Hoping to tap into what they see as increasing interest in China as a medical device manufacturing platform, U.S. molder Classic Industries Inc. and Chinese plastics firm Ace Mold Co. Ltd. have formed a joint venture.
The 50-50 partnership, announced Feb. 6, will start with 10 all-electric injection molding machines and assembly operations in a clean room at an Ace factory in Shanghai, said Jack Yeung, chief executive officer of Hong Kong-based Ace.
Jay Policastro, chief executive officer and president of Latrobe, Pa.-based Classic, said the medical device manufacturing industry, traditionally more risk averse to offshore sourcing because of liability and regulation, is becoming more interested in China.
``Five years ago they were thinking about it,'' he said. ``Now they are more than thinking about it, they are putting their toes in the water.''
Classic, which has factories in the continental United States and Puerto Rico, does the vast majority of its work in medical device manufacturing.
Yeung said the venture will initially be primarily export oriented, which is the focus of Ace's manufacturing. But he said the partners are interested in tapping China's growing medical device market.
Yeung predicted the venture could do US$10 million in sales of medical devices in a few years: ``We have high hopes for this JV,'' he said.
The venture will start in about 40,000 square feet of space, with a Class 100,000 clean room. It will meet ISO 13485 and the U.S. Food and Drug Administration's Good Manufacturing Practices, the companies said.
The venture is designed to give Classic a foothold in Asia, a region where company officials say they have been looking for an entrance point for years.
It's also designed to give Ace, a sizable Chinese plastics molder and mold maker, an entrance into the potentially more lucrative and technologically demanding medical market.
Ace has about 130 injection presses in Shenzhen and Shanghai, with 2,000 employees, including 650 mold makers. The fast-growing company late last year said it would spend US$8 million to add another 40 presses and 400 employees in Zhuhai, China this year. The firm also said it wanted to get into more sophisticated technology and markets.
Policastro said Ace had been a supplier of molds to Classic for years, and that led to discussions about forming an equity partnership. The companies declined to disclose the size of their investments but Policastro said it is ``significant.''
He said Classic, which has about 75 molding machines, is increasingly doing more labor-intensive work like subassemblies and packaging. Yeung said the partnership will not necessarily be limited to simpler medical devices, and will manufacture more complex medical products.
The venture is part of a push for Classic, which said in the Feb. 6 announcement that it has established an alliance in Europe. Policastro said the firm would provide details later, but he said the deal involves a partner in Ireland.