Guangdong Decro BOPP Co. Ltd. operates in one of China's most competitive manufacturing sectors, plastics packaging. But the firm said it sees its future not in price wars, slugging it out for volume with countless competitors, but in technology and market development.
The midsized firm, based in Shunde, recently added a 27-foot high-speed Bruckner extrusion line that will boost Decro's capacity to about 176.4 million pounds of biaxially oriented polypropylene film a year. The investment joins a wave of capacity expansion this year that is expected to flood the Chinese BOPP sector.
But President Weiman Luo is more interested in Decro's efforts to tap new areas, such as developing packaging films, that will help China's farmers crack export markets. In a July 18 interview at Decro headquarters, Luo also discussed what he sees as China's need to protect the intellectual property of companies like his that focus on new technology.
Decro, which has six extrusion lines at its Shunde plant all from Germany's Bruckner Technology or Japan's Mitsubishi is working on new films for China's agricultural market, an area that has not been given enough attention by the domestic packaging industry, Luo said.
``It is a fact that Chinese agricultural products can hardly enter overseas markets,'' Luo said, speaking through a translator. ``The agricultural market has a very large potential and should not be neglected by the packaging industry.''
Decro wants to focus on films that can better preserve China's fresh fruits and vegetables, for example, he said.
Decro also last year launched a new business making glueless lamination film, which it claims is easier on the environment than traditional BOPP film processes. It also makes laminating equipment for paper and plastic.
The firm has more technology in development, Luo said, from its advances in multifunctional anti-fogging, antibacterial and holographic films, to a partnership with an unnamed university to develop degradable BOPP.
``To create a new market is the core of our development tactics,'' he said. ``If we are only satisfied with simple enlargement of volume, it would be a disaster.''
The Chinese government sees the dangers of ``blind production'' and wants to encourage technology development, said Luo, who is also chairman of the Shunde General Chamber of Commerce.
``In various fields we can see it is repeating the same tragedy of enlarging the volumes and stopping development, and coming to competition only on price and ruining the whole industry,'' he said.
He said the company was cautious in discussing too many details of its technology, though, for fear of tipping off competitors, some of whom try to copy its products. He said he is pushing a message to industry and government about the need to protect intellectual property.
``We do face difficulties in protecting our intellectual property,'' he said. ``The government now recognizes that such a lack of respect will ruin this industry in the long term.''
Still, he said Decro is committed to its current path: ``Even though we face such difficulties and suffer economically, we will not give up the direction of technology development.''
The near term will mean overcapacity for domestic BOPP, as about 1.1 billion pounds of new capacity comes on-stream this year, pushing China's total capacity to about 6.6 billion pounds. That contrasts with domestic demand of between 4.9 billion and 5.3 billion pounds, he said.
He predicted that overcapacity will lead to pressures for consolidation among producers, which he said the industry has not seen in earlier periods of overcapacity. But because the industry lacks a dominant firm that could lead any consolidation, the immediate result will be heated competition among many companies, he said.
Decro is not focused on buying other firms or consolidating, preferring instead to stay oriented on new technology, Luo said.
Decro's future business plans call for boosting exports from about 10 percent of its sales now to about 20 percent in three years, with an emphasis on Japan, Korea, Italy and Australia, Luo said. He said the company's extrusion lines range in width from 13-27 feet.
The firm projects sales will increase by 40 percent in 2008, to 1.03 billion yuan (US$150 million), while profit is expected to rise 50 percent from 2007, to 90 million yuan (US$13 million) this year.
Decro sits in the middle of South China's exported-oriented Pearl River Delta manufacturing zone, which has been hard hit by economic change. Guangdong province's economy, for example, grew 10.7 percent in the first half of the year, down more than 3.5 percentage points from last year, as China's economy overall is slowing.
But Luo said his firm has not seen a significant impact on its immediate fortunes: ``All those negative inputs do not have influence on our company too much because we are a company keen on self-development.''