Sunningdale Tech Ltd. of Singapore is spending S$20 million (US$12.7 million) to arrest its decline in profit from telecommunications businesses and intensify its focus on automobile, consumer and information technology part production.
Executive Chairman Koh Boon Hwee said the move is largely the result of supply-chain changes in the mobile phone manufacturing industry. Foreign currency exchange rates also have hurt the firm, which nevertheless is determined to increase auto part production, especially the bezels and trim plates that it designs and supplies to Tier 1 manufacturers.
The customer mix is shifting at Sunningdale plants in China and Malaysia, while its Singapore operations will be downsized. By the first quarter of next year, the firm's headquarters operation will be limited to administrative, research and development, design, engineering and marketing.
Sunningdale employs 8,000 at plants in Singapore, Malaysia, Indonesia, China, Hong Kong, the Philippines and Mexico. Although the changes announced Aug. 14 will mean some cutbacks, the firm expects to add to its employment total as it expands low-cost plants outside Singapore.
Sunningdale already has expended S$10 million (US$6.34 million) on capital projects in the first half of 2006, and it expects to spend S$5 million to $6 million (US$3.17 million to $3.8 million) in the second half on new modules, maintenance and upgrading equipment, Koh said. It expects to boost capacity by 8 percent.
Some Chinese plants that will see changes include Sunningdale Plastic Technology (Tianjin) Co. Ltd. in Tianjin, Sunningdale Precision Industries (Shanghai) Co. Ltd. in Shanghai, Omni Tech (Suzhou) Co. Ltd. in Suzhou and Zhongshan Zhihe Electrical Equipment Co. Ltd. in Zhuhai. Tianjin was most affected by the drop in telecommunications orders.
The firm will expand production at SDP Manufacturing Sdn Bhd and Podoyo Plastics Industries (M) Sdn Bhd in Johor Baru, Malaysia, and at PT GP Technology Bintan on the Indonesian island of Bintan, off Singapore.
``We have developed the S$4 million (US$2.53 million) Bintan plant since mid-2004 with capability to support our automotive customers. Today, the plant is serving the customers in both consumer and automotive. The operation is focusing on high-labor-intensive products for customers who want low-cost products in south Asia,'' Koh said.
Sunningdale will continue to serve telecommunications customers, although that market now generates only 13 percent of annual sales, down from 18 percent a year ago.
The company also plans to increase its focus on the medical sector during the next two years.
``We have strengthened the marketing team for handling the medical segment of the business,'' he said. But it takes about 18 months to gain medical customer qualification, compared with an average of six months for other plastic products, he said.
Koh especially stressed the need to be closer to customers. He highlighted the role of the Mexican manufacturing base at Pinar de la Calma Tlaquepaque, which was set up four years ago to serve the U.S. auto industry.
``We will certainly invest in the customer-dedicated Mexico plant in the future,'' he said, anticipating a stronger auto demand in the U.S. in the coming years. Sunningdale has invested about S$12 million (US$7.6 million) in the Mexican plant, known as Sunningdale Technologies SA de CV.
Koh said slower car sales in the U.S. have affected the Mexico plant during the past few quarters, but he is confident of completing delivery of orders by year's end or first-quarter 2007.
Sunningdale's profit plunged 85 percent to S$2.18 million (US$1.38 million) in first-half 2006, pressured by industrywide overcapacity, customers' product pricing and rising resin costs. Sales fell 1.7 percent to S$182.27 million (US$115.62 million).