Hong Kong's Yee Kueng Industrial Co. Ltd. is like a lot of midsized South China manufacturing operations. The last year has been tough for the 500-employee injection molder and mold maker, with rising costs, new labor regulations and China's rising currency taking a big bite.
By some estimates, thousands of factories in the Pearl River Delta manufacturing area between Guangzhou and Hong Kong have closed down, as China kicked in tough new tax and labor laws designed to push local industry to modernize.
``It affects our profit margins a lot,'' said Winnie Ho, director of project management for YKI, which has a factory in Zhongshan. ``For some of our products in 2008, we have only minimal profit. It is a drag, I can say.''
YKI was among dozens of local plastics companies gathered at the AsiaMold 2008 exhibition in Guangzhou in late September, mulling strategies on how to stay competitive and attending what organizers said was a first for Asia: programs showing how software, equipment and machinery can be linked together to automate mold production.
Such steps are urgently needed in China, as the financial crisis in the United States could make next year more difficult, one local industry leader predicted.
``I think the challenging time will be the coming year,'' said Alfred Au, vice chairman of the Hong Kong Mould and Die Council, which also sponsored AsiaMold. ``If the situation doesn't change, more and more companies will be hurt next year.''
Au said organizers pushed automation to local firms. The Sept. 24-26 event was sponsored by Messe Frankfurt and the organizers of the EuroMold trade fair.
The display that HKMDC and others ran at the show illustrated, for example, how mold makers can automate and boost the use of electric discharge machining units from 30 percent common in China to 70 percent common in Europe, Japan or North America, he said.
Firms are trying various strategies.
Yee Kueng Industrial is pursuing more precision molding, diversifying away from over-reliance on exports and toward domestic Chinese markets like automotive, which are more attractive with the Chinese yuan rising in value, said Jacky Ho, assistant general manager.
Hong Kong-based Ultratech Mold Design and Mfg. Co. Ltd., a 1,000-employee injection molding and mold-making shop with three factories in Dongguan and Shenzhen, has formed a team to make better use of enterprise-resource-planning software and adopted technology to cut mold making setup times from 30 minutes to five minutes, said Simon Chueng, assistant general manager of sales and marketing.
The company has been able to hold its annual sales of US$32 million (and its profits) steady, even as its wages for its injection molding operators have risen 30 percent in the last year, to about 2,000 yuan ($292.05) a month, he said.
With wages rising that quickly, economists and business leaders have debated whether the Pearl River Delta is losing competitiveness to places like Vietnam, India and cheaper regions in China's interior.
Cheung said the PRD is losing some competitiveness, but he said the company is not interested in looking for cheaper spots, preferring to focus on making itself more efficient. The firm's customers, major multinationals like Phillips Electronics NV and General Electric Co., still maintain their business in South China, he said.
One local molding executive said the South China firms that are in the most trouble did not prepare for the changes that have swept the industry.
``We had been laid back in that we could take advantage of labor, but that has changed rapidly,'' said Jack Yeung, chief executive officer at Hong Kong-based Ace Plastics Co. ``I think the factories that are closing down or going out of business were not managed very well.''