to KPPMIC's You.