Hercules Shum's mold-making factory in South China seems well-positioned for the future it has a joint venture with a U.S. company that is helping to upgrade its skills, and it has survived the economic crisis and industrial implosion that hit hard at local manufacturers.
But Shum, who says he judges his efforts by world-market standards, only sees more work ahead for his 100-person factory, Cosmos Tooling Solutions Ltd., in its quest to stay competitive.
Cosmos' general manager, Shum sees how his American mold-making partner, for example, gets five times the sales with a staff one-third the size because, in part, it makes better use of technology and management.
There is still a lot of room for improvement, trust me, Shum said in a mid-December interview at Cosmos Tooling's Dongguan factory.
Like Shum, others in Dongguan's hard-hit mold-making industry see upgrading as critical, and they are organizing themselves to try to help local firms better position themselves for international markets.
Executives from one association, the Hardware Mould and Machinery Association of Dongguan (HMAD), set up the interview with Shum and joined him in his factory to discuss challenges local firms face.
HMAD, which formed in 2003 with funding from local governments and industry, recently launched a new effort to significantly expand internationally, exhibiting as an association for the first time overseas, at the Emo Milano machine tool world exhibition in Italy in early October.
HMAD also has hired foreign marketing and technical experts to help the association's 200 member companies better meet international standards and market themselves overseas, something they say the mostly small firms cannot effectively do on their own.
I think the main point is most of the local factories are not strong enough but they want to develop the international market, said Reinie Liu, an HMAD manager.
The companies also want the association to be a more direct channel to world markets, rather than relying as much on agents, she said.
It has been a difficult time for the local industry. By Shum's estimate, about 30 percent of the mold-making shops in Dongguan have closed in the past two years, although the city and surrounding Guangdong province remain a center for the industry in China.
HMAD estimates the province has 7,000 mold-making factories, many of them small companies. Those businesses accounted for 40 percent of China's mold production in 2008. But many of them were export-oriented and saw orders plummet when major markets like North America, Europe and Japan dropped off, HMAD said.
Our main focus is on networking, trying to upgrade the factories to international levels and helping them to upgrade their marketing systems, said Anna Grunwald, manager of HMAD's molding and machinery platform, which handles the international marketing efforts.
HMAD also will be sending its technical expert, an Israeli mold engineer who relocated to China, to assess the capabilities of its member companies and build a database to make referrals from potential foreign mold buyers.
That engineer, Ron Grunwald, who is Anna's husband, said he has helped to upgrade six HMAD companies so far, doing things like improving factory designs to boost efficiencies. Anna Grunwald brings a background in business development in Israel's agricultural industry, and has an MBA degree.
Helping local firms
Shum said he hoped the effort would create in Dongguan something similar to the Hong Kong Mould and Die Council, a trade group in nearby Hong Kong that improves local industry with seminars, study trips and exhibitions.
HMAD has done some of that, organizing trips to visit RWTH Aachen University's Machine Tool and Production Engineering Laboratory, in Aachen, Germany, and to see European firms like Wicro Plastics BV in Kessel, Netherlands.
Shum, who is from Hong Kong, worked for one of Hong Kong's largest tool shops, Ace Mold, before helping to start Cosmos with two local partners in 2008. He said Chinese shops would benefit from more efforts to work together to boost the industry.
I don't see much cooperation or information sharing among mold makers in China, Shum said.
He said too many people have entered the Chinese mold-making industry without good knowledge of the overall market, and they initially buy expensive equipment without fully understanding how to use it.
After investing heavily in the equipment, they learn too late that they can't get enough orders, so they start price wars that hurt the industry, Shum said.
That's one of the reasons HMAD wants to raise standards of the local industry, said Anna Grunwald.
A lot of mold makers in China don't understand their job costs, Shum said. They throw out a low price, maybe they go out of business or are in bankruptcy two years later, but they've already damaged the market.
Shum said his experience working with his American partners, Extreme Tool & Engineering Inc. in Wakefield, Mich., and Future Engineering Inc. in Flushing, Mich., has helped him and the other two Hong Kong partners improve operations.
The U.S. partner firms own 50 percent of Cosmos, and Shum and his partners own the other half.
Even though we have dealt with export tooling for a long time, when we started to work with our partners in the States, it's a totally different story, Shum said. Then we understand why there are a lot of complaints about Chinese mold makers.
He said the U.S. companies are very strict on standards, and Cosmos lost some of the staff it initially recruited because they could not meet those performance levels.
But Shum said he believes the experience has paid off. He said his company will continue its spending on upgrades such as enterprise resource planning management systems and equipment for scientific molding, which he said are unusual items among local firms.
HMAD officials said their effort is part of a government effort in Dongguan to continue to develop and improve the mold industry. They declined to say how much funding HMAD gets from local governments.
While it can sometimes be difficult to assess whether Chinese industrial development money is spent efficiently, Shum suggested government spending on overall mold industry development in the area is sizable.
He said one local township in Dongguan has spent 6 million yuan ($877,000) on developing its mold-making industry, for example.
In spite of the challenges jostling local mold makers, both Shum and Ron Grunwald say they do not see other parts of Asia being able to duplicate the scale of the country's mold-making industry easily or quickly or the supply chain that has grown up to support it.
They said they believe China will remain competitive in mold making, even though some local firms have taken steps to explore places like Vietnam, Shum said.
Ron Grunwald, who also operates a mold consulting business in Dongguan, said he has tracked the shifting centers of mold making from Portugal to Taiwan and Korea, and now China, for more than 20 years.
I really do believe that China is different than all the other countries we were traveling, he said. I tried to do this business in Thailand, where the labor costs are cheaper and you have nice factories. But everything doesn't move. I ask for a quotation and I get an e-mail in two weeks.
In China, I get a phone call that day saying, 'Is it OK that I give it to you tomorrow?'
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