Continuing to be stung by slowness in their traditional export markets in North America and Europe, Hong Kong's mold makers and custom injection molders are increasingly turning to the mainland China market.
Domestic China business, for example, now accounts for half of the business for Ultratech Mold Design & Mfg. Co. Ltd., up from 30 percent two or three years ago. The shift comes even as overall sales have remained roughly flat at about US$25 million in the global economic slowdown.
Before, we relied more on the export markets, but now we rely on the Chinese market, said Simon Cheung, vice president of Ultratech, which employs 800 at several factories building molds and doing injection molding in South China, near Hong Kong.
Switching to the Chinese market is under way at many Hong Kong firms, said Alfred Au, vice chairman of the Hong Kong Mould and Die Council.
They are targeting sectors like China's automotive market and the Japanese car factories in Guangzhou, which increasingly are looking at suppliers outside their traditional Japanese base as a way to cut costs, he said.
The economic picture for Hong Kong's plastics molding and mold-making industries, while improving from 2009, remains uncertain as the overseas markets are problematic, Au said.
The economy is recovering, but it's not fast and it's not steady, he said.
People tell me they have plenty of work one month but not much work the next.
Au said Hong Kong plastics firms need to either get bigger or focus on specialty markets. He and other executives were interviewed at Asiamold, held Sept. 15-17 in Guangzhou.
Au said Hong Kong's industry wanted to use Asiamold to showcase its capabilities in sophisticated areas such as micro-molding and complex tool building. The Mould and Die Council set up a showcase of high-tech work from local companies at the fair.
Focusing on the mainland market is not a sure thing for the Hong Kong firms, though. While the companies own thousands of factories in the Chinese mainland, executives said there can be major differences in business culture between the two places. And the mainland market is extremely price-competitive, with locally owned firms often able to undercut their Hong Kong rivals.
As a result, many of the Hong Kong firms focus on working for multinational firms trying to build their domestic China businesses, rather than for local Chinese brands.
Ultratech's Cheung said his company believes that Chinese brands tend not to want to pay for quality, a challenge for Hong Kong firms that have traditionally geared themselves to Western markets.
He said the company sees its strength in providing quality. Ultratech recently became one of the first Chinese mold-making houses certified to meet complex German automaking standards.
A few Hong Kong plastic molders, like Ace Corp. Holdings Ltd., have announced plans to put factories in inland Chinese cities to focus on local markets.
But Au said he does not think most others will follow, because their markets are not financially stable enough to afford that kind of risk.
Some smaller Hong Kong mold makers have either closed or merged in recent years, according to Au.
Still, they are looking with interest at China's market.
Nypro Tool Hong Kong Ltd. sees more interest in the Chinese market, although more than 85 percent of its business remains export-oriented, said Amen Fong, business development manager.
The company a joint venture between one of the largest plastics molders in the U.S., Nypro Inc., and a Hong Kong partner wanted to use the Asiamold show to position itself better for the local market. Nypro Tool sees Chinese domestic brands increasingly wanting and able to pay for better quality in manufacturing, Fong said.
It is these businesses we are going after, he said.
The company's business remains below levels before the economic crisis, but expects to return to pre-crisis levels next year, Fong said.
Partially as a cost-cutting move, the company is looking to double the size of its Shenzhen mold-making factory and shift some work from its Hong Kong factory, which will became more focused on research, product development and higher-tech projects, he said.
Nypro Tool has mold-making factories in Shenzhen, Suzhou and Tianjin.
Other Asian firms are seeing increasing demand from mainland China.
We don't make a concerted effort in the domestic market [in China] but it is picking up, said Leong Yoke Ming, managing director of Singapore-based ExpressTech Co. Ltd., a 150-person firm with mold-making factories in Singapore, China's Jiangsu province and Vietnam.
We are seeing that the quality demand is increasing and the local mold makers cannot meet that, many times, he said.
Not all Hong Kong mold makers are targeting China's market.
Hoyu Tooling Ltd., for example, is specifically staying away from the mainland market because of its intense price competition, said Andy S.K. Chu, business operations director.
Hoyu has focused on the toy industry, making about 1,500 molds a year for Mattel, or about 15 percent of the company's total mold consumption, he said. But it is trying to diversify into markets like medical and precision electronics.
Growth in those new businesses, which are now about 25 percent of Hoyu's overall sales, helped sales reach its highest level ever in 2010, exceeding levels before the economic crisis, Chu said.
Customers in the U.S. have placed more orders with the company because they are under more pressure to cut costs and are looking at more Asian tooling to do that, Chu said.