If necessity is the mother of invention, so too, can it be the mother of business partnerships.
In 2003, as the U.S. manufacturing industry was struggling through a downturn, California injection molder Magic Plastics Inc. of Valencia was seeing significant pieces of its tooling business, and then its molding business, head to Asia.
Across the world, in Shenzhen, the company supplying the bulk of Magic's molds, MoldKing (Shenzhen) Co. Ltd., was looking for ways to take advantage of that manufacturing shift and expand into injection molding.
But it lacked enough solid molding opportunities, particularly since it was focused on exporting to the United States.
Rather than competing for molding business, the two companies began talking. By late 2003, they decided to build on their ties and launch a joint venture in China.
After a lengthy period of scouting locations and clearing Chinese government hurdles, in mid-2005, they opened a joint venture, a 64,600-square-foot molding and assembly plant in Shenzhen.
``We were losing business from companies moving over here,'' said Tony Madormo, vice president of sales, in an Aug. 29 interview in Shenzhen. He and President John Sarno knew ``we had to do something different in order to continue to increase and maintain business,'' Madormo said.
So far, the two firms said the venture, Magic-Wei Precision Plastics (Shenzhen) Co. Ltd., has helped them both to expand into new markets; and for Magic, it has opened up opportunities for offering both a ``U.S. price'' and a ``China price.''
Beyond their bottom lines, however, the venture also offers a glimpse into how two small manufacturers are trying to find a competitive niche in a globalizing manufacturing environment.
Neither company is large. Family-owned Magic has 21 injection presses and 140 employees in California. About 70 percent of its business is in proprietary products such as valves and fittings for the pool and spa, plumbing and other markets.
Privately owned MoldKing employs 130, including 95 toolmakers, in Shenzhen. The firm has grown quickly, starting up in 1998 with eight employees.
Magic-Wei also started small, with 70 employees and seven presses from 50-500 metric tons. The operation plans to add as many as five more machines this year, and has room for additional operations, like assembly.
But the companies don't want their partnership to stay small: MoldKing President JianJun Wei thinks that in five years the joint venture will have 500 employees and 50 presses, and he envisions a second facility in eastern China.
So far, Madormo said, the venture has exceeded expectations.
Magic has been able to use its low-cost China venture to launch some commodity product lines it previously could not make competitively, such as some PVC fittings for spas; and, it is considering new markets, such as making valves for the recreational vehicle industry.
If the venture grows as expected,it will dwarf Magic's manufacturing platform in the U.S. But Madormo said the China business hasn't meant transferring jobs from California, so far.
``We're looking to grow overall [and] we're also looking to grow our U.S. operations,'' he said.
While he said he can't predict the future looks, an Asian presence has helped Magic's U.S. business by bringing in work and making the company more competitive. Still, he said the growth is clearly in China.
``I think that we'd like to see both companies grow, but realistically, [China] is our future,'' he said.
The companies started the venture by moving one of Magic's biggest-selling products, a valve for the spa industry, to Shenzhen. Magic sells about 600,000 of the valves a year but had seen margins disappear to almost nothing as new competitors jumped in. By shifting manufacturing to China, it was able to recoup some of that, said Madormo.
``[It's] not that we were able to reap giant benefits, but we were able to get it back up to where it should have been,'' he said.
Madormo and Wei said that molding, on average, is 30 percent cheaper in China. But both executives said it's not always the less-expensive option, such as when the part is large or does not ship cheaply.
In another case, the company found that because of higher material costs in China, it did not make sense to move production.
Magic toyed with moving another product, made of recycled plastic, to Shenzhen, but kept it in the U.S. after discovering it was almost impossible to find recycled material in China.
The joint venture was not easy to pull off, requiring more than a year of logistics, negotiating bureaucracies under Wei's guidance, and a substantial staff commitment, Madormo said. Magic Plastics General Manager Dennis Dyer was billeted to Shenzhen for eight months before the launch, for example.
Both companies said choosing a partner was the most important decision they made.
Magic had been unsure of buying molds in China when it began shopping there in the late 1990s, but Madormo said the firm was impressed by the quality and cost that came from MoldKing, and by Wei's late-night phone calls and seemingly 24 hour availability.
``I don't think the guy ever sleeps,'' Madormo said.
They had heard horror stories of communication problems in joint ventures, but did not find any of that, Madormo said. Wei, who speaks fluent English, said he focuses on language skills in recruiting.
The joint venture is entirely focused on exporting to the United States, as is MoldKing's business.
Wei is a 33-year-old former People's Liberation Army officer who worked as a salesman for a large state-owned mold maker in Shenzhen before launching MoldKing. He said he prefers doing business in the United States to China's sometimes lengthy, but necessary, relationship-building process before deals are struck.
``The U.S. is basically very straightforward: As long as you can give them very good price and good quality, everything is fine,'' he said.
Plus, he said, the internal Chinese market is not very developed for the spa and pool products they are focused on. And selling into China's domestic market means competing against local manufacturers that are happy to take work without any profit, to keep their businesses going, according to Wei.
``My feeling is that it's Chinese people killing Chinese people,'' Wei said.
The companies said they plan to continue focusing on the export market, at least for the foreseeable future. Americans remain the biggest consumers of spas, although Europe and other places are catching up, Madormo said.
If necessity helped start the venture, the firms feel opportunity will keep it going.
``This has opened a lot of doors for everybody,'' Madormo said.