Danish plastics executive Svend Lund is betting big on Vietnam.
The chief executive officer of Phasion Group, a group of plastics and metal companies in Skive, Denmark, moved most of his mold production from Europe to a joint venture he set up in Vietnam's business hub of Ho Chi Minh City in 2003.
Next, he's planning to set up a joint venture molding and assembly plant there, within two years, as he seeks to build a low-cost manufacturing base and turn his Danish operations into a more sophisticated engineering and rapid prototyping center.
``We have to adapt to the new times,'' he said. ``Otherwise we have to close our plant here in Denmark.''
Vietnam remains an untapped market for Western mold making, and Lund said it took some time for the operations to progress from reaching a deal with its 50-50 joint venture partner, local injection molder An Lap Ltd. in Ho Chi Minh City, to getting the US$6 million investment operating.
Now, the 60 or so employees at its Viedam Ltd. subsidiary make about 15 molds a month, mostly ``high precision'' tools for export to European markets like electronics and automotive, although Lund said a few customers, like Vietnamese dairy Vinamilk, are starting to purchase its molds, even though they are expensive by local standards.
Having a partner in Vietnam is also letting the company secure more complete manufacturing work it could not have done cost effectively from Denmark, said Claus Sorensen, overseas project manager and Phasion's top executive living in Vietnam.
As he showed a visitor around the company's new seven-story factory on a mid-November tour, Sorensen said that by working with An Lap, Phasion won a contract to do molding and complete assembly of a portable electrical light used at work sites.
In Denmark, it would not have been competitive on the assembly side of the project, and that is something it wants to do more of in Vietnam, he said.
Necessity seemed to drive Phasion to the East.
Lund, who has been doing business in Asia for two decades, faced a quandary in the early part of the decade, with his mold-making work for its WBL A/S subsidiary going to less expensive countries.
Coincidentally, the Danish government was looking to improve relations with Vietnam and offered to pay his expenses there in 2001 to scout opportunities, he said.
``I was looking for a low-cost location,'' he said. ``I had a mold factory in Denmark at the time, and I could see that our business was getting poorer and poorer.
``China is a real big competitor in this field,'' said Lund. ``We could not earn money in Denmark in this field anymore.''
Instead, Denmark has become the company's rapid prototyping center, where Phasion handles projects like making mock-ups of 200 mobile phones in 10 days.
Overall, employment at the Danish operations, where the company has 20 injection molding presses, has increased slightly, to 120, but the nature of its workforce is changing.
``We had a turnaround in 2003 where we had to lay off some workers and bring in other workers with higher education,'' Lund said.
The company also is upgrading its skills in Vietnam. Sorensen said the firm has the same quality of equipment in Vietnam as in Denmark.
The company wants to start making its most sophisticated molds at Viedam, such as for toymaker Lego A/S, and started training staff on some of those techniques six months ago.
``The quality is good but we are spending longer to do it [in Vietnam] because people are learning,'' Sorensen said. In six more months, Viedam will be able to produce those molds efficiently, he estimated.
Lund said that he was initially drawn to An Lap because of the technical skills of its owner, Vo Cong Hai, even if his equipment was out of date.
As well, the two quickly got along, even though they shared no common language and had to work through an interpreter at that first meeting.
``I asked him about a lot of things and after about a half hour, we were almost talking without any language, just with pen and paper,'' Lund said. ``You know how it is with chemistry.''
Vo has since developed some fluency in English, and the company has given English lessons to workers.
Lund said he is taking a long-term approach, and expects within a decade that prototyping will also move to Vietnam, leaving Denmark to find a new focus. One area he is looking at: a niche in combining fuel cell technology with Denmark's strong wind power industry.
``Maybe in five to 10 years, our prototyping production will go to Vietnam, and then we will have to make something new,'' Lund said.