Seeing more medical-device-manufacturing opportunities and other business in China, American injection molder GW Plastics Inc. recently expanded its facility there and is planning a second factory in the country.
GW, based in Bethel, Vt., said health-care manufacturing will become the largest market for its factory in Dongguan this year, replacing electronics, and growth in China is prompting the firm to look at a second factory, likely in the Yangtze River Delta area around Shanghai.
“As our business grows, the geographic distance to Shanghai can be a limiting factor,” said Benjamin Bouchard, vice president of international market development for GW. “I have no hesitation of saying we'll expand to another footprint in China. … There are ongoing discussions.”
Speaking in an Aug. 18 interview at the Dongguan plant, he declined to specify a time frame for a new factory but said the Dongguan operation is profitable and will soon be at capacity.
Its sales are now “significantly above” what they were before the economic crisis began in 2008, when the factory had some lean months, he said.
The firm established the Dongguan location in 2006 as a majority GW-owned joint venture with a local toolmaking company called WCH, and tripled its size in 2007 to 40,000 square feet.
Earlier this year it added another 14,000 square feet of warehouse space and completed a buyout of its Chinese partner, giving GW complete ownership. “We wanted more control and we wanted to be comfortable in a long-term approach,” said Bouchard.
The firm put a Class 8 clean room molding area in the Dongguan plant in 2007 and has seen significant growth there, mainly from Western firms in medical, electronics and automotive markets looking for the same quality they would find in North America or Europe, Bouchard said.
In particular, he said health care has expanded quickly. The factory is about to launch production of a multicomponent assembled respiratory-therapy device for a global medical-device maker, with production runs in the millions of pieces a year, among other projects.
Dongguan employs about 130 people and is heavily automated, with five-axis robots and scientific molding processes in place.
Its 18 molding machines are Engel and Fanuc models, and it has one operator handling five machines in Dongguan because low-cost labor is not GW's primary driver in China, Bouchard said.
General Manager Ed Boyden said the automation focus has for GW blunted the impact of rising labor rates in China, where many cities have seen minimum wages typically paid to machine operators rise 20 percent.
Some manufacturers are leaving coastal areas for cheaper locations, but Bouchard said the quality and stability of the labor force is more important to GW, and the company has not raised prices to its customers.
“We have seen a labor cost increase, but it's not a driving factor in where we are in China,” Bouchard said. “Our market is not a market where we're chasing labor to Indonesia or Vietnam.”
GW uses automation heavily worldwide because it wants to provide standardized manufacturing on a global basis, he said. All of its factories — in the United States, Mexico and China — operate with the same type of manufacturing systems, he said.
“Our philosophy here is, if we have a Western customer that is familiar with GW Plastics in the U.S. or in Mexico, and they walk in here, they will feel instantly comfortable and familiar with the standardization and the quality,” Bouchard said. “We are offering primarily Western customers that same quality, technology and capability we offer in [North America].”
He said, for example, that the company's U.S. factories exceed U.S. safety standards for molding machine guards and shields, and it applies those same standards in China.
The company believes that focus on quality and targeting customers with a “total-cost approach” — rather than customers looking for simply the cheapest single part — has helped it gain business in China, particularly from Western multinational firms, Bouchard said.
Boyden said the initial inquiry for the high-volume respiratory-therapy project, for example, came through GW's China factory, and GW said it has since expanded that relationship to the customer's operations in North America and Europe.
In that case, the device requires extensive regulatory approval and the validation protocols are thousands of pages long.
“Most of the suppliers out here in China say they can do health-care validations, but when it comes time to deliver they cannot, absolutely cannot,” Boyden said. “There's a very strong discipline involved in an orderly way of validating a process.”
Beyond medical and electronics, the Dongguan factory also supplies automotive parts.
In that industry, it is seeing some of its multinational customers beginning to “de-content” parts by simplifying them and reducing costs for the China market, Bouchard said. But those same customers can't reduce their quality, so that creates opportunity for firms like GW, he said.