Tessy Plastics Corp. has upgraded its China facility to target medical device manufacturing, moving its operations into a medically oriented industrial park in Shanghai.
The Elbridge, N.Y.-based company said it wants medical devices to be 30 percent of the facility's business by 2010, up from 5 percent of current China sales of about $12 million, said Eric Frearson, vice president of engineering and China operations.
Such a switch would better align Shanghai's business mix with that of Tessy's U.S. plants, where medical products account for about 50 percent of the company's roughly $130 million in 2006 sales, he said.
Tessy spent $2 million to build the new plant, which will have a Class 100,000 clean room throughout its manufacturing area, he said.
The company moved from its Shanghai location in late August because city officials were redeveloping the area into hotels and a financial center, and Tessy decided to take advantage and upgrade, he said.
``A lot of our medical customers in Elbridge are really interested in our China facility,'' said Frearson, speaking in an Oct. 10 telephone interview. ``We wanted to set ourselves up for that type of business.''
The industrial park, known as the Shanghai Zhangjiang Medical Park, is located in the city's Pudong section, and is home to facilities for health-care multinationals, including Medtronic and Roche.
Frearson said Tessy's current medical work in China is simpler than what it does in the United States, and except for one subassembly that is shipped to the United States, does not use much labor.
But the company expects its future medical work will have to take advantage of Shanghai's lower wage rates, he said.
He said Tessy has worked hard to maintain a stable engineering staff at the plant, and provide training in China and the United States to upgrade skills, so it can handle more sophisticated medical work.
``We've really taken a lot of pride in the fact that we're able to maintain relatively low turnover in our technical staff in China,'' he said. ``That's enabled us over the last two or three years to really make strides in their capabilities.''
While its medical work will grow, the company expects that other business in China, such as its work making business machine components, may not. That work could migrate to even lower-wage locations in Asia or to manufacturing closer to the points of sale, such as Eastern Europe or Mexico, as shipping becomes a greater concern, he said.
The new facility is 58,000 square feet, slightly smaller than the old one, and has 20 presses, compared with 25 previously. The company did not move some of its older machines, and when it buys new machines, it plans to buy all-electrics, including two Sumitomos now arriving, he said.
Tessy started operations in China in 2000.
``Up to about two years ago, it never made any money but since then it's been pretty steady,'' Frearson said. ``We have a stable operation there and now we want to grow it.''